U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended May 31, 1998.
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934.
For the transition period from to
Commission File Number: 001-12509
MEGA HOLDING CORP.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter
New York 13-2793653
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
278A New Dorp Lane, Staten Island, New York 10306
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Address of principal executive offices)
718-667-9117
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(Registrant's telephone number, including area code)
(Not Applicable)
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(Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark, whether the registrant:: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the 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 the number of shares outstanding of each of the issuer's classes
of stock as of the close of the period covered by this report.
Class Number of Shares Outstanding
Common Shares 3,615,000
Transitional Small Business Disclosure Format: Yes No x
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
The condensed financial statements for the periods ended May 31, 1998
included herein have been prepared by Mega Holding Corp. (the "Company"),
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission (the "Commission"). In the opinion of management, the
statements include all adjustments necessary to present fairly the financial
position of the Company as of May 31, 1998, and the results of operations and
cash flows for the three and nine month periods ended May 31, 1998 and 1997.
The Company's results of operations during the nine months of the Company's
fiscal year are not necessarily indicative of the results to be expected for the
full fiscal year.
2
<PAGE>
MEGA HOLDING CORP.
BALANCE SHEETS
ASSETS
May 31, August 31,
1998 1997
(Unaudited) Audited)
----------- -----------
Current Assets:
Cash $ 8,555 $ 15,060
Accounts Receivable 461 51,671
Royalties Receivable (Note 2) 376 375
Inventory (Note 1) 28,390 --
Marketable Securities (Notes 1 & 4) 404,313 31,765
Notes Receivable (Note 3) 128,200 129,200
---------- ---------
Total Current Assets 570,295 228,071
---------- ---------
Property and Equipment
Office Equipment at Cost (Note 1) 67,724 66,664
Less: Accumulated Depreciation (47,373) (39,192)
---------- ---------
Total Property and Equipment 20,351 27,472
----------- ---------
Investments and Other Assets:
Restricted Securities-par value (Note 5) 24,789 3,287
Royalties Receivable (Note 2) 154,117 154,493
----------- ---------
Total Investments & Other Assets 178,906 157,780
----------- ---------
Total Assets $ 769,552 $ 413,323
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable $ 1,100 $ --
Income Taxes Payable 122,508 --
Officer's Loan -- 5,000
Payroll Taxes Payable -- 188
----------- ---------
Total Current Liabilities 123,608 5,188
----------- ---------
Long - Term Liabilities:
Deferred Taxes (Note 7) 2,233 2,233
----------- ---------
Total Long-Term Liabilities 2,233 2,233
----------- ---------
Commitments and Contingent Liabilities (Note 6)
Stockholders' Equity:
Common Stock - $.01 par value
Authorized 20,000,000 shares
Issued 3,615,000 shares 36,150 36,150
Paid In Capital 488,616 488,616
Retained Earnings/(Deficit) 118,945 (118,864)
----------- ---------
Total Stockholders' Equity 643,671 405,902
----------- ---------
Total Liabilities and
Stockholders' Equity $ 769,552 $ 413,323
=========== ==========
See accompanying notes to the financial statements.
3
<PAGE>
MEGA HOLDING CORP.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
Nine Months Ended
May 31,
May 31,
1998 1997
1998 1997
(Unaudited) (Unaudited)
(Unaudited) (Unaudited)
----------- -----------
- ----------- -----------
<S> <C> <C>
<C> <C>
Net Sales $ 272,562 $ 43,000 $
395,184 $ 139,040
Cost Of Sales 37,889 23,369
70,334 73,422
--------- ---------
- --------- ----------
Gross Profit 234,673 19,631
324,850 65,618
--------- ---------
- --------- ----------
General and Administrative Expenses:
Advertising 1,169 --
3,652 27
Commissions 7,453 10,365
36,178 39,520
Credit Reports 59 59
506 504
Dues 25 --
1,329 --
Education/Seminars 300 --
1,100 --
Equipment Lease -- 256
-- 256
Insurance 604 889
1,351 889
Miscellaneous 80 --
1,298 2,971
Office Expense 3,966 8,252
18,075 15,826
Payroll and Associated Costs 2,533 3,244
5,414 4,660
Postage 860 542
1,971 542
Printing 550 --
550 --
Professional -- --
1,000 6,000
Rent 3,941 3,906
11,824 13,022
Taxes -- --
-- 11,223
Telephone and Utilities 1,603 2,136
4,635 5,644
Travel and Entertainment 2,490 1,746
9,419 9,373
Depreciation 2,760 --
8,181 1,196
--------- ---------
- --------- ----------
Total Operating Expenses 28,393 31,395
106,483 111,653
--------- ---------
- --------- ----------
Earnings Before Unrealized
Holding Loss on Marketable
Securities, Other Income,
and Income Taxes 206,280 (11,764)
218,367 (46,035)
Unrealized Holding Gain/(Loss)
on Marketable Securities 136,657 67,605
126,282 (24,205)
--------- ---------
- --------- ---------
Other Income:
Royalties Income -- --
3,275 343
Interest Income - Royalties -- --
12,375 12,407
Interest Income - Other 18 --
18 --
--------- ---------
- --------- ----------
Total Other Income 18 --
15,668 12,750
--------- ---------
- --------- ----------
Income Before Income Taxes 342,955 55,841
360,317 (57,490)
--------- ---------
- --------- ----------
Provision For Income Taxes 116,605 --
122,508 --
Net Income/(Loss) $ 226,350 $ 55,841 $
237,809 $ (57,490)
========= =========
========= ==========
Net Earnings/(Loss) Per Share:
Net Earnings/(Loss) $ 0.063 $ 0.015 $
0.066 $ (0.016)
Weighted Average Number
of Common Shares 3,615,000 3,615,000
3,615,000 3,615,000
</TABLE>
See accompanying notes to the financial statements.
4
<PAGE>
MEGA HOLDING CORP.
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED
May 31, August 31,
1998 1997
(Unaudited) (Audited)
----------- ------------
Cash Flow from Operating Activities:
Net Income/(Loss) $ 364,091 $(137,803)
Adjustments To Reconcile Net Income/(Loss)
To Net Cash (Used)/Provided in
Operating Activities:
Depreciation 8,181 7,832
Unrealized Holding (Gain)/Loss on
Marketable Securities (126,282) 41,127
(Increase)/Decrease in Accounts Receivable 51,210 (8,171)
(Increase)/Decrease in Royalties Receivable 375 343
(Increase)/Decrease in Inventory (28,390) --
Increase/(Decrease) in Accounts Payable -- (6,257)
Increase/(Decrease) in Deferred Taxes -- (55,000)
Increase/(Decrease) in Income Taxes 122,508 --
Increase/(Decrease) in Payroll Taxes (188) 188
------------ ----------
Total Adjustments 27,414 (19,938)
------------ ----------
Net Cash (Used)/Provided by
Operating Activities 391,505 (157,741)
Cash Flow From Investing Activities:
(Purchase)/Disposal of Property,
Plant & Equipment (1,060) (15,249)
(Increase)/Decrease in Marketable Securities (372,548) 145,855
(Increase)/Decrease in Restricted Securities (21,502) 26,713
------------ ----------
Net Cash Provided by Investing Activities (395,110) 157,319
Cash Flow From Financing Activities:
(Increase)/Decrease in Notes Receivable 1,000 5,800
Increase/(Decrease) in Notes Payable 1,100 --
Increase/(Decrease) in Officer's Loan
Payable (5,000) 5,000
------------ ----------
Net Cash Provided by Financing Activities (2,900) 10,800
------------ ----------
Net Increase/Decrease in Cash (6,505) 10,378
Cash at the Beginning of the Period 15,060 4,682
------------ ----------
Cash at the End of the Period $ 8,555 $ 15,060
============ ==========
See accompanying notes to the financial statements.
5
<PAGE>
MEGA HOLDING CORP.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Additional Retained Total
September 1, 1996 Common Paid In Earnings/ Stockholders'
To May 31, 1998 Stock Capital (Deficit) Equity
----------------- ------ ----------- --------- -------------
September 1, 1998 $ 36,150 $ 488,616 $ 18,939 $ 543,705
Net Loss - 1997 (137,803) (137,803)
-------- --------- ----------- ----------
Total Stockholders' Equity
As of August 31, 1997 36,150 488,616 (118,864) 405,902
Net Income - May 31, 1998 237,809 237,809
-------- --------- ----------- ----------
Total Stockholders' Equity
As of May 31, 1998 $ 36,150 $ 488,616 $ 118,945 $ 643,711
======== ========= =========== ===========
See accompanying notes to the financial statements.
6
<PAGE>
MEGA HOLDING CORP.
NOTES TO THE FINANCIAL STATEMENTS
MAY 31, 1998
Note 1 - Basis of Presentation and Significant Accounting Policies:
The accompanying unaudited financial statements have been prepared by Mega
Holding Corp. (the "Company") in accordance with generally accepted accounting
principles for interim financial statements and with the instructions to Form
10-QSB and Item 310 of Regulation S-B. Accordingly, they do not include all of
the information and disclosures required by generally accepted accounting
principles for complete financial statements. In the opinion of the Company's
management, all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation have been included. Results of operations for the nine
month period ended May 31, 1998 are not necessarily indicative of future
financial results. For further information, refer to the financial statements
and footnotes thereto for the fiscal year ended August 31, 1997, included with
the Company's Form 10-KSB, as filed with the Securities and Exchange Commission.
7
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Management's Discussion and Analysis
of Financial Condition and Results of Operations
for the nine months ended May 31, 1998 and 1997
-----------------------------------------------------
The Private Securities Litigation Reform Act of 1995 provides a safe harbor
for forward-looking statements. In order to comply with the terms of the safe
harbor, the Company notes that except for the description of historical facts
contained herein, this Form 10-QSB contains certain forward looking statements
that involve risks and uncertainties as detailed herein and from time to time in
the Company's filings with the Securities and Exchange Commission and elsewhere.
Such statements are based on management's current expectations and are subject
to a number of factors and uncertainties which could cause actual results to
differ materially from those described in the forward-looking statements.
Nine Months Ended May 31, 1998 Compared to Nine Months Ended May 31, 1997
- -------------------------------------------------------------------------
Revenues for the nine months ended May 31, 1998 increased $259,062 or
170.7% when compared to the nine months ended May 31, 1997. During the nine
months ended May 31, 1998, the Company generated $364,682 (88.8%) of its
revenues from business and financial consulting services, $15,650 (3.8%) of its
revenues from its mining royalty interest, and $30,520 (7.4%) of its revenues
from mortgage brokering activities. During the nine months ended May 31, 1997,
the Company generated $139,040 (91.6%) of its revenues from business and
consulting services, $12,750 (8.4%) of its revenues from its mining royalty
interest, and $ -0- (0.0%) of its revenues from mortgage brokering activities.
Business and financial consulting services revenues increased by $225,642
(162.3%) due to the successful completion of several transactions in the period.
Revenues from the Company's mining royalty interest increased by $2,900 (22.8%)
due to the extraction of coal in excess of the agreed upon 300,000 tons. The
Company, therefore, received an additional royalty of $.0425 per ton in excess
of the 300,000 tons during the interim period. Additionally, mortgage brokering
activity revenues increased $30,520 due to the success of the Company's
marketing of such services.
Cost of sales for the nine months ended May 31, 1998 decreased by $3,088
(4.2%) when compared to the nine months ended May 31, 1997. General and
administrative expenses however, decreased by $5,170 (4.6%) for the nine months
ended May 31, 1998 when compared to the nine months ended May 31, 1997 due to
normal operating activities. Additionally, taxes decreased $11,223 (100.0%) due
to the full payment being remitted for prior period penalty and interest.
As a percentage of sales, cost of sales decreased from 52.8% for the nine
months ended May 31, 1997 to 17.8% for the nine months ended May 31, 1998 and
general and administrative expenses decreased from 80.3% for the nine months
ended May 31, 1997 to 26.95% for the nine months ended May 31, 1998. These
percentage decreases are attributable to the Company showing higher revenues for
the nine months ended May 31, 1998 as compared to the nine months ended May 31,
1997.
8
<PAGE>
Marketable securities and restricted securities both increased at May 31,
1998 when compared to May 31, 1997 due to the acquisition and appreciation of
various securities during the interim period. Accordingly, an unrealized holding
gain has been shown for the nine month period ended May 31, 1998 whereas an
unrealized holding loss was shown for the nine months ended May 31, 1997. This
occurrence was due to the securities acquired prior to May 31, 1997 depreciating
in value by August 31, 1997 whereas those acquired subsequent to August 31, 1997
appreciated in value for the nine months ended May 31, 1998. Additionally, a
number of securities had been acquired and disposed of during the interim
period.
The Company gains interests in other companies by acquiring shares of such
companies' stocks. The Company acquires these securities with the intent to
resell them within the next twelve months. The Company's marketable securities
for the nine months ended May 31, 1998 increased $372,548 from the same period
in the prior fiscal year. This increase is attributable to the fact that the
Company acquired additional securities as well as previously held securities
appreciating in value. Management classifies these marketable securities as
trading securities because the Company purchases these securities principally
for the purpose of reselling them in the near term. The securities are,
therefore, reported on the balance sheet at fair market value with any
unrealized holding gains and losses included in current earnings. As a result,
for the nine months ended May 31, 1998, the Company's net unrealized gain
increased $150,487 (621.7%) when compared to the nine months ended May 31, 1997.
Liquidity and Capital Resources
- ----------------------------------
As of May 31, 1998, the Company's current assets exceeded its current
liabilities by $446,687; however, only $8,555 of current assets was composed of
cash with the remainder being comprised of various receivables, inventory, and
marketable securities.
Historically, the Company has financed its operations through cash flow
from operations. Due to the current operating cash flow, the Company has no need
to maintain any external funding sources.
As of May 31, 1998, the Company had no material commitments for capital
expenditures.
During the nine months ended May 31, 1998, the Company earned approximately
$267,629 in the form of stock. Although the Company is receiving a greater
percent of its revenues in stock, there is no material effect on the Company's
liquidity and overall financial position. Although the Company anticipates to
continue to distribute to its shareholders a portion of the stock that it
receives in other entities, it is retaining a greater percentage of these stocks
to be used as working capital. If the fees received are more so in the form of
stock than cash, and the majority are distributed to the Company's shareholders,
the Company's liquidity may be adversely affected. However, management
anticipates, but cannot assure, that the cash portion of fees received and the
proceeds from the sale of stock not distributed to the Company's shareholders
will be sufficient to meet the Company's anticipated cash flow needs. Where the
Company receives shares with restrictions on transfer, the Company will be
required to hold such shares indefinitely and will only be able to sell such
shares if and when the shares are registered on an exemption from registration
is available, and if and when a market for such securities develops.
Accordingly, such shares will not be able to be used to meet cash flow needs.
At May 31, 1998, royalties due from Powderhorn International ("Powderhorn")
represented 20.1% of the Company's total assets. Based upon Powderhorn's prior
history in payment of like kind transaction, management believes that all
royalties will be collected on a timely basis.
9
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The Company won a judgment against M. Fishkin in the amount of $6,100
relating to services rendered in February, 1996. There are no material legal
proceedings. The Company is not aware of any threatened legal proceedings to
which it may be a party or to which its property may be subject.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities.
Not applicable.
None.
Item 4. Submission of Matters to a Vote of Security-Holders.
Not applicable.
Item 5. Other Information
Not applicable.
Item. 6, Exhibits and Reports on Form 8-K.
No report on Form 8-K was filed with the Securities and Exchange commission
for the period covered by this report.
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
MEGA HOLDING CORP.
(Registrant)
s/Thomas M. Abate
------------------------
Thomas M. Abate,
President and Principal
Executive Officer
s/John M. Seroor
------------------------
Treasurer and Principal
Financial Officer
Dated: July 31, 1998
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
financial statements for the nine month period ended May 31, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> MAY-31-1998
<CASH> 8,555
<SECURITIES> 432,703
<RECEIVABLES> 283,154
<ALLOWANCES> 0
<INVENTORY> 28,390
<CURRENT-ASSETS> 570,295
<PP&E> 67,724
<DEPRECIATION> 47,373
<TOTAL-ASSETS> 769,552
<CURRENT-LIABILITIES> 123,608
<BONDS> 0
0
0
<COMMON> 36,150
<OTHER-SE> 974,521
<TOTAL-LIABILITY-AND-EQUITY> 769,552
<SALES> 395,184
<TOTAL-REVENUES> 410,852
<CGS> 70,334
<TOTAL-COSTS> 176,817
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 360,317
<INCOME-TAX> 122,508
<INCOME-CONTINUING> 237,809
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 237,809
<EPS-PRIMARY> (0.066)
<EPS-DILUTED> (0.066)
</TABLE>
