---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-F

(MARK ONE)

[   ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(B)
  OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ or __________

Commission file number: 0-32359

MERIDIAN CO., LTD.(Exact
name of registrant as specified in its charter)

The Republic of Korea(Jurisdiction of
incorporation or organization)

4F, 196-35, Anyang-Dong, Manan-Gu, Anyang-Si, Gyeonggi-Do,
Korea 430-857 (Tel: 82-31-463-7700)(Address of principal
executive offices)

Securities registered or to be registered pursuant to Section
12(b) of the Act:

Title of Each Class: None

Name of each exchange on which
  registered: Not applicable

Securities registered or to be registered pursuant to
  section 12(g) of the act:

Common shares with par value
  (Title of Class)

Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the
issuer's classes of capital or common stock as of the close of the period
covered by the annual report.

Common shares outstanding August 19, 2011: 36,594,156

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
[   ]    No [X]

If this report is an annual report or transition report,
indicate by check mark if the registrant is not required to file reports
pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934. Yes
[   ]    No [X]

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 [X]    No
[   ]

---

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of
the Exchange Act. (Check one):

Large accelerated filer [  
]        Accelerated filer [  
]        Non-accelerated filer [ 
 ]        Smaller reporting company [X]

Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:

|U.S. GAAP [X] | International Financial
      Reporting Standards as issued | Other [   ]
|------------- | ----------------------------------------------------------- | -----------
|              | by the International Accounting
      Standards Board [   ] |            

Indicate by check mark which financial statement item the
registrant has selected to follow. Item 17 [   ]   Item
18 [X]

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [   ]   No [X]

---

TABLE OF CONTENTS

ReferencesCurrency Translation

|ITEM
      1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                             
|------------------------------------------------------------------------------------------------
|ITEM
      2. OFFER STATISTICS AND EXPECTED TIMETABLE                                           
|ITEM
      3. KEY INFORMATION                                                                   
|ITEM
      4. INFORMATION ON THE COMPANY                                                        
|ITEM
      5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                      
|ITEM
      6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                        
|ITEM
      7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                                 
|ITEM
      8. FINANCIAL INFORMATION                                                             
|ITEM
      9. THE OFFER AND LISTING                                                             
|ITEM
      10. ADDITIONAL INFORMATION                                                           
|ITEM
      11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                       
|ITEM
      12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.                          
|ITEM
      13.DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCIES                                  
|ITEM
      14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS
|ITEM
      15. CONTROLS AND PROCEDURES                                                          
|ITEM
      16. [RESERVED]                                                                       
|ITEM
      16A. AUDIT COMMITTEE FINANCIAL EXPERT                                                
|ITEM
      16B. CODE OF ETHICS                                                                  
|ITEM
      16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                          
|ITEM
      16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                      
|ITEM
      16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
      PURCHASERS    
|ITEM
      17. FINANCIAL STATEMENTS                                                             
|ITEM
      18. FINANCIAL STATEMENTS                                                             
|ITEM
      19. EXHIBITS                                                                         

---



References

All references to "Korea" herein are references to The Republic
of Korea. All references to "Meridian," the "Company", "we," "us" or "our"
herein are references to Meridian Co., Ltd. All references to the "Government"
are references to the government of Korea. All references to the "shares" are
references to the Company's issued common shares of par value Won 100 (US $0.09
at December 31, 2010).

Currency Translation

In this annual report, references to "Won" or "\" are to the
currency of Korea and all references to "Dollars," "$" or "US$" are to the
currency of the United States of America. Our financial statements are prepared
in Won and presented in accordance with accounting principles generally accepted
in the United States for the fiscal years ended December 31, 2010, 2009, 2008,
2007 and 2006. Solely for the convenience of the reader and to improve clarity,
certain items in this annual report were expressed in US$ at specified rates.
Those US$ amounts are not audited. All translations from Won to US$ were made
(unless otherwise indicated) at the noon buying rate in The City of New York for
cable transfers in Won per US$1.00 as certified for customs purposes by the
Federal Reserve Bank of New York in effect on December 31, 2010, which was Won
1,130.60 to US$1.00. No representation is made that the Won or US$ amounts
referred to in this annual report could have been or could be converted into US$
or Won, as the case may be, at any particular rate or at all. See also Item 3,
Key Information, Exchange Rates Information, for information regarding the rates
of exchange between the Won and the US$. On June 30, 2011 the exchange rate was
Won 1,066.3 to US$1.00.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISERS

A. DIRECTORS AND SENIOR MANAGEMENT

See Item 4.C.

B. ADVISERS

Not Applicable

C. AUDITORS

Not Applicable

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable

ITEM 3. KEY INFORMATION

A. SELECTED FINANCIAL DATA

The selected consolidated financial and other data set forth
below should be read in conjunction with the audited consolidated financial
statements of Meridian Co., Ltd. as of December 31, 2010 and 2009 and for the
years ended December 31, 2010, 2009 and 2008 including the notes thereto, and
"Item 5 - Operating and Financial Review and Prospects" included in this annual
report. The selected consolidated financial data set forth below for the fiscal
years ended December 31, 2010, 2009, 2008, 2007 and 2006 are derived from the
audited consolidated financial statements of Meridian, which have been audited
by Choi, Kim and Park LLP, independent accountants

Our consolidated financial statements are compiled in Won and
presented in accordance with accounting principles generally accepted in the
United States.

---

Meridian Co., Ltd. and Subsidiaries Condensed Consolidated
Statements of Operations For the years ended December 31, 2010, 2009, 2008,
2007 and 2006 
  (Korean Won (\) in thousands, except per share amounts)

|                                                               |   | 2010(1)(in US$) |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|-------------------------------------------------------------- | - | --------------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                                               |   | (unaudited)     |   |   | 2010       |   |   | 2009       |   |   | 2008       |   |   | 2007       |   |   | 2006       |  
|                                                               |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|                                                               |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|Sales                                                          | $ | 1,184,053       |   | \ | 1,338,690  |   | \ | 1,373,379  |   | \ | 3,324,923  |   | \ | 2,604,541  |   | \ | 1,526,828  |  
|Cost of sales                                                  |   | 621,662         |   |   | 702,851    |   |   | 441,416    |   |   | 944,250    |   |   | 819,418    |   |   | 591,819    |  
|Gross profits                                                  |   | 562,391         |   |   | 635,839    |   |   | 931,963    |   |   | 2,380,673  |   |   | 1,785,123  |   |   | 935,009    |  
|Operating expenses                                             |   | 1,428,707       |   |   | 1,615,296  |   |   | 2,985,018  |   |   | 2,608,778  |   |   | 2,347,469  |   |   | 1,186,416  |  
|Loss from operations                                           |   | (866,316        | ) |   | (979,457   | ) |   | (2,053,055 | ) |   | (228,105   | ) |   | (562,346   | ) |   | (251,407   | )
|Other income(expenses)                                         |   | (383,784        | ) |   | (433,901   | ) |   | (444,353   | ) |   | 401,089    |   |   | (45,317    | ) |   | (83,600    | )
|                                                               |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|Income(Loss) before income taxes                               | $ | (1,250,100      | ) | \ | (1,413,358 | ) | \ | (2,497,408 | ) | \ | 172,984    |   | \ | (607,663   | ) | \ | (335,007   | )
|Income taxes                                                   |   | -               |   |   | -          |   |   | -          |   |   | -          |   |   | -          |   |   | -          |  
|Net income(loss)                                               |   | (1,250,100      | ) |   | (1,413,358 | ) |   | (2,497,408 | ) |   | 172,984    |   |   | (607,663   | ) |   | (324,747   | )
|                                                               |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|Net income(loss) per common
      share      Basic and diluted | $ | (0.036          | ) | \ | (40        | ) | \ | (71        | ) | \ | 5          |   | \ | (19        | ) | \ | (10        | )
|Weighted average number of
      common shares                 |   | 35,094,156      |   |   | 35,094,156 |   |   | 35,094,156 |   |   | 35,033,418 |   |   | 32,553,528 |   |   | 31,393,984 |  

Condensed Consolidated Balance Sheets As of December 31,
2010, 2009, 2008, 2007, and 2006 
  (Korean Won (\) in thousands)

|                                         |   | 2010(1)(in US$) |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|---------------------------------------- | - | --------------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                         |   | (unaudited)     |   |   | 2010       |   |   | 2009       |   |   | 2008       |   |   | 2007       |   |   | 2006       |  
|                                         |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|                                         |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|Cash and cash equivalents                | $ | 6,565           |   | \ | 7,423      |   | \ | 5,630      |   | \ | 2,927      |   | \ | 103,865    |   | \ | 2,387      |  
|Accounts receivable                      |   | 114,907         |   |   | 129,915    |   |   | 835,623    |   |   | 2,319,328  |   |   | 1,195,182  |   |   | 453,747    |  
|Inventories                              |   | 119,345         |   |   | 134,932    |   |   | 352,705    |   |   | 491,769    |   |   | 549,798    |   |   | 371,209    |  
|Other current assets                     |   | 40,994          |   |   | 46,348     |   |   | 6,843      |   |   | 46,124     |   |   | 23,893     |   |   | 21,337     |  
|                                         |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|Total current assets                     |   | 281,811         |   |   | 318,618    |   |   | 1,200,801  |   |   | 2,860,148  |   |   | 1,872,738  |   |   | 848,680    |  
|Property, plant and
      equipment, net |   | 14,563          |   |   | 16,466     |   |   | 59,668     |   |   | 83,304     |   |   | 50,565     |   |   | 16,546     |  
|Investments and other assets             |   | 3,887           |   |   | 4,396      |   |   | 43,614     |   |   | 150,564    |   |   | 132,090    |   |   | 104,792    |  
|                                         |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|TOTAL ASSETS                             | $ | 300,261         |   | \ | 339,480    |   | \ | 1,304,083  |   | \ | 3,094,016  |   | \ | 2,055,393  |   | \ | 970,018    |  
|                                         |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|Trade accounts payable and current debt  | $ | 7,553,788       |   | \ | 8,540,312  |   | \ | 7,450,947  |   | \ | 5,902,010  |   | \ | 4,457,132  |   | \ | 5,085,477  |  
|Long-term borrowings                     |   | 1,296,024       |   |   | 1,465,286  |   |   | 2,142,966  |   |   | 3,072,011  |   |   | 3,683,599  |   |   | 3,984,116  |  
|Shareholders deficiency                 |   | (8,549,551      | ) |   | (9,666,118 | ) |   | (8,289,830 | ) |   | (5,880,005 | ) |   | (6,085,338 | ) |   | (8,099,575 | )
|                                         |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|TOTAL LIABILITIES AND DEFICIENCY         | $ | 300,261         |   | \ | 339,480    |   | \ | 1,304,083  |   | \ | 3,094,016  |   | \ | 2,055,393  |   | \ | 970,018    |  

(1) For convenience only, the Won amounts are expressed in U.S.
dollars at the rate of Won 1,130.6 to US$1.00, the noon buying rate as quoted by
the Federal Reserve Bank of New York in effect on December 31, 2010. This
translation should not be construed as a representation that the Won amounts
represent, have been or could be converted to US$ at that rate or any other
rate.

---

Exchange rate information

The following table sets forth, for the periods and dates
indicated, certain information concerning the noon buying rate of a U.S. dollar
in Won. No representation is made that the Won or Dollar amounts referred to
herein could have been or could be converted into Dollars or Won, as the case
may be, at any particular rate, or at all.

Won per U.S dollar(noon buying rate)YEAR
      Period-End
      Average(1)
      High
      Low2006
      930.0
      954.3
      1,002.9
      913.72007
      935.8
      929.0
      950.2
      903.22008
      1,262.0
      1,098.7
      1,507.9
      935.22009
      1,163.7
      1,274.6
      1,570.1
      1,149.02010
      1,130.6
      1,155.7
      1,253.2
      1,104.02011January
      1,119.1
      1,118.9
      1,128.1
      1,111.0February
      1,123.7
      1,117.4
      1,130.6
      1,100.9March
      1,097.3
      1,119.3
      1,135.6
      1,097.3April
      1,068.4
      1,083.2
      1,091.8
      1,068.4May
      1,078.0
      1,084.4
      1,101.6
      1,065.5June
      1,066.3
      1,080.5
      1,091.2
      1,066.3


(1) The average of the daily noon buying rates of the Federal
  Reserve Bank in effect during the relevant period (or portion thereof)

B. Capitalization and indebtedness

Not applicable

C. Reasons for the offer and use of proceeds

Not applicable

D. Risk Factors

The following risks relate specifically to the Company's
business and should be considered carefully. The Company's business, financial
condition and results of operations could be materially and adversely affected
by any of the following risks. In particular, the Company is a Korean Company
and is governed by a legal and regulatory environment which in some respects may
differ from that which prevails in other countries.

The Company's additional funding requirements

The Company has limited financial resources. The Company will
require additional cash to implement its business strategies, including cash for
(i) payment of long-term and short-term borrowings (ii) payment of operating
expenses, (iii) costs associated with bringing new products to market, (iv)
continued research and development and (v) further implementation of those
business strategies. The Company anticipates raising such additional capital
through public or private financings, as well as through loans and other
resources. There is no assurance that the necessary funds would be available to
the Company on terms acceptable to it. Failure to obtain such additional funding
could result in a delay or an indefinite postponement in providing some or all
of the Company's products to the market place, or the ability to supply
sufficient product to the market place on a continual and profitable basis.
Additional funds raised by the Company through the issuance of equity or
convertible debt securities will cause the Company's current stockholders to
experience dilution. Such securities may grant rights, preferences or privileges
senior to those of the Company's common stockholders. The Company does not have
any contractual restrictions on the Company's ability to incur debt and,
accordingly, the Company could incur significant amounts of indebtedness to
finance its operations. Any such indebtedness could contain covenants which
would restrict the Company's operations.

In February 2004, the Company received approval for a debt
restructuring plan for a total of 4,697,927 thousand Won from the Chooncheon
District Court, Korea, whereby a group of creditors of the Company and a
representative of the Company agreed to reschedule the payments on 4,697,927
thousand Won of the Company's debt.

In January 2005, Woori Bank exercised its security right on the
apartment owned by Meridian. The proceeds of 42,837 thousand Won from
foreclosure were used to pay debt principal, interest and other direct expenses
related to foreclosure.

Aside from the debt restructuring, Meridian had a borrowing
from Chohung Bank (Chohung Bank has been merged into Shinhan Bank as of April 1,
2006), which was not included in the original restructuring plan, as the bank
did not agree to the terms. In December 2005, Chohung Bank exercised its security right on the land and building,
which had been provided as collaterals by Meridian. The proceeds of 883,308
thousand Won from the foreclosure, was paid to preemptive other creditors and
Chohung Bank. Subsequent to the foreclosure, the original debt restructuring
plan was modified to include the outstanding principal of 1,074,455 thousand Won
to Chohung Bank.

---

The repayments under the modified plan were scheduled as
follows:

|(in thousand) |   |         |  |   |         |  |   |         |  |   |         |  |   |         |  |   |         |  |   |         |  |   |           | 
|------------- | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | --------- | 
|              |   | 2007    |  |   | 2008    |  |   | 2009    |  |   | 2010    |  |   | 2011    |  |   | 2012    |  |   | 2013    |  |   | Total     | 
|Principal     | \ | 650,757 |  | \ | 650,757 |  | \ | 650,757 |  | \ | 650,757 |  | \ | 650,757 |  | \ | 650,757 |  | \ | 650,756 |  | \ | 4,555,298 | 
|Interest      |   | 159,435 |  |   | 136,659 |  |   | 113,883 |  |   | 91,106  |  |   | 68,329  |  |   | 45,553  |  |   | 22,777  |  |   | 637,742   | 
|Total         | \ | 810,192 |  | \ | 787,416 |  | \ | 764,640 |  | \ | 741,863 |  | \ | 719,086 |  | \ | 696,310 |  | \ | 673,533 |  | \ | 5,193,040 | 

In December 2008, Korea Technology Credit Guarantee Fund
reduced their original principal from 1,151,884 thousand Won to 1,142,064
thousand Won. The repayments under the re-modified plan were scheduled as
follows:

(in thousand)2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    TotalPrincipal
    \
    462,656
    
    \
    649,082
    
    \
    \ 649,082
    
    \
    649,082
    
    \
    649,082
    
    \
    649,082
    
    \
    649,081
    
    \
    4,357,147Interest
    
    447,346
    
    
    158,465
    
    
    162,399
    
    
    150,251
    
    
    68,180
    
    
    45,461
    
    
    22,727
    
    
    1,054,829Total
    \
    910,002
    
    \
    \ 807,547
    
    \
    811,481
    
    \
    799,333
    
    \
    717,262
    
    \
    694,543
    
    \
    671,808
    
    \
    5,411,976


However, due to the recurring losses from operations, Meridian
was not able to meet the repayment schedule. As of December 31, 2010, Meridian
has not paid 2,409,902 thousand Won of principal and 918,461 thousand Won of
accrued interest outstanding to financial institutions, and 863,102 thousand Won
of accounts payable to various vendors.

In June, 2004, the Company received funds of US$530,000 from
investors through an equity financing whereby, the Company issued 3,312,500
common shares of the Company to three non-U.S. investors at the price of US$0.16
per share.

In April 2007, the Company raised 517,000,000 Won from twenty
non-U.S. investors for total 933,506 common shares at the price of 554 Won per
share and warrants to purchase 133,358 common shares at 950 Won per share. As of
December 31 2009, due to the end of exercisable period, those warrants are not
effective any more.

In June 2007, the Company raised US$350,000 from one non-U.S.
investor for 700,000 common shares at the price of US$0.50 per share.

In December 2007, the Company raised 1,779,000,000 Won from
forty nine non-U.S. investors for total 1,976,666 common shares at the price of
900 Won per share.

In January 2011, the Company raised US$150,000 from one U.S.
investor for 1,500,000 common shares at the price of US$0.10 per share.

The Company intends to raise additional financing through the
issuance of debt or equity instruments. However, if the Company's efforts are
not successful, the Company may not be able to realize its assets and discharge
its liabilities in the normal course of operations.

The Company incurred significant operating losses in the
past and may not be able to achieve or sustain profitability in the future.

For the year ended December 31, 2010, the Company had a net
loss of 1,413,358 thousand won ($1,250,100) and an accumulated deficit of
19,121,226 thousand won ($16,912,461). The extent of future losses will depend,
in part, on growth in revenues from the Company's products. The Company expects
that operating costs will increase during the next several years, especially in
the areas of sales and marketing, product development and general and
administrative expenses as it pursues its business strategy. Thus, the Company
will need to generate revenues faster than the rate of growth in costs to
achieve profitability. To the extent that increases in its operating expenses
precede or are not subsequently followed by corresponding increases in revenues,
or if it is unable to adjust operating expense levels accordingly, the Company's
business, results of operations and financial condition would be materially and
adversely affected. There is no assurance that the Company will sustain
profitability or that its operating losses will not increase in the future.

The Company operates in a highly competitive industry and
competes against many large companies.

Increased competition in the medical device manufacturing
industry in our markets from existing and potential competitors could make it
difficult for us to retain existing customers and attract new customers. Many of
our competitors have significantly greater financial, marketing and development
resources than we have. As a result, we may not be able to devote adequate
resources to develop new product. The risk to the Company's markets could impair
the Company's growth and have a negative effect on the Company's business.

---

The Company may need to upgrade products and develop new
technologies to succeed in product life cycles.

Continued participation by the Company in its market may
  require the investment of the Company's resources in upgrading of its products
  and technology for the Company to compete and meet regulatory and statutory
  standards. There can be no assurance that such resources will be available to
  the Company or that the pace of product and technology development established
  by management will be appropriate to the competitive requirements of the
  marketplace. The Company's success will depend on a substantial degree on its
  ability to develop and introduce in a timely manner new products and
  enhancements that meet changing customer requirements and emerging industry
  standards. The development of new, technologically advanced products and
  enhancements is a complex and uncertain process requiring high levels of
  innovation as well as the anticipation of technology and market trends.

There can be no assurance that the Company will be able to identify,
  develop, manufacture, market, sell, or support new products and enhancements
  successfully, that new products or enhancements will achieve market acceptance,
  or that the Company will be able to respond effectively to technology changes,
  emerging industry standards or product announcements by competitors.

The Company currently depends on a limited number of
domestic suppliers to manufacture certain key components and these manufacturers
may not be able to satisfy requirements and could cause potential revenues to
decline.

The Company currently buys certain key components from a
limited number of suppliers. The Company anticipates that these suppliers will
manufacture these key components in sufficient amounts to meet its production
requirements. If these suppliers fail to satisfy the Company's requirements on a
timely basis and at competitive prices, the Company could suffer manufacturing
delays, a possible loss of revenues or higher than anticipated costs of
revenues, any of which could seriously harm its operating results.

Macroeconomic factors in regional markets may adversely
affect the business.

Any significant deterioration in the general economic
conditions would have an adverse effect on the Company's business, results of
operations and financial condition. The success of the Company's operations
depends on a significant extent upon a number of factors relating to
discretionary consumer spending, including economic conditions (and perceptions
of such conditions by consumers) affecting disposable consumer income such as
employment, wages, salaries, business conditions, interest rates, availability
of credit and taxation for the economy as a whole and in regional and local
markets where the Company operates. There can be no assurance that consumer
spending will not be adversely affected by general economic conditions, which
could negatively impact the Company's results of operations and financial
conditions. Any significant deterioration in general economic conditions or
increases in interest rates may inhibit consumers' use of credit and cause a
material adverse effect on the Company's revenues and profitability. Any
significant deterioration in general economic conditions that adversely affect
these companies could also have a material adverse effect on the Company's
business, results of operations and financial condition.

Sales and Distribution

The Company has yet to establish a significant distribution and
support network in certain markets. Failure on the part of the Company to put
into place an experienced and effective marketing infrastructure in a timely
manner could act to delay or negate the realization of anticipated revenues.

Market Acceptance

The viability of the Company is dependent upon the market
acceptance of its current and future products. There is no assurance that the
Company's products will attain a level of market acceptance that will allow for
continuation and growth of its business operations. In addition, the Company
will need to develop new processes and products to maintain its operations in
the longer term. The development and launching of such processes and products
can involve significant expenditure. There can be no assurance that the Company
will have sufficient financial resources to fund such programs and whether such
undertaking will be commercially successful.

Adequate Labor and Dependence Upon Key personnel; No
Employment Agreements

The Company will depend upon recruiting and maintaining
qualified personnel to staff its operations. The Company believes that such
personnel are currently available at reasonable salaries and wages. There can be
no assurance, however, that such personnel will always be available in the
future. The continuing development of the Company's products has been almost
entirely dependent on the skills of management and certain key employees of the
Company with which the Company has no employment agreements. Loss of the
services of any of this management team and key employees could have a material
adverse effect upon the Company.

The Company's growth depends on its ability to commercialize
products.

Currently a significant amount of the Company's revenue comes
from the Meridian product line that is central to the Company's growth strategy.
This line of products encounters competition and is price sensitive. While the
Company is currently developing new products, the Company cannot be assured that
these products will reach the market on time, will satisfactorily address
customer needs, will be sold in high volume, or will be sold at profitable
margins.

---

The Company's operating expenses are anticipated to be
relatively fixed and therefore the Company may have limited ability to reduce
expenses quickly in response to any revenue shortfall.

The Company anticipates that its operating expenses will be
relatively fixed, and the Company therefore has limited ability to reduce
expenses quickly in response to any revenue shortfalls. Consequently, the
Company's operating results will be harmed if the Company's revenues do not meet
its revenue projections. The Company may experience revenue shortfalls for the
following reasons:

|- | significant pricing pressures that occur due to
      competition, over supply, or other reasons;                                                                                                                                                                                      
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | sudden shortages of raw materials or fabrication, test or
      assembly capacity constraints that lead the Company's suppliers to
      allocate available supplies or capacity to other customers which, in turn,
      harm the Company's ability to meet its sales obligations; and
|- | the reduction, restructuring or cancellation of customer
      orders.                                                                                                                                                                                                                 

The Company's markets are subject to rapid technological
change and, therefore, its success depends upon the Company's ability to
develop and introduce new products The markets for the Company's products are
characterized by:

|- | rapidly changing technologies;                            
|- | ----------------------------------------------------------
|- | evolving and competing industry
      standards           
|- | changing customer needs; and                              
|- | frequent new product
      introductions and enhancements.

To develop new products for its target markets, the Company
must develop, gain access to and use leading technologies in a cost-effective
and timely manner and continue to expand its technical and design expertise. In
addition, the Company must have its products designed into its customers' future
products and maintain close working relationships with key customers in order to
develop new products that meet their changing needs.

The Company cannot be assured that it will be able to identify
new product opportunities successfully, develop and bring to market new
products, achieve design wins or respond effectively to new technological
changes or product announcements by its competitors. In addition, the Company
may not be successful in developing or using new technologies or in developing
new products or product enhancements that achieve market acceptance. The pursuit
of necessary technological advances may require substantial time and expense.
Failure in any of these areas could harm the Company's anticipated operating
results.

The Company's ability to compete successfully will depend,
in part, on its ability to protect its intellectual property rights, which the
Company may not be able to protect.

The Company relies on a combination of patent, trade secrets,
and copyright, nondisclosure agreements and other contractual provisions and
technical measures to protect its intellectual property rights. Policing
unauthorized use of the Company's products is difficult, especially in foreign
countries. Litigations may continue to be necessary in the future to enforce its
intellectual property rights, to protect its trade secrets, to determine the
validity and scope of the proprietary rights of others, or to defend against
claims of infringement or invalidity. Litigation could result in substantial
costs and diversion of resources and could harm its business, operating results
and financial condition regardless of the outcome of the litigation.

The Company cannot be assured that any pending patent
application will be granted.

The Company has acquired ownership or exclusive license to a
number of patents or patent applications related to its products. However, the
Company cannot be assured that any pending patent application will be granted,
or that all such patents can provide adequate protection for its intellectual
property. The Company's operating results could be seriously harmed by the
failure to protect its intellectual property. If the Company is accused of
infringing the intellectual property rights of other parties, it may become
subject to time-consuming and costly litigation. If the Company loses, it could
suffer a significant impact on its business and it may be forced to pay damages.
Third parties may assert that the Company's products infringe their proprietary
rights, or may assert claims for indemnification resulting from infringement
claims against it. Any such claims may cause the Company to delay or cancel
shipment of its products or pay damages that could seriously harm its business,
financial condition and results of operations. In addition, irrespective of the
validity or the successful assertion of such claims, the Company could incur
significant costs in defending against such claims. The Company's litigation may
be expensive, may be protracted, and confidential information may be
compromised. Whether or not the Company is successful in any litigation, the
Company expects the litigation to consume substantial amounts of its financial
and managerial resources. Further, because of the substantial amount of
discovery required in connection with this type of litigation, there is a risk
that some of the Company's confidential information could be compromised by
disclosure.

A limited number of customers generate a significant portion
of the Companys revenue.

The Company's accounts receivable are derived primarily from
revenue earned from customers located in the U.S. and Korea. The Company
performs ongoing credit evaluations of its customers' financial condition and,
generally, requires no collaterals from its customers. The Company maintains an
allowance for doubtful accounts receivable based upon the expected
collectability of accounts receivable. There was 522,823 thousand won write-off
in the year ended December 31, 2010 and was no write-off in 2009.

---

In 2010, the Company had one customer represented approximately
55.8% of revenues. In 2009, the Company had two customers that each represented
more than 10% of its revenues, one of which represented approximately 47.5% of
revenues and the other which represented approximately 11% of revenues. In 2008,
the Company had three customers that each represented more than 10% of its
revenues, one of which represented 29% and two of which represented
approximately 11% of revenues.

At December 31, 2010, the Company had one customer that
accounted for 77% of accounts receivable. At December 31, 2009, the Company had
one customer that accounted for 65% of accounts receivable.

Expansion of the Companys operations abroad is important to
its long-term successes, but its limited experience in the operation outside of
Korea increases the risk that the performance in oversea markets would not be
successful with the large expenditure for various license acquisition fees and
marketing cost.

The Company's business may suffer due to risks associated with
international sales and operations. The Company anticipates that export products
will account for most of its revenues. International business activities are
subject to a number of risks, each of which could impose unexpected costs of the
Company that would have an adverse effect on its operating results. These risks
include:

|- | difficulty in complying with
      regulatory requirements and standards;
|- | -------------------------------------------------------------------------
|- | tariffs and other trade barriers;                                        
|- | costs and risks of localizing
      products for foreign countries;      
|- | reliance on third parties to
      distribute the Company's products;    
|- | longer accounts receivable
      payment cycles;                         
|- | potentially adverse tax
      consequences;                              
|- | limits on repatriation of
      earnings; and                            
|- | burdens of complying with a wide
      variety of foreign laws           

The Company anticipates that it will have to continue to
depend on manufacturers' representatives, agents, and distributors to generate
substantial amounts of its revenues.

The Company anticipates that it will have to continue to rely
on manufacturers' representatives, agents, and distributors to sell a
significant portion of its products, and these entities could discontinue
selling its products at any time. The loss of any significant agent could
seriously harm the Company's operating results.

The Company's success may be affected by unusual growth of
competing new products.

There may be new products being introduced by competitors in
the future which meet unusually high global demands. If the new products'
customer base overlaps a substantial portion of the Company's products' customer
base, or that the new products use the same key component as the Company's
products, the demand for the Company's products or the supply of their key
component may be reduced, which may seriously harm the Company's operations.

Forward Looking Statements

All statements, other than statements of historical facts,
included in this registration statement, including, without limitation, the
statements under and located elsewhere herein regarding industry prospects and
the Company's financial position are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectation will
prove to have been correct. A shareholder or prospective shareholder should bear
this in mind when assessing the Company's business.

Shares Eligible for Future Sales

There has been no sustained market for the Company's shares,
and there can be no assurance that a significant market will develop or be
sustained. Future sales of substantial amounts of the Company's shares
(including shares issued upon exercise of options and warrants) in the public
market could adversely affect market prices prevailing from time to time and
could impair the Company's ability to raise capital through sales of the
Company's equity securities.

Country Risks

There are unique economic and political risks associated with
investing in companies from Korea. Some of Korea's recent financial and economic
difficulties have included:

|- | Exchange rate fluctuations;             
|- | ----------------------------------------
|- | Interest rate fluctuations;             
|- | Reduced credit from foreign
      banks;
|- | Volatile stock prices; and              

---

|- | Higher unemployment.
|- | --------------------

Relations between South Korea and North Korea have been tense
over most of Korea's history. The level of tension between the two Koreas has
fluctuated and may increase or change abruptly as a result of current or future
events. The occurrence of such events could have a material adverse effect on
the Company's operations and the price of its shares.

Ownership of shares may be subject to certain restrictions
under Korean law.

Prior to making an investment in 10% or more of the outstanding
shares of a Korean company, foreign investors are generally required under
Foreign Investment Promotion Law of Korea to submit a report to a Korean bank
pursuant to a delegation by the Ministry of Commerce, Industry and Energy of
Korea. Failure to comply with this reporting requirement may result in the
imposition of criminal sanctions. Subsequent sales by such investors of its
shares in such company will also require a prior report to such bank.

The Company may not be able to convert and remit dividends
in Dollars if the Government imposes certain emergency measures.

The Company does not intend to pay dividends on its shares in
the foreseeable future. However, if it declares cash dividends, such dividends
will be declared in Won. In order for the Company to pay such dividends outside
Korea, such dividends will be converted into Dollars and remitted to the
shareholders, subject to certain conditions. Fluctuations in the exchange rate
between the Won and the Dollar will affect, among other things, the amounts a
holder of shares of the Company will receive as dividends. Under Korean law, if
the Government deems that certain emergency circumstances are likely to occur it
may impose necessary restrictions. Emergency circumstances include, but are not
limited to, sudden fluctuations in interest rates or exchange rates, extreme
difficulty in stabilizing the balance of payments, or a substantial disturbance
in the Korean financial and capital markets. The restrictions imposed by the
Korean government could include requiring foreign investors to obtain prior
approval from the Ministry of Finance and Economy for the acquisition of Korean
securities or for the repatriation of interest, dividend or sales proceeds
arising from Korean securities or from disposition of such securities, including
the Company's shares.

The Company cannot give any assurance that it can secure such
prior approval from the Ministry of Finance and Economy for payment of dividends
to foreign investors in the future when the Government deems that there are
emergency circumstances in the Korean financial market.

The Company's ability to raise money in equity offerings may
be constrained by the need to register those offerings with the SEC.

The Commercial Code of Korea and the Company's Articles of
Incorporation require the Company, with certain exceptions, to offer
shareholders the right to subscribe for new shares in proportion to their
existing ownership percentage whenever new shares are issued. The Company cannot
exclude U.S. holders of shares from these offers, and must thus register those
offers with the SEC. If the Company cannot, or chooses not to register these
offerings, the Company will be unable to consummate them, which will restrict
the range of capital raising options available to the Company.

Compliance with corporate governance regulations could
increase the cost of our operations

As a result of changing laws, regulations and standards
relating to accounting, corporate governance and public disclosure, the costs of
being a public company in general have increased in recent years. The
Sarbanes-Oxley Act of 2002 requires changes in some of corporate governance and
securities disclosure or compliance practices. The Company expects that the
on-going implementation of these regulations will further increase its legal
compliance costs and will make some activities more time consuming. The Company
is presently planning and implementing regulatory developments and cannot
estimate the magnitude of additional costs it may incur as a result of such
developments in connection with its future implementation of Section 404 of the
Sarbanes-Oxley Act of 2002, which governs.

---

ITEM 4. INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

Meridian Co., Ltd. (Meridian or the Company) was
incorporated in the Republic of Korea on April 19, 1994 for the purpose of
developing and manufacturing medical devices, particularly to the integrative
medical markets. In July 1998, the Company completed the acquisition of Hippo
Medical Devices Co. Ltd. ("Hippo"), a Korean company that was engaged in selling
medical equipment. The acquisition of Hippo by Meridian was a synergistic union
whereby the sales and distribution offices of Hippo were consolidated with the
research and manufacturing divisions of the Company.

On August 30, 1999, the Company agreed to sell, in an arm's
length transaction, certain assets amounting to $1,284,556 relating to two
product lines acquired in the 1998 acquisition of Hippo, to Medicore Co. Ltd.,
an unrelated Korean company. In return, Medicore assumed certain liabilities,
primarily attributed to the two product lines, of the Company in the same
amount. These product lines are the Urea Breath Test Device (UBT) and Infra-Red
Imaging System (IR-2000). This transaction was completed on December 31, 1999.

Pursuant to an Agreement and Plan of Reorganization (the Merger
Agreement) dated February 6, 2001, the Company acquired all the outstanding
shares of common stock of By George Holding, Corp. (By George), a Georgia
corporation, from the shareholders thereof in an exchange of an aggregate of
68,142 shares (equivalent to 1,703,550 post split shares) of common stock of the
Company and other consideration of payments of certain fees and expenses.
Immediately following the Acquisition, ABR Meridian (Georgia) Inc. (Subco), a
Georgia corporation and a wholly-owned subsidiary of the Company, merged with By
George (the Merger) in a transaction in which the Subco became the surviving
corporation.

Upon effectiveness of the Acquisition and Merger, pursuant to
Rule 12g-13(a) of the General Rules and Regulations of the Securities and
Exchange Commission (SEC), the Company elected to become the successor issuer to
By George for reporting purposes under the Securities Exchange Act of 1934, as
amended (the 1934 Act) and elects to report under the 1934 Act effective
February 12, 2001.

On February 13, 2002, the Company's common stock was accepted
for quotation by the NASD on the OTC Bulletin Board under the symbol MRDAF.

In February 2004, the Company received an approval for a debt
restructuring plan for a total of 4,697,927 thousand Won from Chooncheon
District Court, Korea. The adjusted period of payment is generally 7 years after
3 years of grace period.

The Company's corporate head office is located at 4F, 196-35,
Anyang-Dong, Manan-Gu, Anyang-Si, Gyeonggi-Do, Korea 430-857.

B. BUSINESS OVERVIEW

Meridian is an established leader in the research, development,
manufacturing, and marketing of integrative medical devices in the healthcare
industry.

With a dynamic research and development team, Meridian is at
the forefront in the development of cutting edge medical technologies. The
Company presently holds a total of 5 registered and pending patents, 2 design
rights and 7 trademarks and has received 4 FDA 510(k) clearances for their
medical devices. In order to distribute worldwide, Meridian has also gained 3
SDA approvals in China and 3 FIP approvals in South America. Successfully
marketed in Korea, Japan, EU, Middle East, USA, Canada, and China, Meridian
continues to provide its superior product line to a growing number of clients
worldwide. Meridian has over 5,000 clients, which include physicians, hospitals,
healthcare professionals, medical device manufacturers, beauty salons and health
and fitness centers.

The Company currently sells three different products to
healthcare practitioners throughout the domestic and overseas market. These
include DPA (Digital Pulse Analyzer), Lapex-2000 and Lapex BCS (Lapex-2000
LipoLaser)

The Company believes that blending together a combination of
intrinsic medical knowledge with superior software and technology it can create
high quality physiological monitoring applications that capitalize on the
growing wellness market.

Meridians strength lies in the unique knowledge base and
skills of our team who possess medical backgrounds, software engineering skills,
and a sincere passion for preventative medicine that can improve the quality of
ones life.

During 2002, the Company completed the development of the
Composition Corpulence Curer as an aid in the reduction of body fat.

On September 26, 2001 the Beijing Meridian Medical Equipment
Co., Ltd. (BMMEC) was established to further pursue the Company's business in
China. BMMEC is a joint corporation formed by Meridian Co., Ltd. and Mr. Trigon
Jung, investor and president of BMMEC. The main business of BMMEC is publicity
activities and setting up dealership networks for sales in China. Also, Meridian
is planning to give BMMEC a manufacturing license for its products in the
future. Expected sales in China have not materialized according to the Company's
expectations, however, the Company will continue to market their product to the
Chinese market.

---

The Company identified the United States as a significant
market and incorporated Meridian America Medical Inc (MAMI) in the United
States as a subsidiary of the Company, in February 2002, in preparation for the
launch of the Meridian products into the US market.

In 2004, Meridian Co. Ltd. entered into an exclusive
distribution agreement with a corporation in Vancouver, BC, Canada, Meridian
Medical Inc. has been fully concentrating on the marketing and sales of the DPA
and Lapex-2000. Meridian Medical has secured valuable strategic relationships
since its inception and is expected to continue its success in the market adding
further value to Meridian Co. Ltd.

On March 4, 2002, Meridian acquired 100% ownership of Meridian
America Medicals, Inc. located in the city of Irvine, California, USA to
establish distribution post for the North American market. On December 13, 2004
and February 15, 2005, Meridian America Medicals, Inc. issued new common stock,
of which the shares were entirely subscribed by a non-controlling shareholder,
Meridian Medical, Inc. Consequently; the ownership by Meridian was diluted from
100% to 75.76% .

On September 29, 2005, Meridian acquired 100% ownership of
Rapha & Health Co., Ltd. for 50 million Won in cash to systemize its sales
process in domestic (Korea) market. On June 7, 2006, Rapha & Health Co.,
Ltd. changed its name to Meitian Co., Ltd. However, Meitian Co., Ltd. closed
down in April 2008, so that Meridian could concentrate its resources on the
overseas markets.

In April 2007, Meridian expanded its business in the European
market by signing a distribution agreement with Laser Lipo based in the U.K.
Meridian has 7 regional distributors in Europe and achieved 1,444,010 thousand
Won in 2008. Since then, the Company revenue in Europe market was 186,687
thousand Won and 327,126 thousand Won for the year ended 2009 and 2010,
respectively.

In 2009, Meridian has entered into new markets, such as
Portugal, Bulgaria, Albania in EU and South Africa, Egypt, Kuwait for the
diversification of revenue. The revenue from new markets accounted to 136,369
thousand Won and 44,993 thousand Won for the year ended 2009 and 2010,
respectively.

In 2010, the aggressive marketing and sales channel development
for North America and Europe market has increased the amount of two regions
revenue, respectively 855,509 thousand Won and 327,126 thousand Won, occupying
88.3% of the Companys total revenue. Especially, North American market has
increased 23%, compared to last year. In Europe, the Company has begun selling
LAPEX BCS Pro in France and Turkey.

Products of the Company

The Meridian line of products includes DPA (Digital Pulse
Analyzer), Lapex-2000, LAPEX BCS (Lapex-2000 LipoLaser), and Meridian II.

Digital Pulse Analyzer

The DPA uses pulse waveform analysis to measure arterial
compliance. The pulse wave is the arterial pressure change that originates from
the heart and transmits through an artery. The pulse wave is changed by the
systolic power of the heart, the vascular condition (the arterial elasticity,
resistance, etc.), and the functional status of cardio-vascular circulation. DPA
irradiates IR (infrared) through the finger-tip and obtains pulse wave
information with the light absorbing characteristics of HbO2 of arterial blood.
All measurements, calculations, analysis, and printouts can be performed
automatically in less than a minute with a fully non-invasive method.

Automated Digital Pulse Waveform Exam

|- | Useful device in detecting early
      signs of cardiovascular dysfunction.
|- | ---------------------------------------------------------------------------
|- | Loss of arterial compliance, can
      be detected in early stages.        
|- | Uses pulse wave analysis.                                                  
|- | Completely non-invasive                                                    
|- | Diagnosis can be done in a little
      as one minute.                     
|- | Results are immediate and can be
      saved to a patient database         

The DPA (Digital Arterial Pulsewave Analyzer) has the
additional feature of measuring heart rate variability(HRV), which gives a good
indication of the condition of the autonomic nervous system. The software has
the capability to store all of the patient's data. The structure is configured
with a DPA console, SpO2 electrode, and computer software with WINDOWS base.

Lapex-2000

The Lapex-2000 is a semiconductor laser therapeutic device,
which applies a laser to the foci of the human body without damaging the skin
tissue and, in turn, promotes healing of any damaged skin tissue. The use of
laser therapy facilities increases blood flow, vitalization of cells, and
increases protein synthesis which can assist in the treatment of soft tissue
damage, acute and chronic joint diseases, chronic pain, and improvement of
circulation.

The Lapex-2000 comes equipped with an advanced digital
semiconductor laser.

---



ASPECT LAPEX-2000 DESCRIPTION

Features: Advanced digital
semiconductor laser, solid curative effect, semi-permanent No other supplies
are necessary Non-invasive laser Practical for small spaces, easy to
move

Structure: Point Laser Probe -
Trigger Point Monitoring Function and Applying Laser to Trigger Point Multi
Laser Probe - To address the largely affected parts at once LIB (Laser
Irradiation of Blood) probe - Non-invasive irradiation of venous blood, easy to
operate, solid curative effect

Lapex BCS (Lapex-2000 LipoLaser)

LAPEX BCS is a modified version of the Lapex-2000 specifically
to target the growing obesity market. The LAPEX BCS's non-invasive treatment is
considered one of the most innovative methods of body contouring to liquefy
adipose tissue under skin layer, and the demand for this type of treatment is
expected to grow rapidly, not only in the plastic surgery profession, but in any
clinical and aesthetic setting, such as spas and wellness centers, that treat
localized body fat deposits which may not have responded to diet and exercise.

It uses 2 multi-beam and 2 enhanced probes which irradiate a
powerful cold red laser (635  680nm/ 40mW) on adipose (fat) Cell.

Lapex BCS Pro

LAPEX BCS Pro is an upgraded version of the Lapex BCS
specifically to target the growing obesity market.

The enhanced features of this upgraded device are
following:

- New technologies on the platform of the main body. (i.e. main
chip, color LCD, Interface etc.) - Enhanced design and color of the main
body - New technologies, materials and designs on the Laser applicators in
order to make it slimmer and more effective - 4 multi-beams and 2 enhanced
probes

Meridian-II

The Meridian-II is a computer assisted assessment and
diagnostic device, which is based on the analysis technique, pioneered by Dr.
Reinhold Voll, a German medical doctor. Termed Electro-Acupuncture according to
Voll (E.A.V.), the assessment process incorporates elements of Western science
and principles of traditional Chinese medicine. Practitioners use electrical,
magnetic, sonic, acoustic, microwave and infrared devices to screen for or treat
health conditions by detecting imbalances in the body's energy field and then
correcting them. E.A.V. works by measuring the meridian lines on the hands and
feet that correspond to the different organs in the body. The purpose of E.A.V.
is to establish a functional testing of organs and tissues by measuring their
respective acupuncture points. The conductance (capacity to let the stimulation
current through) of an organ or a tissue is measured in order to discover any
energetically unbalanced points. It is believed that the energetic equilibrium
of a human is altered, among other things, by the negative ambiance influence
exercised by some medications, stress, poisons, insecticides, viruses, bacteria,
harmful electromagnetic fields and inflammations as well as certain ailments.

The Meridian-II is a computer assisted assessment and
diagnostic device that establishes a functional testing of organs and tissues by
measuring their respective acupuncture points and delivers a complete computer
drafted evaluation for analysis. If stress or imbalance is detected in a
patient, the Meridian-II can identify the meridian imbalances in a person's body
and also assist the practitioner in recommending a course of treatment or
therapy to alleviate the stress or to restore balance to the body's meridian
systems. This provides the health practitioner with the ability to detect a
potential health problem early and to treat it before the problem manifests
itself. Using the Meridian-II, the practitioner can monitor the progress of
corrective therapies. The device is in the structure of a cart that includes a
touch screen monitor, computer, printer, a set of medical instruments and
supplemental parts including hand and foot electrodes.

ASPECTS MERIDIAN-II DESCRIPTION

Features: 
  Point finder (ARC) 
  MS WINDOWS 98 Acupuncture Point finder (ARC) / Better curative
effect (UPM) Easy operation (TOUCH SCREEN) 
  Single body design

---

Structure: Main body - CART in
exclusive use PC: P-233MHz CPU, 32MB MEMORY, 6.4GB HDD 
  WINDOWS 98 OS, 40X CD-ROM, AGP 4MB VGA

Revenue by Geographic Market

Sales revenue is attributable to geographic locations based on
the location of the customer, as follows:

(Korean Won (\) in thousands)

2010
    
    
    2009
    
    
    2008ExportNorth America
    \
    855,509
    
    \
    693,543
    
    \
    1,143,757Asia
    
    49,220
    
    
    111,835
    
    
    544,461Europe
    
    327,126
    
    
    186,687
    
    
    1,444,010Other
    
    44,993
    
    
    107,966
    
    
    15,6151,276,848
    
    
    1,100,031
    
    
    3,147,843Domestic Sales
    
    61,842
    
    
    273,348
    
    
    177,080\
    1 338 690
    
    \
    1,373,379
    
    \
    3 324 923


Industry Background

The medical instruments industry is characterized by low-volume
production of various medical equipments and apparatus. It contains components
from a diverse range of industries such as electronics, advanced materials and
information technology and includes the fields of physics, chemistry, biology
and medicine. In many countries, government support is provided in the medical
instruments industry as a priority industry. This industry tends to be
technology-intensive, low energy consuming and non-polluting.

Size of Industry

World Medical Device Market

The demand for medical devices is influenced by an increasing
patient population and the focus on health care cost containment and
preventative therapies. Medical devices include a broad range of surgical
devices and equipment used in cardiovascular, orthopedics, respiratory,
ophthalmic, neurology, urinary, disposable, infection and more. The world
medical device industry is expected to grow at a compound annual growth rate of
4.0 percent between 2010 and 2015.

World Medical Device Market size (US $ M), 2010-2015

2010
    2011
    2012
    2013
    2014
    2015
    CAGR(10 ~ 15, %)Market size
    245,633
    256,253
    270,349
    284,126
    298,079
    310,835
    4.0


Source: Espicom, The World Medical Markets Forecasts to 2015,
2010

The global market for medical equipment and supplies is valued
at US $ 254.6 billion in 2010. The CAGR for the 2006-2010 periods is 5.3%,
although this masks the major reduction in growth which has occurred in 2009 and
2010. Many markets which experienced very rapid growth in the years prior to
2009 have experienced a fall due to reduced spending, exchange rate movements or
a combination of both. Market growth is expected to resume in 2011 and beyond,
although it will not be as rapid as before the global economic downturn. Espicom
projects that the total market will rise to US$310.9 billion by 2015, equal to
US$54 per capita. Some of the best prospects for growth will be in the
developing markets of Asia, Latin America and Central Europe, while traditional
Western markets represent more steady performers. The USA is the world largest
market, valued at US$94.9 billion in 2010, equal to 38.6% of the global total.
Japan is the second largest, with US$23.9 billion (9.7%), and Germany third with
US$18.9 billion (7.7%) . All three count among the world richest markets,
although Switzerland and the Scandinavian countries generally outperform them in
terms of per capita spending. The value of the four BRIC markets (Brazil,
Russia, India and China) amounted to US$18.1 billion in 2010, equal to 7.4% of
the world total. The value of the Chinese and Russian markets in particular have
grown strongly in recent years, and China is set to further climb the rankings.
While Chinese per capita spending remains very low, the market is the 7th
largest in the world in 2010 and is set to become the fourth largest by 2015.



---

Cardiovascular Device Market (U.S.)

According to US Medical Device Industry Outlook, released by
  Frost & Sullivan, the total revenue generated from medical device market in
  the U.S. was close to $83 billion in 2006. The revenue in the U.S. medical
  device market is expected to grow average 11.7% annually until 2011. The revenue
  from cardiovascular devices was the highest, $21.3 billion with the expected
  annual growth rate at 7.6% until 2013, the cardiovascular device industry is
  expected to be remaining the biggest industry in the U.S. medical device market
  for next several years. The total cardiovascular device market in the U.S. is
  forecasted to reach $35.6 billion by way of revenues by 2013.

Medical Laser Market (Global)

In 2007, Global Industry Analysts, Inc. reported that the
estimated size of the world medical laser system market US$4 billion in 2007.
United States is the largest market for medical laser systems worldwide at an
estimated US$2.4 billion in 2007. Europe is the second largest market followed
by Japan at a distant third. United States and Europe together account for about
82 percent of the global share. The global and regional markets are expected to
grow at a compound annual grow rate ranging between 9% and 13%.

Direct-energy Based Medical Devices Market (U.S)

Aesthetic laser applications for cellulite reduction require
ongoing follow-up maintenance procedures, resulting in recurring revenue source.
It is estimated that 80% of adult women have cellulite in U.S. Revenue from body
shaping procedures is forecasted to grow to $61.4 million in 2012. A recent 2008
survey conducted by the ASDS reported that consumers are electing minimally
invasive treatments to boost their appearance and be more competitive in
workplace. (US Direct-energy Based Medical Devices Market  Aesthetic;
Cardiovascular; Gynecology; Orthopedics; Urology. Frost & Sullivan, March,
2011)

Body Contouring Device Market (U.S)

Body Contouring Devices market is composed of Cellulite
Reduction Device, Fat Reduction Device and Skin Tightening Device mainly. By
2012, Body Contouring Device market in the United States will be expanded
because of the increases of SPA facilities and the increasing demands for
patients who are interested in invasive and non invasive treatments. Cellulite
removal treatment and skin tightening is used in Plastic Surgery and cosmetic
skin medical area also and this makes it possible the body contouring markets
continuously increase. Especially the combination of the traditional fat
reduction and laser skin tightening will effects on the growth of the body
contouring device market.

Medical Device (MD) Resource: Body Contouring Device Market,
by Indication, US (US $), 2006-2012

Year
    Cellulite Reduction 
      Device
      Market 
      Value (US$M)
    Growth 
      (%)
    Fat Reduction 
      Device Market
      Value (US$M)
    Growth 
      (%)
    Skin Tightening 
      Device Market
      
      Value (US$M)
    Growth 
      (%)
    Total Market 
      Value (US$M)
    Growth 
    (%)2006
    $67.7
    
    $38.1
    
    $38.2
    
    $144.12007
    $78.7
    16.2%
    $65.2
    70.9%
    $43.9
    14.9%
    $187.8
    30.4%2008
    $92.7
    17.7%
    $74.0
    13.5%
    $50.3
    14.5%
    $216.9
    15.5%2009
    $112.8
    21.7%
    $120.3
    62.7%
    $57.5
    14.3%
    $290.6
    34.0%2010
    $139.1
    23.3%
    $148.2
    23.2%
    $65.7
    14.3%
    $352.9
    21.5%2011
    $172.4
    24.0%
    $175.7
    18.6%
    $75.0
    14.3%
    $423.1
    19.9%2012
    $214.4
    24.3%
    $202.9
    15.5%
    $85.8
    14.3%
    $503.0
    18.9%CAGR (08-12)
    
    23.3%
    
    28.7%
    
    14.3%
    
    23.4%


Source: Millennium Research Group

C. ORGANIZATIONAL STRUCTURE

Meridian Co., Ltd. was incorporated under the laws of Korea on
April 19, 1994 as a private company. The Company operates corporate head office
and manufacturing plant are located at 4F, 196-35, Anyang-Dong, Manan-Gu,
Anyang-Si, Gyeonggi-Do, Korea 430-857.

As of December 31, 2010, the Company had one subsidiary. The
acquisition dates and Meridian Co., Ltd.'s ownership percentages of its
consolidated subsidiaries as at December 31, 2010, 2009 and 2008 are as follows:

Acquisition
      Percentage
        ownership at December 31,Subsidiary
      Country of Incorporation
      Primary Business
      Date
      2010
      2009
      2008Meridian America 
        Medicals, Inc.
      USA
      Wholesale and
        retail of medical equipment
      March 4, 
        2002
      75.76%
      75.76%
      75.76%Meitian Co., Ltd
      Korea
      "
      September 29, 
        2005
      Dissolved
      Dissolved
      100.00%


---

On March 4, 2002, Meridian acquired 100% ownership of Meridian America Medicals, Inc. located in the city of Irvine, California, USA to establish distribution post for the North American market. On December 13, 2004 and February 15, 2005, Meridian
America Medicals, Inc. issued new common stock, of which the shares were entirely subscribed by a non-controlling shareholder, Meridian Medical, Inc. Consequently; the ownership by Meridian was diluted from 100% to 75.76% .

On September 29, 2005, Meridian acquired 100% ownership of Rapha & Health Co., Ltd. for 50 million Won in cash to systemize its sales process in domestic (Korea) market. On June 7, 2006, Rapha & Health Co., Ltd. changed its name to Meitian
Co., Ltd. However, Meitian Co., Ltd. ceased its operation in April 2008, so that Meridian could concentrate its resources on the overseas markets.

Directors and Senior Management Team

IN BEOM PARK, President, CEO and Director

Mr. Park graduated from the Seoul National University with a degree in Sociology. From 1991 to 1998 he was the head of the Development & Planning Department of Kia Techono Co., Ltd. He was the Founder of Eduevision Korea Co., Ltd. in 1999. Mr.
Park joined Meridian in 2002 as the head of the Planning Department and CFO and was appointed as CEO in November 2009.

JOHN Y.C. MYUNG, (Secretary, CFO and Director resigned in March 2011)

Mr. Myung graduated from the Pusan University with a degree in Computer Statistics. From 1985 to 1991 he worked in the R&D department of LG Electronics. He was appointed as a chief of Planning Department of Medison Co., Ltd. in 1991 and later
appointed and served as a director of international sales. While he was in charge of international sale in Medison, he contributed on significant growth of oversea sales in Europe, North America, Japan and Southeast Asia and the oversea sales was
increased from US$20M to $70M. He also served as a director of Management & International Marketing Business of Korea Strategic Partners that the primary businesses are dental X-ray and panoramic sales in Korea from 2001 to 2007. Mr.
Myung joined Meridian in 2007 as an international sale director and was appointed as CEO in April 2009. In November 2009, Mr Myung resigned and appointed Secretary and CFO.

HYUNG KYOON KIM, (Director resigned in March 2011)

Mr. Kim graduated from Seoul National University a degree in Anthropology in 1989. From 1995 to 2007 he was the manager of the Security Trading department of Daewoo Securities. In April 2006, he was appointed a Director of Meridian.

HYEON-SEONG MYEONG, Secretary, CFO and Director (appointed in March 2011)

Mr. Myeong graduated from the Seoul National University in 1982 with a degree in Electronic Engineering. From 1983 to 1988 he was Section Chief of Research Center for the GoldStar (LG Electronics) Company. From 1990 to 1991 Mr. Myeong was Division
Chief of Research for Medison Co. Ltd., a large Korean medical device company. From 1992 to 1993 he was the Chief of the International Technical Coordination and the Vice President of a Joint Corporation with Russia (Ultramed) as a director of
Medison Co., Ltd. Since the Company's founding until October 2009, Mr. Myeong had been the President and CEO of the Company and was the founder of the Company. In March 2011, Mr Myeong appointed Secretary and CFO and Director.

J. RICHARD LANDRETH, Director (appointed in March 2011)

Mr. J. Richard Landreth graduated from the Guiford College with a degree in Administrative Science-Management. From 1969 to 1986 worked in Flakt Products as a master scheduler. From 1987 to 2000 he worked in the manufacturing department of Grass
America. From 2001 to present he served as office manager in Salvage Discount Inc. In March 2011, Mr J. Richard appointed Director.

D. PROPERTY, PLANT AND EQUIPMENT

The Company relocated its factory from Kangwon Province to Seoul in November 2005. The previous factory in Kangwon Province (687-6, Sangohan-Ri, Hongchun-Eup, Hongchun-Kun, Kangwon-Do, Korea) was disposed to repay its debts to pre-emptive creditors
and Chohung Bank.

The Company signed the lease contract for its current office and factory at 4F, 196-35, Anyang-Dong, Manan-Gu, Anyang-Si, Gyeonggi-Do, Korea in October 2009. The Company's products are assembled from purchased and manufactured components at
its factory. Virtually all of the components making up the Company's products are readily available from domestic suppliers. Some of the components have been designed by the Company and/or are custom manufactured to its specifications.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis is based on and should be read in conjunction with the Company's audited consolidated financial statements, including the notes thereto, and other financial information appearing elsewhere herein. The
audited consolidated financial statements have been prepared using Korean Won and presented in accordance with accounting principles generally accepted in the United States.

---



A. OPERATING RESULTS

Revenue

The following table sets forth, for the periods indicated, our
consolidated revenue by product:

|(Korean Won (\) in thousands) |  |                                        |  |  |                                        |  |  |                                        |  |  |                     |  |  |           |  |  |                     | 
|----------------------------- |  | -------------------------------------- |  |  | -------------------------------------- |  |  | -------------------------------------- |  |  | ------------------- |  |  | --------- |  |  | ------------------- | 
|                              |  | For
      the year ended Dec. 31, 2010 |  |  | For
      the year ended Dec. 31, 2009 |  |  | For
      the year ended Dec. 31, 2008 | 
|Product                       |  | Revenues                               |  |  | Revenues % to total                    |  |  | Revenues                               |  |  | Revenues % to total |  |  | Revenues  |  |  | Revenues % to total | 
|                              |  |                                        |  |  |                                        |  |  |                                        |  |  |                     |  |  |           |  |  |                     | 
|Lapex BCS                     |  | 934,675                                |  |  | 69.8%                                  |  |  | 909,583                                |  |  | 66.2%               |  |  | 2,859,231 |  |  | 86.0%               | 
|DPA                           |  | 165,229                                |  |  | 12.4%                                  |  |  | 167,071                                |  |  | 12.2%               |  |  | 258,982   |  |  | 7.8%                | 
|Others                        |  | 238,786                                |  |  | 17.8%                                  |  |  | 296,725                                |  |  | 21.6%               |  |  | 206,710   |  |  | 6.2%                | 
|Total                         |  | 1,338,690                              |  |  | 100.0%                                 |  |  | 1,373,379                              |  |  | 100.0%              |  |  | 3,324,923 |  |  | 100.0%              | 

The following table sets forth, for the periods indicated, our
  consolidated revenue by market:

|(Korean Won (\) in thousands) |   |           |  |  |              |  |   |           |  |  |              |  |   |           |  |  |              | 
|----------------------------- | - | --------- |  |  | ------------ |  | - | --------- |  |  | ------------ |  | - | --------- |  |  | ------------ | 
|                              |   | 2010      |  |  | 2009         |  |   | 2008      | 
|Regions                       |   | Revenue   |  |  | % to revenue |  |   | Revenue   |  |  | % to revenue |  |   | Revenue   |  |  | % to revenue | 
|                              |   |           |  |  |              |  |   |           |  |  |              |  |   |           |  |  |              | 
|North America                 | \ | 855,509   |  |  | 63.9         |  | \ | 693,543   |  |  | 50.5         |  | \ | 1,143,757 |  |  | 34.4         | 
|Asia                          |   |           |  |  |              |  |   |           |  |  |              |  |   |           |  |  |              | 
|Japan                         |   | 22,787    |  |  |              |  |   | -         |  |  |              |  |   | 436,108   |  |  |              | 
|Taiwan                        |   | 24,768    |  |  |              |  |   | 111,835   |  |  |              |  |   | 107,788   |  |  |              | 
|Others                        |   | 1,665     |  |  |              |  |   | -         |  |  |              |  |   | 565       |  |  |              | 
|Total in Asia                 |   | 49,220    |  |  | 3.7          |  |   | 111,835   |  |  | 8.1          |  |   | 544,461   |  |  | 16.4         | 
|Europe                        |   |           |  |  |              |  |   |           |  |  |              |  |   |           |  |  |              | 
|UK                            |   | 74,941    |  |  |              |  |   | 13,267    |  |  |              |  |   | 842,959   |  |  |              | 
|Sweden                        |   | 93,469    |  |  |              |  |   | 103,784   |  |  |              |  |   | 28,864    |  |  |              | 
|France                        |   | 116,530   |  |  |              |  |   | -         |  |  |              |  |   | 172,504   |  |  |              | 
|Others                        |   | 42,186    |  |  |              |  |   | 69,636    |  |  |              |  |   | 399,683   |  |  |              | 
|Total in Europe               |   | 327,126   |  |  | 24.4         |  |   | 186,687   |  |  | 13.6         |  |   | 1,444,010 |  |  | 43.4         | 
|Other regions                 |   | 44,993    |  |  | 3.4          |  |   | 107,966   |  |  | 7.9          |  |   | 15,615    |  |  | 0.5          | 
|                              |   |           |  |  |              |  |   |           |  |  |              |  |   |           |  |  |              | 
|International                 |   |           |  |  |              |  |   |           |  |  |              |  |   |           |  |  |              | 
|Sales                         |   | 1,276,848 |  |  | 95.4         |  |   | 1,100,031 |  |  | 80.1         |  |   | 3,147,843 |  |  | 94.7         | 
|Domestic Sales                |   | 61,842    |  |  | 4.6          |  |   | 273,348   |  |  | 19.9         |  |   | 177,080   |  |  | 5.3          | 
|Total                         | \ | 1,338,690 |  |  | 100          |  | \ | 1,373,379 |  |  | 100          |  | \ | 3,324,923 |  |  | 100          | 

The following table sets forth, for the periods indicated,
financial data as percentage of total revenues by item as a percentage of the
amount over the comparable period in the previous years.

Percentage of Sales For the year endedDecember
        31,2010
      
      
      2009
      
      
      2008Sales
      
      100
      
      
      100
      
      
      100Cost of sales
      
      52.5
      
      
      32.1
      
      
      28.4Gross profits
      
      47.5
      
      
      67.9
      
      
      71.6Operating expenses
      
      120.7
      
      
      217.3
      
      
      78.5Loss from operations
      
      (73.2
      )
      
      (149.4
      )
      
      (6.9
      )Other income (expenses)
      
      (32.4
      )
      
      (32.4
      )
      
      12.1Minority interest
      
      -
      
      
      -
      
      
      -


Income (loss) before income taxes
      
      (105.6
      )
      
      (181.8
      )
      
      5.2Income taxes
      
      -
      
      
      -
      
      
      -Net income (loss)
      
      (105.6
      )
      
      (181.8
      )
      
      5.2


---

Sales Revenue

The sales revenue of the Company for the year ended December
31, 2010 decreased by 2.53% to 1,338,690 thousand Won from 1,373,379 thousand
Won for the year ended December 31, 2009. The slight decreases in the sales
revenue during the year ended December 31, 2010 and 2009 were mainly
attributable to:

| | - | In 2010, due to the aggressive marketing and sales
      channel development for the North American market and European market, the
      Companys sales volume increased by 23%, 75%, respectively (855,509
      thousand Won, 327,126 thousand Won in 2010) compared to for the year ended
      2009. In North America market, the sales in Canada decreased, but strong
      sales in U.S. market increased the total sales in North America market. In
      European market, the successful launching of the LAPEX BCS Pro in France
      led the increase of sales.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | However, the Company couldnt attain the good performance
      in Asia (including Korea), the Middle East, and Africa. In those markets,
      the sales volume decreased from 493,150 thousand Won for the year ended
      2009 to 156,055 thousand Won for the year ended 2010. As results, the
      total sales volume decreased slightly.                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | On the other hand, unit sales quantity of the Company was
      increased by 43% compared to 2009, but the selling price that is declined
      by 30% affected the Companys sales revenue.                                                                                                                                                                                                                                                                                                                                                                                  

Gross Profits & Gross Margin

In 2010, the increase in manufacturing cost caused by rising
raw material cost resulted in the decrease of gross profit. The manufacturing
cost of 2010 was 702,851 thousand won, compared to 441,416 thousand won in 2009.
The Company intended to differentiate its product from competitors products,
especially for the LAPEX BCS and BCS Pro products. The differentiation strategy
and changes in the specification of the products need more sophisticated and
high-performance parts. In addition, some parts of the supply price rises were
the other causes of increase in manufacturing cost. In 2011, the Company is
trying to find out competitive new vendors for diversifying the suppliers for
the decreasing in the price of raw materials.

Operating Expenses

The Companys operating loss has decreased to 979,457 thousand
Won for the year ended December 2010 from loss of 2,053,055 thousand Won in 2009
and from the loss of 228,105 thousand Won in 2008. The decrease in the operating
loss in 2010 was primarily due to the decrease of operating expenses. Operating
expenses as a percentage of total sales was to 120.7% for the year ended
December 31, 2010, as compared to 217.3% in 2009 and 78.5% in 2008. The decrease
compare to 2009 was mainly attributable to decrease in salary cost by 52% to
262,625 thousand Won in 2010 from 550,253 thousand Won in 2009 and decrease in
bad debt expenses by 50.5% to 614,137 thousand Won in 2010 from 1,240,146
thousand Won in 2009.

Research and Development Expenses

Research and development expenses consist primarily of payroll,
depreciation expense and other overhead expenses which are all expensed as
incurred until technological feasibility is reached. The Company has expensed
170,506 thousand Won, 283,237 thousand Won and 392,902 thousand Won as research
and development expenses during the years ended December 31, 2010, 2009 and
2008, respectively.

Other Expense(Income)

Other expense was 433,901 thousand Won in 2010, as compared to
other expense of 444,353 thousand Won in 2009 and other expense 401,809 thousand
Won in 2008. This was primarily due to 230,784 thousand Won of interest expense
and 54,606 thousand Won of loss on disposal of inventory. For the year ended
December 31, 2010, the Korean Won appreciated by approximately 2.5% against the
U.S. dollar compared to the exchange rate for the year ended December 31, 2009.
This appreciation resulted loss on foreign currency transactions to the Company.

---

B. LIQUIDITY AND CAPITAL RESOURCES

The following table sets forth the summary of our cash flows
  for the periods indicated:

|                                                    |  | For the Years Ended December 31,       |  
|--------------------------------------------------- |  | -------------------------------------- | -
|                                                    |  | 2010(1)                                |  
|                                                    |  | (Korean Won (\) in thousands, and US$) |  
|                                                    |  |                                        |  
|Net cash provided by (used in) operating activities |  | US$ 89,181                             |  
|Net cash provided by (used in) investing activities |  | 10,670                                 |  
|Net cash provided by (used in) financing activities |  | (98,265                                | )
|Net increase(decrease) in cash                      |  | 1,586                                  |  
|Cash at beginning of year                           |  | 4,979                                  |  
|Cash at end of year                                 |  | 6,565                                  |  

Note:

For the convenience of the reader, the Won amounts are
expressed in US$ at the rate of Won 1,130.6 to US$1.00, the exchange rate
announced by the Federal Reserve Bank of New York on December 31, 2010.

Net cash provided by (used in) operating activities was 100,829
thousand Won ($89,181) in 2010, (17,698) thousand Won in 2009 and (282,775)
thousand Won in 2008. The main reason of the positive net cash provided in
operating activities is from the bad debt expenses and decrease in operation
assets and increase of operation liabilities.

Net cash provided by (used in) investing activities was 12,064
thousand Won ($10,970) in 2010, (35,000) thousand Won in 2009 and (68,484)
thousand Won in 2008. The main reason of the positive net cash from investing
activities is the disposal of tangible asset for the year ended 2010. The main
reason of the negative net cash in investing activities for the year ended 2009
and 2008 was the increase of the tangible asset acquisitions and the increase of
short-term loan.

Net cash used in financing activities was 111,100 thousand Won
  ($98,265) in 2010, mainly due to the repayment of short-term and long-term borrowings.
  We generated positive cash flow from financing activities of 55,401 thousand
  Won in 2009 and 250,321 thousand Won in 2008 reflecting the increase in our
  short-term borrowing.

C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES,
ETC.

Research and Development

It is the goal of the Company to continually make enhancements
and improvements to its products. Costs incurred to make routine enhancements or
improvements, design changes to existing products and trouble shooting in
production are excluded from research and development expenses.

Proprietary Technology and Other Intellectual Properties

The Company has 5 registered and pending patents, 2 design
rights and 7 trademarks at the Korea and Japan Industrial Property Office. The
Company also has 1 pending patent under the Patent Cooperation Treaty at China.
The Company believes that Korean intellectual property laws and regulations
afford owners of intellectual property protections similar to those enjoyed by
owners of intellectual property in the United States. Korean intellectual
property laws were amended at the end of 1995 to harmonize them with the
Trade-Related Aspects of Intellectual Property Rights Agreement.

The Companys registered patents are summarized in the
following table:

TECHNOLOGY DESCRIPTION
    
    REGISTRATION
    
    DATE OF REGISTRATIONOR
      PUBLICATION NUMBER
    
    OR
      PUBLICATION(PATENTS)Diagnostic device using the electric features of the human
      body
    
    KR130791
    
    November  97Automatic
      detection of meridians by probe device
    
    KR210233
    
    April  99Pulse formation analysis device
    
    KR0368021
    
    December  02Laser beam
      irradiation device
    
    KR0457964
    
    November  04Adipose Resolve Apparatus for Low-Power LASER: Korea
    
    KR0653441
    
    November  06Adipose Resolve
      Apparatus for Low-Power LASER: PCT
    
    PCT  KR20061000694 WO 2006/093384 A1
    
    September  06


---

Adipose Resolve Apparatus for Low-Power LASER: Japan
    
    JP4143114
    
    June  08Adipose Resolve
      Apparatus for Low-Power LASER: China (pending)
    
    Pub.#: CN101115449
    
    January  08(DESIGN)Electrode holder for laser treatment
    
    0302314
    
    June  02Electrode for
      laser treatment
    
    0302315
    
    June  02(TRADEMARK)Lapex
    
    0500915
    
    September  01Biomeridian
    
    0522196
    
    June  02Pulsecare
    
    0538120
    
    December  02Mcview
    
    0531965
    
    October  02Meridian CI Logo
    
    0685047
    
    November  06DPAUSA
    
    3658804
    
    July  09Korea
    
    40-0755763
    
    August  08LapexUSA
    
    3523481
    
    December - 08EU
    
    006327399
    
    September - 08Japan
    
    5134672
    
    May  08China
    
    6312375
    
    February - 10


The Company relies on a combination of patent and trade secrets
to establish and protect the proprietary rights in its products. In order to
protect and support current and future development of its products, the Company
expects that it will continue to make application for patents at the Korea
Industrial Property Office. The Company believes that the ownership of patents
will be a significant factor in contributing to its business. However, the
success of the Company will depend primarily on the innovative skills, technical
competence and marketing abilities of its personnel. In addition, there can be
no assurances that the Companys current and future patent applications will be
granted, or if granted, that the claims covered by the patents will not be
reduced from those included in the Companys applications. Claims by third
parties that the Companys current or future products infringe upon their
intellectual property rights may have a material adverse effect on the Company.
Intellectual property litigation is complex and expensive and the outcome of
this litigation is difficult to predict. Any future litigation, regardless of
outcome, may result in substantial expense to the Company and significant
diversion of the Companys management and technical personnel.

Regulatory Restrictions

Use of the Companys products internationally is subject to
various government regulatory requirements on a country-by-country basis.
Europe, the U.S., Canada, Taiwan, South Africa and China each have their own
product certification systems. As a result, this has slowed the process for the
Company to expand in the world market. Even if there are no technical
difficulties, its products are directly involved with human life, and require
that the Company obtain government approval of clinical safety for the products
through various analysis and testing procedures. The table below includes all
the regions in the world where Meridians products have been approved for sale.

|REGION        | REGULATION                               | PRODUCTS APPROVED                                                                                                        
|------------- | ---------------------------------------- | -------------------------------------------------------------------------------------------------------------------------
|              |                                          |                                                                                                                          
|Korea         | KFDA                                     | Meridian-II, ABR-2000,
      LapexBCS (LipoLaser), LAPEX BCS Pro (LAPEX 2000P), DPA (Digital Pulse
      Analyzer)      
|China         | SDA                                      | Meridian-II, Lapex-2000                                                                                                  
|Taiwan        | Taiwan Department of Health              | LAPEX 2000                                                                                                               
|U.S.A.        | FDA                                      | Meridian-II, Meridian Portable, Lapex-2000,
      ABR-2000, DPA(Digital Pulse Analyzer), LAPEX BCS, Lucia (LAPEX BCS Pro)
|Canada        | Health Canada                            | DPA (Digital Pulse Analyzer),
      Lapex-2000 LipoLaser                                                                 
|South America | FIP                                      | Meridian-II, Lapex-2000                                                                                                  
|South Africa  | South African Department of
      Health | LAPEX BCS and BCS Pro                                                                                                    
|EU            | CE EMC, CE LVD CE MDD                    | Lapex-BCS, Lapex BCS Pro : CE LVD, CE EMC DPA,
      LAPEX BCS and Pro: CE MDD (CE0123)                                  
|International | ISO13485:2003 ISO13485:CMDCAS            | Quality Assurance System for DPA and Laser Therapy Device                                                                

---

D. TREND INFORMATION

The operations of the Company have been significantly affected,
and may continue to be affected for the foreseeable future, by the general
unstable global economic conditions, especially U.S and Europe region. The
curtailed economic activity in the Companys traditional markets resulted in a
significant decline in the Companys sales, production and inventory from 2009
to 2010. The Company is actively seeking to expand its sales into North America,
Europe and the Company is in transition of its target market, mainly preventive
medicine and aesthetic laser market with Lapex BCS and DPA. These two products
contributed 82.2% of the total sales revenue in 2010 and 78.4% in 2009. In 2010,
the sales portions from North America, Europe and Asia (excluding Korea) were
63.9%, 24.4% and 3.7% of the total revenue of the Company.

E. OFF-BALANCE SHEET ARRANGEMENTS

Not applicable.

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

Payments
        due (by period) (Korean Won (\) in thousands)Less than
      
      
      
      
      
      
      
      
      more thanContractual Obligations
      
      Total
      
      
      one
        year
      
      
      1-3
        years
      
      
      3-5
        years
      
      
      5
        yearsLong-term accounts payable
      \
      863,102
      
      \
      863,102
      
      \
      -
      
      \
      -
      
      \
      -Operating lease obligations
      
      50,000
      
      
      50,000
      
      
      -
      
      
      -
      
      
      -Long-term debt obligations (1)
      
      4,642,146
      
      
      3,343,983
      
      
      1,298,163
      
      
      -
      
      
      -Grand total
      \
      5,555,248
      
      \
      4,257,085
      
      \
      1,298,163
      
      \
      -
      
      \
      -


(1) See Note 11. Long-Term Borrowings of consolidated
financial statements.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.
  DIRECTORS AND SENIOR MANAGEMENT

See Item 4.C.

B. COMPENSATION

Salary
    Bonus
    Accrued SeveranceName & Principal (Position)
    Year
    (Korean Won
    (Korean Won
    Benefits (Korean Won
    All Other(\))
    (\))
    (\))
    CompensationPark, In Beom (Director,
      President, CEO appointed in November 2009)
    2010
    50,400,000
    Nil
    21,700,000
    NilJohn Y.C. Myung (Director,
      Secretary, CFO resigned in March 2011)
    2010
    54,799,630
    Nil
    11,552,740
    NilHyung Kyoon Kim (Director
      resigned in March 2011)
    2010
    Nil
    Nil
    Nil
    NilMyeong, Hyeon-Seong
      (Director, Secretary, CFO appointed in March 2011)
    2010
    58,800,000
    Nil
    79,103,676
    NilJ, Richard Landreth (Director
      appointed in March 2011)
    2010
    Nil
    Nil
    Nil
    Nil


*Hyeon Seong Myeong was granted options for 2,218 shares of the
Companys common stock at the price of 680 Won in March 2001 (expired in
February 2008).

---

Compensation of Directors

Directors and directors who are also employees of the Company
receive no extra compensation for their services on the Board of Directors of
the Company.

Employment Contracts with employees and officers

The Company has not entered into any employment contracts, but
anticipates entering into employment contracts with certain management and other
key personnel.

C. BOARD PRACTICES

Not applicable

D. EMPLOYEES

The Company has 14 employees in the following areas:

Department
    Number of EmployeesCEO
    1CFO
    1Finance and Accounting
    3Sales and Customer Support
    1Research and Development
    3Technical Support
    2Purchasing
    1Quality Control
    2Total
    14


E. SHARE OWNERSHIP

The following table sets forth certain information regarding
the beneficial ownership of the common stock of the Company as of December 31,
2010 and June 30, 2011, (a) each of the Companys directors and officers, and
(b) all directors and officers of the Company, as a group:

Name and address of beneficial owner
    Amount Stock
    Percentage of
    Amount Stock
    Percentage ofBeneficially
    
    Beneficiallyand position with the company
    Owned as of Dec. 31,
    Class as of
    Owned as of June
    Class as of June 30,2010
    Dec.31,2010
    30,
      2011
    2011In Beom Park (Director, President, CEO
      appointed in November 2009) #909-202, JungSan Maeul 9 Danji Apt,
      Jungsan-dong, Ilsandong-gu, Goyang-si, Gyeonggi-do, Korea
    Nil
    Nil
    Nil
    NilJohn Y.C. Myung (Director, Secretary,
      CFO resinged in March 2011) 476-2, munhwa-dong, joong-gu,
      Deajeon-si, Korea
    Nil
    Nil
    Nil
    NilHyung Kyoon Kim (Director resinged in
      March 2011) Dongil-hivill apt, 2102-802, joong-dong, kiheung-gu,
      Yongin-si, Gyeonggi-do, Korea
    Nil
    Nil
    Nil
    Nil


---

Hyeong Seong Myeong (Director,
      Secretary, CFO appointed in March 2011) 201-2101, Hyundai I-Park
      2cha APT. 815,Chang-dong, Dobong-gu, Seoul, Korea
    971,500 common shares
    2.77%
    971,500 common shares
    2.65%J. Richard Landreth (Director appointed
      in March 2011) 4307 Kernersville Road, Kernersville, N.C. 27284,
      USA
    Nil
    Nil
    Nil
    NilAll officers and Directors as a Group
    971,500
    2.77%
    971,500
    2.65%


Stock Option Plans

Under the Companys Articles of Incorporation, the Company may
grant options for the purchase of its shares to certain qualified officers and
employees. Set forth below are the details of the Companys stock option plan as
currently contained in its Articles of Incorporation (the Stock Option Plan).
In order to qualify for participation in the Stock Option Plan, officers and
employees must have the ability to contribute to, the establishment, development
or technological innovation of the Company. Notwithstanding the foregoing, the
following criteria shall not be eligible to receive options under the Stock
Option Plan; (i) the Companys largest shareholder and its specially related
parties, as defined in the Securities and Exchange Act of Korea (the Securities
Act of Korea), (ii) major shareholders and their specially related parties, as
defined in the Securities Act of Korea, and (iii) any shareholder who would
become a major shareholder upon exercise of stock options granted under the
Stock Option Plan. Under the Securities Act of Korea, a major shareholder is
defined as a shareholder who (i) holds 10% or more of shares issued and
outstanding or (ii) has actual control over major management decisions. Under
the Securities Act of Korea the largest shareholder of a company is the person
who holds the largest number of issued and outstanding shares of the company.
The specific terms and conditions of stock options granted under the Stock
Option Plan shall be approved at a duly convened shareholders meeting. Under
the Companys Articles of Incorporation, stock options shall be offered through
(i) issuance of new shares, or (ii) payment in cash or treasury stock held by
the Company of the difference between the market price of its shares and the
option exercise price. The maximum aggregate number of the Companys shares
available for issuance under the Stock Option Plan shall not exceed 15% of the
total number of its shares outstanding. The stock options may not be granted to
all officers and employees at the same time. Any single officer or employee may
not be granted stock options for the shares exceeding 10% of the shares issued
and outstanding. Stock options granted under the Stock Option Plan will have a
minimum exercise price equal to the arithmetic mean of (i) the weighted average
of the daily market share prices for the two-month period prior to the date on
which the stock options are granted, (ii) the weighted average of the daily
market share prices for the one-month period prior to such date and (iii) the
weighted average of the daily market share prices for the one-week period prior
to such date. When new shares are issued upon the exercise of the stock options,
the option exercise price shall not be less than the par value of the Companys
shares. Stock options granted under the Stock Option Plan may be exercised after
the third anniversary date of the shareholders meeting at which the grant of
stock options under the Stock Option Plan is approved but prior to the seventh
anniversary date thereof, unless otherwise revoked by the board of directors.
The board of directors may revoke stock options granted under the Stock Option
Plan if (i) a beneficiary resigns prior to the exercise of the stock options,
(ii) the beneficiary causes significant loss to the Company by his or her
negligence or willful misconduct, or (iii) an event of termination specified in
the Stock Option Plan occur. Shares purchased upon the exercise of stock options
granted under the Stock Option Plan will not, at the time of their issuance, be
registered with the Securities and Exchange Commission but may be salable in the
public market in the United States in accordance with Rule 144 under the
Securities Act and applicable Korean laws and regulations.

The Company adopted the following material changes with respect
to its Stock Option Plan:

|- | persons entitled to receive stock options has been
      expanded to include researchers, faculty members of a university,
      practicing lawyers, certified public accountants who possess technological
      or managerial capabilities and Universities and Research Institutes;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                       
|- | the number of stock options
      granted at any one time cannot exceed 50% of the total issued and
      outstanding shares of the Company; and.                                                                                                                                     
|  |                                                                                                                                                                                                                                                                                       
|- | stock option holders shall be
      entitled to exercise their stock options only after having served in the
      Company for two (2) years.                                                                                                                                         

On March 19, 2001, the Company granted stock options to its
executive officers, directors and 13 employees to purchase 425,250 common shares
at an exercise price of Won 680 per share. The options vested on March 19, 2004
and were exercisable until March 18, 2008. At December 31, 2010 there was no
stock option plan outstanding.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS

---

A.MAJOR SHAREHOLDERS

The following table sets forth information with respect to the
beneficial ownership of our shares as of December 31, 2010 and June 30, 2011),
by each person known to us to own beneficially more than five percent (5%) of
our shares.

Name and address
    Amount Stock
    Percentage
    Amount Stock
    Percentage of
    Number of Stockof Class
    
    Class
    OptionBeneficially Owned
    of Dec.31,
    Beneficially Owned as of
    of June 30,
    HeldAs of Dec. 31 2010
    2010
    June 30 2011
    2011The Hong Group of Companies including:
      3,171,400 common shares
      9.04%
      3,171,400 common shares
      8.67%
      NilSolbon Venture Investment Co. Ltd. (931,175
      shares),Cheongdam Spopia 1st, Cheongdam
      dong,Gangnam-Gu Seoul KoreaMok-Won Assets Management Co. Ltd(1,375,000 shares),2004 Ho, Anam tower 702-10Yuksam-dong Gangnam-ku, Seoul, KoreaBio & Medical Research Co. Ltd. (524,425
      shares),702-10 Yuksam-dong, Gangnam-ku,
      Seoul, KoreaKi-tae Hong (127,800 shares)Cheongdam Spopia 1st, Cheongdam dong,Gangnam-Gu, Seoul, KoreaHye-sook Lee (213,000 shares)Cheongdam Spopia 1st, Cheongdam
      dong,Gangnam-Gu, Seoul, Korea


Note: Every shareholders right and interest is not different.

Securities held in the host country

The Company has legally issued its shares and complied with the
filing requirements pursuant to the SEC regulations. However, 13,975,159 common
shares issued through S-8 registrations, (i) for acquisition of By George
Holdings, (ii) debt-for-equity swap on October 21, 2004 and (iii) service fee
for IR and marketing activities, have not been included in the Korean Commercial
Registration Office due to the different requirements of the share issuance
between the US and Korean Commercial Laws. The number of outstanding shares and
capital stock as of December 31, 2008 in SEC and in Korean Commercial
Registration Office are as follows:

(Korean Won (\) in thousands,)

Korean CommercialSEC
      
      
      Registration OfficeNumber of outstanding shares
    
    35,094,156
    
    
    19,421,182Capital Stock
    \
    3,509,415
    
    \
    1,942,118


B.Related party
transactions

There is no known relationship between any of the Directors and
Officers of the Company with major clients or provider of essential products and
technology.

In the event conflicts do arise the Company will attempt to
resolve any such conflicts of interest in favor of the Company. The officers and
directors of the Company are accountable to the Company and its shareholders as
fiduciaries, which requires that such officers and directors exercise good faith
and integrity in handling the Companys affairs. A shareholder may be able to
institute legal action on behalf of the Company or on behalf of that shareholder
and all other similarly situated shareholders to recover damages or for other
relief in cases of the resolution of conflicts in any manner prejudicial to the
Company.

The transactions between the Company and its subsidiary are
disclosed in the Note 18 to the consolidated financial statements.

C.Interests of experts and
  counsel

There is no material interest of experts and counsel with the
Company.

---

ITEM 8. FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

See Item 18- Financial Statements

Legal Proceedings

On February 27, 2004, the Company received approval for a debt
restructuring plan for a total of 4,697,927 thousand Won from the Chooncheon
District Court, Korea, whereby a group of creditors of the Company and a
representative of the Company agreed to reschedule the payments on 4,697,927
thousand Won of the Companys debt. An application for the restructuring plan
was subsequently filed with Chooncheon District Court and approved by the court
on the same day.

Meridian America Medical Inc., a subsidiary of Meridian Co.,
Ltd. was served in October 2007 as a defendant in a lawsuit claiming trademark
infringement and false advertising filed by Therapy Products, Inc. d/b/a
Erchonia Medical to the United States District Court for the Southern District
of New York. The Court dismissed Erchoinas claims in May 2009.

Dividend Policy

We intend to retain any earnings for use in our business. We do
not intend to pay dividends on our shares for the foreseeable future. Dividends,
if any, on the outstanding shares are recommended by the board of directors and
must be approved at our annual general meeting of shareholders. This meeting is
generally held in March each year, and the dividend in respect of the preceding
year is generally paid shortly thereafter. The declaration of dividends is
subject to the discretion of the shareholders, and consequently, no assurance
can be given to the amount of dividends per share or that any such dividends
will be declared. Future cash dividends, if any, will also depend upon our
future operations and earnings, capital requirements and surplus, general
financial condition, contractual restrictions and other factors as may deem
relevant. Loan agreements and contractual arrangements entered into by Meridian
may also restrict distributions of dividends.

B. SIGNIFICANT CHANGES

On April 30, 2008, Meitian Co., Ltd., a subsidiary in Korea,
closed down and discontinued its operations. The decision was made by management
to concentrate the Companys resources on growing overseas markets.

ITEM 9. THE OFFER AND LISTING

A. OFFER AND LISTING DETAILS

Price History

The common shares of the Company began trading on the OTC
Bulletin Board on February 13, 2002 under the symbol MRDAF. The following table
sets forth the high and low sales of prices of our common shares on the OTC
Bulletin Board for the periods indicated.

OTC Bulletin BoardHigh (U.S.$)
      Low (U.S.$)Annual Highs and Lows2009
      0.3
      0.062008
      1.35
      0.162007
      1.54
      0.42006
      0.74
      0.11Quarterly Highs and Lows2010Fourth Quarter
      0.15
      0.02Third Quarter
      0.17
      0.05Second Quarter
      0.19
      0.05First Quarter
      0.21
      0.072009Fourth Quarter
      0.1
      0.06Third Quarter
      0.16
      0.07Second Quarter
      0.25
      0.09First Quarter
      0.3
      0.09


---

Monthly Highs and Lows2011June
    0.04
    0.01May
    0.05
    0.02April
    0.05
    0.04March
    0.08
    0.04February
    0.08
    0.03January
    0.08
    0.03


The transfer of our common shares is managed by our transfer
agent, Computershare Investor Services (formerly called Pacific Corporate Trust
Company), 3rd Floor  510 Burrard Street, Vancouver, British Columbia, V6C 3B9
(Telephone: 604.689.9853; Facsimile: 604.689.8144) .

B. PLAN OF DISTRIBUTION

Not applicable.

C. MARKETS

Our common shares are quoted on the Over-the-Counter Bulletin
Board (as they have been quoted since February 13, 2002). Our symbol is "MRDAF"
and our CUSIP number is Y6020X 10 3.

D. SELLING SHAREHOLDERS

Not applicable.

E. DILUTION

Not applicable.

F. EXPENSES OF THE ISSUER

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not applicable.

D.MEMORANDUM AND ARTICLES OF ASSOCIATION

The Company is authorized to issue 100,000,000 shares of common
stock, each share of common stock having equal rights and preferences, including
voting privileges. The Company is not authorized to issue shares of preferred
stock. As of December 31, 2010 there were 35,094,156 shares of the Company's
stock issued and outstanding. The shares of common stock of the Company
constitute equity interests in the Company entitling each shareholder to a pro
rata share of cash distributions made to shareholders, including dividend
payments. The holders of the Company's common stock are entitled to one vote for
each share of record on all matters to be voted on by shareholders. There is no
cumulative voting with respect to election of directors of the Company or any
other matter, with the result that the holders of more than 50% of the shares
voted for the election of those directors can elect all of the directors. The
holders of the Company's common stock are entitled to receive dividends when, as
and if declared by the Company's Board of Directors from funds legally available
therefore; provided, however, that cash dividends are at the sole discretion of
the Company's Board of Directors. In the event of liquidation, dissolution or
winding up of the Company, the holders of common stock are entitled to share
ratably in all assets remaining available for distribution to them after payment
of liabilities of the Company and after provision has been made for each class
of stock, if any, having preference in relation to the Company's common stock.
Holders of the shares of the Company's common stock have no conversion,
preemptive or other subscription rights, and there are no redemption provisions
applicable to the Company's common stock. All of the outstanding shares of the
Company's common stock are duly authorized, validly issued, fully paid and
non-assessable.

---

Dividends

Dividends are distributed to shareholders in proportion to the number of shares of capital stock owned by each shareholder following approval by the shareholders at a general meeting of shareholders. Under the Commercial Code and the Company's
  Articles of Incorporation, the Company will pay, to the extent declared, full annual dividends on newly issued shares. The Company may declare dividends annually ("annual dividends") at the annual general meeting of shareholders which is held within
  three months after the end of the fiscal year. Shortly after the annual general meeting, the annual dividend is paid to the shareholders of record as of the end of the preceding fiscal year. Annual dividends may be distributed either in cash or in
  shares provided that shares must be distributed at par value and dividends in shares may not exceed one-half of the annual dividend. Under the Commercial Code and the Company's Articles of Incorporation, the Company does have an obligation to pay
  any annual dividend unclaimed for five years from the payment date. The Commercial Code provides that a company shall not pay an annual dividend unless it has set aside in its legal reserve an amount equal to at least one-tenth of the cash portion
  of such annual dividend or has a legal reserve of not less than one-half of its stated capital. The Commercial Code also provides that a company may pay an annual dividend out of the excess of its net assets over the sum of (i) its stated capital,
  (ii) the aggregate amount of its capital surplus reserve and legal reserve which have been accumulated up to the end of the relevant dividend period, and (iii) the legal reserve to be set aside in respect of such annual dividend. Such reserves are
  not available for payment of cash dividends but may be transferred to capital stock or used to reduce an accumulated deficit through a shareholder action.

Distribution of Free Shares

In addition to dividends in the form of shares to be paid out of retained or current earnings, the Commercial Code permits a company to distribute to is shareholders an amount transferred from the capital surplus or legal reserve to stated capital
in the form of free shares. Such distribution must be made pro rata.

Preemptive Rights and Issuance of Additional Shares

The authorized but unissued shares may be issued at such times and, unless otherwise provided in the Commercial Code, upon such terms as the board of directors of a company may determine. The new shares must be offered on uniform terms to all
shareholders who have preemptive rights and who are listed on the shareholders' register as of the record date. The Company's shareholders are entitled to subscribe for any newly issued shares in proportion to their existing shareholdings, provided
that pursuant to the Articles of Incorporation, new share that are (i) issued by public offering in accordance with the Securities and Exchange Law of Korea, (ii) represented by depositary receipts, (iii) issued to foreigners in accordance with the
Foreign Investment Promotion Law of Korea within 33% of the total number of shares outstanding, (iv) issued to the Company's employee stock ownership association up to 20% of the newly issued shares (to the extent the total number of shares so
subscribed and held by the members of the employee stock ownership association does not exceed 20% of the total number of shares), (v) issued outside Korea for listing on a foreign stock exchange or foreign securities market trading securities by
means of an electronic or a quotation system, (vi) issued according to a stock option plan, (vii) issued to a domestic corporation having a strategic relationship with the Company in connection with the Company's management or technology of up to 5%
of the total number of issued and outstanding shares after such issuance, (viii) issued as consideration for the acquisition of the stock or assets of another company up to less than 20% of the total number of issued and outstanding shares, or (ix)
issued through general public offering in accordance with the Securities and Exchange Law of Korea may be issued pursuant to a resolution of the board of directors to persons other than existing shareholders. Under the Commercial Code, a company may
vary, without shareholder approval, the terms of such preemptive rights for different classes of shares. Public notice of the preemptive rights to new shares and the transferability thereof must be given not less than two weeks (excluding the period
during which the shareholders' register is closed) prior to the record date. The Company will notify the shareholders who are entitled to subscribe for newly issued shares of the deadline for subscription at least two weeks prior to such deadline.
If a shareholder fails to subscribe on or before such deadline, such shareholder's preemptive rights will lapse. The board of directors may determine how to distribute shares in respect of which preemptive rights have not been exercised or where
fractions of shares occur. If the Company adopts the New Articles of Incorporation newly issued shares can be issued pursuant to a resolution of the board of directors of the Company to persons other than existing shareholders of the Company under
the following cases (i) the Company offers new shares or allows underwriters to underwrite new shares in accordance with Article 2 and Article 8 of the Securities Exchange Act of Korea;(ii) the Company issues new shares through a public offering by
the resolution of the Board of Directors in accordance with Article 189-3 of the Securities Exchange Act of Korea; (iii) the Company issues new shares through exercises of stock options in accordance with Article 16-3 of the Venture Company
Promotion Special Measures Act of Korea; (iv) the Company issues new shares for the purpose of listing or registration on or with a foreign securities exchange or market; (v) the Company issues new shares for foreign direct investments in accordance
with the Foreign Investment Promotion Act as needed for business purposes, including but not limited to improvement of the financial structure; (vi) the Company issues new shares to another company with which the Company forms or intends to form a
business alliance relationship for the purpose of technology transfer; or (vii) the Company issues new shares for consideration for the acquisition of the shares or assets of another company or the assets of a person.

General Meeting of Shareholders

Under the Commercial Code, the ordinary general meeting of shareholders is held within three months after the end of each fiscal year and, subject to board resolution or court approval, an extraordinary general meeting of shareholders may be held as
necessary or at the request of holders of an aggregate of 3% or more of the outstanding shares of a company or at the request of a company's statutory auditor or audit committee. Under the Commercial Code, written notices setting forth the date,
place and agenda of the meeting must be given to shareholders at least two weeks prior to the date of the general meeting of shareholders. Currently, the Company uses The Korean Economic Daily for the purpose of providing public notices.
Shareholders not on the shareholders' register as of the record date are not entitled to receive notice of the annual general meeting of shareholders or attend or vote at such meeting. The agenda of the general meeting of shareholders is determined
at
the meeting of the board of directors. In addition, shareholders holding an aggregate of 3% or more of the outstanding shares may propose an agenda for the general meeting of shareholders. Such proposal should be made in writing at least six weeks
prior to the meeting. The board of directors may decline such proposal if it is in violation of the relevant laws and regulations of the Company's Articles of Incorporation. The general meeting of shareholders is held at the Company's headquarters
or, if necessary, may be held anywhere in the vicinity of the Company's headquarters.

---

Voting Rights

Holders of the Company's shares are entitled to one vote for each share, except that voting rights with respect to shares held by the Company and shares held by a corporate shareholder, more than one-tenth of whose outstanding capital stock is
directly or indirectly owned by the Company, may not be exercised. Cumulative voting is precluded in the Company's Articles of Incorporation. Under the Commercial Code, for the purpose of electing the Company's statutory auditors, a shareholder
holding more than 3% of the total shares may not exercise voting rights with respect to such shares in excess of such 3% limit. The Commercial Code also provides that in order to amend the Company's Articles of Incorporation (which is required for
any change to the Company's authorized share capital) and for certain other instances, including removal of any of the Company's director and statutory auditor, dissolution, merger or consolidation, transfer of the whole or a significant part of the
Company's business, acquisition of all of the business of any other company or issuance of new shares at a price lower than their par value, an approval from holders of at least two-thirds of those shares present or represented at such meeting is
required, provided that such super-majority also represents at least one-third of the total issued and outstanding shares. A shareholder may exercise his voting by proxy given to any person. The proxy must present a document evidencing the power of
attorney prior to the start of the general meeting of shareholders.

Registration of Shareholders and Record Date Computershare Investor Service of Vancouver BC Canada is the Company's sole transfer agent. Computershare Investor Service maintains the register of the Company's shareholders and register of transfers of
registered shares traded. For the purpose of determining the holders of the Company's shares entitled to annual dividends, the register of shareholders is closed for a period following December 31 and ending on the close of the ordinary general
shareholders' meeting for such fiscal year. The record date for annual dividends is December 31. Further, the Commercial Code and the Company's Articles of Incorporation permit the Company, upon at least two weeks' public notice, to set a record
date and/or close the register of shareholders entitled to certain rights pertaining to the Company's shares. The trading of the Company's shares and the delivery of certificates in respect thereof may continue while the register of shareholders is
closed.

Annual and Periodic Reports

At least one week prior to the annual general meeting of shareholders, the Company's annual report and audited non-consolidated financial statements must be made available for inspection at the Company's principal office and at all branch offices.
Copies of annual reports, the audited consolidated financial statements and any resolutions adopted at the general meeting of shareholders will be available to the Company's shareholders. In addition, the Company will dispatch the copies of its
financials and statements and business report to its shareholders at least two weeks prior to the date of the annual general meeting of shareholders.

Transfer of Shares

Under the Commercial Code, the transfer of shares is effected by delivery of share certificates but, in order to assert shareholders' rights against the Company, the transferee must have his name and address registered on the register of
shareholders. For this purpose, shareholders are required to file their name, address and seal or specimen signature with the Company. Under the regulations of the Financial Supervisory Commission of Korea, non-resident shareholders may appoint a
standing proxy and may not allow any person other than such standing proxy to exercise rights regarding the acquired shares or perform any task related thereto on his behalf, subject to certain exceptions. Under current Korean regulations,
securities companies and banks in Korea (including licensed branches of non-Korean securities companies and banks), investment management companies in Korea, internationally recognized foreign custodians and the Korean Securities Depository are
authorized to act as agents and provide related services.

Acquisition by the Company of Shares

The Company generally may not acquire its own shares except in certain limited circumstances, including, without limitation, a reduction in capital. Under the Commercial Code, except in case of a reduction in capital, any of the Company's own shares
acquired by it must be sold or otherwise transferred to a third party within a reasonable time.

Liquidation Rights

In the event of a liquidation of the Company remaining after payment of all debts, liquidation expenses and taxes will be distributed among shareholders in proportion to the number of the Company's shares held.

Inspection of Books and Records

Under the Commercial Code, any individual shareholder or shareholders having at least 3% of all outstanding shares (irrespective of voting or non-voting shares) of a Korean corporation may inspect books and records of the corporation.

---

C. MATERIAL CONTRACTS

Not applicable.

D. EXCHANGE CONTROLS

The Foreign Exchange Transaction Law of Korea and the Presidential Decree and regulations established thereunder (collectively the "Foreign Exchange Transaction Laws") regulate investment in Korean securities by non-residents and issuance of
securities outside Korea by Korean companies. Under the Foreign Exchange Transaction Laws, non-residents may invest in Korean securities only to the extent specifically allowed by such laws or otherwise permitted by the Ministry of Finance and
Economy. The Financial Supervisory Commission also has adopted, pursuant to the delegated authority under the Securities and Exchange Law of Korea, regulations that restrict investment by foreigners in Korean securities and regulate issuance of
securities outside Korea by Korean companies. Under the Foreign Exchange Transaction Laws, if the Government deems that certain emergency circumstances are likely to occur, it may require certain investors to obtain prior approval for certain
Capital Transactions as defined in the Foreign Exchange Transaction Laws from the relevant Korean authority or to deposit a certain portion of the investors' holdings in Korea. Such emergency circumstances include sudden fluctuations in interest
rates or exchange rates, extreme difficulty in stabilizing the balance of payments or a substantial disturbance in the Korean financial and capital markets.

Government Reporting Requirements

In order for the Company to issue its shares outside of Korea, the Company is required to file a prior report of such issuance with the Ministry of Finance and Economy. No further approval from the Government is necessary for the issuance of the
Company's shares. Furthermore, prior to making an investment to 10% or more of the outstanding shares of a Korean company, foreign investors are generally required under the Foreign Investment Promotion Law to submit a report to a Korean bank
pursuant to a delegation by the Ministry of Commerce, Industry and Energy. Subsequent sale by such investor of the shares will also require a prior report to such bank

Dividend to be declared in Won

The Company currently is not in the position to pay dividends on its shares for the foreseeable future. However, if the Company declares cash dividends, such dividends will be declared in Won. In order for the Company to pay such dividends outside
Korea, such dividends will be converted into Dollars and remitted to the shareholders, subject to certain conditions. The Company will convert dividend amount in foreign currency and remit them to shareholders abroad. No governmental approval is
required for foreign investors to receive dividends. However, in order for the Company to convert the Won amount in foreign currency and to remit such amount abroad, relevant documents must be submitted to the foreign exchange bank to verify (i)
that the amount being paid conforms to the amount required to be paid and (ii) whether all necessary legal procedures have been completed.

E. TAXATION

KOREAN TAXATION

The following is a summary of the principal Korean tax consequences to owners of our shares that are non-resident individuals or non-Korean corporations without a permanent establishment in Korea to which the relevant income is attributable
("non-resident holders"). The statements regarding Korean tax laws set forth below are based on the laws in force and as interpreted by the Korean taxation authorities as of the date hereof. This summary is not exhaustive of all possible tax
consideration which may apply to a particular investor and prospective investors are advised to satisfy themselves as to the overall tax consequences of the acquisition, ownership and disposition of our shares, including specifically the tax
consequences under Korean law, the laws of the jurisdiction of which they are resident, and any tax treaty between Korea and their country of residence, by consulting their own tax advisors.

Taxation of Dividends

For the purposes of Korean taxation of distributions of profits either in cash or shares made on the Company's shares, a non-resident holder will be treated as the owner of the Company's shares. Dividends paid (whether in cash or in shares) to a
non-resident holder are generally subject to withholding tax at a rate of 27.5% or such lower rate as is applicable under a treaty between Korean and such non-resident holder's country of tax residence. Such tax is required to be deducted from such
dividends and only the net amount is paid to the non-resident holder of the Company's shares. Under the U.S. - Korea Tax Treaty, the maximum rate of withholding on dividends paid to United States residents eligible for treaty benefits and beneficial
owners of such dividend generally is 15% (10% if the recipient of the dividends is a U.S. corporation and owned at least 10% of the outstanding shares of voting stock of the relevant Korean company during any part of its taxable year which precedes
the date of payment of the dividend and during the whole of its prior taxable year {if any} and certain other conditions are satisfied) which does not include withholding of local tax. In addition, a local surtax will be included in the withholding,
therefore the maximum rate of withholding is generally 16.5% . The aforementioned maximum rate on withholding of dividends does not apply if the United States resident has a permanent establishment in Korea and the shares to which the dividends are
paid are connected with such permanent establishment.

Distribution of free shares representing a transfer of certain capital reserves or asset revaluation reserves into paid-in capital may be treated as dividends subject to Korean tax. However, stock splits, if any, will not be treated as dividends.

---

Taxation of Capital Gains

A non-resident holder will be subject to Korean taxation on
capital gains realized on a sale of our shares unless the non-resident holder is
eligible for the benefits of an applicable tax treaty exempting such capital
tax. In addition, the capital gains realized from the transfer of shares listed
on certain foreign stock exchanges (including the Nasdaq National Market),
insofar as the transfer is completed through such stock exchange, are exempted
from Korean income taxation by virtue of the Tax Exemption and Limitation Law.
Under the U.S.-Korea tax treaty, capital gains realized by holders that are
residents of the United States eligible for treaty benefits will not be subject
to Korean taxation upon the disposition of our shares, with certain exceptions.
In the absence of any applicable treaty or the exemption under the Tax Exemption
and Limitation Law, a non-resident holder will generally be subject to Korean
taxation on capital gains realized on a sale of our shares at the rate of the
lesser of 27.5% of the gains or 11% of the gross sales proceeds until December
31, 2000 and the lesser of 26 7/8% of the gains and 10 3/4% of the gross sales
proceeds thereafter. See "-Withholding of Taxes."

Application of the U.S.-Korea Tax Treaty Under the U.S.-Korea
tax treaty, a resident of the United States means (i) a United States
corporation and, (ii) any other person (except a corporation or any entity
treated under United States law as a corporation) resident in the United States
for purposes of its tax, but in the case of a person acting as partner or
fiduciary only to the extent that the income derived by such person is subject
to United States tax as the income of a resident. Further, the reduced Korean
withholding tax rate on dividends and capital gains under the U.S.-Korea Tax
Treaty would not be available if (a) the U.S. resident holders are certain
investment or holding companies or (b) the dividends or capital gains derived by
residents of the United States from our shares are effectively connected with
the United States residents' permanent establishment in Korea or, in the case o
f capital gains derived by an individual, (i) such United States resident
maintains a fixed base in Korea for a period aggregating 183 days or more during
the taxable year and our shares are effectively connected with such fixed base
or (ii) such United States resident is present in Korea for 183 days or more
during the taxable year.

Securities Transaction Tax

Under the Securities Transaction Tax Law of Korea, securities
transaction tax to be imposed at the rate of 0.5% (this rate may be reduced to
0.3%, including other surtax, if traded through the Korea Stock Exchange or
KOSDAQ) will not be imposed on the trading of shares through a foreign stock
exchange on which the shares are listed. Although there has been no established
precedent on the point of whether the Nasdaq National Market will be included in
the definition of "foreign stock exchange" for the purpose of Securities
Transaction Tax Law, it is likely that the securities transaction tax will not
be imposed on the trading through the Nasdaq National Market. Further,
securities transaction tax will not be applied if the sale is executed between
non-residents without permanent establishments in Korea and the non-resident
holder (together with our shares held by any entity which has a certain special
relationship with such non-resident) did not own 10% or more of the total issued
and outstanding shares at any time during the five years before the year within
which the transfer occurs and the non-resident holder did not sell such shares
through a securities broker in Korea.

Inheritance Tax and Gift Tax

Under Korean inheritance and gift tax laws, shares issued by
Korean corporations are deemed located in Korea irrespective of where they are
physically located or by whom they are owned. Therefore, Korean inheritance tax
and gift tax are imposed with respect to our shares. The taxes are imposed
currently at the rate of 10% to 50%, if the value of the relevant property is
above a certain limit and vary according to the identity of the parties
involved. At present, Korea has not entered into any tax treaty with respect to
inheritance or gift tax.

Withholding of Taxes

Under Korean tax law, holders of our shares in the United
States will generally be subject to Korean withholding taxes on the capital
gains and dividend payments by us in respect of those shares, unless exempted by
a relevant tax treaty or the Tax Exemption and Limitation Law. Failure to
withhold Korean taxes may result in the imposition of the withholding tax itself
and 10% penalty tax, and, if prosecuted, a criminal penalty of an imprisonment
up to one year and/or a fine up to the tax amount, on the relevant withholding
agent. We, as payer of dividends, will act as withholding agent for the
collection of Korean tax on such dividend payment. The capital gains realized
from the transfer of shares listed and traded on the Nasdaq National Market are
exempt from Korean income taxation by virtue of the Tax Exemption and Limitation
Law. Korean tax law provides that, in case of transfer of Korean shares, the
Korean securities broker broking such transfer, or if there is no such
securities broker, the purchaser is required to withhold the relevant Korean
capital gains taxes.

UNITED STATES FEDERAL INCOME TAXATION

The following is a general discussion of the material United
States federal income tax consequences of purchasing, owning, and disposing the
common shares if you are a U.S. Holder (as defined below) and hold the common
shares as capital assets for United States federal income tax purposes. This
discussion does not address all of the tax consequences relating to the
ownership of the common shares, and does not take into account U.S. Holders
subject to special rules including:

|- | dealers in securities or
      currencies;
|- | ------------------------------------------
|- | financial institutions;                   
|- | tax-exempt entities;                      
|- | banks;                                    

---

|- | life insurance companies;                                                                                                                                                                                                                                                                                                                                                                                                   
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | traders in securities that elect to mark-to-market their
      securities;                                                                                                                                                                                                                                                                                                                                                  
|- | persons that hold common shares as a part of a straddle
      or a hedging, or conversion transaction;                                                                                                                                                                                                                                                                                                                      
|- | persons liable for the alternative minimum tax;                                                                                                                                                                                                                                                                                                                                                                             
|- | persons that actually or constructively owns 10% or more
      of our voting stock; or                                                                                                                                                                                                                                                                                                                                      
|- | persons whose "functional currency" is not the U.S.
      dollar. This discussion is based on the Internal Revenue Code of 1986, as
      amended, its legislative history, final, temporary, and proposed Treasury
      regulations, published rulings and court decisions, all as currently in
      effect. These laws are subject to change, possibly on a retroactive basis.
      You are a "U.S. Holder" if you are:
|- | a citizen or resident of the United States;                                                                                                                                                                                                                                                                                                                                                                                 
|- | a corporation, partnership or other entity created or
      organized in or under the laws of the United States or any political
      subdivision thereof;                                                                                                                                                                                                                                                                 
|- | an estate the income of which is subject to United States
      federal income taxation regardless of its source;                                                                                                                                                                                                                                                                                                           
|- | a trust:                                                                                                                                                                                                                                                                                                                                                                                                                    
|- | if a United States court can exercise primary supervision
      over the trust's administration and one or more United States persons are
      authorized to control all substantial decisions of the trust; or                                                                                                                                                                                                            
|- | that has elected to be treated as a United States person
      under applicable Treasury regulations. This discussion addresses only
      United States federal income taxation.                                                                                                                                                                                                                                           

F. DIVIDENDS AND PAYING AGENT

Not applicable.

G. STATEMENTS BY EXPERTS

Not applicable.

H. DOCUMENTS ON DISPLAY

Not applicable

I. SUBSIDIARY INFORMATION

See Note 2 of the Consolidated Financial Statements.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Market Risk Disclosure

Market risk generally represents the risk that losses may occur
in the value of financial instruments as a result of movements in market rates
of interest and foreign exchange. The Company's primary market risk exposures
are fluctuations in exchange rates, interest rates and equity prices. The
Company is exposed to foreign exchange risk related to export sales denominated
in foreign currency. All of the Company's export sales are denominated in U.S.
Dollars, regardless of the currencies of the countries/regions in which the
purchasers are located. For the year ended December 31, 2010, the Company had an
aggregate 1,276,848 thousand Won export sales, accounting for 95.4% of the
Company's total revenues. The Company has no other significant foreign currency
denominated revenue. As a result, changes in the foreign exchange rate between
the Won and the Dollar may significantly affect the Company due to the effect of
such changes on the amount of payment, denominated in Won, the Company receives
from foreign purchasers on the export sales. As of December 31, 2010, all of the
Company's liabilities are denominated in Won. Therefore, if the Won depreciates
against the Dollar by 10% and all other variables are held constant from their
levels for the year ended December 31, 2010, the Company estimates that the
payment receivable from its overseas customers will decrease by approximately
2,607 thousand Won ($2,289) in 2010. The Company is exposed to interest rate
risk due to significant amounts of short-term and long-term debt. Upward
fluctuations in interest rates increase the cost of additional debt. However, as
of December 31, 2010, the Company had no floating rate borrowings. Currently the
Company does not use any derivatives or other financial instruments to mitigate
these risks discussed above.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES

The Company currently has the default tax payment of 30,194
thousand Won ($26,706) to the federal tax office and the default interest
payment of 919,804 thousand Won ($813,554).

---

Due to the recurring losses from operations, Meridian was not able to meet the repayment schedule. As of December 31, 2010, Meridian has not paid 2,409,902 thousand Won of principal and 918,461 thousand Won of accrued interest outstanding to
financial institutions, and 863,102 thousand Won of accounts payable to various vendors.

The details of the debt restructuring of the Company, which is disclosed in Item 8 and Note 2 to the consolidated financial statements in this report, were reported in the form 6-K filed on March 28, 2004.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
  HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

A. Disclosure Controls and Procedures

Our management has evaluated, with the participation of our Chief Executive Officer and Director, the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of
December 31, 2010. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly,
even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our Chief Executive Officer and Director concluded that our disclosure controls and procedures
were effective as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Director, as
appropriate to allow timely decisions regarding required disclosure.

B. Management's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed by, and under the supervision of, our principal executive,
principal operating and principal financial officers, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in
accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the
financial statements.

Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management has completed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2010 based on criteria in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO" ). Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2010.

C. Attestation Report of the Independent Registered Public Accounting Firm

This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's
registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permits the company to provide only management's report in this annual report.

---

D. Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial
  reporting that occurred during the year covered by this annual report that has
  materially affected, or is reasonably likely to materially affect, our internal
  control over financial reporting.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

The Company does not yet have an audit committee financial
expert.

ITEM 16B. CODE OF ETHICS

The Company does not have in place a written code of ethics
that applies to its executive, financial or accounting officers or to persons
performing similar functions. The Company is dependent upon its president to
lead by example and has faith in his ability to do so. The Company does not plan
to grant any waiver, including an implicit waiver, from a provision of the code
of business conduct and ethics to any person.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

(a) Audit Fees: In the fiscal year 2010, the Company was
charged 60,186,885 Won ($50,092) for professional services rendered by its
auditors for the audit of the Company's annual financial statements or services
normally provided in connection with statutory and regulatory filings for the
fiscal year 2010.

(b) Audit-Related Fees During the last two fiscal years, the
Company paid $nil for professional services rendered by the current or former
auditors for audit-related services..

(c) Tax Fees During the last two fiscal years, the Company paid
$nil for professional services rendered by the principal accountant for tax
compliance, tax advice and tax planning.

(d) All Other Fees During the last two fiscal years, the
Company paid $nil for professional services rendered by the principal accountant
for services other than those described under (a) through (c).

(e) The Company's board of directors is currently acting as the
audit committee. The board approves all of the services provided by the
principal accountants.

(f) Percentage of work performed by persons other than the
principal accountant's full-time, permanent employees: 0%

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
  COMMITTEES

Not Applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER
  AND AFFILIATED PURCHASERS

Not Applicable.

Part III

ITEM 17. FINANCIAL STATEMENTS

The Company has responded to Item 18 in lieu of this item.

---

ITEM 18. FINACIAL STATEMENTS

Meridian Co., Ltd.

CONSOLIDATED FINANCIAL STATEMENTS

For the Years ended December 31, 2010, 2009 and 2008

Table of Contents

| | Independent
      Auditors' Report                                  
| | --------------------------------------------------------------------
| |                                                                     
| | Consolidated
      Balance Sheets                                   
| |                                                                     
| | Consolidated
      Statements of Income                             
| |                                                                     
| | Consolidated
      Statements of Changes in Shareholders' Deficiency
| |                                                                     
| | Consolidated
      Statements of Cash Flows                         
| |                                                                     
| | Notes
      to Consolidated Financial Statements                    

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Meridian Co.,
Ltd.

We have audited the accompanying consolidated balance sheets of
Meridian Co., Ltd., and subsidiary (the Company) as of December 31, 2010 and
2009, and the related consolidated statements of operations, shareholders
deficiency, and cash flows for the years ended December 31, 2010, 2009 and 2008.
Our responsibility is to express an opinion on the consolidated financial
statements based on our audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purposes
of expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
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 financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Meridian Co., Ltd.
and subsidiary as of December 31, 2010 and 2009, and the results of their
operations and cash flows for the years ended December 31, 2010, 2009 and 2008
in conformity with accounting principles generally accepted in the United States
of America.

The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 2 to the consolidated financial statements, the Company's
significant operating losses and working capital deficit raise substantial doubt
about its ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

/s/ Choi, Kim & Park LLP

Los Angeles, California 
  August 12, 2011

---

Meridian Co., Ltd. and SubsidiariesConsolidated
Balance SheetsAs of December 31, 2010 and 2009
  (in thousands of Korean Won (\))

|                                                                                                                                                                           |  |   | 2010(in US$) |  |  |           |  |  |             | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ------------ |  |  | --------- |  |  | ----------- | 
|                                                                                                                                                                           |  |   | (Note 4)     |  |  |           |  |  |             | 
|ASSETS                                                                                                                                                                     |  |   | (unaudited)  |  |  | 2010      |  |  | 2009        | 
|                                                                                                                                                                           |  |   |              |  |  |           |  |  |             | 
|Current assets :                                                                                                                                                           |  |   |              |  |  |           |  |  |             | 
|Cash and cash equivalents (Note 3)                                                                                                                                         |  | $ | 6,565        |  |  | \ 7,423   |  |  | \ 5,630     | 
|Trade
      accounts receivable - less allowance for doubtful accounts
      of                 
      297,840 (USD 263,435) in 2010 and 1,997,878 in 2009 (Notes 3 and 5) |  |   | 48,546       |  |  | 54,887    |  |  | 752,263     | 
|Short-term
      loans - less allowance for doubtful accounts of 37,791
      (USD                 
      33,426) in 2010 and 218,485 in 2009                              |  |   | 30,957       |  |  | 35,000    |  |  | 35,000      | 
|Other
      accounts receivable - less allowance for doubtful accounts of nil
      in 
                       2010
      and 3,020 in 2009                                |  |   | 35,404       |  |  | 40,028    |  |  | 48,360      | 
|Inventories, net (Note 6)                                                                                                                                                  |  |   | 119,345      |  |  | 134,932   |  |  | 352,705     | 
|Other current assets                                                                                                                                                       |  |   | 40,994       |  |  | 46,348    |  |  | 6,843       | 
|                                                                                                                                                                           |  |   |              |  |  |           |  |  |             | 
|Total current assets                                                                                                                                                       |  |   | 281,811      |  |  | 318,618   |  |  | 1,200,801   | 
|                                                                                                                                                                           |  |   |              |  |  |           |  |  |             | 
|                                                                                                                                                                           |  |   |              |  |  |           |  |  |             | 
|Property, plant and equipment, net (Notes 3
      and 7)                                                                                                                   |  |   | 14,563       |  |  | 16,466    |  |  | 59,668      | 
|                                                                                                                                                                           |  |   |              |  |  |           |  |  |             | 
|Investments and other assets :                                                                                                                                             |  |   |              |  |  |           |  |  |             | 
|Investments (Note 8)                                                                                                                                                       |  |   | -            |  |  | -         |  |  | 37,382      | 
|Security deposits                                                                                                                                                          |  |   | 3,721        |  |  | 4,208     |  |  | 5,856       | 
|Patents and trademarks, net of amortization (Notes 3
      and 9)                                                                                                          |  |   | 166          |  |  | 188       |  |  | 376         | 
|                                                                                                                                                                           |  |   |              |  |  |           |  |  |             | 
|Total investments and other assets                                                                                                                                         |  |   | 3,887        |  |  | 4,396     |  |  | 43,614      | 
|                                                                                                                                                                           |  |   |              |  |  |           |  |  |             | 
|TOTAL ASSETS                                                                                                                                                               |  | $ | 300,261      |  |  | \ 339,480 |  |  | \ 1,304,083 | 

The accompanying notes are an integral part of these
Consolidated Financial Statements.

---

(Continued)Meridian Co., Ltd. and
SubsidiariesConsolidated Balance SheetsAs of December 31,
2010 and 2009
  (in thousands of Korean Won (\))

|                                                                                                                                                                                                                                           |  |   | 2010(in US$) |   |   |             |   |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | - | ------------ | - | - | ----------- | - | - | ----------- | -
|                                                                                                                                                                                                                                           |  |   | (Note 4)     |   |   |             |   |   |             |  
|LIABILITIES AND DEFICIENCY                                                                                                                                                                                                                 |  |   | (unaudited)  |   |   | 2010        |   |   | 2009        |  
|                                                                                                                                                                                                                                           |  |   |              |   |   |             |   |   |             |  
|Current liabilities                                                                                                                                                                                                                        |  |   |              |   |   |             |   |   |             |  
|Accounts payable                                                                                                                                                                                                                           |  | $ | 2,075,402    |   | \ | 2,346,450   |   | \ | 2,161,121   |  
|Current portion of long-term accounts payable (Note 2)                                                                                                                                                                                     |  |   | 763,401      |   |   | 863,102     |   |   | 882,656     |  
|Short-term borrowings (Note 10)                                                                                                                                                                                                            |  |   | 602,777      |   |   | 681,500     |   |   | 684,500     |  
|Current portion of long-term borrowings (Note 11)                                                                                                                                                                                          |  |   | 2,957,706    |   |   | 3,343,983   |   |   | 2,741,169   |  
|Accrued expenses                                                                                                                                                                                                                           |  |   | 813,553      |   |   | 919,804     |   |   | 767,031     |  
|Advanced received                                                                                                                                                                                                                          |  |   | 268,516      |   |   | 303,585     |   |   | 141,256     |  
|Deferred warranty revenue                                                                                                                                                                                                                  |  |   | 28,277       |   |   | 31,971      |   |   | 25,573      |  
|Other current liabilities                                                                                                                                                                                                                  |  |   | 44,156       |   |   | 49,917      |   |   | 47,641      |  
|                                                                                                                                                                                                                                           |  |   |              |   |   |             |   |   |             |  
|Total
      current liabilities                                                                                                                                                                                                            |  |   | 7,553,788    |   |   | 8,540,312   |   |   | 7,450,947   |  
|                                                                                                                                                                                                                                           |  |   |              |   |   |             |   |   |             |  
|Long-term accounts payable (Note 2)                                                                                                                                                                                                        |  |   | -            |   |   | -           |   |   | 3,736       |  
|Long-term borrowings (Note
      11)                                                                                                                                                                                                       |  |   | 1,148,207    |   |   | 1,298,163   |   |   | 1,989,523   |  
|Accrued severence benefits (Note 12)                                                                                                                                                                                                       |  |   | 147,817      |   |   | 167,123     |   |   | 149,707     |  
|                                                                                                                                                                                                                                           |  |   |              |   |   |             |   |   |             |  
|Total
      liabilities                                                                                                                                                                                                                    |  |   | 8,849,812    |   |   | 10,005,598  |   |   | 9,593,913   |  
|                                                                                                                                                                                                                                           |  |   |              |   |   |             |   |   |             |  
|Commitments and contingencies (Note 13)                                                                                                                                                                                                    |  |   | -            |   |   | -           |   |   | -           |  
|                                                                                                                                                                                                                                           |  |   |              |   |   |             |   |   |             |  
|Deficiency (Note 14)                                                                                                                                                                                                                       |  |   |              |   |   |             |   |   |             |  
|Meridian Co. shareholders' deficiency                                                                                                                                                                                                      |  |   |              |   |   |             |   |   |             |  
|Common
      stock - par value 100 WON per share; 100
      million                     
      shares authorized issued and outstanding 35,094
      thousand                     
      shares at December 31, 2010 and December 31, 2009 |  |   | 3,104,028    |   |   | 3,509,415   |   |   | 3,509,415   |  
|Additional paid-in capital                                                                                                                                                                                                                 |  |   | 5,512,564    |   |   | 6,232,505   |   |   | 6,232,505   |  
|Accumulated deficit                                                                                                                                                                                                                        |  |   | (16,912,461  | ) |   | (19,121,226 | ) |   | (17,878,998 | )
|Accumulated other comprehensive income
      (loss)                                                                                                                                                                                        |  |   | 79,624       |   |   | 90,024      |   |   | 61,940      |  
|                                                                                                                                                                                                                                           |  |   |              |   |   |             |   |   |             |  
|Total
      Meridian Co. shareholders' deficiency                                                                                                                                                                                          |  |   | (8,216,245   | ) |   | (9,289,282  | ) |   | (8,075,138  | )
|                                                                                                                                                                                                                                           |  |   |              |   |   |             |   |   |             |  
|Non-controlling interest                                                                                                                                                                                                                   |  |   | (333,306     | ) |   | (376,836    | ) |   | (214,692    | )
|                                                                                                                                                                                                                                           |  |   |              |   |   |             |   |   |             |  
|Total
      deficiency                                                                                                                                                                                                                     |  |   | (8,549,551   | ) |   | (9,666,118  | ) |   | (8,289,830  | )
|                                                                                                                                                                                                                                           |  |   |              |   |   |             |   |   |             |  
|TOTAL LIABILITIES AND DEFICIENCY                                                                                                                                                                                                           |  | $ | 300,261      |   | \ | 339,480     |   | \ | 1,304,083   |  

The accompanying notes are an integral part of these
Consolidated Financial Statements.

---

Meridian Co., Ltd. and SubsidiariesConsolidated
Statements of Operations and Comprehensive Income (Loss)For the Years
Ended December 31, 2010, 2009 and 2008
  (in thousands of Korean Won (\), except per share amounts and number of shares)

|                                                                |   | 2010(in US$) |   |   |            |   |   |            |   |   |            |  
|--------------------------------------------------------------- | - | ------------ | - | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                                                |   | (Note 4)     |   |   |            |   |   |            |   |   |            |  
|                                                                |   | (unaudited)  |   |   | 2010       |   |   | 2009       |   |   | 2008       |  
|                                                                |   |              |   |   |            |   |   |            |   |   |            |  
|Sales (Notes 3 and 19)                                          | $ | 1,184,053    |   | \ | 1,338,690  |   | \ | 1,373,379  |   | \ | 3,324,923  |  
|                                                                |   |              |   |   |            |   |   |            |   |   |            |  
|Cost of sales                                                   |   | 621,662      |   |   | 702,851    |   |   | 441,416    |   |   | 944,250    |  
|                                                                |   |              |   |   |            |   |   |            |   |   |            |  
|Gross profits                                                   |   | 562,391      |   |   | 635,839    |   |   | 931,963    |   |   | 2,380,673  |  
|                                                                |   |              |   |   |            |   |   |            |   |   |            |  
|Selling, general and
      administrative expenses              |   | 1,277,897    |   |   | 1,444,790  |   |   | 2,701,781  |   |   | 2,215,876  |  
|Research and development expenses                               |   | 150,810      |   |   | 170,506    |   |   | 283,237    |   |   | 392,902    |  
|                                                                |   |              |   |   |            |   |   |            |   |   |            |  
|Loss from operations                                            |   | (866,316     | ) |   | (979,457   | ) |   | (2,053,055 | ) |   | (228,105   | )
|                                                                |   |              |   |   |            |   |   |            |   |   |            |  
|Other income (expense) (Note 15)                                |   |              |   |   |            |   |   |            |   |   |            |  
|                                                                |   |              |   |   |            |   |   |            |   |   |            |  
|Interest income                                                 |   | 39           |   |   | 44         |   |   | 52         |   |   | 104        |  
|Interest expense                                                |   | (204,126     | ) |   | (230,784   | ) |   | (231,489   | ) |   | (188,350   | )
|Foreign transaction loss                                        |   | (19,109      | ) |   | (21,605    | ) |   | (14,660    | ) |   | (140       | )
|Income (expense) on foreign currency translation, net           |   | (47,337      | ) |   | (53,520    | ) |   | (148,378   | ) |   | 427,512    |  
|Other, net                                                      |   | (113,251     | ) |   | (128,036   | ) |   | (49,878    | ) |   | 161,963    |  
|                                                                |   |              |   |   |            |   |   |            |   |   |            |  
|Total other income (expense)                                    |   | (383,784     | ) |   | (433,901   | ) |   | (444,353   | ) |   | 401,089    |  
|                                                                |   |              |   |   |            |   |   |            |   |   |            |  
|Income (loss) before provision
      (benefit) for income taxes |   | (1,250,100   | ) |   | (1,413,358 | ) |   | (2,497,408 | ) |   | 172,984    |  
|                                                                |   |              |   |   |            |   |   |            |   |   |            |  
|Income taxes (Note 16)                                          |   | -            |   |   | -          |   |   | -          |   |   | -          |  
|                                                                |   |              |   |   |            |   |   |            |   |   |            |  
|Net income (loss)                                               |   | (1,250,100   | ) |   | (1,413,358 | ) |   | (2,497,408 | ) |   | 172,984    |  
|                                                                |   |              |   |   |            |   |   |            |   |   |            |  
|Less: Net loss attributable to non-controlling interest         |   | 151,362      |   |   | 171,130    |   |   | 235,924    |   |   | -          |  
|                                                                |   |              |   |   |            |   |   |            |   |   |            |  
|Net Income (loss) attributable
      to Meridian Co., LTD.      |   | (1,098,738   | ) |   | (1,242,228 | ) |   | (2,261,484 | ) |   | 172,984    |  
|                                                                |   |              |   |   |            |   |   |            |   |   |            |  
|Net income (loss) per common share (Note 17)                    |   |              |   |   |            |   |   |            |   |   |            |  
|Basic and
      diluted                                         | $ | -0.036       |   | \ | (40        | ) | \ | (71        | ) | \ | 5          |  
|                                                                |   |              |   |   |            |   |   |            |   |   |            |  
|Weighted average number of
      common shares                  |   |              |   |   |            |   |   |            |   |   |            |  
|Basic and diluted                                               |   | 35,094,156   |   |   | 35,094,156 |   |   | 35,094,156 |   |   | 35,033,418 |  

The accompanying notes are an integral part of these
Consolidated Financial Statements

---

Meridian Co., Ltd. and SubsidiariesConsolidated
Statement of Changes in Shareholders' DeficiencyFor the Years Ended
December 31, 2010, 2009 and 2008
  (in thousands of Korean Won (\), except shares data)

|                                               |  |                           |  |   |             |  |   |             |  |   |               |   |   | Accumulated     |   |   | Deficiency      |   |   |              |  
|---------------------------------------------- |  | ------------------------- |  | - | ----------- |  | - | ----------- |  | - | ------------- | - | - | --------------- | - | - | --------------- | - | - | ------------ | -
|                                               |  | Common
      Stock Issued |  |   | Additional  |  |   |             |  |   | Other         |   |   | Attributable to |   |   |                 |  
|                                               |  |                           |  |   |             |  |   | Paid-in     |  |   | Accumulated   |   |   | Comprehensive   |   |   | Non-Controlling |   |   |              |  
|                                               |  | Shares                    |  |   | Amount      |  |   | Capital     |  |   | Deficit       |   |   | Income (Loss)   |   |   | Interest        |   |   | Total        |  
|                                               |  |                           |  |   |             |  |   |             |  |   |               |   |   |                 |   |   |                 |   |   |              |  
|Balance at January 1, 2008                     |  | 35,004,156                |  |   | \ 3,500,415 |  |   | \ 6,189,683 |  |   | \ (15,790,498 | ) |   | \ 15,062        |   |   | \ -             |   |   | \ (6,085,338 | )
|                                               |  |                           |  |   |             |  |   |             |  |   |               |   |   |                 |   |   |                 |   |   |              |  
|                                               |  |                           |  |   |             |  |   |             |  |   |               |   |   |                 |   |   |                 |   |   |              |  
|Issuance of common shares                      |  | 90,000                    |  |   | 9,000       |  |   | 42,822      |  |   | -             |   |   | -               |   |   |                 |   |   | 51,822       |  
|Net income (loss)                              |  | -                         |  |   | -           |  |   | -           |  |   | 172,984       |   |   | -               |   |   |                 |   |   | 172,984      |  
|Other comprehensive loss:                      |  |                           |  |   |             |  |   |             |  |   |               |   |   |                 |   |   |                 |   |   |              |  
|Foreign translation loss                       |  | -                         |  |   | -           |  |   | -           |  |   | -             |   |   | (19,473         | ) |   |                 |   |   | (19,473      | )
|Balance at December 31, 2008                   |  | 35,094,156                |  |   | \ 3,509,415 |  |   | \ 6,232,505 |  |   | \ (15,617,514 | ) |   | \ (4,411        | ) |   | \ -             |   |   | \ (5,880,005 | )
|                                               |  |                           |  |   |             |  |   |             |  |   |               |   |   |                 |   |   |                 |   |   |              |  
|                                               |  |                           |  |   |             |  |   |             |  |   |               |   |   |                 |   |   |                 |   |   |              |  
|Net income (loss)                              |  |                           |  |   |             |  |   |             |  |   | (2,261,484    | ) |   |                 |   |   | (235,924        | ) |   | (2,497,408   | )
|Other comprehensive loss:                      |  |                           |  |   |             |  |   |             |  |   |               |   |   |                 |   |   |                 |   |   |              |  
|Foreign translation loss                       |  | -                         |  |   | -           |  |   | -           |  |   | -             |   |   | 66,351          |   |   | 21,232          |   |   | 87,583       |  
|Balance at December 31, 2009                   |  | 35,094,156                |  |   | \ 3,509,415 |  |   | \ 6,232,505 |  |   | \ (17,878,998 | ) |   | \ 61,940        |   |   | \ (214,692      | ) |   | \ (8,289,830 | )
|                                               |  |                           |  |   |             |  |   |             |  |   |               |   |   |                 |   |   |                 |   |   |              |  
|                                               |  |                           |  |   |             |  |   |             |  |   |               |   |   |                 |   |   |                 |   |   |              |  
|Net income (loss)                              |  |                           |  |   |             |  |   |             |  |   | (1,242,228    | ) |   |                 |   |   | (171,130        | ) |   | (1,413,358   | )
|Other comprehensive loss:                      |  |                           |  |   |             |  |   |             |  |   |               |   |   |                 |   |   |                 |   |   |              |  
|Foreign translation loss                       |  | -                         |  |   | -           |  |   | -           |  |   | -             |   |   | 28,084          |   |   | 8,986           |   |   | 37,070       |  
|Balance at December 31, 2010                   |  | 35,094,156                |  |   | \ 3,509,415 |  |   | \ 6,232,505 |  |   | \ (19,121,226 | ) |   | \ 90,024        |   |   | \ (376,836      | ) |   | \ (9,666,118 | )
|                                               |  |                           |  |   |             |  |   |             |  |   |               |   |   |                 |   |   |                 |   |   |              |  
|                                               |  |                           |  |   |             |  |   |             |  |   |               |   |   |                 |   |   |                 |   |   |              |  
|                                               |  |                           |  |   |             |  |   |             |  |   |               |   |   |                 |   |   |                 |   |   |              |  
|Balance at December 31, 2009 (in US$) (Note 4) |  | 35,094,156                |  | $ | 3,104,028   |  | $ | 5,512,564   |  | $ | (15,813,723   | ) | $ | 54,781          |   |   | (189,891        | ) | $ | (7,332,241   | )
|                                               |  |                           |  |   |             |  |   |             |  |   |               |   |   |                 |   |   |                 |   |   |              |  
|Net income (loss)                              |  |                           |  |   |             |  |   |             |  |   | (1,098,738    | ) |   |                 |   |   | (151,362        | ) |   | (1,250,100   | )
|Other comprehensive loss:                      |  |                           |  |   |             |  |   |             |  |   |               |   |   |                 |   |   |                 |   |   |              |  
|Foreign translation loss                       |  | -                         |  |   |             |  |   |             |  |   |               |   |   | 24,843          |   |   | 7,947           |   |   | 32,790       |  
|Balance at December 31, 2010                   |  | 35,094,156                |  | $ | 3,104,028   |  | $ | 5,512,564   |  | $ | (16,912,461   | ) | $ | 79,624          |   | $ | (333,306        | ) | $ | (8,549,551   | )

The accompanying notes are an integral part of these
Consolidated Financial Statements.

---

Meridian Co., Ltd. and SubsidiariesConsolidated
Statements of Cash FlowsFor the Years Ended December 31, 2010, 2009
and 2008(in thousands of Korean Won)

|                                                                                                                   |   | 2010 (in US$) |   |   |            |   |   |            |   |   |            |  
|------------------------------------------------------------------------------------------------------------------ | - | ------------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                                                                                                   |   | (Note 4)      |   |   |            |   |   |            |   |   |            |  
|                                                                                                                   |   | (unaudited)   |   |   | 2010       |   |   | 2009       |   |   | 2008       |  
|                                                                                                                   |   |               |   |   |            |   |   |            |   |   |            |  
|CASH FLOWS FROM OPERATING ACTIVITIES :                                                                             |   |               |   |   |            |   |   |            |   |   |            |  
|Net income (loss)                                                                                                  | $ | (1,250,100    | ) | \ | (1,413,358 | ) | \ | (2,497,408 | ) | \ | 172,984    |  
|Adjustments to reconcile net
      income (loss) from operations    to net cash used in
      operating activities |   |               |   |   |            |   |   |            |   |   |            |  
|Depreciation                                                                                                       |   | 22,034        |   |   | 24,912     |   |   | 38,172     |   |   | 53,325     |  
|Provision
      for severance benefits                                                                             |   | 29,472        |   |   | 33,322     |   |   | 75,583     |   |   | 74,580     |  
|Bad debt expenses, net
      (recovery income)                                                                     |   | 528,601       |   |   | 597,637    |   |   | 1,211,828  |   |   | 378,653    |  
|Amortization of intangible assets                                                                                  |   | 167           |   |   | 189        |   |   | 189        |   |   | 189        |  
|Loss on disposal of
      property, plant and equipment                                                            |   | 5,382         |   |   | 6,085      |   |   | -          |   |   | -          |  
|Equity in
      loss(gain) of investee                                                                             |   | -             |   |   | -          |   |   | 393        |   |   | 712        |  
|Loss on impairment of
      equity method investment securities                                                    |   | 33,063        |   |   | 37,382     |   |   | -          |   |   | -          |  
|Loss on
      disposal of inventory                                                                                |   | 48,298        |   |   | 54,606     |   |   | -          |   |   | 2,190      |  
|Loss on obsolete
      inventory                                                                                   |   | 26,195        |   |   | 29,617     |   |   | -          |   |   | -          |  
|Loss from
      correction of accounting error                                                                     |   | 4,859         |   |   | 5,494      |   |   | -          |   |   | -          |  
|Gain on forgiveness of
      debt                                                                                  |   | -             |   |   | -          |   |   | -          |   |   | (9,820     | )
|Changes in operating assets
      and liabilities                                                                  |   |               |   |   |            |   |   |            |   |   |            |  
|Decrease (increase) in
      accounts receivable                                                                   |   | 88,215        |   |   | 99,737     |   |   | 397,375    |   |   | (1,193,225 | )
|Decrease
      (increase) in inventory                                                                             |   | 120,815       |   |   | 136,594    |   |   | 122,987    |   |   | 71,251     |  
|Decrease (increase) in
      other current assets                                                                  |   | (27,572       | ) |   | (31,174    | ) |   | 39,281     |   |   | (22,230    | )
|Decrease
      (increase) in security deposits                                                                     |   | -             |   |   | -          |   |   | 7,088      |   |   | -          |  
|Increase (decrease) in
      accounts payable - trade                                                              |   | (23,817       | ) |   | (26,928    | ) |   | (82,593    | ) |   | (192,695   | )
|Increase
      (decrease) in accounts payable - other                                                              |   | 172,660       |   |   | 195,210    |   |   | 709,664    |   |   | 292,558    |  
|Increase (decrease) in
      other current liabilities                                                             |   | 282,526       |   |   | 319,424    |   |   | 82,522     |   |   | 86,913     |  
|Severance
      payments                                                                                           |   | -             |   |   | -          |   |   | (77,485    | ) |   | (16,003    | )
|Other                                                                                                              |   | 28,383        |   |   | 32,080     |   |   | (45,294    | ) |   | 17,843     |  
|Sub-total                                                                                                          |   | 1,339,281     |   |   | 1,514,187  |   |   | 2,479,710  |   |   | (455,759   | )
|                                                                                                                   |   |               |   |   |            |   |   |            |   |   |            |  
|Net cash
      provided by (used in) operating activities                                                          |   | 89,181        |   |   | 100,829    |   |   | (17,698    | ) |   | (282,775   | )
|                                                                                                                   |   |               |   |   |            |   |   |            |   |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES :                                                                             |   |               |   |   |            |   |   |            |   |   |            |  
|Decrease in short-term loans                                                                                       |   | -             |   |   | -          |   |   | -          |   |   | 10,000     |  
|Proceeds from sales of
      property, plant and equipment                                                         |   | 10,670        |   |   | 12,064     |   |   | -          |   |   | -          |  
|Increase in short-term loans                                                                                       |   | -             |   |   | -          |   |   | (35,000    | ) |   | -          |  
|Acquisition of property, plant
      and equipment                                                                 |   | -             |   |   | -          |   |   | -          |   |   | (78,484    | )
|                                                                                                                   |   |               |   |   |            |   |   |            |   |   |            |  
|Net cash
      provided by (used in) investing activities                                                          |   | 10,670        |   |   | 12,064     |   |   | (35,000    | ) |   | (68,484    | )
|                                                                                                                   |   |               |   |   |            |   |   |            |   |   |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES :                                                                             |   |               |   |   |            |   |   |            |   |   |            |  
|Proceeds from issuance of common stocks                                                                            |   | -             |   |   | -          |   |   | -          |   |   | -          |  
|Proceeds from short-term
      borrowings                                                                          |   | -             |   |   | -          |   |   | 29,500     |   |   | 585,000    |  
|Proceeds from long-term borrowings                                                                                 |   | -             |   |   | -          |   |   | 34,512     |   |   | -          |  
|Payment of long-term accounts
      payable                                                                        |   | -             |   |   | -          |   |   | (8,611     | ) |   | -          |  
|Repayment of short-term borrowings                                                                                 |   | (2,653        | ) |   | (3,000     | ) |   | -          |   |   | (124,609   | )
|Repayment of long-term
      borrowings                                                                            |   | (95,612       | ) |   | (108,100   | ) |   | -          |   |   | (210,070   | )
|                                                                                                                   |   |               |   |   |            |   |   |            |   |   |            |  
|Net cash
      (used in) provided by financing activities                                                          |   | (98,265       | ) |   | (111,100   | ) |   | 55,401     |   |   | 250,321    |  
|                                                                                                                   |   |               |   |   |            |   |   |            |   |   |            |  
|EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
      CASH EQUIVALENTS                                                 |   |               |   |   |            |   |   |            |   |   |            |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                               |   | 1,586         |   |   | 1,793      |   |   | 2,703      |   |   | (100,938   | )
|                                                                                                                   |   |               |   |   |            |   |   |            |   |   |            |  
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                                                     |   | 4,979         |   |   | 5,630      |   |   | 2,927      |   |   | 103,865    |  
|                                                                                                                   |   |               |   |   |            |   |   |            |   |   |            |  
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                                                           | $ | 6,565         |   | \ | 7,423      |   | \ | 5,630      |   | \ | 2,927      |  
|                                                                                                                   |   |               |   |   |            |   |   |            |   |   |            |  
|                                                                                                                   |   |               |   |   |            |   |   |            |   |   |            |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
      INFORMATION                                                             |   |               |   |   |            |   |   |            |   |   |            |  
|Cash paid for interest                                                                                             | $ | 66,041        |   | \ | 76,852     |   | \ | 81,300     |   | \ | 64,221     |  
|SUPPLEMENTAL DISCLOSURE OF NONCASH
      FINANCING ACTIVITIES                                                      |   |               |   |   |            |   |   |            |   |   |            |  
|Accrued severance benefits transferred to
      other current liability                                            | $ | 9,927         |   | \ | 11,553     |   | \ | 19,031     |   | \ | 5,858      |  
|Stock issued in lieu of
      service fees                                                                         | $ | -             |   | \ | -          |   | \ | -          |   | \ | 51,822     |  

The accompanying notes are an integral part of these
Consolidated Financial Statements.

---

Meridian Co., Ltd. and SubsidiariesNotes to
Consolidated Financial Statements
  (in thousands of Korean Won (\ ))

Note 1. Nature of Operation

Meridian Co., Ltd. (Meridian), incorporated on April 19, 1994
under the laws of the Republic of Korea ("Korea"), and its subsidiary
(hereinafter collectively referred to as the Company), are in the business of
developing, manufacturing and selling of integrated medical equipment in
domestic (Korea) and overseas markets.

On March 4, 2002, Meridian acquired 100% ownership of Meridian
America Medicals, Inc. located in the city of Irvine, California, USA to
establish distribution post for the North American market. On December 13, 2004
and February 15, 2005, Meridian America Medicals, Inc. (MAMI) issued new
common stock, of which the shares were entirely subscribed by a non-controlling
shareholder, Meridian Medical, Inc. (MMI) Consequently; the ownership by
Meridian was diluted from 100% to 75.76% .

On September 29, 2005, Meridian acquired 100% ownership of
Rapha & Health Co., Ltd. for \ 50 million in cash to systemize its sales
process in domestic (Korea) market. On June 7, 2006, Rapha & Health Co.,
Ltd. changed its name to Meitian Co., Ltd. However, Meitian Co., Ltd. ceased its
operation in April 2008, so that Meridian could concentrate its resources on the
overseas markets.

Note 2. Liquidity and Going Concern

In addition to the large scale net loss \ 2,497,408 in 2009,
the Company had recorded \ 1,413,358 net loss in this fiscal year. The Company
has an accumulated deficit of \ 19,121,226 and working capital deficits of \
8,221,694 of as of December 31, 2010. As of December 31, 2010, the Companys
principal source of liquidity is \ 7,423 of cash and \ 94,915 of trade and other
accounts receivable. Such conditions including the Company's inability to comply
with debt restructuring approved by Court as of December 31, 2009 and 2010 and
its negative working capital position raise substantial doubt about its ability
to continue as a going concern. These operating results occurred while the
Company continues to develop and commercialize new products. These factors have
placed a significant strain on the financial resources of the Company. The
ability of the Company to overcome these challenges depends on its ability to
continue to generate higher revenue, and achieve positive cash flows from
continuing operations, profitability and continued sources of debt and equity
financing. The consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. Accordingly, the financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts, classification of liabilities, or any
other adjustments that might result should the Company be unable to continue as
a going concern.

On August 4, 2003, when Meridian suffered deteriorated
liquidity, the bank accounts of Meridian were suspended from the transactions
such as check clearing and direct deposits. In addition, on February 27, 2004,
Chooncheon District Court in Korea approved the Companys debt restructuring
plan (or composition) for the total debt of \ 4,697,927, which constituted
approximately 68% of the total outstanding borrowings and payables of Meridian
at that time. The creditors who have agreed to the debt restructuring include
the following:

Account
    
    Creditor
    
    
    AmountBorrowings
    
    Woori Bank
    
    \
    391 787SMIII ABS Specialty Co., Ltd.
    
    
    1,000,000Rainbow Specialty
      Securitization Co., Ltd.
    
    
    500,000Korea Technology Credit Guarantee
      Fund
    
    
    1,151,884Small Business
      Corporation
    
    
    300,000Korea Exchange Bank
    
    
    125,831Shinhan Bank
    
    
    41,612Subtotal  financial institutions
    
    
    3,511,114Accounts payable
    
    Various vendors
    
    
    1,186,813Total
    
    \
    4,697,927


The original terms of the borrowings, which include secured \
34,200 and unsecured \ 3,476,914 of debts to various financial institutions,
were alleviated. The new terms require installment payments over 7 years through
2013 at the fixed interest rate of 3.5% per annum. All accrued and unpaid
interests on the borrowings were forgiven.

---

New terms were obtained for the accounts payable due to various
vendors, which require installment repayments over 3 years through 2007 at no
interest.

In January 2005, Woori Bank exercised its security right on an
apartment owned by Meridian. The proceeds of \ 42,837 from foreclosure were used
to pay debt principal, interest and other direct expenses related to the
foreclosure.

Aside from the debt restructuring, Meridian had a borrowing
from Chohung Bank (Chohung Bank has been merged into Shinhan Bank as of April 1,
2006), which was not included in the original restructuring plan, as the bank
did not agree to the terms. In December 2005, Chohung Bank exercised its
security right on the land and building, which had been provided as collaterals
by Meridian. The proceeds of \ 883,308 from the foreclosure, was paid to
preemptive other creditors and Chohung Bank. Subsequent to the foreclosure, the
original debt restructuring plan was modified to include the outstanding
principal of \ 1,074,455 to Chohung Bank. The repayments under the modified plan
were scheduled as follows:

2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    TotalPrincipal
    
    \ 650 757
    
    
    \ 650 757
    
    
    \ 650 757
    
    
    \ 650 757
    
    
    \ 650 757
    
    
    \ 650 757
    
    
    \ 650 756
    
    
    \ 4 555 298Interest
    
    159,435
    
    
    136,659
    
    
    113,883
    
    
    91,106
    
    
    68,329
    
    
    45,553
    
    
    22,777
    
    
    637,742Total
    
    \ 810 192
    
    
    \ 787 416
    
    
    \ 764 640
    
    
    \ 741 863
    
    
    \ 719 086
    
    
    \ 696 310
    
    
    \ 673 533
    
    
    \ 5 193 040


In December 2008, Korea Technology Credit Guarantee Fund
reduced their original principal from \ 1,151,884 to \ 1,142,064. The repayments
under the re-modified plan were scheduled as follows:

2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    TotalPrincipal
    
    \ 462 656
    
    
    \ 649 082
    
    
    \ 649 082
    
    
    \ 649 082
    
    
    \ 649 082
    
    
    \ 649 082
    
    
    \ 649 081
    
    
    \ 4 357 147Interest
    
    447,346
    
    
    158,465
    
    
    162,399
    
    
    150,251
    
    
    68,180
    
    
    45,461
    
    
    22,727
    
    
    1,054,829Total
    
    \ 910 002
    
    
    \ 807 547
    
    
    \ 811 481
    
    
    \ 799 333
    
    
    \ 717 262
    
    
    \ 694 543
    
    
    \ 671 808
    
    
    \ 5 411 976


However, due to the recurring losses from operations, Meridian
was not able to meet the repayment schedule. As of December 31, 2010, Meridian
has not paid \ 2,409,902 of principal and \ 918,461 of accrued interest
outstanding to financial institutions, and \ 863,102 of accounts payable to
various vendors. However, the Company continuously tries to pay overdue
principal and interest under the consultation with the creditor.

The status of the restructuring plan is reported to Chooncheon
District Court, Korea every quarter. However, under the restructuring plan (or
composition), the Court does not have authorities to dictate or supervise
day-to-day financial activities, which is typical for court receivership.
Therefore, any additional debt or equity financing could be made with no
intervention from the Court.

Meridian carried out an aggressive global marketing in last 3
years with the funds raised in late 2007. Despite of this effort, due to the
global financial crisis and the entrance of imitation machines in export market,
the companys performance has stagnated in 2009 and 2010. However, the Company
has a plan for attract new foreign investment that will improve financial
structures and reinforce the R&D activity and marketing activity.

Note 3. Summary of Significant Accounting Policies

The consolidated financial statements are presented in
accordance with accounting principles generally accepted in the United States of
America (U.S. GAAP). Significant accounting policies followed by the Company
in the preparation of the accompanying consolidated financial statements are
summarized below.

Principles of Consolidation

The accompanying consolidated financial statements include the
accounts of Meridian, the parent company, and its majority-owned subsidiary,
Meridian America Medicals, Inc. and its wholly-owned subsidiary, Meitian Co.,
Ltd. All significant inter-company balances and transactions have been
eliminated. Non-controlling interest in consolidated financial statements
represent the share of Meridian Medical Inc. who owns 24.24% of common stock of
Meridian America Medicals, Inc.

---

Revenue Recognition

Revenue is recognized pursuant to applicable accounting standards including Securities and Exchange Commission ("SEC" ) Staff Accounting Bulletin ("SAB" ) No. 101 (SAB 101), "Revenue Recognition in Financial
Statements" , and SAB 104, Revenue Recognition. SAB 101 as amended and SAB 104 summarize certain points of the SEC staff's views in applying generally accepted accounting principles to revenue recognition in financial statements and
provide guidance on revenue recognition issues in the absence of authoritative literature addressing a specific arrangement or a specific industry. The Company's revenue recognition policy complies with the requirements of SAB 101 and SAB 104.

Revenues from the sale of products and the rendering of services are recognized when the significant risks and rewards of ownership of the goods have been transferred to the customer and collectability is reasonably assured. The Company recognizes
revenue from sales of products when the products are shipped to the customers. For medical equipment, the Company's sales policy does not allow returns unless the products are defective. The customer's acceptance is governed by the terms
on the contract or arrangement, and any transactions not meeting the predetermined conditions are not recorded as revenue.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. The most significant
estimates and assumptions relate to the allowance for doubtful accounts, inventory write-down due to decline in market value and deferred tax valuation allowance. Although these estimates are based on management's best knowledge of current
events and actions that the Company may undertake in the future, actual results may be different from the estimates.

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments, including term deposits and short-term bonds which are readily convertible into known amounts of cash and have an original maturity of three months or less. For the
purposes of the statements of cash flows, the Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents.

Allowance for Doubtful Accounts

Allowance for doubtful accounts is estimated based on analysis of individual accounts and past experience of collection. When circumstances indicate that collection of an accounts receivable is doubtful, an allowance and a charge against earnings
are recognized. When circumstances indicate that collection of an accounts receivable is not to be realized, the outstanding accounts receivable and the associated allowance are written off.

Concentrations of credit risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash, cash equivalents, short-term and long-term investments and accounts receivable. The Company places its cash primarily in deposit
accounts with reputable financial institutions. The Company's accounts receivable are derived primarily from revenue earned from customers located in the U.S., Europe and Korea. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collaterals from its customers. The Company maintains an allowance for doubtful accounts receivable based upon the expected collectability of accounts receivable. There was \ 522,823 write off in the
year ended December 31, 2010 and was no write off in 2009.

In 2010, the Company had one customer represented approximately 55.8% of revenues.  In 2009, the Company had two customers that each represented more than 10% of its revenues, one of which represented approximately 47.5% of revenues and the other
which represented approximately 11% of revenues. In 2008, the Company had three customers that each represented more than 10% of its revenues, one of which represented 29% and two of which represented approximately 11% of revenues.

As of December 31, 2010, the Company had one customer that accounted for 77% of accounts receivable. At December 31, 2009, the Company had one customer that accounted for 65% of the total outstanding accounts receivable.

Value - Added Taxes

Under the Korean Value-Added Tax ("VAT") law, the Company pays a 10% VAT on each purchase of VAT-taxable goods or services("input VAT") and collects VAT from its customers equal to 10% of sales ("output VAT"). The net amount is recorded as prepaid
VAT, if the input VAT is greater than the output VAT, or VAT payable if the output VAT is greater than the input VAT.

Inventories

Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated selling cost. The cost of inventories is determined on the average cost
method. The Company reviews the
components of inventories on a regular basis for excess or obsolete inventories and makes appropriate adjustments to the value of inventories in the period that such excess or obsolete inventories are identified.

---

Investment in Affiliate

Investee entities, in which the Company may exercise significant influence, but not control, are accounted for under the equity method of accounting. Whether the Company exercises significant influence with respect to an investee depends on an
evaluation of several factors including, among others, representation on the entity's board of directors and ownership level, generally 20% to 50% interest in the voting securities of the entity including voting rights associated with the
Company's holdings in common, preferred and other convertible instruments in the entity. Under the equity method of accounting, the Company's share of the earnings or losses of these entities is included in the equity income (loss)
section of the consolidated statements of operations.

Determination of impairment is based on the consideration of such factors as operating results, business plans and estimated future cash flows. Net realizable value is determined through the use of such methodologies as discounted cash flows,
valuation of recent financings and comparable valuations of similar companies.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Significant additions or improvements extending useful lives of assets are capitalized. However, normal maintenance and repairs are charged to expense as incurred.

Depreciation is computed by the declining-balance method using rates based on useful lives of 4 years.

Impairment of Long-Lived Assets

The Company reviews for the impairment of long-lived assets, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimated undiscounted future
net cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.

No impairment loss was recognized in 2010, 2009 and 2008.

Intangible Assets

Intangible assets, which consist of patents and trademarks, are stated at cost less accumulated amortization computed using the straight-line method over their estimated useful lives of 10 years.

Accrued Severance Benefits

Employees who have been with the Company for more than one year are entitled to lump-sum payments based on current rates of pay and length of service when they leave the Company. The Company's estimated liability under the plan which would be
payable if all employees left on the balance sheet date is accrued in the accompanying balance sheets.

Through March 1999, under the National Pension Plan in Korea, the Company was required to transfer a certain portion of retirement allowances of employees to the National Pension Fund. The amount transferred will reduce the retirement and severance
benefit amount to be payable to the employees and is accordingly reflected in the accompanying financial statements as a reduction from the accrued severance benefits liability. Since April 1999, however, under a new regulation, such transfers to
the National Pension Fund became no longer required.

Shipping and Handling Costs

The Company includes shipping and handling costs in selling, general and administrative costs. Shipping and handling costs for the years ended December 31, 2010, 2009 and 2008, amounted to \ 2,623, \ 4,202, and \ 13,440, respectively.

Research and Development Costs

Research and development costs consist primarily of payroll, depreciation expense and other overhead expenses which are all expensed as incurred until technological feasibility is reached. The Company has expensed \ 170,506, \ 283,237 and \ 392,902
during the years ended December 31, 2010, 2009 and 2008, respectively.

Advertising Costs

The Company expenses advertising expenses as they are incurred. Advertising expenses for the years ended December 31, 2010, 2009 and 2008 were \ 5,099, \ 10,372 and \ 45,290, respectively.

---

Fair Value of Financial Instruments

The estimated fair value of amounts reported in the consolidated financial statements have been determined using available market information and valuation methodologies, as applicable. The carrying amount of cash and cash equivalents, accounts
receivable, accounts payable, and all other current assets and liabilities approximate their fair value because of their short term maturities at December 31, 2010 and 2009, unless otherwise stated. The fair value of non-current assets and
liabilities approximate their carrying value unless otherwise stated. The fair value of the Company's long-term debt is based on interest rates that would be available to the Company for the issuance of debt with similar terms.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Other Comprehensive Income

Other comprehensive income refers to revenues, expenses, gains and losses that, under U.S GAAP are included in comprehensive income, but are excluded from net income as these amounts are recorded directly as an adjustment to shareholders'
deficiency. The Company's other comprehensive income is primarily comprised of foreign currency translation gain (loss).

Translation of Foreign Currency

The Company appliesASC 830, Foreign Currency Matters, for translating foreign currency into Korean Won in its consolidation of the financial statements. Upon consolidation of the Company's foreign subsidiary into the Company's
consolidated financial statements, any balances with the subsidiary denominated in the foreign currency are translated at the exchange rate at year end. The financial statements of Meridian America Medicals, Inc. ("MAMI" ) have been
translated based upon US Dollar as the functional currency. MAMI's assets and liabilities were translated using the exchange rate at year end and income and expense items were translated at the average exchange rate for the year. The resulting
translation adjustment was included in other comprehensive income (loss).

The Company used the exchange rates published by The Korea Financial Telecommunications & Clearings Institute.

Noncontrolling Interest in Consolidated Subsidiary

The Company's consolidated financial statements include 100%
  of the assets, liabilities, revenues and expenses of its majority-owned subsidiary
  over which it has effective control. The ownership interests of the other stockholders
  are reflected as noncontrolling interests.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding for all periods. Diluted earnings (loss) per share is computed by dividing net
earnings (loss) by the weighted average number of common shares outstanding, increased by common stock equivalents. Common stock equivalents are calculated using the treasury stock method and represent incremental shares issuable upon exercise of
the Company's outstanding stock options. However, potential common shares are not included in the denominator of the diluted earnings (loss) per share calculation when inclusion of such shares would be anti-dilutive, such as in a period
in which a net loss is recorded.

Stock Option Plan

The Company previously applied the intrinsic value-based method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees,"  and related interpretations, in accounting for its fixed stock option plan. As
permitted, the Company had previously elected to adopt provisions of ASC 718, "Compensation - Stock Compensation" , for options granted to non-employees who perform services for the Company and the disclosure-only provisions of options
granted to employees.

Pursuant to ASC Topic 718, the company measures the cost of employee services received in exchange for an award of stock-based compensation based on the grant-date fair value of the award. The cost is recognized over the requisite service period,
except for awards granted to retirement-eligible employees, which are fully expensed by the grant date. No compensation cost is recognized for awards that are subsequently forfeited. However, the Company did not recognize compensation cost related
with stock options as the vesting period was completed up prior to 2004 for all outstanding options.

The fair value of stock options granted were estimated on the dates of grant using the Black-Scholes option pricing model with the following
assumptions: dividend yield and expected volatility of nil for all years, risk-free interest rate of 5.64% to 9% and expected lives of 4 years. The weighted average fair value per stock option granted during 2001 was \ 607.

---

At December 31, 2010 there is no stock option plan outstanding.

Recent Accounting Pronouncements

In June 2009, the FASB issued SFAS No. 168,The FASB Accounting Standards Codification ("ASC" ) and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162. This statement modifies the
GAAP hierarchy by establishing only two levels of GAAP, authoritative and nonauthoritative accounting literature. Effective July 2009, the FASB ASC, also known collectively as the "Codification,"  is considered the single source of
authoritative U.S. accounting and reporting standards, except for additional authoritative rules and interpretive releases issued by the SEC. Nonauthoritative guidance and literature would include, among other things, FASB Concepts Statements,
American Institute of Certified Public Accountants Issue Papers and Technical Practice Aids, and accounting textbooks. The Codification was developed to organize GAAP pronouncements by topic so that users can more easily access authoritative
accounting guidance. It is organized by topic, subtopic, section, and paragraph, each of which is identified by a numerical designation. This statement is effective for financial statements for interim and annual reporting periods ending after
September 15, 2009. All accounting references have been updated, and therefore SFAS references have been replaced with ASC references.

In December 2007, the FASB issued SFAS No. 141 (revised),Business Combinations, which was primarily codified into theBusiness Combinations Topic, ASC 805. This guidance changes the accounting for business combinations, including the
measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and
development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition related transaction costs, and the recognition of changes in the acquirer's income tax valuation allowance. This guidance is
effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The adoption of this guidance did not have any impact on the Company's consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51, which was primarily codified into theConsolidations Topic, ASC 810-10-65. This guidance
establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This guidance is effective for fiscal years beginning on or after December 15, 2008. The adoption of this
guidance did not have any impact on the Company's consolidated financial statements.

In May 2009, the FASB issued SFAS No. 165,Subsequent Events, which was primarily codified into theSubsequent Events Topic, ASC 855. This guidance establishes general standards of accounting for and disclosure of events that occur
after the balance sheet data but before financial statements are issued. This guidance is effective for interim or annual financial periods ending after June 15, 2009. The adoption of this guidance did not have any impact on the Company's
consolidated financial statements.

In September 2009, the FASB issued ASU No. 2009-12,Fair Value Measurements and Disclosure, or ASU 2009-12. This standard provides additional guidance on using the net asset value per share, provided by an investee, when estimating the fair
value of an alternate investment that does not have a readily determinable fair value and enhances the disclosures concerning these investments. Examples of alternate investments, within the scope of this standard, include investments in hedge funds
and private equity, real estate, and venture capital partnerships. This standard is effective for interim and annual periods ending after December 15, 2009. The Company does not expect the adoption of this guidance to have any impact on our
consolidated financial statements.

In December 2009, the FASB issued ASU No. 2009-17,Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, or ASU 2009-17. The amendments in this update replace the
quantitative-based risks and rewards calculation for determining which reporting entity, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which reporting entity has the power to
direct the activities of a variable interest entity that most significantly impact the entity's economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. An approach that
is expected to be primarily qualitative will be more effective for identifying which reporting entity has a controlling financial interest in a variable interest entity. The amendments in this update also require additional disclosures about a
reporting entity's involvement in variable interest entities, which will enhance the information provided to users of financial statements. This standard is effective for fiscal years beginning on or after December 15, 2009. The Company does
not expect the adoption of this guidance to have any impact on our consolidated financial statements.

In January 2010, the FASB issued ASU No. 2010-06,Fair Value Measurements and Disclosures (ASC Topic 820) — Improving Disclosures About Fair Value Measurements. The amendments in this update require new disclosures about transfers into
and out of Levels 1 (fair value determined based on quoted prices in active markets for identical assets and liabilities) and 2 (fair value determined based on significant other observable inputs), and separate disclosures about purchases, sales,
issuances, and settlements relating to Level 3 measurements. It also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. Except for the detailed Level 3
roll-forward disclosures, the new standard is effective for interim and annual reporting periods beginning after December 31, 2009. The requirement to provide detailed
disclosures about the purchases, sales, issuances, and settlements in the
roll-forward activity for Level 3 fair value measurements is effective for
interim and annual reporting periods beginning after December 31, 2010. We do
not expect the adoption of this guidance to have a material impact on the
Companys consolidated financial statements.

---

In February 2010, the FASB issued ASU 2010-09, Subsequent
Events(Topic 855) Amendments to Certain Recognition and Disclosure
Requirements, which amends ASC 855, Subsequent Events, so that SEC
filers, as defined in the ASU, no longer are required to disclose the date
through which subsequent events have been evaluated in originally issued and
revised financial statements. The Company adopted the amendments effective
immediately, and the adoption did not impact the Companys financial condition
and results of operations.

In December 2010, the FASB issued ASU 2010-29, Disclosure
of Supplementary Pro Forma Information for Business Combinations. This ASU
specifies that if a public company presents comparative financial statements,
the entity should only disclose revenue and earnings of the combined entity as
though the business combination(s) that occurred during the current year had
occurred as of the beginning of the comparable prior annual reporting period.
ASU 2010-29 is effective prospectively for business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2010, with early adoption permitted.
The Company early adopted this amendments as of January 1, 2010, however, the
adoption of ASU 2010-29 did not impact our financial position, results of
operations, or cash flows, as its requirements only pertain to financial
statement footnote disclosure.

Other recent accounting pronouncements issued by the FASB
(including its Emerging Issues Task Force), the AICPA and the SEC did not or are
not believed by management to have a material impact on our companys present or
future consolidated financial statements.

Note 4. Convenience Translation into United States
Dollar-Amounts

The Company reports its consolidated financial statements in
Korean Won. The United States dollar (US dollar) amounts disclosed in
the accompanying consolidated financial statements are presented solely for the
convenience of the reader, and have been converted at the rate of 1,163.70
Korean Won to one US dollar, which is the noon buying rate of the U.S. Federal
Reserve Bank of New York in effect on December 31, 2010. Such translations
should not be construed as representations that the Korean Won amounts
represent, have been, or could be, converted into, US dollars at that or any
other rate. The US dollar amounts are unaudited and are not presented in
accordance with generally accepted accounting principles generally accepted
either in the Republic of Korea or the United States of America.

Note 5. Accounts Receivable

Trade and other accounts receivable at December 31 are as
follows:

2010
    
    
    2009Trade
    \
    352 727
    
    \
    2 750 141Others
    
    40,028
    
    
    51,380392,755
    
    
    2,801,521Allowance for doubtful accounts
    
    (297,840
    )
    
    (2,000,898
    )Accounts Receivable, net
    \
    94 915
    
    \
    800 623


Note 6. Inventories

Inventories are comprised of the following as of December 31:

2010
    
    
    2009Merchandise
    
    \ 54 352
    
    
    \ 71 949Finished goods
    
    33,965
    
    
    193,680Work-in-process
    
    91,604
    
    
    106,098Raw material
    
    219,420
    
    
    248,432399,341
    
    
    620,159Reserves
    
    (264,409
    )
    
    (267,454
    )\ 134 932
    
    
    \ 352 705


Merchandise consists of medical equipment, medical supplies and
electronic equipment purchased and held for resale by the Company. Finished
goods are comprised principally of alternative medical equipments manufactured
by the Company.

---

Note 7. Property, Plant and Equipment

Property, plant and equipment are comprised of the following at
December 31:

2010
    
    
    2009Machinery
    \
    55 276
    
    \
    55 416Vehicles
    
    -
    
    
    32,769Tools
    
    47,900
    
    
    47,900Furniture and fixtures
    
    930,281
    
    
    930,2811,033,457
    
    
    1,066,366Less accumulated depreciation
    
    (1,016,991
    )
    
    (1,006,698
    )Property, plant and equipment, net
    \
    16 466
    
    \
    59 668


Depreciation expenses for the years ended December 31, 2010,
2009 and 2008 were \ 24,912, \ 38,172 and \ 53,325, respectively.

Note 8. Equity Method Investment

The Company accounts for its ownership interest in Beijing
Meridian Medicals Equipment Co., Ltd. ("Beijing Meridian") under the equity
method of accounting and adjusts its investment balance for its share of Beijing
Meridian income and losses. Beijing Meridians primary business is wholesale and
retail of medical equipment in China.

On November 10, 2001, the Company acquired 45% ownership of
Beijing Meridian for \ 76,956 in cash. The changes of ownership percentage
occurred in 2002 and 2003 when Beijing Meridian issued additional capital
stocks. The ownership percentage was 25% in 2010 and 2009.

The recognized loss on this investment was \ 393 in 2009. And
the carrying amount of the investment was \ 37,382 as of December 31, 2009. In
2010, however the Company recognized \ 37,382 loss on impairment of equity
method investments securities considering the factors indicating that a decrease
in value of the investment has occurred.

Note 9. Patents and Trademarks

Patents and trademarks are comprised of the following at
December 31:

2010
    
    
    2009Acquisition cost
    \
    5 466
    
    \
    5 466Less accumulated amortization
    
    (5,277
    )
    
    (5,090
    )Intangible assets, net
    \
    189
    
    \
    376


Amortization expenses for the years ended December 31, 2009,
2008 and 2007 were \ 189, \ 189 and \ 189, respectively.

Note 10. Short-Term Borrowings

Short-term borrowings as of December 31 are as follows:

AnnualCreditor
    
    interest rate
    
    
    2010
    
    
    2009Other (third party individuals)
    
    8 ~ 9 %
    
    \
    681,500
    
    \
    684,500


Note 11. Long-Term Borrowings

Long-term borrowings as of December 31 are as follows:

---

|                                         |  | Annual        |  |  |                   |  |   |            |   |   |            |  
|---------------------------------------- |  | ------------- |  |  | ----------------- |  | - | ---------- | - | - | ---------- | -
|Creditor                                 |  | interest rate |  |  | Maturity Date     |  |   | 2010       |   |   | 2009       |  
|                                         |  |               |  |  |                   |  |   |            |   |   |            |  
|Chohung Bank (Note a)                    |  | 3.5 %         |  |  | December 31, 2013 |  | \ | 1,074,455  |   | \ | 1,074,455  |  
|Korea Technology Credit Guarantee Fund   |  | 3.5 %         |  |  | December 31, 2013 |  |   | 978,912    |   |   | 1,009,160  |  
|Korea Exchange Bank                      |  | 3.5 %         |  |  | December 31, 2013 |  |   | 125,831    |   |   | 125,831    |  
|Woori Bank                               |  | 3.5 %         |  |  | December 31, 2013 |  |   | 361,516    |   |   | 361,516    |  
|Small Business Corporation               |  | 3.5 %         |  |  | December 31, 2013 |  |   | 276,606    |   |   | 276,606    |  
|Shinhan Bank                             |  | 3.5 %         |  |  | December 31, 2013 |  |   | 39,827     |   |   | 41,612     |  
|SMI II ABS Specialty Co., Ltd. (Note b)  |  | 3.5 %         |  |  | December 31, 2013 |  |   | 1,000,000  |   |   | 1,000,000  |  
|Rainbow Specialty Sec Co., Ltd. (Note b) |  | 3.5 %         |  |  | December 31, 2013 |  |   | 500,000    |   |   | 500,000    |  
|Shareholder                              |  | 2%            |  |  | December 31, 2011 |  |   | -          |   |   | 41,512     |  
|                                         |  |               |  |  |                   |  |   | 4,357,147  |   |   | 4,430,692  |  
|Less current portion                     |  |               |  |  |                   |  |   | (3,058,984 | ) |   | (2,441,169 | )
|                                         |  |               |  |  |                   |  | \ | 1 298 163  |   | \ | 1 989 523  |  

(Note a) Chohung Bank has been merged into Shinhan Bank as of
April 1, 2006.

(Note b) The Company had issued two series of non-guaranteed
corporate bonds in 2001. As explained in Note 2, the Company entered into debt
restructuring plan including debentures. As a result, two series of debentures
were reclassified to long-term borrowings and the maturity date was extended to
December 31, 2013 with a reduced interest rate of 3.5% per annum. Details of
debentures as of December 31, 2010, are as follows:

Restructured
      
      
      OriginalAmount
      
      
      Interest rate
      
      
      Maturity
      
      
      Interest rate
      
      
      Maturity1stdebentures
      
      \1,000,000
      
      
      3.5%
      
      
      December 31, 2013
      
      
      12.15%
      
      
      January 31, 20032nddebentures
      
      500,000
      
      
      3.5%
      
      
      December 31, 2013
      
      
      13.92%
      
      
      August 14, 2004\1
        500 000


The repayment schedule for long-term borrowings as of December
31, 2010 is as follows:

Year
    
    
      Amount2011
    
    \
    3,058,9842012
    
    
    649,0822013
    
    
    649,081\
    4,357,147


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Note 12. Accrued Severance Benefits

Changes in accrued severance benefits for the years ended
December 31, 2010 and 2009 are summarized as follows:

2010
    
    
    2009Accrued severance benefits at
      beginning of year
    \
    192 214
    
    \
    194 114Provision
    
    33,322
    
    
    75,584Payments
    
    (11,553
    )
    
    (77,486
    )Transfer to National Pension Fund
    
    (4,063
    )
    
    (4,063
    )209,920
    
    
    188,149Less current portion
    
    (42,797
    )
    
    (38,442
    )Balance at end of year
    \
    167 123
    
    \
    149 707


Note 13. Commitments

The Company leases its manufacturing and office facilities from
non-affiliates. Current lease will be expired in October 2011. Thereafter, the
management expects to renew its lease agreement on an annual basis. Total rent
expense were \ 72,438, \ 135,735 and \ 165,338 for the years ended December 31,
2010, 2009 and 2008, respectively.

Total future minimum lease payment under current operating
lease is \ 50,000 for the year ending December, 31.

Note 14. Shareholders Deficiency

The Companys capital stock consists entirely of common stock
with a par value of 100 Won and the number of authorized, issued and outstanding
shares as of December 31, 2010 and 2009 are as follows:

2010
    
    
    2009Authorized shares
    
    100,000,000
    
    
    100,000,000Issued and outstanding shares
    
    35,094,156
    
    
    35,094,156


In April 2007, the Company raised 517,000 Won from twenty
non-U.S. investors for total 933,506 common shares at the price of 554 Won per
share and warrants to purchase 133,358 common shares at 950 Won per share. As of
December 31 2009, due to the end of exercisable period, those warrants are not
effective any more.

In June 2007, the Company raised US$350,000 from one non-U.S.
investor for 700,000 common shares at the price of US$0.50 per share.

In December 2007, the Company raised 1,779,000 Won from forty
nine non-U.S. investors for total 1,976,666 common shares at the price of 900
Won per share.

On September 4, 2008, the Company issued 90,000 shares of
common stock (par value 100 Won) in exchange for investor relations and
marketing services with the fair value to the Company of \ 51,822. The shares
issued were valued at the trading price of the company's common stock as of the
date of authorization for the issuance.

The Company has legally issued its shares and complied with the
filing requirements pursuant to the SEC regulations. However, 13,975,159 common
shares issued through S-8 registrations, (i) for acquisition of By George
Holdings, (ii) debt-for-equity swap on October 21, 2004 and (iii) service fee
for IR and marketing activities, have not been included in the Korean Commercial
Registration Office due to the different requirements of the share issuance
between the US and Korean Commercial Laws. The number of outstanding shares and
capital stock as of December 31, 2008 in SEC and in Korean Commercial
Registration Office are as follows:

Korean CommercialSEC
    
    
    Registration OfficeNumber of outstanding shares
    
    35,094,156
    
    
    19,421,182Capital Stock
    \
    3,509,4156
    
    \
    1,942,118


However, regardless of registration in Korean Commercial
Registration Office, every shareholders right and interest is not different.

---

Note 15. Other income (expense)

The Company classifies income (expense) items not generated
from the routine business operation as net other of other income (expense). Net
other for the years ended December 31, 2010, 2009 and 2008 are \ (128,036), \
(49,878) and \ 161,963, respectively. The main components of net other of other
income (expense) from the statements of operations and comprehensive income are
as follows. For the year ended 2010, the Company classified \ (54,606) loss on
disposal of inventory, \ (37,382) loss on impairment of equity method investment
securities and \ (29,617) loss on obsolete inventory, \ (5,494) loss from
correction of accounting error as net other. For the year ended 2009, the
Company classified \ (74,302) loss from correction of accounting error as net
other. For the year ended 2008, the Company classified \ 102,700 refund of
service fee as net other.

Note 16. Income Taxes

The Company adopted ASC Subtopic 740-10-Income Taxes-Overall
(FASB Interpretation No. 48), Accounting for Uncertainty in Income Taxes which
prescribes a recognition threshold and measurement process for recording in the
financial statements, uncertain tax positions taken or expected to be taken in a
tax return. Under ASC Subtopic 740-10, the impact of an uncertain income tax
position on the income tax return must be recognized at the largest amount that
is more-likely-not to be sustained upon audit by the relevant taxing authority.
An uncertain income tax position will not be recognized if it has less than a
50% likelihood of being sustained. ). Management believes that there are no
significant unrecognized tax expense (benefits) as of December 31, 2010.

The Company recognizes federal and state tax liabilities or
assets based on its estimate of taxes payable to or refundable by tax
authorities in the current fiscal year. The Company also recognizes federal and
state tax liabilities or assets based on its estimate of future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. A valuation allowance is required when it is more
likely than not that the Company will not be able to realize all or a portion of
our deferred tax assets.

Income tax provision from continuing operations for the years
ended December 31, 2010 and 2009 were $0.

The provisions for income taxes reconcile to the amount
computed by applying effective federal statutory income tax rate to income
before provision for income taxes as follows:

2010
    
    
    2009Foreign tax
    
    (23.98%
    )
    
    (15.02%
    )Federal tax at statutory tax rate
    
    (2.27%
    )
    
    (13.92%
    )State tax, net of valuation
      allowance
    
    (0.39%
    )
    
    (2.39%Nondeductible expenses
    
    0.65%
    
    
    0.25%Tax Credits
    
    0.00%
    
    
    0.00%AMT
    
    0.00%
    
    
    0.00%Expired NOL
    
    50.42%
    
    
    19.64%Change of Valuation Allowance
    
    (24.43%
    )
    
    11.44%Income Tax Provision
    
    0.00%
    
    
    0.00%


Deferred income taxes reflect the net effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the deferred tax assets at December 31 consisted of the following:

2010
    
    
    2009Current Deferred Tax Asset
      (Liabilities)Foreign currency translation
    \
    (56,404
    )
    \
    (69,784
    )Allowance for accounts
      receivable
    
    208,145
    
    
    152,238Non-current Deferred Tax
      Asset (Liabilities)Net Operating Losses
    
    2,398,406
    
    
    3,092,000Investment
    
    134,624
    
    
    134,624


---

Intangible asset
    
      (100,634
    )
    
      (107,986
    )Severance
    
      45,295
    
    
      42,253Total Deferred Tax Asset
    
      2,629,433
    
    
      3,243,345Less Valuation allowance
    
      (2,629,433
    )
    
      (3,243,345
    )Net, deferred tax asset
    \
      -
    
    \
      -


The significant component of the deferred tax asset (liability)
at December 31, 2010 and 2009 resulted from net operating loss carry-forwards in
the amount of approximately 10.5 billion Won and 11.2 billion Won, respectively.

In assessing the realization of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Based upon
factors such as the scheduled reversal of temporary differences and projected
future taxable income, management considers the scheduled reversal of deferred
income tax assets and liabilities, the projected future taxable income, and tax
planning strategies in making this assessment. Based upon the level of
historical and projected taxable income, management believes it is more likely
than not that the deferred tax assets will be realized. The valuation allowance
increased by 613.9 million Won for the year ended December 31, 2010.

Note 17. Income (loss) Per Share

Income (loss) per share is computed by dividing net income
(loss) by the weighted-average number of shares outstanding during the year.
Diluted income (loss) per share is computed in a manner consistent with that of
basic loss per share while giving effect to all potentially dilutive common
shares that were outstanding during the period.

Income (loss) per share for the years ended December 31, 2010,
2009 and 2008 is calculated as follows (in thousands of Korean won, except for
per share amount and number of shares):

|                                                          |   | 2010       |   |   | 2009       |   |   | 2008       | 
|--------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | 
|Basic earnings per shares                                 |   |            |   |   |            |   |   |            | 
|Net income (loss)                                         | \ | (1,413,358 | ) | \ | (2,497,408 | ) | \ | 172,984    | 
|Net income (loss) applicable to common
      shareholders |   | (1,413,358 | ) |   | (2,497,408 | ) |   | 172,984    | 
|Weighted average common shares outstanding-basic          |   | 35,094,156 |   |   | 35,094,156 |   |   | 35,033,418 | 
|Basic earnings
      per share                            |   | (40        | ) |   | (71        | ) |   | 5          | 

The Company has potentially dilutive common shares as of
December 31, 2007, 2005 and 2004, however there were no dilutive effects as of
December 31, 2010, 2009 and 2008. Therefore, income (loss) per share is same as
the diluted income (loss) per share.

Note 18. Related Party Transactions

Significant account balance with related company as of December
31 are summarized as follows:

|Related party          |  | Nature of Relationship      |  |  | Account balance      |  |   | 2010 |  |   | 2009      | 
|---------------------- |  | --------------------------- |  |  | -------------------- |  | - | ---- |  | - | --------- | 
|Meridian Medical, Inc. |  | MAMIs minority shareholder |  |  | Account Receivables  |  |   | -    |  |   | 1,794,473 | 
|Park hee yo            |  | MAMIs shareholders         |  |  | Long-term borrowings |  |   | -    |  |   | 41,512    | 
|                       |  |                             |  |  |                      |  | \ | -    |  | \ | 1,835,985 | 

In 2010, the Company recognized \ 602,872 bad debt expenses and
wrote off all remaining balance of \ 1,686,454 in regard to account receivables
of Meridian Medical, Inc (MMI). The allowances for doubtful accounts were \ 0
and \ 135,735 for the years ended December 31, 2010 and 2009, respectively.

Significant transactions with related company for the years
ended December 31, 2010, 2009 and 2008 are summarized as follows:

---

Related party
    
    Transactions
    
    
    2010
    
    
    2009
    
    
    2008Meridian Medical, Inc.
    
    Sales
    
    
    746,812
    
    
    652,436
    
    
    970,343Service fees
    
    
    117,872
    
    
    313,234
    
    
    297,112\
    864 684
    
    \
    965 670
    
    \
    1,267 455


In June 2004, the Company entered into an exclusive
distribution agreement with MMI. Under the agreement, MMI was entitled to an
exclusive distribution right in North American Market.

On January 1 2010, the Company entered into service agreement
with MMI. Based on that agreement, MMI carries out sales, marketing and admin
support service on behalf of the Company in US market. However, that service
agreement was terminated on June 30, 2010.

Note 19. Geographic Information

In 2010, the Company operated in one industry segment, the
development and manufacturing of alternative medical equipments. The Company's
identifiable assets are located in one geographic area, the Republic of Korea
(also known as South Korea). Sales revenue is attributable to geographic
locations based on the location of the customer, as follows, for the years ended
December 31:

2010
    
    
    2009
    
    
    2008ExportNorth America
    \
    855,509
    
    \
    693,543
    
    \
    1,143,757Asia
    
    49,220
    
    
    111,835
    
    
    544,461Europe
    
    327,126
    
    
    186,687
    
    
    1,444,010Other
    
    44,993
    
    
    107,966
    
    
    15,6151,276,848
    
    
    1,100,031
    
    
    3,147,843Domestic Sales
    
    61,842
    
    
    273,348
    
    
    177,080\
    1,338 690
    
    \
    1,373 379
    
    \
    3,324 923


Note 20. Legal Proceedings

The Company is not aware of any pending or threatened
litigation, claims, or assessments or unasserted claims or assessments that are
required to be accrued or disclosed in the financial statements in accordance
with Financial Accounting Standards Board Accounting Standards Codification 450,
Contingencies, and we have not consulted a lawyer concerning litigation, claims,
or assessments.

Note 21. Subsequent Events

The Company has evaluated all subsequent events to the
consolidated balance sheet date of December 31, 2010 through the date that the
financial statements were issued on August 12, 2011, and the subsequent events
that require disclosure under FASB Accounting Standards Codification Topic 855,
Subsequent Events is as follows:

In January 2011, the Company raised US$150,000 from one US
investor for total 1,500,000 common shares at the price of US$0.10 per share.

---

ITEM 19. EXHIBITS

|Exhibit |                                           
|------- | ------------------------------------------
|12.1    | Section
      302 Certification of the CEO
|12.2    | Section 302 Certification                 
|13.1    | Section
      906 Certification of the CEO
|13.2    | Section 906 Certification                 

---

SIGNATURES

The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.

By: /s/In Beom ParkName: In Beom Park
Title: President, CEO, Director 
  Date: August 19, 2011

---