SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM IO-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE
SECURITIES ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
FEBRUARY 27,1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES
ACT OF 1934 FOR THE TRANSITION PERIOD FROM 12/l/96 TO 2/28/97
COMMISSION FILE NO. 001-12509
MEGA HOLDING CORP.
(Exact name of small business issuer as specified in its charter)
NEW YORK 13-2793653
(State or other jurisdiction IRS Employer Identification
of incorporation or organization) Number)
278A New Dorp Lane, Staten Island, NY 10306
(Address of principal executive offices)
(718) 667-9117
Issuer's telephone number
Check whether registrant (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days Yes No X
As of February 28, 1997, 3,615,000 Shares of Common Stock were outstanding.
Transitional Small Business Disclosure Format: Yes No X
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1- Financial Information
For financial information, please see the Financial Statements on pages F1
through F1O Item 2- Management's Discussion and Analysis or Plan of Operation.
Plan of Operation Mega Holding Corp. (the Company) incorporated as a New York
corporation and commenced business on March 31, 1970. The Company offers its
services to corporations that are seeking banking and investment banking
relationships. The Company charges a fee for these services and at times earns
an equity interest in these companies. Fees are also earned from clients that
wish to go public and/or raise capital. The company is licensed and registered
with the New York State banking Department as a mortgage broker wherein it earns
fees. In addition, the Company receives royalties from Powderhorn Incorporated (
a subsidiary of Peabody Coal Company) located in Palisade, Colorado.
The following discussion of the results of operations and financial condition
should be read in conjunction with the audited financial statements and related
notes appearing subsequently under the caption "Financial Statements".
Overview
Past revenues have been derived principally from commissions on mortgage
brokerage and investment banking activities, and royalties from Powderhorn
International. Future income is dependent on management's ability to generate
new business in the mortgage brokerage and investment banking segments of its
business, which are more particularly discussed in Item 1, above
Management anticipates that sales, gross profit and income from operations will
continue to increase in fiscal 1997 at a greater rate than in 1996. This
increase will result from an anticipated increase in both the Company's mortgage
brokerage business and to a greater extent, an increase in the Company's
investment banking activities. This increase in activity, in turn should
generate more cash flow and net profit, thereby reducing their effect on cash
used from operations and net income.
<PAGE>
Results of Operation
During the six months ended February 1997, the Company principally provided for
its cash needs through normal operations of its business as more particularly
discussed in Item 1, above.
Net sales for the six months ending February 28, 1997 totaled $96,040 with an
operating loss of $34,271. We expect revenues to increase during the next six
months which should result in operating profits.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal proceedings and the Company is not aware of any threatened
legal proceedings to which the Company is a party or to which its property is
subject.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Report on Form 8-K.
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the under
signed hereunto duly authorized.
April 14, 1997
Date
MEGA HOLDING CORP.
Registrant
/s/ Thomas M. Abate
- ----------------------
Thomas M. Abate, President
/s/ James D. Paulsen
- ----------------------
James D. Paulsen, Secretary
<PAGE>
(Letterhead)
Independent Accountants' Report
To the Stockholders of
Mega Holding Corp.
We have reviewed the accompanying balance sheet of Mega Holding Corp. as of
February 28, 1997, and the related statements of operations, shareholder's
equity, and cash flows for the period September 1, 1996 through February 29,
1997 in accordance with statements on standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants. All
information included in these financial Statements is the representation of the
management of Mega Holding Corp.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with general accepted accounting principles.
McManus & Co., P.C.
Certified Public Accountants
Morris Plains, New Jersey
April 11, 1997
Fl
<PAGE>
MEGA HOLDING CORP. BALANCE SHEET FEBRUARY 28, 1997
ASSETS
Current Assets:
Cash $ 2,872
Accounts Receivable 52,257
Royalties Receivable (Note 2) 375
Notes Receivable (Note 3) 25,000
------
Total Current Assets 80,504
------
Property and Equipment
Office Equipment at cost (Note 1) 51,415
Less: Accumulated Depreciation (32,556)
-------
Total Property, Plant, and Equipment 18,859
------
Other Assets:
Marketable Securities (Note 4) 126,937
Notes Receivable (Note 3) 100,000
Restricted Securities at par value (Note 5) 30,000
Royalties Receivable (Note 2) 154,493
-------
Total Other Assets 411,430
Total Assets $510,793
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 5,251
Officer's Loan 3,000
-----
Total Current Liabilities 8,251
-----
Long - Term Liabilities:
Deferred Taxes (Note 7) 72,168
------
Total Long - Term Liabilities 72,168
------
Commitments and Contingent Liabilities (Note 6)
Stockholder's Equity:
Common Stock-$.O1 par value
Authorized 20,000,000 shares
Issued 3,615,000 shares 36,150
Paid In Capital 488,616
Retained Deficit (94,392)
-------
Total Stockholder's Equity 430,374
Total Liabilities and Stockholders' Equity $510,793
========
See accompanying accountant's report notes to the financial statements.
F2
<PAGE>
MEGA HOLDING CORP.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997
Net Sales $ 96,040
Cost Of Sales 50,053
------
Gross Profit 45,987
------
General and Administrative Expenses:
Advertising 27
Commissions 29,155
Depreciation 1,196
Licenses and Application Fees 445
Miscellaneous 2,971
Office Expense 7,574
Payroll & Associated Costs 1,416
Professional Fees 6,000
Rent 9,116
Taxes 11,223
Telephone and Utilities 3,508
Travel and Entertainment 7,627
-----
Total Operating Expenses 80,258
------
Loss Before Unrealized Holding Loss on Marketable
Securities, Other Income, and Income Taxes (34,271)
Unrealized Holding Loss on Marketable Securities (Note 4) (91,810)
-------
Other Income:
Royalties Income 343
Interest Income 12,407
------
Total Other Income 12,750
------
Loss Before Income Taxes (113,331)
--------
Provision For Income Taxes --
--------
Net Loss $(113,331)
========
Net Loss Per Share:
Net Loss $ (0.0314)
Weighted Average Number of Common Shares Outstanding 3,615,000
See accompanying accountant's report and notes to the financial statements.
F3
<PAGE>
<TABLE>
<CAPTION>
MEGA HOLDING CORP.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997
Additional Total
September 1, 1996 Common Paid In Retained Stockholders'
To February 28, 1997 Stock Capital Earnings Equity
- -------------------- ----- ------- -------- ------
<S> <C> <C> <C> <C>
September 1, 1996 $ 36,150 $ 488,616 $ 18,939 $ 543,705
Net Loss (113,331) (113,331)
------------- ------------- ------------- -------------
Total Stockholders' Equity
As of February 28, 1997 $ 36,150 $ 488 616 $ 4,392 $ 430,374
============== ============== ============== =============
See accompanying accountant's report and notes to the financial statements.
F4
<PAGE>
<CAPTION>
MEGA HOLDING CORP.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997
<S> <C>
Cash Flow from Operating Activities:
Net Loss (113,331)
Adjustments To Reconcile Net Loss To Net
Cash Provided/ (Used) In Operating Activities:
Depreciation 1,196
Unrealized holding gain/(loss) on marketable securities 91,810
(Increase)/Decrease in accounts receivable (8,847)
(Increase)/Decrease in royalties receivable 343
Increase/ (Decrease) in accounts payable (916)
Increase/ (Decrease) in officer's loan payable 3,000
Increase/ (Decrease) in deferred taxes 14,935
------
Total Adjustments 101,521
-------
Net Cash provided/(used) by Operating Activities (11,810)
Cash Flow from Financing Activities:
Increase/(Decrease) in notes÷nds receivable 10,000
------
Net Cash provided/(used) by Financing Activities 10,000
------
Net Decrease in Cash (1,810)
Cash at the Beginning of the Period 4,682
-----
Cash at the End of the Period $ 2,872
=====
</TABLE>
See accompanying accountant's report and notes to the financial statements.
F5
<PAGE>
MEGA HOLDING CORP.
NOTES TO THE FINANCIAL STATEMENTS
Note 1 - Basis of Presentation and Significant Accounting Policies:
Mega Holding Corp. (the Company) incorporated as a New York corporation
and commenced business on March 31, 1970. The Company offers its
services to corporations that are seeking banking and investment
banking relationships. The Company charges a fee for these services and
at times earns an equity interest in these companies. Fees are also
earned from clients wishing to go public and/or raise capital. The
Company is licensed and registered with the New York State Banking
Department as a mortgage broker wherein it earns fees. In addition, the
Company receives royalties from Powderhorn Incorporated (a subsidiary
of Peabody Coal Company) located in Palisade, Colorado.
A) Property and Equipment
Property and equipment are carried at cost less accumulated depreciation.
Depreciation is calculated by using the modified accelerated cost recovery
system as provided by the tax reform act of 1986 for property acquired
after December 31, 1986. The recovery classifications are five years for
furniture and fixtures and office equipment.
Expenditures for maintenance and repairs are charged against income as
incurred whereas major improvements are capitalized.
B) Marketable Securities
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 1 15, "Accounting for Certain
Investments in Debt and Equity Securities," effective for fiscal years
beginning after December 15, 1993. This statement considers debt securities
that the Company has both the positive intent and ability to hold to
maturity are carried at amortized cost. Debt securities that the Company
does not have the positive intent and ability to hold to maturity and all
marketable equity securities are classified as available-for-sale or
trading securities and are carried at fair market value. Unrealized holding
gains and losses on securities classified as available-for-sale are carried
as a separate component of stockholders' equity. Unrealized holding gains
and losses on securities classified as trading are reported in earnings.
Management determines the appropriate classification of marketable equity
and debt securities at the time of purchase and reevaluates such
designation as of each balance sheet date.
F 6
<PAGE>
MEGA HOLDING CORP.
NOTES TO THE FINANCIAL STATEMENTS
Note I - Basis of Presentation and Significant Accounting Policies:
(continued)
C) Revenue Recognition
The Company recognizes revenues at the point in time when the stock in the
newly formed company is sold.
D) Cost of Sales
The cost of sales consist wholly of those expenses accumulated when
acquiring the stock of the original company.
E) Income Taxes
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes", which requires a
change from the deferral method to the assets and liability method of
accounting for income taxes. Timing differences exist between book income
and tax income which relate primarily to the recognition of income.
F) Net Earnings/(Loss) Per Common Share
Net earnings/(loss) per common share is computed by dividing net
earnings/(Loss) by the weighted average number of shares of common stock
outstanding during the period.
Note 2 - Royalties Receivable:
On September 29, 1994, the Company resolved a royalty dispute whereby
Powderhorn Incorporated will pay the Company additional royalties with
a future value of $624,044. This amount will be payable at $12,750 per
annum for non-production royalty and an 8.5% royalty should production
resume.
F 7
<PAGE>
MEGA HOLDING CORP.
NOTES TO THE FINANCIAL STATEMENTS
Note 2 - Royalties Receivable: (continued)
February 28, 1997
-----------------
Royalties Receivable From Court Settlement:
Non-interest bearing receivable,
receivable in annual installments
of $12,750; due 2043. $ 585,794
Less unamortized discount based
on imputed interest rate of 8%. 430,926
Royalties receivable less unamortized
discount. 154,868
Less: Current Portion 375
--------
Total Long-Term Royalties Receivable $154,493
========
Note 3 - Notes Receivable:
In 1993, the Company entered into a loan agreement with AWEC for the
sum of $100,000. This loan is non-interest bearing and due in 1998.
With this note, the Company has two(2) options. Option one maintains
the Company carry the note to maturity and receive face value. Option
two gives the Company the night to convert the outstanding note
receivable into AWEC common stock at fair market value. This right may
be exercised at the Company's option during 1997.
In 1996, the Company received notes from Bonsangue and Nocito companies
in the amounts of $30,000 and $5,000 respectively. Both notes are
non-interest bearing and are considered current. At February 28, 1997
Bonsangue has repaid $10,000.
Note 4 - Marketable Securities:
As discussed in Note 1, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." At February 28,
1997, all of the Company's marketable equity securities are classified
as trading securities; they were purchased with an intent to resell
them within the next year.
F8
<PAGE>
MEGA HOLDING CORP.
NOTES TO THE FINANCIAL STATEMENTS
Note 4 - Marketable Securities: (continued)
The current marketable securities represents an equity investment in
various corporations which the Company considers as trading securities.
The securities had an original cost of $116,488; determined by
multiplying the number of shares being purchased by the fair market
value of those shares. At the balance sheet date, the market value was
$126,937; determined by multiplying the number of shares held by the
fair market value of those shares at the balance sheet date. The
difference between the cost and fair market value represents an
unrealized holding gain and is included in current earnings.
Note 5 - Restricted Securities:
The Company owns various securities that are restricted by the
Securities and Exchange Commission from sale. These restricted
securities are carried at par value totaling $30,000. The fair market
value of the restricted securities held at the balance sheet date is
determined by the cost basis of those securities. If there were no cost
basis, the number of shares multiplied by the given par value would be
used.
Note 6 - Executive Compensation:
As president, Mr. Abate intermittently receives shares of stock as
compensation. At February 28, 1997, no non-cash compensation has been
issued.
Note 7 - Commitments and Contingent Liabilities:
The Company is engaged in a three year lease for its office space in
the amount of $1,302 per month. This non-cancelable lease begins
January 1, 1996 and expires
December 31, 1998.
Future minimum lease payments are summarized as
follows:
February 28 Amount
----------- -------
1997 $15,624
1998 13,020
---- ------
Total $28,644
=======
F9
<PAGE>
MEGA HOLDING CORP.
NOTES TO THE FINANCIAL STATEMENTS
Note 8 - Income Taxes:
As discussed in Note 1, the Company adopted the provisions of Statement
of Financial Standards (SFAS) No. 109 "Accounting for Income Taxes".
Implementation of SFAS 109 did not have a material cumulative effect on
prior periods nor did it result in a change to the current year's
provision.
A) The effective tax rate for the Company is reconcilable to statutory tax
rates as follows:
February 28,
1997
------------
U.S. Federal Statutory Tax Rate 34
Valuation allowance for deferred tax
assets allocated to income tax expense (34)
Effective Tax Rate - 0 -
B) Deferred income taxes are provided for differences between financial
statement and income tax reporting. The principal difference is the
manner in which income is recognized for financial and income tax
reporting purposes.
F10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001027642
<NAME> Mega Holding Corp
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> FEB-28-1997
<EXCHANGE-RATE> 1.000
<CASH> 2,872
<SECURITIES> 156,937
<RECEIVABLES> 332,125
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 80,504
<PP&E> 51,415
<DEPRECIATION> 32,556
<TOTAL-ASSETS> 510,793
<CURRENT-LIABILITIES> 8,251
<BONDS> 0
0
0
<COMMON> 36,150
<OTHER-SE> 394,224
<TOTAL-LIABILITY-AND-EQUITY> 510,793
<SALES> 96,040
<TOTAL-REVENUES> 108,790
<CGS> 50,053
<TOTAL-COSTS> 130,311
<OTHER-EXPENSES> 91,810
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (113,331)
<INCOME-TAX> 0
<INCOME-CONTINUING> (113,331)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (113,331)
<EPS-PRIMARY> (0.031)
<EPS-DILUTED> (0.031)
</TABLE>
