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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, 2008

[ ] 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)

3F, Poonglim Tech-one BLDG, 273-10, Seongsu-Dong 2ga,
Seongdong-Gu, Seoul Korea 133-120 (Tel: 82-2-2103-3300)(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 July 14, 2009:
35,094,156

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 by the International Accounting Standards Board [ ] | Other [ ]
|------------- | --------------------------------------------------------------------------------------------------------------- | ---------

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]

2

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TABLE OF CONTENTS

References Currency 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                                                                         

3

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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 $0.08
at December 31, 2008).

Currency Translation

In this annual report, references to "Won" or "W" 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, 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, 2008, which was Won 1,262 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, 2009 the exchange rate was Won 1,273.5
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, 2008 and 2007 and for the
years ended December 31, 2008, 2007 and 2006 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, 2008, 2007, 2006, 2005 and 2004 are derived from the
audited consolidated financial statements of Meridian, which have been audited
by Choi, Kim and Park LLP, independent accountants (for the fiscal year ended
December 31, 2008, 2007, 2006 and 2005) and by ShinHan Accounting Corporation,
independent accountants (for the fiscal years ended December 31, 2004).

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

4

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|Meridian Co., Ltd. and Subsidiaries                                   
|----------------------------------------------------------------------
|Condensed Consolidated Statements of Operations                       
|For the years ended December 31, 2008, 2007, 2006, 2005
      and 2004
|(Korean Won (W) in thousands, except per share
      amounts)         

|                                  |   | 2008(1)(in US$) |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|--------------------------------- | - | --------------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                  |   | (unaudited)     |   |   | 2008       |   |   | 2007       |   |   | 2006       |   |   | 2005       |   |   | 2004       |  
|                                  |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|Sales                             | $ | 2,634,646       |   | W | 3,324,923  |   | W | 2,604,541  |   | W | 1,526,828  |   | W | 1,434,519  |   | W | 2,204,234  |  
|Cost of sales                     |   | 748,217         |   |   | 944,250    |   |   | 819,418    |   |   | 591,819    |   |   | 1,099,194  |   |   | 1,214,803  |  
|Gross profits                     |   | 1,886,429       |   |   | 2,380,673  |   |   | 1,785,123  |   |   | 935,009    |   |   | 335,325    |   |   | 989,431    |  
|Operating expenses                |   | 2,067,179       |   |   | 2,608,778  |   |   | 2,347,469  |   |   | 1,186,416  |   |   | 2,293,172  |   |   | 2,461,664  |  
|Loss from operations              |   | (180,750        | ) |   | (228,105   | ) |   | (562,346   | ) |   | (251,407   | ) |   | (1,957,847 | ) |   | (1,472,233 | )
|Other income(expenses)            |   | 317,819         |   |   | 401,089    |   |   | (45,317    | ) |   | (83,600    | ) |   | (1,424,510 | ) |   | (584,913   | )
|                                  |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|Income(Loss) before income taxes  | $ | 137,069         |   | W | 172,984    |   | W | (607,663   | ) | W | (335,007   | ) | W | (3,382,357 | ) | W | (2,057,146 | )
|Income taxes                      |   | -               |   |   | -          |   |   | -          |   |   | -          |   |   | -          |   |   | -          |  
|Minority interest in net loss of  |   | -               |   |   | -          |   |   | -          |   |   | 10,260     |   |   | 32,951     |   |   | 1,319      |  
|consolidated subsidiaries         |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|Net income(loss)                  |   | 137,069         |   |   | 172,984    |   |   | (607,663   | ) |   | (324,747   | ) |   | (3,349,406 | ) |   | (2,055,827 | )
|                                  |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|Net income(loss) per common share | $ | 0.004           |   | W | 0.005      |   | W | (0.019     | ) | W | (0.01      | ) | W | (0.106     | ) | W | (0.093     | )
|Basic and diluted                 |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|Weighted average number of common |   | 35,033,418      |   |   | 35,033,418 |   |   | 32,553,528 |   |   | 31,393,984 |   |   | 31,603,847 |   |   | 22,199,701 |  
|shares                            |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  

|Condensed Consolidated Balance Sheets              
|---------------------------------------------------
|As of December 31, 2008, 2007, 2006, 2005, and 2004
|(Korean Won (W) in thousands)                      

|                                        |   | 2008(1)(in US$) |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|--------------------------------------- | - | --------------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                        |   | (unaudited)     |   |   | 2008       |   |   | 2007       |   |   | 2006       |   |   | 2005       |   |   | 2004       |  
|                                        |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|                                        |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|Cash and cash equivalents               | $ | 2,320           |   | W | 2,927      |   | W | 103,865    |   | W | 2,387      |   | W | 22,967     |   | W | 42,131     |  
|Accounts receivable                     |   | 1,837,819       |   |   | 2,319,328  |   |   | 1,195,182  |   |   | 453,747    |   |   | 368,226    |   |   | 586,411    |  
|Inventories                             |   | 389,675         |   |   | 491,769    |   |   | 549,798    |   |   | 371,209    |   |   | 488,455    |   |   | 695,996    |  
|Other current assets                    |   | 36,545          |   |   | 46,124     |   |   | 23,893     |   |   | 21,337     |   |   | 1,749      |   |   | 188,614    |  
|                                        |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|Total current assets                    |   | 2,266,359       |   |   | 2,860,148  |   |   | 1,872,738  |   |   | 848,680    |   |   | 881,397    |   |   | 1,513,152  |  
|Property, plant and equipment, net      |   | 66,010          |   |   | 83,304     |   |   | 50,565     |   |   | 16,546     |   |   | 23,804     |   |   | 1,491,667  |  
|Investments and other assets            |   | 119,307         |   |   | 150,564    |   |   | 132,090    |   |   | 104,792    |   |   | 50,636     |   |   | 162,109    |  
|                                        |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|TOTAL ASSETS                            | $ | 2,451,676       |   | W | 3,094,016  |   | W | 2,055,393  |   | W | 970,018    |   | W | 955,837    |   | W | 3,166,928  |  
|                                        |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|Trade accounts payable and current debt | $ | 4,676,713       |   | W | 5,902,010  |   | W | 4,457,132  |   | W | 5,085,477  |   | W | 3,669,845  |   | W | 3,297,535  |  
|Long-term borrowings                    |   | 2,434,241       |   |   | 3,072,011  |   |   | 3,683,599  |   |   | 3,984,116  |   |   | 5,072,441  |   |   | 4,591,176  |  
|Shareholders deficiency                |   | (4,659,278      | ) |   | (5,880,005 | ) |   | (6,085,338 | ) |   | (8,099,575 | ) |   | (7,786,449 | ) |   | (4,741,719 | )
|Minority interest                       |   | -               |   |   | -          |   |   | -          |   |   | -          |   |   | -          |   |   | 19,936     |  
|                                        |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|TOTAL LIABILITIES AND                   |   |                 |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |  
|SHAREHOLDERS' DEFICIENCY                | $ | 2,451,676       |   | W | 3,094,016  |   | W | 2,055,393  |   | W | 970,018    |   | W | 955,837    |   | W | 3,166,928  |  

(1) For convenience, 2008 financial statements in Won are also
expressed in US$ at the rate of (Won) 1,262 to US$ 1.00. The exchange rate in
effect on December 31, 2008 was published by the Federal Reserve Bank of New
York. 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.

5

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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.

|     |  |                      |  |                                  |  | ANNUAL |  | ANNUAL
|---- |  | -------------------- |  | -------------------------------- |  | ------ |  | ------
|YEAR |  | AT
      DECEMBER 31 |  | ANNUAL AVERAGE RATE PER $1.00 US |  | HIGH   |  | LOW   
|2004 |  | 1035.1               |  | 1139.3                           |  | 1195.1 |  | 1035.1
|2005 |  | 1010                 |  | 1023.8                           |  | 1059.8 |  | 997   
|2006 |  | 930                  |  | 954.3                            |  | 1002.9 |  | 913.7 
|2007 |  | 935.8                |  | 929.0                            |  | 950.2  |  | 903.2 
|2008 |  | 1,262                |  | 1098.7                           |  | 1507.9 |  | 935.2 

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 agreed 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 Chochung 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 | W | 650,757 |  | W | 650,757 |  | W | 650,757 |  | W | 650,757 |  | W | 650,757 |  | W | 650,757 |  | W | 650,756 |  | W | 4,555,298 | 
|Interest  |   | 159,435 |  |   | 136,659 |  |   | 113,883 |  |   | 91,106  |  |   | 68,329  |  |   | 45,553  |  |   | 22,777  |  |   | 637,742   | 
|Total     | W | 810,192 |  | W | 787,416 |  | W | 764,640 |  | W | 741,863 |  | W | 719,086 |  | W | 696,310 |  | W | 673,533 |  | W | 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)

6

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|          |   | 2007    |  |   | 2008    |  |   | 2009    |  |   | 2010    |  |   | 2011    |  |   | 2012    |  |   | 2013    |  |   | Total     | 
|--------- | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | --------- | 
|Principal | W | 500,159 |  | W | 649,337 |  | W | 649,337 |  | W | 649,337 |  | W | 649,337 |  | W | 649,337 |  | W | 649,336 |  | W | 4,396,180 | 
|Interest  |   | 443,601 |  |   | 161,067 |  |   | 113,634 |  |   | 90,907  |  |   | 68,180  |  |   | 45,461  |  |   | 22,727  |  |   | 945,577   | 
|Total     | W | 943,760 |  | W | 810,404 |  | W | 762,971 |  | W | 740,244 |  | W | 717,517 |  | W | 694,798 |  | W | 672,063 |  | W | 5,341,757 | 

However, due to the recurring losses from operations, Meridian
was not able to meet the repayment schedule. As of December 31, 2008, Meridian
has not paid 1,149,496 thousand Won of principal and 604,668 thousand Won of
accrued interest outstanding to financial institutions, and 891,266 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 2008, 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.

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, 2008, the Company had a net
profit of 172,984 thousand won ($137,069). However, an accumulated deficit was
still 15,617,514 thousand won ($12,375,212). Although the Company achieved the
net profit for the fist time of its history, it recognizes the possibility of
incurring losses for the foreseeable future. The extent of future losses will
depend, in part, on the amount of 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 increased 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 can be no
assurance that the Company will sustain profitability or that its operating
losses will not increase in the future.

The Company expects increasing competition from larger
companies.

The markets in which the Company competes are intensely
competitive and the Company competes and will compete with companies that have
greater financial and technical resources. Therefore, to the extent that the
Company is able to establish sales revenues, there is no assurance that it would
be able to sustain such sales revenues. Moreover if, and when, the Company
begins achieving its objectives, larger, better financed companies in peripheral
businesses may be attracted to the Company's markets. They may be prepared to
spend large sums quickly to develop competitive products and to mount major
marketing campaigns. 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 to 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 the Company's 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.

7

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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 to 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 affects
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.

8

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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., Canada, Europe, Japan 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. 992,089 thousand Won of the
Companys accounts receivable was written off in the year ended December 31,
2005. There were no write offs in the years ended December 31, 2008, and 2007.
In 2008, the Company had three customers that each represented more than 10% of
its revenues, one of which represented approximately 29% of revenues and two of
which represented approximately 11% of revenues. In 2007, the Company had two
customers that each represented more than 10% of its revenues, one of which
represented 36% and the other which represented approximately 26% of revenues.
In 2006, the Company had two customers that each represented more than 10% of
its revenues, one of which represented 21% and the other which represented
approximately 19% of revenues.

At December 31, 2008, the Company had three customers that
accounted for 78% of accounts receivable. At December 31, 2007, the Company had
two customers that accounted for 60% of accounts receivable.

Expansion of the Companys operations abroad is important to
its long-term successs, and its limited experience in the operation outside
Korea increases the risk that each international expansion efforts would not be
successful.

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.

9

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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

10

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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.

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ITEM 4. INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANYMeridian
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.

The Company's corporate head office is located at 3F, Poonglim
Tech-one BLDG, 273-10, Seongsu-Dong 2ga, Seongdong-Gu, Seoul Korea 133-120.

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.

B. BUSINESS OVERVIEWMeridian 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, Turkey, 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 four different products to
healthcare practitioners throughout the domestic and overseas market. These
include DPA (Digital Pulse Analyzer), Lapex-2000, Lapex BCS (Lapex-2000
LipoLaser), and Meridian II.

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.

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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.

On January 19, 2007, Meridian entered into an exclusive
distribution agreement with a Japanese corporation, Leichel, for the sales Lapex
BCS. In December 2008, Meridian replaced its Japanese distributor with Profit
Co., Ltd. The total sales revenues generated in the Japanese market were
1,080,469 thousand Won in 2007 and 436,108 thousand Won in 2008.

In April 2007, Meridian expanded its business in the European
market by signing a distribution agreement with Laser Lipo based in the U.K.
Currently, Meridian has 7 regional distributors in Europe and achieved 1,444,010
thousand Won in 2008.

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

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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 98Acupuncture 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

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Revenue by Geographic Market

Sales revenue is attributable to geographic locations based on
  the location of the customer, as follows: (Korean Won (W) in thousands)

|               |   | 2008      |  |   | 2007      |  |   | 2006      | 
|-------------- | - | --------- |  | - | --------- |  | - | --------- | 
|Export         |   |           |  |   |           |  |   |           | 
|North America  | W | 1,143,757 |  | W | 848,459   |  | W | 485,371   | 
|Asia           |   | 544,461   |  |   | 1,109,121 |  |   | 71,092    | 
|Europe         |   | 1,444,010 |  |   | 266,629   |  |   | -         | 
|Other          |   | 15,615    |  |   | 41,884    |  |   | 41,533    | 
|               |   | 3,147,843 |  |   | 2,266,093 |  |   | 597,996   | 
|               |   |           |  |   |           |  |   |           | 
|Domestic Sales |   | 177,080   |  |   | 338,448   |  |   | 928,832   | 
|               | W | 3,324,923 |  | W | 2,604,541 |  | W | 1,526,828 | 

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. In the fact,
World Medical Market reported that the global medical device market was expected
to be valued at $197 billion in 2007, of which $83 billion was generated from
the U.S. market.

The U.S. is still the largest medical device market and leads
the world in advanced medical technologies. The U.S. medical device industry is
expected to grow at a compound annual growth rate of 4.7 percent between 2007
and 2012. It will continue to develop new innovative devices in minimal invasive
surgery, cardiovascular, and orthopedic implants. However, cost containment
constraints in the healthcare system have contributed to hospital cutbacks in
medical device purchases.

The largest medical device markets next to the U.S. are Japan
($21 billion in 2007) and Germany ($13 billion in 2007). (Espicom, World Medical
Market Forcasts to 2012, 2007.12)

Cardiovascular Device Market (U.S.)

According to US Medical Device Industry Outlook, 2008 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

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%. The expected
global market value in 2010 is $5.8 Billion.

Cellulite Reduction Laser Market

15

---

The market for cellulite reduction laser devices was valued at
over $14 million in 2006. This market will achieve high growth over the
forecast, driven by the adoption of new product innovations. Despite the great
challenge from alternative methods of cellulite reduction, including
electrotherapy and mesotherapy, which are gaining in popularity due to improved
media coverage, the market for cellulite reduction laser devices will achieve
high growth over the forecast period. (US Markets for Aesthetic Laser and Energy
Devices 2007 by Millennium Research Group, June, 2007)

C. ORGANIZATIONAL STRUCTUREMeridian Co., Ltd. was
incorporated under the laws of Korea on April 19, 1994 as a private company. The
Company operates from its both corporate head office and manufacturing plant are
located at 3F, Poonglim Tech-one Bldg, 273-10, Seongsu-Dong 2ga, Seongdong-Gu,
Seoul Korea 133-120.

As of December 31, 2008, the Company had one subsidiary. The
acquisition dates and Meridian Co., Ltd.'s ownership percentages of its
consolidated subsidiaries as at December 31, 2008, 2007 and 2006 are as
follows:

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

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.

Directors and Senior Management Team

JOHN Y.C. MYUNG, President, CEO and Director (appointed in
April 2009)

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 BEOM PARK, Secretary, CFO and DirectorMr. 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.

HYUNG KYOON KIM, Director (appointed in April 2009)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, (President, CEO and Director resigned in
April 2009)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 1994, Mr. Myeong has been
the President and CEO of the Company and is the founder of the Company.

SOON WOONG JANG, Director (Director resigned in April,
2009)Mr. Jang graduated from Korea University in South Korea with
Agriculture as his major. From 1988 to 1992 he was the Business Manager for
Hyundai Department Store, a subsidiary of KeumKang Development Industrial Co.,
Ltd. He established Samgong Distribution Co., Ltd., a wholesale distributor, and
had been a CEO of Samgong until 2003. From 2001 he has been a vice president of
Korea E-commerce Association. On March 31, 2006, he was appointed a Director of
Meridian.

16

---

D. PROPERTY, PLANTS AND EQUIPMENTThe 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 3F, Poonglim Tech-One Bldg, 273-10, Seongsu-dong 2ga,
Seongdong-gu, Seoul, Korea in June 2006. 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 (W) in thousands)

|          |  | For the year ended Dec. 31, 2008 |  |  | For the year ended Dec. 31, 2007 |  |  | For the year ended Dec. 31, 2006 | 
|--------- |  | -------------------------------- |  |  | -------------------------------- |  |  | -------------------------------- | 
|Product   |  | Revenues                         |  |  | Revenues % to total              |  |  | Revenues                         | 
|          |  |                                  |  |  |                                  |  |  |                                  | 
|Lapex BCS |  | 2,859,231                        |  |  | 86.0%                            |  |  | 2,015,232                        | 
|DPA       |  | 258,982                          |  |  | 7.8%                             |  |  | 428,936                          | 
|Others    |  | 206,710                          |  |  | 6.2%                             |  |  | 160,373                          | 
|Total     |  | 3,324,923                        |  |  | 100.0%                           |  |  | 2,604,541                        | 

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

(Korean Won (W) in thousands)

|                    |   | 2008      |  |  | 2007         |  |   | 2006      | 
|------------------- | - | --------- |  |  | ------------ |  | - | --------- | 
|Regions             |   | Revenue   |  |  | % to revenue |  |   | Revenue   | 
|                    |   |           |  |  |              |  |   |           | 
|North America       | W | 1,143,757 |  |  | 34.4         |  | W | 848,459   | 
|Asia                |   |           |  |  |              |  |   |           | 
|Japan               |   | 436,108   |  |  |              |  |   | 1,080,469 | 
|Others              |   | 108,353   |  |  |              |  |   | 28,652    | 
|Total in Asia       |   | 544,461   |  |  | 16.4         |  |   | 1,109,121 | 
|Europe              |   |           |  |  |              |  |   |           | 
|UK                  |   | 842,959   |  |  |              |  |   | 132,692   | 
|Others              |   | 601,051   |  |  |              |  |   | 133,937   | 
|Total in Europe     |   | 1,444,010 |  |  | 43.4         |  |   | 266,629   | 
|Other regions       |   | 15,615    |  |  | 0.5          |  |   | 41,884    | 
|                    |   |           |  |  |              |  |   |           | 
|International Sales |   | 3,147,843 |  |  | 94.7         |  |   | 2,266,093 | 
|Domestic Sales      |   | 177,080   |  |  | 5.3          |  |   | 338,448   | 
|Total               | W | 3,324,923 |  |  | 100          |  | W | 2,604,541 | 

17

---

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
      ended |  
|--------------------------------- |  | -------------------------------------------- | -
|                                  |  | December 31,                                 |  
|                                  |  | 2008                                         |  
|Sales                             |  | 100                                          |  
|Cost of sales                     |  | 28.4                                         |  
|Gross profits                     |  | 71.6                                         |  
|Operating expenses                |  | 78.5                                         |  
|Loss from operations              |  | (6.9                                         | )
|Other income (expenses)           |  | 12.1                                         |  
|Minority interest                 |  | -                                            |  
|                                  |  |                                              |  
|Income (loss) before income taxes |  | 5.2                                          |  
|Income taxes                      |  | -                                            |  
|Net income (loss)                 |  | 5.2                                          |  

Sales Revenue

The sales revenue of the Company for the year ended December
31, 2008 increased 27.7% to 3,324,923 thousand Won from 2,604,541 thousand Won
for the year ended December 31, 2007. The increases in the sales revenue during
the year ended December 31, 2008 and 2007 were mainly attributable to:

- New market development in Europe. The sales of the Company started in
  Europe in 2007 and for the year ended December 31, 2008, the sales in Europe
  had increased by 442% to 1,444,010 thousand Won from 266,629 thousand Won in
  2007. For the year ended December 31, 2008, 43.4% of the total revenue of the
  Company was received from Europe (25.4% from the U.K.).
- Continuous growth of the sales in the North American market. The sales
  growth in North America (the U.S. and Canada) was 34.8% in 2008 and 74.8% in
  2007. The sales contribution from the North America to our total sales revenue
  had also steadily increased from 31.8% in 2006 to 32.6% in 2007 and 34.4% in
  2008.

However, the sales from Japan decreased by 59.6% to 436,108
thousand Won in the year ended December 31, 2008 , from 1,080,459 thousand Won
in the year ended December 31, 2007.

Gross Profits & Gross Margin

For the year ended December 31, 2008, the gross profits were
2,380,673 thousand Won, as compared to 1,785,123 thousand Won for the year ended
December 31, 2007 and 935,009 thousand Won for the year ended December 31,
2006

Total gross margin as a percentage of total revenues was 71.6%
for the year ended December 31, 2008, as compared to 68.5% for the year ended
December 31, 2007 and 61.2% for the year ended December 31, 2006. The
significant increases of gross profit and gross margin in 2008 and 2007 were due
to the sales increases of Lapex BCS which has the highest margin rate. Lapex BCS
contributed 86% of the total sales of the Company in 2008 compared with 77.4% in
2007 and 60.1% . The sales of DPA, however, decreased by 39.6% in 2008 from
2007.

Operating Expenses

The Companys operating loss has decreased to 228,105 thousand
Won for the year ended December 2008 from loss of 562,346 thousand Won in 2007
and from the loss of 251,407 thousand Won in 2006. The decrease in the operating
loss in 2008 was due primarily to the decrease of operating expenses. Operating
expenses as a percentage of total sales decreased to 78.5 % for the year ended
December 31, 2008, as compare to 90.1% in 2007 and 77.7% in 2006. The decrease
was partly attributable to a decrease in commissions and fees by 38% to 473,158
thousand Won in 2008 from 764,910 thousand Won.

Furthermore, bad debt expenses in 2008 increased to 378,653
thousand Won from 0 in 2007. Allowance for bad debts was reserved in a
conservative point of view due to arising concerns on large number of account
receivable unpaid by few major customers of the Company.

Research and Development Expenses

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
392,903 thousand Won, 305,307 thousand Won and 75,309 thousand Won during the
years ended December 31, 2008, 2007 and 2006, respectively.

18

---

Other Income

Other income was 401,089 thousand Won in 2008, as compared to
expense of 45,317 thousand Won in 2007 and 83,600 thousand Won in 2006. This was
primarily due to 427,512 thousand Won of income on foreign currency translation.
For the year ended December 31, 2008, the Korean Won depreciated by
approximately 25.3% against the U.S. dollar compared to the exchange rate for
the year ended December 31, 2007. This depreciation resulted gain 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, |   |  |              |  
|--------------------------------------------------- |  | ------------------------------------------- | - |  | -------------------------------- | - |  | ------------ | -
|                                                    |  | 2008(1)                                     |   |  | 2008                             |   |  | 2007         |  
|                                                    |  | (Korean Won (W) in thousands,and
      US$) |  
|Net cash used in operating activities               |  | US$ (224,068                                | ) |  | W (282,775                       | ) |  | W (1,974,975 | )
|Net cash provided by (used in) investing activities |  | (54,266                                     | ) |  | (68,484                          | ) |  | (70,103      | )
|Net cash provided by financing activities           |  | 198,352                                     |   |  | 250,321                          |   |  | 2,146,556    |  
|Net increase(decrease) in cash                      |  | (79,982                                     | ) |  | (100,938                         | ) |  | 101,478      |  
|Cash at beginning of year                           |  | 82,302                                      |   |  | 103,865                          |   |  | 2,387        |  
|Cash at end of year                                 |  | 2,320                                       |   |  | 2,927                            |   |  | 103,865      |  

Note:

For the convenience of the reader, the Won amounts are
expressed in US$ at the rate of Won 1,262 to US$1.00, the exchange rate
announced by the Federal Reserve Bank of New York on December 31, 2008.

Our primary source of liquidity is cash flow from financing
activities.

Net cash used in operating activities was 282,775 thousand Won
($224,068) in 2008, 1,974,975 thousand Won in 2007 and 183,575 thousand Won in
2006. We have not been able to generate positive cash flow from operating
activities over the last three years as we have recorded net losses in 2007 and
2006.

Net cash used in investing activities was 68,484 thousand Won
($54,266) in 2008, 70,103 thousand Won in 2007 mainly due to the increase of the
tangible asset acquisitions. We generated positive cash flow from investing
activities of 143,995 thousand Won in 2006, mainly from the decrease in
short-term loans.

Net cash provided by financing activities was 250,321 thousand
Won ($198,352) in 2008, mainly due to the issuance of short-term borrowings. We
generated positive cash flow from financing activities of 2,146,556 thousand Won
in 2007 reflecting the increase in our capital stock. Net cash provided by
financing activities was 19,000 thousand Won in 2006, mainly due to the issuance
of short-term borrowings.

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 as well as
the United States and EU, China, Canada. 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:

19

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|TECHNOLOGY
      DESCRIPTION                                          |  | REGISTRATION NUMBER        |  | DATE
      OF REGISTRATION
|--------------------------------------------------------------------- |  | -------------------------- |  | --------------------------
|                                                                      |  |                            |  |                           
|(PATENTS)                                                             |  |                            |  |                           
|Diagnostic device using the electric features of the human
      body |  | 130791                     |  | November  97             
|Automatic
      detection of meridians by probe device                |  | 210233                     |  | April
       99          
|Pulse formation analysis device                                       |  | 0368021                    |  | December  02             
|Laser beam
      irradiation device                                   |  | 0457964                    |  | January  03              
|Adipose Resolve Apparatus for Low-Power LASER: Korea                  |  | 0653441                    |  | March  06                
|Adipose Resolve
      Apparatus for Low-Power LASER: PCT              |  | PCT 
      KR20061000694  |  | May 
      06            
|Adipose Resolve Apparatus for Low-Power LASER: Japan                  |  | 4143114                    |  | May  08                  
|Adipose Resolve Apparatus for Low-Power LASER: USA
      (pending)    |  | US2008114418, US2008119831 |  | May  07                  
|Adipose Resolve Apparatus for Low-Power
      LASER: EU (pending)     |  | EP1853190                  |  | November  07             
|Adipose Resolve Apparatus for Low-Power LASER: Canada
      (pending) |  | CA2599682                  |  | August  07               
|Adipose Resolve Apparatus for Low-Power
      LASER: China (pending)  |  | CN101115449                |  | January  08              
|                                                                      |  |                            |  |                           
|(DESIGN)                                                              |  |                            |  |                           
|Electrode holder
      for laser treatment                            |  | 0302314                    |  | June 
      02           
|Electrode for laser treatment                                         |  | 0302315                    |  | June  02                 
|                                                                      |  |                            |  |                           
|(TRADEMARK)                                                           |  |                            |  |                           
|Lapex                                                                 |  | 500915                     |  | September  01            
|Biomeridian                                                           |  | 0522196                    |  | June  02                 
|Pulsecare                                                             |  | 0538120                    |  | December  02             
|Mcview                                                                |  | 0531965                    |  | October  02              
|Meridian CI Logo                                                      |  | 0685047                    |  | November 06               
|DPA                                                                   |  |                            |  |                           
|USA                                                                   |  | 77-303758                  |  | December - 07             
|Korea                                                                 |  | 40-0755763                 |  | August  07               
|Lapex                                                                 |  |                            |  |                           
|USA                                                                   |  | 3523481                    |  | December - 08             
|EU                                                                    |  | 006327399                  |  | September - 08            
|Japan                                                                 |  | 5134672                    |  | May - 08                  
|China (pending)                                                       |  | 6312375                    |  | December - 08             

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

20

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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, Australia, Japan 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        |                 | LAPEX 2000                                                                                                         
|U.S.A.        | FDA             | Meridian-II, Meridian Portable, Lapex-2000,
      ABR-2000, DPA(Digital Pulse Analyzer), LAPEX BCS                 
|Canada        | Health Canada   | DPA (Digital Pulse Analyzer),
      Lapex-2000 LipoLaser                                                           
|South America | FIP             | Meridian-II, Lapex-2000                                                                                            
|EU            | CE EMC, CE LVD  | Lapex-BCS, Lapex BCS Pro : CE
      LVD, CE EMC                                                                    
|              | CE MDD          | DPA: CE MDD (CE0123)                                                                                               
|International | ISO13485:2003   | Quality Assurance System for
      DPA and Laser Therapy Device                                                    
|              | ISO13485:CMDCAS |                                                                                                                    

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 economic conditions in Korea and in the Asia Pacific 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 2003
to 2005. The Company is actively seeking to expand its sales into new markets,
principally North America, Europe and Japan. From 2005, 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 93.8% of the total
sales revenue in 2008 and 93.9% in 2007. In 2008, the sales portions from North
America, Europe and Asia (excluding Korea) were 34.4%, 43.4% and 16.4% 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 (W) in thousands) |           |          
|------------------------------ | - | --------- |  | ------------------------------------------------------------ | --------- | ---------
|                               |   |           |  | Less than                                                    |           |          
|Contractual Obligations        |   | Total     |  | one year                                                     |           | 1-3 years
|Long-term accounts payable     | W | 1,195,290 |  | W                                                            | 891,266   |          
|Operating lease obligations    |   | 327,000   |  |                                                              | 130,800   |          
|                               |   |           |  |                                                              |           |          
|Long-term debt obligations (1) |   | 4,396,180 |  |                                                              | 1,798,833 |          
|Grand total                    | W | 5,918,470 |  | W                                                            | 2,820,899 |          

(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 Severance    |  |  |              | 
|--------------------------------------------------------------------------- |  | ---- |  |  | ----------- |  |  | -------------- |  |  | -------------------- |  |  | ------------ | 
|                                                                            |  |      |  |  |             |  |  |                |  |  |                      |  |  |              | 
|Name & Principal (Position)                                                 |  | Year |  |  | (Korean Won |  |  | (Korean        |  |  | Benefits (Korean Won |  |  | All Other    | 
|                                                                            |  |      |  |  | (W))        |  |  | Won
      (W)) |  |  | (W))                 |  |  | Compensation | 
|Myeong, Hyeon-Seong (Director, President, CEO
      resigned in April 2009) |  | 2008 |  |  | 58,800,000  |  |  | Nil            |  |  | 69,303,676           |  |  | Nil          | 
|Park, In Beom (Director, CFO)                                               |  | 2008 |  |  | 50,400,000  |  |  | Nil            |  |  | 13,300,000           |  |  | Nil          | 
|Soon Woong Jang (Director resigned in April
      2009)                     |  | 2008 |  |  | Nil         |  |  | Nil            |  |  | Nil                  |  |  | Nil          | 
|John YC Myung (Director, President, CEO appointed in April
      2009       |  | 2008 |  |  | 50,400,000  |  |  | Nil            |  |  | Nil                  |  |  | Nil          | 
|Hyung Kyoon Kim (Director appointed in April
      2009)                    |  | 2008 |  |  | Nil         |  |  | Nil            |  |  | Nil                  |  |  | Nil          | 

21

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*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 24 employees in the following areas:

|Department               | Number of Employees
|------------------------ | -------------------
|                         |                    
|CEO                      | 1                  
|CFO                      | 1                  
|Finance and Accounting   | 4                  
|Sales                    | 5                  
|Customer Support         | 2                  
|Business Administration  | 1                  
|Research and Development | 3                  
|Technical Support        | 4                  
|Purchasing               | 1                  
|Quality Control          | 2                  
|Total                    | 24                 

There were no significant changes in number of employees during
the past three years.

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,
2008 and June 30, 2009, (a) each of the Companys directors and officers, and
(b) all directors and officers of the Company, as a group:

22

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|Name and address of beneficial owner      |  | Amount Stock          |  |  | Percentage of |  |  | Amount Stock          |  |  | Percentage of        | 
|----------------------------------------- |  | --------------------- |  |  | ------------- |  |  | --------------------- |  |  | -------------------- | 
|                                          |  | Beneficially          |  |  |               |  |  | Beneficially          |  |  |                      | 
|and position with the company             |  | Owned as of Dec. 31,  |  |  | Class as of   |  |  | Owned as of June      |  |  | Class as of June 30, | 
|                                          |  | 2008                  |  |  | Dec.31,2008   |  |  | 30,
      2009        |  |  | 2009                 | 
|                                          |  |                       |  |  |               |  |  |                       |  |  |                      | 
|Myeong, Hyeong-seong.                     |  | 971,500 common shares |  |  | 2.78%         |  |  | 971,500 common shares |  |  | 2.77%                | 
|(President, CEO and Director resigned in  |  |                       |  |  |               |  |  |                       |  |  |                      | 
|April 2009)                               |  |                       |  |  |               |  |  |                       |  |  |                      | 
|#997-4 Daechi-dong                        |  |                       |  |  |               |  |  |                       |  |  |                      | 
|Gangnam-gu, Seoul, Korea                  |  |                       |  |  |               |  |  |                       |  |  |                      | 
|                                          |  |                       |  |  |               |  |  |                       |  |  |                      | 
|In Beom Park                              |  | Nil                   |  |  | Nil           |  |  | Nil                   |  |  | Nil                  | 
|(Director, CFO)                           |  |                       |  |  |               |  |  |                       |  |  |                      | 
|#603 605, JungSan town,                   |  |                       |  |  |               |  |  |                       |  |  |                      | 
|Ilsan-dong,                               |  |                       |  |  |               |  |  |                       |  |  |                      | 
|Ilsan-gu, Goyang-city,                    |  |                       |  |  |               |  |  |                       |  |  |                      | 
|KyungKi-do, Korea                         |  |                       |  |  |               |  |  |                       |  |  |                      | 
|                                          |  |                       |  |  |               |  |  |                       |  |  |                      | 
|Soon Woong Jang                           |  | Nil                   |  |  | Nil           |  |  | Nil                   |  |  | Nil                  | 
|(Director resigned in April 2009)         |  |                       |  |  |               |  |  |                       |  |  |                      | 
|#122-75 Noranggin dong,                   |  |                       |  |  |               |  |  |                       |  |  |                      | 
|Dongjak-gu, Korea,                        |  |                       |  |  |               |  |  |                       |  |  |                      | 
|                                          |  |                       |  |  |               |  |  |                       |  |  |                      | 
|John YC Myung                             |  | Nil                   |  |  | Nil           |  |  | Nil                   |  |  | Nil                  | 
|(President, CEO and Director appointed in |  |                       |  |  |               |  |  |                       |  |  |                      | 
|April 2009)                               |  |                       |  |  |               |  |  |                       |  |  |                      | 
|476-2, munhwa-dong, joong-gu,             |  |                       |  |  |               |  |  |                       |  |  |                      | 
|Deajeon-si, Korea                         |  |                       |  |  |               |  |  |                       |  |  |                      | 
|                                          |  |                       |  |  |               |  |  |                       |  |  |                      | 
|Hyung Kyoon Kim*                          |  | -                     |  |  | -             |  |  | 19,000                |  |  | 0.0005%              | 
|(Director appointed in April 2009)        |  |                       |  |  |               |  |  |                       |  |  |                      | 
|Dongil-hivill apt, 2102-802,              |  |                       |  |  |               |  |  |                       |  |  |                      | 
|joong-dong, kiheung-gu,                   |  |                       |  |  |               |  |  |                       |  |  |                      | 
|Yongin-si,Kyeonggi-do, Korea              |  |                       |  |  |               |  |  |                       |  |  |                      | 
|                                          |  |                       |  |  |               |  |  |                       |  |  |                      | 
|All officers and Directors as a Group     |  | 971,500               |  |  | 2,78%         |  |  | 990,500               |  |  | 2.82%                | 

*Hyung Kyoon Kim owned 267,670 common shares at December 31,
2008, but was not a director of the Company at that time.

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 - illful misconduct, or (iii)

23

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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, 2008 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, 2008 and June 30, 2009),
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 Stock | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- |  |  | ---------- |  |  | ------------------------ |  |  | ------------- |  |  | --------------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                         |  |  | of Class   |  |  |                          |  |  | Class         |  |  | Option          | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Beneficially Owned      |  |  | of Dec.31, |  |  | Beneficially Owned as of |  |  | of June 30,   |  |  | Held            | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | As of Dec. 31 2008      |  |  | 2008       |  |  | June 30 2009             |  |  | 2009          |  |  |                 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                         |  |  |            |  |  |                          |  |  |               |  |  |                 | 
|The Hong Group of Companies 
      including: 
      Serome Investment Co. Ltd. (1,085,675shares), 
      151-7 Samseong-Dong ; 
      Kangnam-Gu Seoul Korea 
      Mok-Won Assets Management Co. Ltd 
      (1,375,000 shares),2004 Ho, Anam tower 702-10 
      Yuksam-dong Kangnam-ku, Seoul, Korea; 
      Bio & Medical Research Co. Ltd. (524,425 shares), 
      702-10 Yuksam-dong, Kangnam-ku, Seoul, Korea; 
      Hye-sook Lee (213,000 shares)151-7 Samseong-Dong, 
      Kangnam-Gu, Seoul, Korea |  | 3,198,100 common shares |  |  | 9.14%      |  |  | 3,198,100 common shares  |  |  | 9.11%         |  |  | Nil             | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                         |  |  |            |  |  |                          |  |  |               |  |  |                 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                         |  |  |            |  |  |                          |  |  |               |  |  |                 | 
|Terasource Funds (Muhan Investment Co., Ltd.) 
      including: 
      Terasource Venture Investment Capital 
      (403,900 common shares); 
      Terasource Venture Capital Fund 4 
      (378,380 common shares) 
      8FR Dongshin Bldg. 141-30 
      Samseong-dong, Kangnam-gu Seoul, Korea                                                                                                                                                                                                             |  | 782,280 common shares   |  |  | 2.23%      |  |  | 403,900 common shares    |  |  | 1.15%         |  |  | Nil             | 

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

Securities held in the host countryThe 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 (W) in thousands,)

24

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|                             |   |            |  |   | Korean Commercial   | 
|---------------------------- | - | ---------- |  | - | ------------------- | 
|                             |   | SEC        |  |   | Registration Office | 
|Number of outstanding shares |   | 35,094,156 |  |   | 19,421,182          | 
|Capital Stock                | W | 3,509,415  |  | W | 1,942,118           | 

Related party transactionsThere 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 subsidiaries are
disclosed in the Note 18 to the consolidated financial statements.

ITEM 8. FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL
INFORMATION

See Item 18- Financial Statements

Legal ProceedingsOn 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 PolicyWe 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.

25

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|                          | OTC Bulletin Board
|------------------------- | ------------------
|                          | High (U.S.$)      
|**Annual Highs and Lows** |                   
|2007                      | 1.54              
|2006                      | 0.74              
|2005                      | 0.48              
|2004                      | 0.58              
|                          |                   
|Quarterly Highs and Lows  |                   
|2008                      |                   
|Fourth Quarter            | 0.43              
|Third Quarter             | 0.7               
|Second Quarter            | 1.15              
|First Quarter             | 1.35              
|2007                      |                   
|Fourth Quarter            | 1.45              
|Third Quarter             | 1.54              
|Second Quarter            | 0.87              
|First Quarter             | 0.82              
|                          |                   
|Monthly Highs and Lows    |                   
|                          |                   
|2009                      |                   
|June                      | 0.25              
|May                       | 0.2               
|April                     | 0.15              
|March                     | 0.19              
|February                  | 0.26              
|January                   | 0.3               

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.

26

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B. 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, 2008 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.

DividendsDividends 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 SharesIn 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 form 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
SharesThe 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 th e 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

27

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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 ShareholdersUnder 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
o f 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 RightsHolders 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 Pacific Corporate
Trust Company of Vancouver BC Canada ("Pacific Corporate") is the Company's sole
transfer agent. Pacific Corporate 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 ReportsAt 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 SharesUnder 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.

28

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Acquisition by the Company of SharesThe 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 RightsIn 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 RecordsUnder 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 RequirementsIn 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 fort he 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 WonThe 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 TAXATIONThe 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 DividendsFor 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

29

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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 GainsA 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 TaxUnder 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 TaxUnder 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 TaxesUnder 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 TAXATIONThe 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

30

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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;
- raders 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 AGENTNot applicable.

G. STATEMENTS BY EXPERTSNot applicable.

H. DOCUMENTS ON DISPLAYNot applicable

I. SUBSIDIARY INFORMATIONSee Note 2 of the
Consolidated Financial Statements.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Market Risk DisclosureMarket 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, 2008, the Company had an aggregate 3,147,843,135 Won
export sales, accounting for 94% 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, 2008, 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, 2008, the Company estimates that the payment receivable from its
overseas customers will decrease by approximately 314,784,314 thousand Won
($249,433) in 2008. 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,
2008, 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
SECURITIESNot applicable.

PART II

31

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ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIESThe Company currently has the default tax payment of
116,271 thousand Won ($92,132) to the federal tax office and the default
interest payment of 604,668 thousand Won ($479,134).

Due to the recurring losses from operations, Meridian was not
able to meet the repayment schedule. As of December 31, 2008, Meridian has not
paid 1,149,496 thousand Won of principal and 604,668 thousand Won of accrued
interest outstanding to financial institutions, and 891,266 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 PROCEEDSNot applicable.

ITEM 15. CONTROLS AND PROCEDURES

A. Disclosure Controls and ProceduresOur 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, 2008. 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 ReportingOur 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, 2008 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, 2008.

C. Attestation Report of the Independent Registered Public
Accounting FirmThis 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
ReportingThere has been no change in our internal control over financial
reporting that occurred during the year covered by this annual report that has

32

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materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERTThe
Company does not yet have an audit committee financial expert.

ITEM 16B. CODE OF ETHICSThe 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 2008 and 2007, the Company was charged
71,787,120 Won ($68,320) and 57,543,620 Won ($61,750), respectively, 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.

(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
COMMITTEESNot Applicable.

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

Part III

ITEM 17. FINANCIAL STATEMENTSThe Company has
responded to Item 18 in lieu of this item.

33

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ITEM 18. FINACIAL STATEMENTS

Meridian Co., Ltd.

CONSOLIDATED FINANCIAL STATEMENTS

For the Years ended December 31, 2008, 2007 and 2006

Table of Contents

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

34

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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 subsidiaries (the Company) as of December 31, 2008 and
2007, and the related consolidated statements of operations, shareholders
deficiency, and cash flows for the years ended December 31, 2008, 2007 and 2006.
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 subsidiaries as of December 31, 2008 and 2007, and the results of their
operations and cash flows for the years ended December 31, 2008, 2007 and 2006,
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 July 15, 2009

35

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Meridian Co., Ltd. and SubsidiariesConsolidated Balance Sheets
  As of December 31, 2008 and 2007
  (in thousands of Korean Won (W))

|                                                                           |   | 2008 (in US$) |  |   |           |  |   |           | 
|-------------------------------------------------------------------------- | - | ------------- |  | - | --------- |  | - | --------- | 
|                                                                           |   | (Note 4)      |  |   |           |  |   |           | 
|A S S E T S                                                                |   | (unaudited)   |  |   | 2008      |  |   | 2007      | 
|                                                                           |   |               |  |   |           |  |   |           | 
|Current assets :                                                           |   |               |  |   |           |  |   |           | 
|Cash and cash equivalents (Note
      3)                                   | $ | 2,320         |  | W | 2,927     |  | W | 103,865   | 
|Trade accounts receivable - less allowance for
      doubtful accounts     |   |               |  |   |           |  |   |           | 
|of 883,512
      (USD 700,088) in 2008 and 534,484 in 2007 (Notes 3 and 5) |   | 1,805,431     |  |   | 2,278,454 |  |   | 1,144,814 | 
|Short-term loans - less allowance for doubtful
      accounts              |   |               |  |   |           |  |   |           | 
|of 218,485
      (USD 173,126) in 2008 and 218,485 in 2007                 |   | -             |  |   | -         |  |   | 10,000    | 
|Other accounts receivable - less allowance for
      doubtful accounts     |   |               |  |   |           |  |   |           | 
|of 3,020
      (USD 2,393) in 2008 and 3,020 in 2007                       |   | 32,388        |  |   | 40,874    |  |   | 40,368    | 
|Inventories, net (Note 6)                                                  |   | 389,675       |  |   | 491,769   |  |   | 549,798   | 
|Other current assets                                                       |   | 36,545        |  |   | 46,124    |  |   | 23,893    | 
|                                                                           |   |               |  |   |           |  |   |           | 
|Total current assets                                                       |   | 2,266,359     |  |   | 2,860,148 |  |   | 1,872,738 | 
|                                                                           |   |               |  |   |           |  |   |           | 
|                                                                           |   |               |  |   |           |  |   |           | 
|Property, plant and equipment, net (Notes 3 and 7)                         |   | 66,010        |  |   | 83,304    |  |   | 50,565    | 
|                                                                           |   |               |  |   |           |  |   |           | 
|Investments and other assets :                                             |   |               |  |   |           |  |   |           | 
|Investments (Note 8)                                                       |   | 32,185        |  |   | 40,617    |  |   | 28,917    | 
|Security deposits                                                          |   | 86,674        |  |   | 109,382   |  |   | 102,419   | 
|Patents and trademarks, net of
      amortization (Notes 3 and 9)          |   | 448           |  |   | 565       |  |   | 754       | 
|                                                                           |   |               |  |   |           |  |   |           | 
|Total investments
      and other assets                                   |   | 119,307       |  |   | 150,564   |  |   | 132,090   | 
|                                                                           |   |               |  |   |           |  |   |           | 
|TOTAL ASSETS                                                               | $ | 2,451,676     |  | W | 3,094,016 |  | W | 2,055,393 | 

The accompanying notes are an integral part of these Consolidated
  Financial Statements.
  36

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(Continued)Meridian Co., Ltd. and SubsidiariesConsolidated Balance Sheets
  As of December 31, 2008 and 2007
  (in thousands of Korean Won (W))

|                                                                                                             |   | 2008 (in US$) |  |   |             |  |   |             | 
|------------------------------------------------------------------------------------------------------------ | - | ------------- |  | - | ----------- |  | - | ----------- | 
|                                                                                                             |   | (Note 4)      |  |   |             |  |   |             | 
|LIABILITIES AND
      SHAREHOLDERS' DEFICIENCY                                                               |   | (unaudited)   |  |   | 2008        |  |   | 2007        | 
|                                                                                                             |   |               |  |   |             |  |   |             | 
|Current liabilities                                                                                          |   |               |  |   |             |  |   |             | 
|Accounts payable                                                                                             | $ | 1,291,641     |  | W | 1,630,050   |  | W | 1,215,811   | 
|Current portion of long-term accounts payable
      (Note 2)                                                 |   | 706,234       |  |   | 891,266     |  |   | 940,123     | 
|Short-term borrowings (Note 10)                                                                              |   | 519,017       |  |   | 655,000     |  |   | 194,610     | 
|Current portion of long-term borrowings (Note
      11)                                                      |   | 1,425,382     |  |   | 1,798,833   |  |   | 1,301,514   | 
|Accrued expenses                                                                                             |   | 488,946       |  |   | 617,049     |  |   | 516,955     | 
|Advance received                                                                                             |   | 149,102       |  |   | 188,166     |  |   | 197,679     | 
|Deferred warranty revenue                                                                                    |   | 70,146        |  |   | 88,524      |  |   | 65,255      | 
|Other current liabilities                                                                                    |   | 26,245        |  |   | 33,122      |  |   | 25,185      | 
|                                                                                                             |   |               |  |   |             |  |   |             | 
|Total current liabilities                                                                                    |   | 4,676,713     |  |   | 5,902,010   |  |   | 4,457,132   | 
|                                                                                                             |   |               |  |   |             |  |   |             | 
|Long-term accounts payable (Note 2)                                                                          |   | 240,907       |  |   | 304,024     |  |   | 311,894     | 
|Long-term borrowings (Note 11)                                                                               |   | 2,058,120     |  |   | 2,597,347   |  |   | 3,253,784   | 
|Accrued severence benefits (Note 12)                                                                         |   | 135,214       |  |   | 170,640     |  |   | 117,921     | 
|                                                                                                             |   |               |  |   |             |  |   |             | 
|Total liabilities                                                                                            |   | 7,110,954     |  |   | 8,974,021   |  |   | 8,140,731   | 
|                                                                                                             |   |               |  |   |             |  |   |             | 
|Commitments (Note 13)                                                                                        |   | -             |  |   | -           |  |   | -           | 
|Minority interest                                                                                            |   | -             |  |   | -           |  |   | -           | 
|                                                                                                             |   |               |  |   |             |  |   |             | 
|Shareholders' deficiency (Note 14)                                                                           |   |               |  |   |             |  |   |             | 
|Meridian Co. shareholders' equity                                                                            |   |               |  |   |             |  |   |             | 
|Common
      stock - par value 100 WON per share; 100 million shares and 50 million shares
      authorized; |   |               |  |   |             |  |  
|issued and outstanding 35,094
      thousand shares and 35,004 thousand shares                               |   | 2,780,836     |  |   | 3,509,415   |  |   | 3,500,415   | 
|at December
      31, 2008 and December 31, 2007, respectively                                               |   |               |  |   |             |  |   |             | 
|Additional paid-in capital                                                                                   |   | 4,938,594     |  |   | 6,232,505   |  |   | 6,189,683   | 
|Accumulated deficit                                                                                          |   | -12,375,212   |  |   | -15,617,514 |  |   | -15,790,498 | 
|Accumulated other comprehensive
      income (loss)                                                          |   | -3,496        |  |   | -4,411      |  |   | 15,062      | 
|                                                                                                             |   |               |  |   |             |  |   |             | 
|Total shareholders'
      deficiency                                                                         |   | -4,659,278    |  |   | -5,880,005  |  |   | -6,085,338  | 
|                                                                                                             |   |               |  |   |             |  |   |             | 
|TOTAL LIABILITIES AND SHAREHOLDERS'
      DEFICIENCY                                                         | $ | 2,451,676     |  | W | 3,094,016   |  | W | 2,055,393   | 

The accompanying notes are an integral part of these Consolidated
  Financial Statements.
  37

---

Meridian Co., Ltd. and SubsidiariesConsolidated Statements of Operations and Comprehensive Income (Loss)
  For the Years Ended December 31, 2008, 2007 and 2006
  (in thousands of Korean Won (W), except number of shares)

|                                                              |   | 2008 (in US$) |  |   |            |  |   |            |  |   |            | 
|------------------------------------------------------------- | - | ------------- |  | - | ---------- |  | - | ---------- |  | - | ---------- | 
|                                                              |   | (Note 4)      |  |   |            |  |   |            |  |   |            | 
|                                                              |   | (unaudited)   |  |   | 2008       |  |   | 2007       |  |   | 2006       | 
|                                                              |   |               |  |   |            |  |   |            |  |   |            | 
|Sales (Notes 3 and 19)                                        | $ | 2,634,646     |  | W | 3,324,923  |  | W | 2,604,541  |  | W | 1,526,828  | 
|Cost of sales                                                 |   | 748,217       |  |   | 944,250    |  |   | 819,418    |  |   | 591,819    | 
|Gross profits                                                 |   | 1,886,429     |  |   | 2,380,673  |  |   | 1,785,123  |  |   | 935,009    | 
|Selling, general and administrative expenses                  |   | 1,755,846     |  |   | 2,215,876  |  |   | 2,042,162  |  |   | 1,111,107  | 
|Research and development expenses                             |   | 311,333       |  |   | 392,902    |  |   | 305,307    |  |   | 75,309     | 
|Loss from operations                                          |   | -180,750      |  |   | -228,105   |  |   | -562,346   |  |   | -251,407   | 
|Other income (expense) (Note 15)                              |   |               |  |   |            |  |   |            |  |   |            | 
|Interest income                                               |   | 83            |  |   | 104        |  |   | 87         |  |   | 30         | 
|Interest expense                                              |   | -149,248      |  |   | -188,350   |  |   | -235,760   |  |   | -246,523   | 
|Foreign transaction gain (loss), net                          |   | 338,647       |  |   | 427,372    |  |   | -3,165     |  |   | -34,615    | 
|Other, net                                                    |   | 128,337       |  |   | 161,963    |  |   | 193,521    |  |   | 197,508    | 
|Total other income (expense)                                  |   | 317,819       |  |   | 401,089    |  |   | -45,317    |  |   | -83,600    | 
|Income (loss) before income taxes
      and minority interest |   | 137,069       |  |   | 172,984    |  |   | -607,663   |  |   | -335,007   | 
|Income taxes (Note 16)                                        |   | -             |  |   | -          |  |   | -          |  |   | -          | 
|Income (Loss) before minority
      interest                  |   | 137,069       |  |   | 172,984    |  |   | -607,663   |  |   | -335,007   | 
|Minority interest in net loss of consolidated subsidiaries    |   | -             |  |   | -          |  |   | -          |  |   | 10,260     | 
|Net Income (loss)                                             | $ | 137,069       |  | W | 172,984    |  | W | -607,663   |  | W | -324,747   | 
|Other comprehensive income (loss)                             |   |               |  |   |            |  |   |            |  |   |            | 
|Foreign
      currency translation                            |   | -15,431       |  |   | -19,473    |  |   | 1,100      |  |   | 11,620     | 
|Comprehensive income (loss)                                   | $ | 121,638       |  | W | 153,511    |  | W | -606,563   |  | W | -313,127   | 
|                                                              |   |               |  |   |            |  |   |            |  |   |            | 
|Net income (loss) per common share (Note 17)                  |   |               |  |   |            |  |   |            |  |   |            | 
|Basic and diluted                                             | $ | 0.004         |  | W | 0.005      |  | W | -0.019     |  | W | -0.010     | 
|Weighted average number of common shares                      |   |               |  |   |            |  |   |            |  |   |            | 
|Basic and diluted                                             |   | 35,033,418    |  |   | 35,033,418 |  |   | 32,553,528 |  |   | 31,393,984 | 

The accompanying notes are an integral part of these Consolidated
  Financial Statements
  38

---

Meridian Co., Ltd. and SubsidiariesConsolidated Statement of Changes in Shareholders' Deficiency
  For the Years Ended December 31, 2008, 2007 and 2006
  (in thousands of Korean Won (W))

|                                               |  |                     |  |   |            |  |   |           |  |   |             |  |   | Accumulated   |  |   |            | 
|---------------------------------------------- |  | ------------------- |  | - | ---------- |  | - | --------- |  | - | ----------- |  | - | ------------- |  | - | ---------- | 
|                                               |  | Common Stock Issued |  |   | Additional |  |   |           |  |   | Other       |  |   |               | 
|                                               |  |                     |  |   |            |  |   | Paid-in   |  |   | Accumulated |  |   | Comprehensive |  |   |            | 
|                                               |  | Shares              |  |   | Amount     |  |   | Capital   |  |   | Deficit     |  |   | Income (Loss) |  |   | Total      | 
|                                               |  |                     |  |   |            |  |   |           |  |   |             |  |   |               |  |   |            | 
|Balance at January 1, 2006                     |  | 31,393,984          |  | W | 3,139,398  |  | W | 3,929,900 |  | W | -14,855,311 |  | W | 2,342         |  | W | -7,783,671 | 
|                                               |  |                     |  |   |            |  |   |           |  |   |             |  |   |               |  |   |            | 
|Net loss                                       |  | -                   |  |   | -          |  |   | -         |  |   | -324,747    |  |   | -             |  |   | -324,747   | 
|Losses in excess of minority interests         |  | -                   |  |   | -          |  |   | -         |  |   | -2,777      |  |   | -             |  |   | -2,777     | 
|Other comprehensive income:                    |  |                     |  |   |            |  |   |           |  |   |             |  |   |               |  |   |            | 
|Foreign translation gain                       |  | -                   |  |   | -          |  |   | -         |  |   | -           |  |   | 11,620        |  |   | 11,620     | 
|Balance at December 31, 2006                   |  | 31,393,984          |  | W | 3,139,398  |  | W | 3,929,900 |  | W | -15,182,835 |  | W | 13,962        |  | W | -8,099,575 | 
|                                               |  |                     |  |   |            |  |   |           |  |   |             |  |   |               |  |   |            | 
|                                               |  |                     |  |   |            |  |   |           |  |   |             |  |   |               |  |   |            | 
|Issuance of common shares                      |  | 3,610,172           |  |   | 361,017    |  |   | 2,259,783 |  |   | -           |  |   | -             |  |   | 2,620,800  | 
|Net loss                                       |  | -                   |  |   | -          |  |   | -         |  |   | -607,663    |  |   | -             |  |   | -607,663   | 
|Other comprehensive income:                    |  |                     |  |   |            |  |   |           |  |   |             |  |   |               |  |   |            | 
|Foreign translation gain                       |  | -                   |  |   | -          |  |   | -         |  |   | -           |  |   | 1,100         |  |   | 1,100      | 
|Balance at December 31, 2007                   |  | 35,004,156          |  | W | 3,500,415  |  | W | 6,189,683 |  | W | -15,790,498 |  | W | 15,062        |  | W | -6,085,338 | 
|                                               |  |                     |  |   |            |  |   |           |  |   |             |  |   |               |  |   |            | 
|                                               |  |                     |  |   |            |  |   |           |  |   |             |  |   |               |  |   |            | 
|Issuance of common shares                      |  | 90,000              |  |   | 9,000      |  |   | 42,822    |  |   | -           |  |   | -             |  |   | 51,822     | 
|Net income                                     |  | -                   |  |   | -          |  |   | -         |  |   | 172,984     |  |   | -             |  |   | 172,984    | 
|Other comprehensive loss:                      |  |                     |  |   |            |  |   |           |  |   |             |  |   |               |  |   |            | 
|Foreign translation loss                       |  | -                   |  |   | -          |  |   | -         |  |   | -           |  |   | -19,473       |  |   | -19,473    | 
|Balance at December 31, 2008                   |  | 35,094,156          |  | W | 3,509,415  |  | W | 6,232,505 |  | W | -15,617,514 |  | W | -4,411        |  | W | -5,880,005 | 
|                                               |  |                     |  |   |            |  |   |           |  |   |             |  |   |               |  |   |            | 
|                                               |  |                     |  |   |            |  |   |           |  |   |             |  |   |               |  |   |            | 
|Balance at December 31, 2007 (in US$) (Note 4) |  | 35,004,156          |  | $ | 2,773,704  |  | $ | 4,904,661 |  | $ | -12,512,281 |  | $ | 11,935        |  | $ | -4,821,981 | 
|                                               |  |                     |  |   |            |  |   |           |  |   |             |  |   |               |  |   |            | 
|Issuance of common shares                      |  | 90,000              |  |   | 7,132      |  |   | 33,933    |  |   | -           |  |   | -             |  |   | 41,065     | 
|Net income                                     |  | -                   |  |   | -          |  |   | -         |  |   | 137,069     |  |   | -             |  |   | 137,069    | 
|Other comprehensive loss:                      |  |                     |  |   |            |  |   |           |  |   |             |  |   |               |  |   |            | 
|Foreign translation loss                       |  | -                   |  |   | -          |  |   | -         |  |   | -           |  |   | -15,431       |  |   | -15,431    | 
|Balance at December 31, 2008                   |  | 35,094,156          |  | $ | 2,780,836  |  | $ | 4,938,594 |  | $ | -12,375,212 |  | $ | -3,496        |  | $ | -4,659,278 | 

The accompanying notes are an integral part of these Consolidated
  Financial Statements.
  39

---

Meridian Co., Ltd. and SubsidiariesConsolidated Statements of Cash Flows
  For the Years Ended December 31, 2008, 2007 and 2006
  (in thousands of Korean Won(W))

|                                                                        |   | 2008 (in US$) |  |   |            |  |   |            |  |   |          | 
|----------------------------------------------------------------------- | - | ------------- |  | - | ---------- |  | - | ---------- |  | - | -------- | 
|                                                                        |   | (Note 4)      |  |   |            |  |   |            |  |   |          | 
|                                                                        |   | (unaudited)   |  |   | 2008       |  |   | 2007       |  |   | 2006     | 
|                                                                        |   |               |  |   |            |  |   |            |  |   |          | 
|CASH FLOWS FROM OPERATING ACTIVITIES :                                  |   |               |  |   |            |  |   |            |  |   |          | 
|Net income (loss)                                                       | $ | 137,069       |  | W | 172,984    |  | W | -607,663   |  | W | -324,747 | 
|Adjustments to reconcile net income (loss)
      from operations to net |   |               |  |   |            |  |   |            |  |   |          | 
|cash used in operating
      activities                                 |   |               |  |   |            |  |   |            |  |   |          | 
|Depreciation                                                            |   | 42,255        |  |   | 53,325     |  |   | 22,918     |  |   | 8,763    | 
|Provision
      for severance benefits                                  |   | 59,097        |  |   | 74,580     |  |   | 76,955     |  |   | 36,710   | 
|Bad debt expenses,
      net (recovery income)                          |   | 300,043       |  |   | 378,653    |  |   | -39,712    |  |   | -201,352 | 
|Amortization
      of intangible assets                                 |   | 149           |  |   | 189        |  |   | 189        |  |   | 263      | 
|Loss on disposal of
      property, plant and equipment                 |   | -             |  |   | -          |  |   | 3,656      |  |   | -        | 
|Equity
      in loss(gain) of investee                                  |   | 564           |  |   | 712        |  |   | 548        |  |   | 483      | 
|Loss on disposal of
      inventory                                     |   | 1,735         |  |   | 2,190      |  |   | -          |  |   | -        | 
|Gain
      on forgiveness of debt                                       |   | -7,782        |  |   | -9,820     |  |   | -          |  |   | -        | 
|Changes in operating assets and liabilities                             |   |               |  |   |            |  |   |            |  |   |          | 
|Decrease
      (increase) in accounts receivable                        |   | -945,503      |  |   | -1,193,226 |  |   | -691,723   |  |   | -29,667  | 
|Decrease (increase)
      in inventory                                  |   | 56,462        |  |   | 71,252     |  |   | -178,588   |  |   | 117,246  | 
|Decrease
      (increase) in other current assets                       |   | -17,615       |  |   | -22,230    |  |   | -2,554     |  |   | -19,588  | 
|Increase (decrease)
      in accounts payable - trade                   |   | -152,691      |  |   | -192,695   |  |   | -86,187    |  |   | -40,701  | 
|Increase
      (decrease) in accounts payable - other                   |   | 231,821       |  |   | 292,558    |  |   | -449,945   |  |   | 307,420  | 
|Increase (decrease)
      in accrued expenses                           |   | 70,119        |  |   | 88,490     |  |   | 103,225    |  |   | 142,561  | 
|Increase
      (decrease) in advance received                           |   | -7,538        |  |   | -9,513     |  |   | -339,137   |  |   | -18,075  | 
|Increase (decrease)
      in other current liabilities                  |   | 6,289         |  |   | 7,936      |  |   | 246,392    |  |   | -230,522 | 
|Severance
      payments                                                |   | -12,681       |  |   | -16,003    |  |   | -32,722    |  |   | -        | 
|Other                                                                   |   | 14,139        |  |   | 17,843     |  |   | -627       |  |   | 67,631   | 
|Sub-total                                                               |   | -361,137      |  |   | 455,759    |  |   | -1,367,312 |  |   | 141,172  | 
|                                                                        |   |               |  |   |            |  |   |            |  |   |          | 
|Net
      cash used in operating activities                             |   | -224,068      |  |   | -282,775   |  |   | -1,974,975 |  |   | -183,575 | 
|                                                                        |   |               |  |   |            |  |   |            |  |   |          | 
|                                                                        |   |               |  |   |            |  |   |            |  |   |          | 
|CASH FLOWS FROM INVESTING ACTIVITIES :                                  |   |               |  |   |            |  |   |            |  |   |          | 
|Decrease in short-term
      loans                                      |   | 7,924         |  |   | 10,000     |  |   | -          |  |   | 145,500  | 
|Proceeds from sales of property, plant
      and equipment              |   | -             |  |   | -          |  |   | 10,193     |  |   | -        | 
|Increase in short-term
      loans                                      |   | -             |  |   | -          |  |   | -10,000    |  |   | -        | 
|Acquisition of property, plant and equipment                            |   | -62,190       |  |   | -78,484    |  |   | -70,296    |  |   | -1,505   | 
|                                                                        |   |               |  |   |            |  |   |            |  |   |          | 
|Net cash (used
      in) provided by investing activities               |   | -54,266       |  |   | -68,484    |  |   | -70,103    |  |   | 143,995  | 
|                                                                        |   |               |  |   |            |  |   |            |  |   |          | 
|                                                                        |   |               |  |   |            |  |   |            |  |   |          | 
|CASH FLOWS FROM FINANCING ACTIVITIES :                                  |   |               |  |   |            |  |   |            |  |   |          | 
|Proceeds from issuance of common stocks                                 |   | -             |  |   | -          |  |   | 2,620,800  |  |   | -        | 
|Proceeds from short-term
      borrowings                               |   | 463,550       |  |   | 585,000    |  |   | 490,950    |  |   | 30,000   | 
|Repayment of short-term borrowings                                      |   | -98,740       |  |   | -124,609   |  |   | -626,556   |  |   | -11,000  | 
|Repayment of long-term
      borrowings                                 |   | -166,458      |  |   | -210,070   |  |   | -338,638   |  |   | -        | 
|                                                                        |   |               |  |   |            |  |   |            |  |   |          | 
|Net
      cash provided by financing activities                         |   | 198,352       |  |   | 250,321    |  |   | 2,146,556  |  |   | 19,000   | 
|                                                                        |   |               |  |   |            |  |   |            |  |   |          | 
|                                                                        |   |               |  |   |            |  |   |            |  |   |          | 
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                    |   | -79,982       |  |   | -100,938   |  |   | 101,478    |  |   | -20,580  | 
|                                                                        |   |               |  |   |            |  |   |            |  |   |          | 
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                          |   | 82,302        |  |   | 103,865    |  |   | 2,387      |  |   | 22,967   | 
|                                                                        |   |               |  |   |            |  |   |            |  |   |          | 
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                | $ | 2,320         |  | W | 2,927      |  | W | 103,865    |  | W | 2,387    | 
|                                                                        |   |               |  |   |            |  |   |            |  |   |          | 
|                                                                        |   |               |  |   |            |  |   |            |  |   |          | 
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                        |   |               |  |   |            |  |   |            |  |   |          | 
|Cash paid for interest                                                  | $ | 50,888        |  | W | 64,221     |  | W | 155,137    |  | W | 105,296  | 
|SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING
      ACTIVITIES           |   |               |  |   |            |  |   |            |  |   |          | 
|Accrued severance benefits transferred
      to other current liability | $ | 4,641         |  | W | 5,858      |  | W | 4,423      |  | W | 9,131    | 
|Stock issued in lieu of
      service fees                              | $ | 41,063        |  | W | 51,822     |  | W | -          |  | W | -        | 

The accompanying notes are an integral part of these Consolidated
  Financial Statements.
  40

---

|Meridian Co., Ltd. and Subsidiaries       
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Korean Won (W) in thousands)             

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 subsidiaries
(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. 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 W 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. closed
down in April 2008, so that Meridian could concentrate its resources on the
overseas markets.

Note 2. Liquidity and Going Concern

Although the Company has recorded W 172,984 net income (or
surpluses) in this fiscal year, the Company had experienced losses from
operation due to continuous depression during last two fiscal years before this
fiscal year. The Company has an accumulated deficit of W 15,617,514 as of
December 31, 2008 and W 3,041,862 working capital deficits. As of December 31,
2008, the Companys principal source of liquidity is W 2,927 of cash and W
2,278,454 of trade and other accounts receivable. Such conditions raise
substantial doubt that the Company will be able 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 do not include any adjustments that might result from the outcome of
the uncertainties.

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

The original terms of the borrowings, which include secured W
34,200 and unsecured W 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.

41

---

|Meridian Co., Ltd. and Subsidiaries       
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Korean Won (W) in thousands)             

In January 2005, Woori Bank exercised its security right on an
apartment owned by Meridian. The proceeds of W 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 agreed 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 W 883,308 from the foreclosure, was paid to
preemptive other creditors and Chochung Bank. Subsequent to the foreclosure, the
original debt restructuring plan was modified to include the outstanding
principal of W 1,074,455 to Chohung Bank. The repayments under the modified plan
were scheduled as follows:

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

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

|          |   | 2007    |  |   | 2008    |  |   | 2009    |  |   | 2010    |  |   | 2011    |  |   | 2012    |  |   | 2013    |  |   | Total     | 
|--------- | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | --------- | 
|Principal | W | 500,159 |  | W | 649,337 |  | W | 649,337 |  | W | 649,337 |  | W | 649,337 |  | W | 649,337 |  | W | 649,336 |  | W | 4,396,180 | 
|Interest  |   | 443,601 |  |   | 161,067 |  |   | 113,634 |  |   | 90,907  |  |   | 68,180  |  |   | 45,461  |  |   | 22,727  |  |   | 945,577   | 
|Total     | W | 943,760 |  | W | 810,404 |  | W | 762,971 |  | W | 740,244 |  | W | 717,517 |  | W | 694,798 |  | W | 672,063 |  | W | 5,341,757 | 

However, due to the recurring losses from operations, Meridian
was not able to meet the repayment schedule. As of December 31, 2008, Meridian
has not paid W 1,149,496 of principal and W 604,668 of accrued interest
outstanding to financial institutions, and W 891,266 of accounts payable to
various vendors.

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 believes that additional equity financing and
continued increase in sales of the new product line-up, recently launched in the
international markets will provide sufficient cash flow for it to continue as a
going concern. During 2007, Meridian was able to attract new investors,
increased its overseas revenue. In 2007, Meridian attained the sales approvals
of Lapex-BCS (LipoLaser) and DPA in EU and Canadian markets, in addition to
Japan market, which will expedite its revenue growth. Also in 2008, the Company
released LAPEX-BCS Pro and attained the sales approvals in Europe markets.

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

42

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|Meridian Co., Ltd. and Subsidiaries       
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Korean Won (W) in thousands)             

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.

Revenue from sales of products is recognized when the products
are shipped to the customers, both. Title and the risks and rewards of ownership
are transferred or services have been rendered and accepted, and collectability
is reasonably assured. 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 analyses
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., Canada, Europe, Japan 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 were no write offs in the years
ended December 31, 2008, and 2007.

In 2008, the Company had three customers that each represented
more than 10% of its revenues, one of which represented approximately 29% of
revenues and two of which represented approximately 11% of revenues. In 2007,
the Company had two customers that each represented more than 10% of its
revenues, one of which represented 36% and the other which represented
approximately 26% of revenues. In 2006, the Company had two customers that each
represented more than 10% of its revenues, one of which represented 21% and the
other which represented approximately 19% of revenues.

At December 31, 2008, the Company had three customers that
accounted for 78% of accounts receivable. At December 31, 2007, the Company had
two customers that accounted for 60% of 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

43

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|Meridian Co., Ltd. and Subsidiaries       
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Korean Won (W) in thousands)             

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.

A loss in value of an investment that is other than a temporary
decline is recognized as a charge to current operations. Evidence of a loss in
value might include, but would not necessarily be limited to, absence of an
ability to recover the carrying amount of the investment or inability of the
investee to sustain an earnings capacity that would justify the carrying amount
of the investment.

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 2008, 2007 and 2006.

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, 2008, 2007 and 2006, amounted to W 13,440, W 12,421 and W
6,483, 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 W
392,903, W 305,307 and W 75,309 during the years ended December 31, 2008, 2007
and 2006, respectively.

44

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|Meridian Co., Ltd. and Subsidiaries       
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Korean Won (W) in thousands)             

Advertising Costs

The Company expenses advertising expenses as they are incurred.
Advertising expenses for the years ended December 31, 2008, 2007 and 2006 are W
45,290, W 25,938 and W 35,671, 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, 2008 and 2007, 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 appliesFASB No. 52, Foreign Currency
Translation, 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.

Earnings (Loss) Per Share

Basic earnings per share (EPS) is computed by dividing
earnings (losses) attributable to common shareholders by the weighted average
number of common shares outstanding for the periods. Diluted EPS is computed
using the weighted average number of common and redeemable common shares and
dilutive common equivalent shares outstanding during the year using the treasury
stock method for warrants.

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 Statement of Financial Accounting Standard (SFAS) No. 123,
Accounting for Stock-Based Compensation for options granted to non-employees who
perform services for the Company and the disclosure-only provisions of options
granted to employees.

In December 2004, the FASB issued SFAS No. 123R (revised 2004),
Share-Based Payment (SFAS 123R), which replaces SFAS No. 123, Accounting for
Stock-Based Compensation, (SFAS 123) and supersedes APB Opinion No. 25. SFAS
123R requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the financial statements based on
their fair values. Under SFAS 123R, the Company is required to measure the cost
of employee services received in exchange for stock options and similar awards
based on the grant-date fair value of the award and recognize this cost in the
income statement over the period during which an employee is required to provide
service in exchange for the award. The pro forma disclosures previously
permitted under SFAS 123 are no longer an alternative to financial statement
recognition. This new rule is effective from the annual reporting period
beginning after June 15,

45

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|Meridian Co., Ltd. and Subsidiaries       
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Korean Won (W) in thousands)             

2005. 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 W607.

At December 31, 2008 there was no stock option plan
outstanding.

Reclassifications

Certain prior period balances have been reclassified to conform
to the current period presentation in the Companys Consolidated Financial
Statements and the accompanying notes. Such reclassification had no effect on
previously reported results of operations or accumulated deficit.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements  an amendment of
Accounting Research Bulletin (ARB) No. 51 (SFAS 160), which amends ARB No.
51,Consolidated Financial Statements , to establish accounting and
reporting standards for the noncontrolling (minority) interest in a subsidiary
and for the deconsolidation of a subsidiary. SFAS No. 160 clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in a
consolidated entity that should be reported as equity in the consolidated
financial statements. This statement also changes the way the consolidated
income statement is presented by requiring consolidated net income to be
reported at amounts that include the amounts attributable to both the parent and
the noncontrolling interest. In addition, SFAS 160 establishes a single method
of accounting for changes in a parents ownership interest in a subsidiary that
do not result in deconsolidation. For the Company, SFAS No. 160 is effective as
of January 1, 2009, and must be applied prospectively, except for certain
presentation and disclosure requirements which must be applied retrospectively.
The Company believes that the retrospective requirements of SFAS 160 will not
have a material impact on the Companys financial statements.

In April 2008, the FASB issued Staff Position FAS 142-3,
Determination of Useful Life of Intangible Assets (FSP 142-3). FSP 142-3
amends the factors that should be considered in developing the renewal or
extension assumptions used to determine the useful life of a recognized
intangible asset under FAS 142, Goodwill and Other Intangible Assets. FSP
142-3 also requires expanded disclosure regarding the determination of
intangible asset useful lives. For the Company, FSP 142-3 is effective as of
January 1, 2009. The Company believes that the adoption of FSP 142-3 will not
have a material impact on the Companys financial statements.

In May 2008, the FASB issued SFAS No. 162 The Hierarchy of
Generally Accepted Accounting Principles (SFAS No.162), which identifies the
sources of accounting principles to be used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with
U.S. GAAP. This Statement is effective 60 days following the SEC's approval of
the Public Company Accounting Oversight Board amendments to AU Section 411 The
Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles. The Company currently adheres to the hierarchy of U.S. GAAP as
presented in SFAS No. 162 and the adoption of SFAS No. 162 during the fourth
quarter of fiscal year 2008 did not have a material impact on its financial
position, results of operations and disclosures.

In April 2009, the FASB issued FASB Staff Position No. 115-2
and 124-2, Recognition and Presentation of Other-Than-Temporary Impairments
(FSP FAS 115-2 and FAS 124-2). The FSP amends the other-than-temporary
impairment guidance in U.S. GAAP for debt securities to make the guidance more
operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities in the financial
statements.This FSP does not amend existing recognition and measurement guidance
related to other-than-temporary impairments of equity securities. The FSP shall
be effective for interim and annual reporting periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15, 2009.
Earlier adoption for periods ending before March 15, 2009, is not permitted. The
Company does not believe FSP FAS 115-2 and FAS 124-2 will have a material effect
on our financial statements and related disclosures.

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. United States Dollar Amounts

The Company operates primarily in Korea and its financial
accounting records are maintained in Korean WON(W). These translations should
not be construed as a representation that the Korean WON amounts shown could be
converted, realized or settled in US dollars. The US dollar

46

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|Meridian Co., Ltd. and Subsidiaries       
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Korean Won (W) in thousands)             

amounts are provided herein as supplemental information solely
for the convenience of the readers. Korean WON amounts are expressed in US
dollars at the rate of W 1262.0: US$1, the US Federal Reserve Bank of New York
noon buying exchange rate in effect on December 31, 2008. The US dollar amounts
are unaudited and are not presented in accordance with generally accepted
accounting principles in either Korea or the United States of America.

Note 5. Accounts Receivable

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

|                                |   | 2008      |   |   | 2007      |  
|------------------------------- | - | --------- | - | - | --------- | -
|Trade                           | W | 3,161,966 |   | W | 1,679,298 |  
|Others                          |   | 43,894    |   |   | 43,388    |  
|                                |   | 3,205,860 |   |   | 1,722,686 |  
|Allowance for doubtful accounts |   | (886,532  | ) |   | (537,504  | )
|Accounts Receivable, net        | W | 2,319,328 |   | W | 1,185,182 |  

Note 6. Inventories

Inventories are comprised of the following as of December
31:

|                |   | 2008     |   |   | 2007     |  
|--------------- | - | -------- | - | - | -------- | -
|Merchandise     | W | 212,148  |   | W | 244,149  |  
|Finished goods  |   | 109,580  |   |   | 111,749  |  
|Work-in-process |   | 202,841  |   |   | 196,579  |  
|Raw material    |   | 354,552  |   |   | 354,737  |  
|                |   | 879,121  |   |   | 907,214  |  
|Reserves        |   | (387,352 | ) |   | (357,416 | )
|                | W | 491,769  |   | W | 549,798  |  

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:

|                                   |   | 2008      |   |   | 2007     |  
|---------------------------------- | - | --------- | - | - | -------- | -
|Machinery                          | W | 55,855    |   | W | 54,296   |  
|Vehicles                           |   | 35,292    |   |   | 44,171   |  
|Tools                              |   | 47,900    |   |   | 47,900   |  
|Furniture and fixtures             |   | 914,205   |   |   | 835,721  |  
|                                   |   | 1,053,252 |   |   | 982,088  |  
|Less accumulated depreciation      |   | (969,948  | ) |   | (931,523 | )
|Property, plant and equipment, net | W | 83,304    |   | W | 50,565   |  

Depreciation expenses for the years ended December 31, 2008,
2007 and 2006 are W 53,325 W 22,918 and W 8,763, respectively.

Note 8. Equity Method Investment

47

---

|Meridian Co., Ltd. and Subsidiaries       
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Korean Won (W) in thousands)             

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 W 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 2008 and 2007.

The recognized loss on this investment was W 712 and W 548 in
2008 and 2007, respectively. And the carrying amount of the investment was W
40,617 and W 28,917 as of December 31, 2008 and 2007, respectively.

Note 9. Patents and Trademarks

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

|                              |   | 2008   |   |   | 2007   |  
|----------------------------- | - | ------ | - | - | ------ | -
|Acquisition cost              | W | 5,466  |   | W | 5,466  |  
|Less accumulated amortization |   | (4,901 | ) |   | (4,712 | )
|Intangible assets, net        | W | 565    |   | W | 754    |  

Amortization expenses for the years ended December 31, 2008,
2007 and 2006 are W 189, W 189 and W 263, respectively.

Note 10. Short-Term Borrowings

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

|                                |  | Annual        |  |   |         |  |   |         | 
|------------------------------- |  | ------------- |  | - | ------- |  | - | ------- | 
|Creditor                        |  | interest rate |  |   | 2008    |  |   | 2007    | 
|                                |  |               |  |   |         |  |   |         | 
|Other (third party individuals) |  | 7 %           |  | W | 655,000 |  | W | 194,610 | 

Note 11. Long-Term Borrowings

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

|                        |  | Annual        |  |  |                   |  |   |           |  |   |           | 
|----------------------- |  | ------------- |  |  | ----------------- |  | - | --------- |  | - | --------- | 
|Creditor                |  | interest rate |  |  | Maturity Date     |  |   | 2008      |  |   | 2007      | 
|                        |  |               |  |  |                   |  |   |           |  |   |           | 
|Chohung Bank (Note a)   |  | 3.5 %         |  |  | December 31, 2013 |  | W | 1,074,455 |  | W | 1,074,455 | 
|Korea Technology Credit |  |               |  |  |                   |  |   |           |  |   |           | 
|Guarantee Fund          |  | 3.5 %         |  |  | December 31, 2013 |  |   | 1,016,160 |  |   | 1,151,884 | 
|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   |  |   | 300,000   | 
|Shinhan Bank            |  | 3.5 %         |  |  | December 31, 2013 |  |   | 41,612    |  |   | 41,612    | 
|SMI | ABS Specialty     |  |               |  |  |                   |  |   |           |  |   |           | 

48

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|Meridian Co., Ltd. and Subsidiaries       
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Korean Won (W) in thousands)             

|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    |  
|                      |  |       |  |  |                   |  |   | 4,396,180  |   |   | 4,555,298  |  
|Less current portion  |  |       |  |  |                   |  |   | (1,798,833 | ) |   | (1,301,514 | )
|                      |  |       |  |  |                   |  | W | 2,597,347  |   | W | 3,253,784  |  

(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 1, 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.

The repayment schedule for long-term borrowings as of December
31, 2008 is as follows:

|Year |  |   | Amount    | 
|---- |  | - | --------- | 
|2009 |  | W | 1,798,833 | 
|2010 |  |   | 649,337   | 
|2011 |  |   | 649,337   | 
|2012 |  |   | 649,337   | 
|2013 |  |   | 649,336   | 
|     |  | W | 4,396,180 | 

Note 12. Accrued Severance Benefits

Changes in accrued severance benefits for the years ended
December 31, 2008 and 2007 are summarized as follows:

|                                                      |   | 2008    |   |   | 2007    |  
|----------------------------------------------------- | - | ------- | - | - | ------- | -
|Accrued severance benefits at beginning of
      year | W | 135,537 |   | W | 91,304  |  
|Provision                                             |   | 74,580  |   |   | 76,955  |  
|Payments                                              |   | (16,003 | ) |   | (32,722 | )
|Transfer to National Pension Fund                     |   | (4,063  | ) |   | (4,063  | )
|                                                      |   | 190,051 |   |   | 131,474 |  
|Less current portion                                  |   | (19,411 | ) |   | (13,553 | )
|Balance at end of year                                | W | 170,640 |   | W | 117,921 |  

Note 13. Commitments

The Company leases its manufacturing and office facilities from
non-affiliates. Current lease will be expired in June 2009. Thereafter, the
management expects to renew its lease agreement on an annual basis. Total rent
expense were W 165,338, W 205,110 and W 158,306 for the years ended December 31,
2008, 2007 and 2006, respectively.

Total future minimum lease payments under operating leases are
as follows:

|Year ending
      December, 31 |  |   | Operating Leases | 
|------------------------------ |  | - | ---------------- | 
|2009                           |  | W | 130,800          | 
|2010                           |  |   | 130,800          | 
|2011                           |  |   | 65,400           | 
|Total                          |  | W | 327,000          | 

49

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|Meridian Co., Ltd. and Subsidiaries       
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Korean Won (W) in thousands)             

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, 2008 and 2007 are as follows:

|                              |  | 2008        |  |  | 2007       | 
|----------------------------- |  | ----------- |  |  | ---------- | 
|Authorized shares             |  | 100,000,000 |  |  | 50,000,000 | 
|Issued and outstanding shares |  | 35,094,156  |  |  | 35,004,156 | 

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 2008, 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 W 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 Commercial   | 
|---------------------------- | - | ---------- |  | - | ------------------- | 
|                             |   | SEC        |  |   | Registration Office | 
|Number of outstanding shares |   | 35,094,156 |  |   | 19,421,182          | 
|Capital Stock                | W | 3,509,4156 |  | W | 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 other, net of other income (expense).
Other, net for the years ended December 31, 2008, 2007 and 2006 are W 161,963, W
193,521 and W 197,508, respectively. The main components of other, net of other
income (expense) from the statements of operations and comprehensive income are
as follows. For the year ended 2008, the Company classified W 102,700 refund of
service fee as other, net. For the year ended 2007, the Company classified W
138,480 sales agency commission as other, net. For the year ended 2006, the
Company classified W 201,532 bad debt recovery income as other, net.

Note 16. Income Taxes

The Company adopted the provisions of FASB interpretation
(FIN) No. 48, Accounting for Uncertainty in Income Taxes  an interpretation
of FASB statement No. 109, 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 FIN 48, 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.

50

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|Meridian Co., Ltd. and Subsidiaries       
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Korean Won (W) in thousands)             

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, 2008 and 2007 are $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:

|                                      |  | 2008     |  |  | 2007    | 
|------------------------------------- |  | -------- |  |  | ------- | 
|Foreign tax                           |  | 10.96%   |  |  | 27.42%  | 
|Federal tax at statutory tax rate     |  | 9.55%    |  |  | -3.30%  | 
|State tax, net of valuation allowance |  | 2.48%    |  |  | -0.86%  | 
|Nondeductible expenses                |  | 10.51%   |  |  | -3.49%  | 
|AMT                                   |  | 0.00%    |  |  | 0.00%   | 
|Expired NOL                           |  | 242.42%  |  |  | -17.05% | 
|Change of Valuation Allowance         |  | -275.92% |  |  | -2.72%  | 
|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:

|                                             |   | 2008       |   |   | 2007       |  
|-------------------------------------------- | - | ---------- | - | - | ---------- | -
|Current Deferred Tax Asset (Liabilities)     |   |            |   |   |            |  
|Foreign currency translation                 | W | (106,878   | ) | W | -          |  
|Allowance for accounts receivable            |   | 154,277    |   |   | 137,351    |  
|                                             |   |            |   |   |            |  
|Non-current Deferred Tax Asset (Liabilities) |   |            |   |   |            |  
|Net Operating Losses                         |   | 2,890,065  |   |   | 3,384,523  |  
|Investment                                   |   | 134,624    |   |   | 134,624    |  
|Intangible asset                             |   | (144,199   | ) |   | (167,035   | )
|Severance                                    |   | 43,738     |   |   | 33,374     |  
|                                             |   |            |   |   |            |  
|Total Deferred Tax Asset                     |   | 2,971,627  |   |   | 3,522,837  |  
|Less Valuation allowance                     |   | (2,971,627 | ) |   | (3,522,837 | )
|Net, deferred tax asset                      | W | -          |   | W | -          |  

The significant component of the deferred tax asset (liability)
at December 31, 2008 and 2007 resulted from net operating loss carry-forwards in
the amount of approximately 11.4 billion Won and 13.4 billion Won,
respectively.

SFAS No. 109 requires a valuation allowance to be recorded when
it is more likely than not that some or all of the deferred tax assets will not
be realized. At December 31, 2008 and 2007, we established a full valuation
allowance on our net deferred tax assets based on the available evidence, both
positive and negative, to determine whether the valuation allowance is needed.
Based on our losses in previous years, and the uncertainly of our ability to
generate future taxable income in upcoming years, management believed that it
was more likely than not that most of the deferred tax assets will not be
realized.

Valuation allowances for the full amount of the net deferred
tax asset were established to reduce the deferred tax assets to zero based on
the level of historical taxable income and projections for future taxable income
over the period of three years.

At December 31, 2008, the established valuation allowance for
the net deferred tax asset was decreased by 551.2 million Won.

Note 17. Income (loss) Per Share

51

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|Meridian Co., Ltd. and Subsidiaries       
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Korean Won (W) in thousands)             

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, 2008,
2007 and 2007 is calculated as follows (in thousands of Korean won):

|                                                       |   | 2008       |  |   | 2007       |  |   | 2006       | 
|------------------------------------------------------ | - | ---------- |  | - | ---------- |  | - | ---------- | 
|Basic earnings per shares                              |   |            |  |   |            |  |   |            | 
|Net income (loss)                                      | W | 172,984    |  | W | (-)607,663 |  | W | (-)324,747 | 
|Net income (loss) applicable to common shareholders    |   | 172,984    |  |   | (-)607,663 |  |   | (-)324,747 | 
|Weighted average common shares
      outstanding-basic |   | 35,033,418 |  |   | 32,553,528 |  |   | 31,393,984 | 
|Basic earnings per share                               |   | 0.005      |  |   | (-)0.019   |  |   | (-)0.010   | 

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, 2008, 2007 and 2006. 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     |  |   | 2008      |  |   | 2007    | 
|---------------------- |  | --------------------------- |  |  | ------------------- |  | - | --------- |  | - | ------- | 
|Meridian Medical, Inc. |  | MAMIs minority shareholder |  |  | Account Receivables |  | W | 2,007,481 |  | W | 968,838 | 

Significant transactions with related company for the years
ended December 31 are summarized as follows:

|Related party          |  | Transactions |  |   | 2008      |  |   | 2007    |  |   | 2006    | 
|---------------------- |  | ------------ |  | - | --------- |  | - | ------- |  | - | ------- | 
|Meridian Medical, Inc. |  | Sales        |  |   | 970,343   |  |   | 676,137 |  |   | 327,265 | 
|                       |  | Service fees |  |   | 297,112   |  |   | 124,736 |  |   | -       | 
|                       |  |              |  | W | 1,267,455 |  | W | 800,873 |  | W | 327,265 | 

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 1 January 2008, the
Company entered into service agreement with Meridian Medical, Inc ("MMI"). Based
on that agreement, MMI carries out sales, marketing and admin support service on
behalf of the Company in US market.

Note 19. Geographic Information

In 2008, 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:

|              |   | 2008      |  |   | 2007      |  |   | 2006    | 
|------------- | - | --------- |  | - | --------- |  | - | ------- | 
|Export        |   |           |  |   |           |  |   |         | 
|North America | W | 1,143,757 |  | W | 848,459   |  | W | 485,371 | 
|Asia          |   | 544,461   |  |   | 1,109,121 |  |   | 71,092  | 
|Europe        |   | 1,444,010 |  |   | 266,629   |  |   | -       | 

52

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|Meridian Co., Ltd. and Subsidiaries       
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Korean Won (W) in thousands)             

|Other          |   | 15,615    |  |   | 41,884    |  |   | 41,533    | 
|-------------- | - | --------- |  | - | --------- |  | - | --------- | 
|               |   | 3,147,843 |  |   | 2,266,093 |  |   | 597,996   | 
|               |   |           |  |   |           |  |   |           | 
|Domestic Sales |   | 177,080   |  |   | 338,448   |  |   | 928,832   | 
|               | W | 3,324,923 |  | W | 2,604,541 |  | W | 1,526,828 | 

53

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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/John Y.C.
MyungName: Myung, John YC Title: President, CEO, Director
Date: July 14, 2009

55

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