SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE
SECURITIES ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
NOVEMBER 30, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE
SECURITIES ACT OF 1934 FOR THE TRANSITION PERIOD FROM
________________ TO ______________________.
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 November 30, 1996, 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 F9 .
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 fiscal 1996, the Company principally provided for its cash needs through
normal operations of its business as more particularly discussed in Item 1,
above
Fiscal Period Twelve Months Ended August 31, 1996 Compared to Twelve Months
Ended August 31, 1995.
Net sales for twelve months ending August 31, 1996, compared to the twelve
months ended August 31, 1995 increased approximately 60.4% from $201,533 to
$509,609. This increase was due primarily to the initial royalty payment of
$190,000 pursuant to the settlement of the Powderhorn dispute.
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
undersigned hereunto duly authorized.
December 30, 1996
Date
MEGA HOLDING CORP.
(Registrant)
By: /s/ Thomas M. Abate
- -----------------------
Thomas M. Abate, President
By: /s/ James D. Paulsen
- ------------------------
James D. Paulsen, Secretary
<PAGE>
Independent Accountants' Report
To the Stockholders of
Mega Holding Corp.
We have reviewed the accompanying balance sheet of Mega Holding Corp. as of
November 30, 1996, and the related statements of earnings, shareholder's equity,
and cash flows for the period September 1, 1996 through November 30, 1996 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 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.
By: /s/ McManus & Co., P.C.
- ---------------------------
McManus & Co., P.C.
Certified Public Accountants
December 31, 1996
<PAGE>
MEGA HOLDING CORP.
BALANCE SHEET
NOVEMBER 30, 1996
ASSETS
Current Assets:
Cash ..................................................... $ 6,592
Accounts Receivable ...................................... 37,257
Royalties Receivable (Note 2) ............................ 12,750
Notes Receivable (Note 3) ................................ 35,000
---------
Total Current Assets ................................. 91,599
Property and Equipment
Office Equipment at cost (Note 1) ........................ 51,415
Less: Accumulated Depreciation ....................... (32,556)
---------
Total Property, Plant, and Equipment ................. 18,859
Investments and 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) ............................ 585,794
---------
Total Investments & Other Assets ..................... 842,731
---------
Total Assets ................................................. $ 953,189
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable ......................................... 8,381
---------
Total Current Liabilities ............................ 8,381
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-$.01 par value
Authorized 20,000,000 shares
Issued 3,615,000 shares .............................. 36,150
Paid In Capital .......................................... 488,616
Retained Earnings ........................................ 347,874
---------
Total Stockholders Equity ............................ 872,640
---------
Total Liabilities and Stockholders' Equity ................... $ 953,189
=========
See accompanying accountant's report and notes to the financial statements.
F-2
<PAGE>
MEGA HOLDING CORP.
STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED NOVEMBER 30,1996
Net Sales ................................................. $ 93,040
Cost Of Sales ............................................. 46,500
-----------
Gross Profit .......................................... 46,540
-----------
General and Administrative Expenses:
Advertising ........................................... 27
Commissions ........................................... 20,130
Depreciation .......................................... 1,196
Licenses and Application Fees ......................... 59
Miscellaneous ......................................... 2,971
Office Expense ........................................ 5,234
Professional Fees ..................................... 4,500
Rent .................................................. 6,511
Taxes ................................................. 10,430
Telephone and Utilities ............................... 2,083
Travel and Entertainment .............................. 1,052
-----------
Total Operating Expenses .............................. 54,193
-----------
Earnings/(Loss) Before Loss on Marketable
Securities, and Income Taxes .......................... (7,653)
Unrealized Holding Gain/(Loss) on
Marketable Securities (Note 4) ........................ (91,810)
-----------
Earnings/(Loss) Before Income Taxes ....................... (99,463)
-----------
Provision For Income Taxes --
-----------
Net Earnings/(Loss) ....................................... $ (99,463)
===========
Net Earnings/(Loss) Per Share:
Net Earnings/(Loss) ................................... $ (0.0275)
Weighted Average Number of Common
Shares Outstanding ............................... 3,615,000
See accompanying accountant's report and notes to the financial statements.
F-3
<PAGE>
MEGA HOLDING CORP.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED NOVEMBER 30,1996
<TABLE>
<CAPTION>
Additional Total
September 1, 1996 Common Paid In Retained Stockholders'
To November 30, 1996 Stock Capital Earnings Equity
- -------------------- ----- ------- -------- ------
<S> <C> <C> <C> <C> <C>
September 1, 1996 ............ $ 36,150 $ 488,616 $ 447,337 $ 972,103
Net Earnings / (Loss) ........ -- -- (99,463) (99,463)
--------- --------- --------- ---------
Total Stockholders' Equity
As Of November 30, 199 ....... $ 36,150 $ 488,616 $ 347,874 $ 872,640
========= ========= ========= =========
</TABLE>
See accompanying accountant's report and notes to the financial statements.
F-4
<PAGE>
MEGA HOLDING CORP.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1996
Cash Flow from Operating Activities:
Net Income/(Loss) ............................................. $ (99,463)
Adjustments To Reconcile Net Income 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 ............... 6,153
(Increase)/Decrease in royalties receivable .............. --
Increase/(Decrease) in accounts payable .................. 2,214
Increase/(Decrease) in deferred taxes .................... --
---------
Total Adjustments ........................................ 101,373
---------
Net Cash provided/(used) by Operating Activities .............. 1,910
Cash Flow from Investing Activities:
(Purchase)/Disposal of property, plant & equipment ....... --
(Increase)/Decrease in marketable securities ............. --
(Increase)/Decrease in restricted securities ............. --
---------
Net Cash provided/(used) by Investing Activities .............. --
Cash Flow from Financing Activities:
Increase/(Decrease) in notes & dividends receivable ........... --
---------
Net Cash provided/(used) by Financing Activities .............. --
---------
Net Increase/(Decrease) in Cash ................................... 1,910
Cash at the Beginning of the Period ............................... 4,682
---------
Cash at the End of the Period ..................................... $ 6,592
=========
See accompanying accountant's report and notes to the financial statements.
F-5
<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 an 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.
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 to income as incurred.
B) Marketable Securities
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No.115, "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.
<PAGE>
MEGA HOLDING CORP.
NOTES TO THE FINANCIAL STATEMENTS
Note 1 - Basis of Presentation and Significant Accounting Policies (continued)
C) 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 book income and tax
income which relate primarily to the recognition of income.
D) 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 totaling
$624,044. This amount will be payable at $12,750 per annum for
non-production royalty and an 8.5% royalty should production resume.
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 right 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.
F-7
<PAGE>
MEGA HOLDING CORP.
NOTES TO THE FINANCIAL STATEMENTS
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 August 31, 1996, all of the
Company's marketable equity securities are classified as trading
securities.
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. At the balance sheet date, the
market value was $126,937. The difference between t 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.
Note 6 - 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.
Note 7 - 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.
F-8
<PAGE>
MEGA HOLDING CORP.
NOTES TO THE FINANCIAL STATEMENTS
Note 7 - Income Taxes (continued)
A) The effective tax rate for the Company is reconcilable to statutory tax
rates as follows:
November 30,
1996
----
%
U.S. Federal Statutory Tax Rate 34
Effective Timing Difference (34)
----
Effective Tax Rate -
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.
F-9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> NOV-30-1996
<CASH> 6,592
<SECURITIES> 156,937
<RECEIVABLES> 685,794
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 85,007
<PP&E> 51,415
<DEPRECIATION> (32,556)
<TOTAL-ASSETS> 953,189
<CURRENT-LIABILITIES> 8,381
<BONDS> 0
0
0
<COMMON> 36,150
<OTHER-SE> 836,490
<TOTAL-LIABILITY-AND-EQUITY> 953,189
<SALES> 93,040
<TOTAL-REVENUES> 93,040
<CGS> 46,500
<TOTAL-COSTS> 54,193
<OTHER-EXPENSES> (91,810)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (99,463)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (99,463)
<EPS-PRIMARY> (0.028)
<EPS-DILUTED> (0.001)
</TABLE>
