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Form 10-K for MERIT DIVERSIFIED INTERNATIONAL, INC.
Filed on Oct. 7. 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 31, 1997
MERIT DIVERSIFIED INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Nevada 0-12423 94-2906927
(state or other jurisdiction) (Commission File No.) (IRS Employer #)
5320 Bellanca Way, Torrance, CA 90505
(address or principal executive office) (Zip Code)
(310) 326-3871
(Registrant's telephone number)
Securities registered pursuant to section 12(g) of the Act:
(Common Stock, no par value
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes ______ No ___X___
The aggregate market value of the voting stock held by non-affiliates of the
Registrant: Currently, the Company's stock is thinly traded. There are
4,942,257 shares held by non-affiliates. The average bid and ask price for
the period covered by this Form 10-K was $1.25 per share. Using this
value of $1.25 per share, the aggregate market value is estimated at
$6,177,821. Number of common shares, without par value, outstanding as of
August 31, 1997, was 30,042,257.
1
MERIT DIVERSIFIED INTERNATIONAL, INC.
FORM 10-K
Fiscal Year ended August 31, 1997
TABLE OF CONTENTS
Page No.
Part I
Item 1 Business
Item 2 Properties
Item 3 Legal Proceedings
Item 4 Submission of Matters to a vote of Security Holders
Part II
Item 5 Market for Registrant's Common Stock and Related
Stockholder Matters
Item 6 Selected Financial Data
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operation
Item 8 Consolidated financial Statements and Supplementary
Data
Item 9 Changes in and Disagreements with Accounts on
Accounting and Financial Disclosure
Part III
Item 10 Directors and Executive Officers of the Registrant
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners
and Management
Item 13 Certain Relationships and Related Transactions
Part IV
Item 14 Exhibits, Financial Statements, Schedules and Reports
on Form 8-K
MERIT DIVERSIFIED INTERNATIONAL, INC.
PART I
ITEM 1: BUSINESS (General)
A. The Company
Merit Diversified International, Inc. ("the Company") currently has no
operations and no cash flow or operating capital. The Company is considered
to be a develop- ment-stage company, and will continue to be classified as
such until the Company initiates business operations.
B. History of Operations
The Company was incorporated in the State of Utah, in 1983, subsequently rein-
corporating in the State of Nevada. Initially, the Company published a
telephone directory, but this operation was suspended in 1987 due to lack of
operating funds and revenues. Since 1988, the Company has made several
attempts to acquire and operate various businesses. All efforts have proven
to be unsuccessful.
In 1994, the Company purchased from Phalanx, Ltd., certain rights to molds
and designs of exclusive jewelry. These were purchased with 27,000,000
shares of the Company's common stock. Originally valued at $270,000 this
investment proved to be worthless. Major shareholders of the Company sued
for return of the shares. On February 9, 1995, the Superior Court of the
County of Maricopa, Arizona decided that the 27,000,000 were improperly
given and denied those shares voting rights. On March 23, 1995, a
shareholders meeting was held whereby those shares were rescinded and
returned to the Company.
In April, 1996, the Company approved a 20 to 1 reverse stock split.
Subsequent to the stock split, the Company approved a merger with a company
named NEAT, Inc., a Nevada corporation, through the issuance of 13,000,000
shares of common stock, with the intent of marketing a certain new
technology and combining the companies. Both parties chose not to continue
the merger; however, NEAT, Inc. returned 13,000,000 shares to the Company.
There is no assurance that the potential business will be successful.
During the past five fiscal years, the Company has been dormant. During May
1997, and in anticipation of the acquisition of Global Resources and
Technology, Inc., the Company appointed Mr. Mallette as officer and interim
director to investigate and facilitate the acquisition of a viable business
operation focusing on environmental products and services. During June 1997,
the Company identified a business opportunity with Amwest Environmental
Group, Inc. (AEG). AEG held contracts to perform environmental reclamation
services for certain cities in the Peoples Republic of China and secured
property, plant and equipment in those cities to operate recycling and
manufacturing facilities. The company issued 25,100,000 shares of no par
value Common Stock to Jen Investments Corporation, in trust for the benefit
of AEG, pending shareholder approval of the exchange of those shares for
AEG's investment in Global Resources & Technology, Inc. (Global). During
May 1997, AEG formed Global as a wholly owned subsidiary and transferred
certain contracts for enviromental clean-up projects, patents, and
proprietary technologies associated with environmental clean-up and
protection, and certain assets acquired including property, plant and
equipment, including land, that it had acquired by purchase. The property,
plant, equipment and land are located in the Peoples Republic of China.
However, the merger to this date has not yet been completed and the Company
does not anticipate that it will be completed in the future.
As of August 31, 1997, the Company had no employees and no operating assets.
The Company continues to meet its organizational obligations through the
contribution of capital by major shareholders.
The Company has continued its efforts to acquire, merge with or enter into
other forms of business combinations. It is presently unknown whether any
transactions will be successfully concluded.
ITEM 2: PROPERTIES
None.
ITEM 3: LEGAL PROCEEDINGS
None.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the OTC Bulletin Board.
The quote below is from the "Pink sheets: and the OTC bulletin Board. These
numbers represent an average. The Company's stock was thinly traded in
fiscal year ended August 31, 1997.
Bid High 1.00 Low .25
Ask High 3.00 Low .75
ITEM 6: SELECTED FINANCIAL DATA
The following information is derived from the consolidated financial
statements included elsewhere herein. All information presented below
should be read in conjunction with the Consolidated Financial Statements
and Notes included elsewhere in this Form 10K.
For Year Ended August 31 1997 1996 1995 1994 1993
Net Sales 0 0 0 0 0
Net Income (Loss) 0 0 (21,418) (17,650) (247,760)
Earnings (Loss) per Share NIL NIL 0 0 (.02)
Cash Dividends per Share 0 0 0 0 0
Total Assets 0 0 0 16,418 16,300
Long-term Notes Payable 0 0 0 0 0
Total Stockholders' Equity 0 0 (109,677) (93,269) (103,464)
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION RESULTS OF OPERATIONS (Continued)
The information set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" below includes "forward-
looking statements" within the meaning of Section 27A of the Securities Act,
and is subject to the safe harbor created by that section. Factors that
could cause actual results to differ materially from these contained in the
forward-looking statements are set forth in "Management's Discussion and
Analysis of Financial condition and Results of Operations".
Year Ended August 31, 1997 and 1996
The Company has no assets, and has not engaged in any operational activities
during the past five (5) years. At present, the Company has no employees.
The Company does not expect any changes unless the Company concludes a
merger or other business combination.
During the years ended august 31, 1996 and 1997, the Company had no
operations. The Company maintained its existence through contributions
from its shareholders to satisfy its general and administrative expenses.
As detailed on the accompanying consolidated statements of cash flows, there
were no significant adjustments between the net loss and net changes in cash.
Due to the nature of the Company's activities, the Company's prospects for
the future are dependent on a number of variables which cannot be predicted.
Generally, after identifying a potential business opportunity, the Company
could incur significant costs in evaluating the desirability of an
acquisition or other form of business combination. Should the Company
determine to proceed with the business combination, the transaction costs
could be significant. Thereafter, results of operation would likely be
materially affected by the business acquired or merged with the Company.
The Company has continued its efforts to acquire, merge with or enter into
another form of business combination with another entity, and the Company
plans to continue these efforts in the future fiscal year. It is presently
unknown whether any transaction will be successfully concluded.
Liquidity and Capital Resources
Year Ended August 31, 1997
The Company currently does not have adequate reserves to satisfy its short
- -term obligations. The Company is currently seeking private placement
funding to maintain its obligation until such time as its operations can
generate cash flow. No guarantee can be made that the current development
stage search for an operational business or private funding will be
successful. The Company is able to continue because the major shareholders
continue to cover administrative expenses. No guarantee can be made that the
major shareholder will continue to cover these expenses.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION RESULTS
OF OPERATIONS (Continued)
The Company considers its current cash and cash equivalent balances
inadequate to satisfy its cash requirements for the next twelve months.
Legal and accounting and other expenses required could increase
significantly in connection with any contemplated business combination. The
Company may not have the liquidity and capital resources to consummate such
business combination. Due to the nature of the Company's present activities,
however, the Company is unable to predict its likely expenditure for
professional fees and other expenses. The Company has no major capital
commitments nor access to mechanisms to fund working or operating capital,
and there can be no assurance that it will be successful in its efforts to
raise additional capital to maintain its plan of operation.
Balance of Page Left Blank Intentionally
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental-Stage Company)
ITEM 8 Financial Statements
Index to Consolidated Financial Statements
________________________________________________________________________________
_____________________________________________________________________________
1997, 1996 and 1995 Consolidated Financial Statements:
Report of Independent Certified Public Accountants
Balance Sheets as of August 31, 1997 and 1996
Statements of Operations for the Years Ended August 31, 1997,
1996 and 1995
Statements of Stockholders' Equity for the Years Ended August 31, 1997,
1996 and 1995
Summary of Accounting Policies and Notes to Consolidated Financial
Statements
Schedules --
II Valuation and Qualifying Accounts
Andrew M. Smith, CPA
3711 Long Beach Blvd., Suite 809
Long Beach, Ca 90807
(562) 424-8679
To the Board of Directors
Merit Diversified International, Inc.:
INDEPENDENT AUDITOR'S REPORT
I have audited the accompanying balance sheet of Merit Diversified
International, Inc., a development-stage company, as of August 31, 1997 and
the related statements of operations, stockholders' equity and cash flows
for the year ended August 31, 1997. My responsibility is to express an
opinion on these financial statements based on my audit. I did not audit
the statements prior to the year ended August 31, 1996. Other auditors
audited those statements.
I have conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis.
Evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financcial statement presentation. I believe that my audit and those of
other auditors provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Merit Diversified
International, Inc., as of August 31, 1997 and the results of their
operations and their cash flows for the three (3) years ended August 31,
1997 in conformity with generally-accepted accounting principles.
Andrew M. Smith, CPA
Dated: August 25, 1998
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental-Stage Company)
CONSOLIDATED BALANCE SHEETS
August 31,
1997 1996
Assets
Total Assets $ - $ -
Liabilities and Shareholders' Equity
Current Liabilities
Accounts and Taxes Payable 8,000 8,000
Total Current Liabilities 8,000 8,000
Commitments and Contingencies
Shareholders' Equity
Common Stock--No Par Value;
50,000,000 shares authorized,
30,042,257 and 16,209,316
issued and outstanding as of
1997 and 1996, respectively 1,332,349 1,332,349
Additional Paid-in Capital 1,122,215 1,122,215
Accumulated Deficit--Accumulated
during the developmental stage (2,462,564) (2,462,564)
Total Shareholders' Equity ( 8,000) ( 8,000)
Total Liabilities and Shareholders' Equity $ - $ -
See Notes to Consolidated Financial Statements.
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental-Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended August 31, 1997, 1996 and 1995
1997 1996 1995
Net Revenue $ - $ - $ -
Costs and Expenses
General and Administrative - - 5,000
Depreciation and Amortization - -
Income (Loss) from Operations - - ($ 5,000)
Other Income (Expense) - - -
Income Before Taxes on Income - - -
Taxes on Income - - -
Net Income (Loss) - - (21,418)
Net Income (Loss) Per Share Nil Nil 0.0
Weighted Average Number of Shares
and Shares Equivalents Outstanding 23,125,787 19,717,435 36,525,554
See Notes to Consolidated Financial Statements.
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental-Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended August 31,
1997, 1996 and 1995:
Common Stock Paid-in Accumulated
Shares Amount Capital (Deficit)
Balance, August 31,
1995 23,225,554 $1,332,349 $1,122,215 ($2,462,564)
Purchase of Consulting 25,000,000
Reverse Stock Split (45,814,276)
Purchase of Stock 13,000,000
Purchase of Consulting 798,038
Net Loss
Balance, August 31,
1996 16,209,316 $1,332,349 $1,122,215 ($2,462,564)
Purchase of consulting 1,186,175
Issuance of shares 25,646,766
Cancellation of Shares (13,000,000)
Balance, August 31,
1997 30,042,257 $1,332,349 $1,122,215 ($2,462,564)
See Notes to Consolidated Financial Statements.
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental-stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
Years Ended August 31, 1997 1996 1995
Operating Activities:
Net Income (Loss) $ - $ - $ -
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation Expense
Loss on Devaluation
Changes in Operating Assets and
Liabilities:
Accounts Payable
Cash Provided by (used in) Operating
Activities
Investing Activities:
Net Decrease in Notes Payable
Purchase of Fixed Assets
Cash Used in Investing Activities
Financing Activities:
Net Change in Common Stock
Paid-in Capital
Cash Provided by Financing Activities
Net Increase (Decrease) in Cash and
Cash Equivalents
Cash and Cash Equivalents,
Beginning of Period
Cash and Cash Equivalents,
End of Period
Significant Non-cash Transactions
Fiscal Year ended August 31, 1997:
Issuance of 25,100,000 Common Shares to JEN INVESTMENTS CORP.
Fiscal Year ended August 31, 1996:
Reverse stock split 20 to 1. Issuance of 13,000,000 common shares to
NEAT, Inc.
Fiscal Year ended August 31, 1995:
Reccission of Phalanx Rights for 27,000,000 Shares of Common Stock
See Notes to Consolidated Financial Statements.
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental-Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. General Company Information and Summary of
Significant Accounting Policies
The Company was organized August 23, 1983, in the State of Utah. Initially,
the Company published and attempted to market a telephone directory, but
this operation was suspended in 1987 due to lack of operating funds and
revenues. Since 1988, the Company has made several attempts to acquire and
operate various businesses. These have proven thus far to be unsuccessful.
Note 2 (below) lists some of the attempted acquisitions and the results. The
Company continues to pursue a path of merger with an operating business.
The Company has incurred significant losses since its inception and as of
August 31 1997, has no source of revenue. The Company has no cash, and has
maintained its existence and paid ongoing expenses through the issuance of
common stock.
The Company has been able to continue because major shareholders have
continued to invest in the Company to meet its expenses.
The Company is considered a development-stage company, and will remain in
this status until operations begin. There can be no assurance that the
Company will be able to merge with an operating company, acquire an ongoing
business, or that the major shareholders will continue to pay the expense
of the Company.
Basis of Presentation
The accompanying consolicated financial statements have been prepared in
accordance with United States generally accepted accounting principles.
Property and Equipment
As of August 31, 1997 the Company had no fixed assets. Previously the
Company depreciated its fixed assets over their estimated useful lives on
a straight line bases.
Development Stage Company
The Company has had no revenue or operations during the previous five years,
and because of this has considers itself a development stage company. It
will remain in this status until such time as it initiates or merges with
operations of some kind. In the early years, the Company generated nominal
revenues from the sale of its telephone directory. These minimal revenues
have been netted with general and administrative expenses of those years.
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental-Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net Loss Per Share
Loss per share is computed based on the average number of shares outstanding
during each year.
Revenue Recognition
The Company has had no revenue during the past five years.
Provision for Income Taxes
The provision for income taxes is the total of the current taxes payable
and the net of the change in the deferred income taxes. Provision is made
for deferred income taxes where differences exist between the period in
which transactions affect current taxable income and the period in which
they enter into the determination of net income in the financial statements.
The Company has a net operating loss carry forward of approximately
$2,000,000 available to offset future taxable income. The last of the carry
forward expires in 2009. No benefit has been recorded on the face of the
balance sheet for this benefit.
Note 2. Investments and Acquisitions
Marketable securities at August 31, 1997 and 1996 had an original cost
basis of $240,000. The stock is currently considered worthless.
Purchase of Phalanx, Ltd. Rights:
In 1994, the Company purchased from Phalanx, Ltd. certain rights to molds
and designs of exclusive jewelry. These were purchased with 27,000,000
shares of the Company's common stock. Originally valued at $270,000 this
investment proved to be worthless. Major shareholders of the Company sued
for return of the shares. On February 9, 1995, the Superior Court of the
County of Maricopa, Arizona decided that the 27,000,000 shares were
improperly given and denied those shares voting rights. On March 23, 1995,
a shareholders' meeting was held wherein those shares were rescinded and
returned to the Company.
Proposed Merger:
As part of a proposed merger, the Company issued 1,250,000 shares to various
parties for consulting. This merger was not successful; however, the shares
of stock for consulting are still outstanding. Similarily, there were
25,100,000 shares issued in association with the proposed acquisition of
Global Resources and Technology, Inc. During June 1997, the Company identified
a business opportunity with Amwest Environmental Group, Inc. (AEG). AEG held
contracts to perform environmental reclamation services for certain cities
in the Peoples Republic of China and secured property, plant, and equipment
in those cities to operate recycling and manufacturing facilities. The
Company issued 25,100,000 shares of no par value Common Stock to Jen
Investments Corporation, in trust, for the benefit of AEG, pending
shareholder approval of the exchange of those shares of AEG's investment
in Global Resources & Technology, Inc. (Global). During May 1997, AEG formed
Global as a wholly owned subsidiary and transferred certain contracts for
environmental clean-up projects, patent and proprietary technologies
associated with environmental clean-up and including land, that it had
acquired by purchase. The property, plant, equipment, and land are located
in the Peoples Republic of China. However, the merger to this date has yet
been completed and the Company does not anticipate that it will be completed
in the future.
Note 3. Related Party Transactions
The Company has been able to continue in existence and to remove most of
its debts because some of the major shareholders have continued to cover
the administrative expenses and to pay outstanding debts. There is no
guarantee that these shareholders will continue to fund the Company.
There are no outstanding obligations due to or from related parties as of
August 31, 1997.
Note 4. Commitments and Contingencies
The Company has no commitments or contingencies as of August 31, 1997
Note 5. Going Concern
The Company has incurred significant losses since its inception and as of
August 31, 1997, had no source of revenue. The Company also had no cash,
and has paid for all of its ongoing expenses with the issuance of its
common stock.
The Company has been able to continue because the major stockholders have
been willing to continually invest in the Company to cover expenses. The
Company is to be considered a development-stage company, and will remain in
this status until operations have been established. No guarantee can be
made that the Company will be able to merge with an operational company or
that the major stockholders will continue to pay the expenses of the Company.
As of August 31, 1997 and 1996, the Company had no assets.
Due to the nature of the Company's activities, the Company's prospects for
the future are dependent on a number of variables which cannot be predicted.
Generally, after identifying a potential business opportunity, the Company
could incur significant costs in evaluating the desirability of an
acquisition or other form of business combination. Should the Company
determine to proceed with the business combination, the transaction costs
could be significant. Thereafter, results of operation would likely be
materially affected by the business acquired or merged with the Company.
In February 1997, major stockholders contributed $8,000 to pay old payables.
Note 6. Subsequent Events
The Company is currently seeking additional funding through debt and equity
financing. The Company is also seeking a suitable merger candidate. No
guarantees can be made that the company will be successful in its attempts
to obtain funding or acquire or start an operational business.
MERIT DIVERSIFIED INTERNATIONAL, INC.
(A Developmental-Stage Company)
SCHEDULE 11 - VALUATION AND QUALIFYING ACCOUNTS
NONE.
ITEM 9: CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
The Company has changed it's accountant to Andrew M. Smith CPA.
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The officers and directors of the Company were the following:
Name Age Title
Dwight Mallette 64 Sec./Treasurer/Director
Mr. Dwight Mallette, age 64, has been a Director and Secretary and Treasurer
of the Company since May 1997. Mr. Mallette has held positions including
Director of Allstar Entertainment, Inc., Director of Largo Vista
International, Inc. and Director of Astral Ventures & Tours, Inc.
ITEM 11: EXECUTIVE COMPENSATION
No officer or director receives compensation for services rendered except
that the directors are authorized to receive 100 shares of R-144 Company
stock for each directors meeting that they attend. No such stock has been
issued.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of August 31, 1997, the following were beneficial owners of more than
five percent of the Company's common stock.
Stock Name and Address Ownership
Common JEN INVESTMENTS CORP. 25,100,000
c/o Allstar
4750 Campus Dr. #2
Newport Beach, Ca 92660
Total as a Group: 25,100,000
The table below sets forth those directors and officers who own shares of
Company stock.
Common Dwight Mallette NONE
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No director or officer, directly or indirectly, in indebted to the Company
in an amount in excess of $60,000 as of the close of the fiscal year
August 31, 1997.
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS
a. Audited Financial Statements.
SIGNATURES
The signature below is that of Mr Dwight Mallette. Mr. Mallette did not
become involved with the Company until May 1997. Mr. Mallette disclaims any
knowledge of, or liability for any transaction prior to this time.
Mr. Mallette signs below as a current officer and director.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
Merit Diversified International, Inc.
(Registrant)
____________/s/_____________________________
Dwight Mallette, Chief Accountant, Secretary
Dated: October 10, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Signature Title
______________________/s/___________________
Dwight Mallette Chief Accountant