SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(x) Quarterly report pursuant to section 13 or 15 (d) of the Security
Exchange Act of 1934.
For the quaerterly period ended May 31,1999
[ ]Transition report pursuant to section 13 or 15 (d) of the Security
Exchange Act of 1934.
For the transition period from to
COMMISSION FILE NO. 001-12509
MEGA HOLDING CORP.
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(Exact name of small business issuer as specified in its charter)
NEW YORK 13-2793653
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(State or other jurisdiction (IRS Employer Identification
of incorporation or organization) Number)
278A New Dorp Lane, Staten Island, NY 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 fild 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 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 class of
stock as of the close of the period conered by this report.
Class Number of Shares Outstanding
------------- ----------------------------
Common Shares 3,854,450
Transitional Small Business Disclosure Format : Yes NO X
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<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
The condensed financial statements for the periods ended May 31,1999
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 the management the statements
include all adjustments necessary to present fairly the financial position of
the Company as of May 31,1999, and the results of the operations and cash flows
for the three and nine month periods ended May 31,1999 and 1998.
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
full fiscal year.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
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 Report on Form 8-K.
No report on Form 8-K was filed with the Commission for the period covered
by this report.
<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.
MEGA HOLDING CORP.
------------------
(Registrant)
s/ Thomas M. Abate
-----------------------------
Thomas M. Abate,
President and Principal
Executive Officer
s/ John M. Seroor
-----------------------------
John M. Seroor,
Treasurer and Principal
Financial Officer
Dated: July 13, 1999
This schedule contains summary financial information extracted from
financial statements for the nine month period ended May 31,1999 and qualified
in its entirety by reference to such financial statements.
<PAGE>
MEGA HOLDING CORP. FINANCIAL STATEMENTS
<PAGE>
MEGA HOLDING CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
May 31, August 31,
1999 1998
(Unaudited) (Audited)
Current Assets:
Cash $ 293,811 $ 19,612
Accounts Receivable 13,310 12,810
Royalties Receivable 376 376
Inventory 21,280 0
Notes Receivable 25,200 28,200
---------- ----------
Total Current Assets 353,977 60,998
---------- ----------
Property and Equipment:
Office Equipment at Cost 73,456 69,793
Less: Accumulated Depreciation (59,236) (51,692)
---------- ----------
Total Property and Equipment 14,220 18,101
---------- ----------
Investments and Other Assets:
Deferred Tax Asset 28,376 96,740
Marketable Securities 167,618 754,435
Marketable Securities - Valuation Allow (96,595) (194,401)
Restricted Securities - par value 109,124 109,124
Royalties Receivable 154,116 154,116
---------- ----------
Total Investments & Other Assets 362,639 920,014
---------- ----------
Total Assets $ 730,836 $ 999,113
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 942 $ 11,432
Notes Payable 4,000 0
Officer's Loan 25,500 26,500
Payroll Taxes Payable 375 376
---------- ----------
Total Current Liabilities 30,817 38,308
---------- ----------
Long - Term Liabilities:
Deferred Taxes 515,345 515,345
---------- ----------
Total Long - Term Liabilities 515,345 515,345
---------- ----------
Stockholders' Equity:
Common Stock - $.01 par value
Authorized 20,000,000 shares
Issued 3,854,450 shares 38,545 36,303
Paid In Capital 1,046,721 488,463
Retained Earnings / (Deficit) (900,592) (79,306)
---------- ----------
Total Stockholder's Equity 184,674 445,460
---------- ----------
Total Liabilities and Stockholders' Equity $ 730,836 $ 999,113
========== ==========
See accompanying notes
<PAGE>
MEGA HOLDING CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31, August 31,
1999 1998 1999 1998 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Sales $ 21,760 $ 272,562 $ 156,591 $ 395,184 $1,530,610
Cost Of Sales 51,791 37,889 61,952 70,334 246,369
---------- ---------- ---------- ---------- ----------
Gross Profit (30,031) 234,673 94,639 324,850 1,284,241
General and Administrative Expenses:
Advertising and Promotion 2,309 1,169 5,459 3,652 1,982
Commissions 62,145 7,453 137,811 36,178 108,373
Consulting Fees 390,000 0 390,000 0 0
Credit Reports 26 59 365 506 0
Dues 0 25 545 1,329 2,463
Education / Seminars 0 300 0 1,100 1,100
Executive Compensation 0 0 0 0 88,616
Equipment Lease 1,256 0 1,566 0 0
Insurance 5,860 604 8,320 1,351 2,667
Interest Expense 1,500 0 1,500 0 0
Licenses and Application Fees 180 0 1,305 579
Miscellaneous 4,950 80 5,650 1,298 2,914
Office Expense 8,803 3,966 22,483 18,075 22,531
Office Supplies 8,034 0 13,074 0 0
Payroll and Associated Costs 0 2,533 8,222 5,414 9,128
Postage 1,770 860 4,954 1,971 4,092
Printing 5,000 550 6,331 550 0
Legal and Professional 19,632 0 19,632 1,000 10,000
Rent 3,941 3,941 11,823 11,824 15,765
Taxes 0 0 351 0 1,279
Telephone and Utilities 1,698 1,603 9,070 4,635 9,396
Travel and Entertainment 17,880 2,490 32,469 9,419 12,559
Depreciation 2,710 2,760 7,544 8,181 12,500
---------- ---------- ---------- ---------- ----------
Total Operating Expenses 537,694 28,393 688,474 106,483 305,944
---------- ---------- ---------- ---------- ----------
Earnings Before Unrealized Holding Loss
on Marketable Securities, Other Income,
Income Taxes, and Other Comprehensive
Income (net of taxes) (567,725) 206,280 (593,835) 218,367 978,297
Loss on Sale of Marketable Securities (190,338) 0 (264,777) 0 (37,960)
Unrealized Holding Gain / (Loss) on
Marketable Securities 0 136,657 0 126,282 0
---------- ---------- ---------- ---------- ----------
Other Income:
Royalties Income 0 0 4,583 3,275 3,275
Interest Income - Royalties 0 0 12,376 12,375 12,375
Interest Income - Other 292 18 425 18 5,860
---------- ---------- ---------- ---------- ----------
Total Other Income 292 18 17,384 15,668 21,510
---------- ---------- ---------- ---------- ----------
Income Before Income Taxes (757,771) 342,955 (841,228) 360,317 961,847
---------- ---------- ---------- ---------- ----------
Provision For Income Taxes 0 116,605 (28,376) 122,508 513,112
---------- ---------- ---------- ---------- ----------
Net Income / (Loss) (757,771) 226,350 (812,852) 237,809 448,735
========== ========== ========== ========== ==========
Unrealized Holding Gain / (Loss)
on Marketable Securities 0 0 (8,434) 0 0
---------- ---------- ---------- ---------- ----------
Comprehensive Income / (Loss) $ (757,771) $ 226,350 $ (821,286) $ 237,809 $ 448,735
========== ========== ========== ========== ==========
Net Earnings / (Loss) Per Share:
Net Earnings / (Loss) $ (0.206) $ 0.062 $ (0.221) $ 0.07 $ 0.12
Weighted Average Number of
Common Shares Outstanding 3,678,961 3,630,250 3,678,961 3,630,250 3,630,250
</TABLE>
See accompanying notes
<PAGE>
MEGA HOLDING CORP.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Retained Total
September 1, 1996 Common Paid In Earnings/ Stockholders'
To May 31, 1999 Stock Capital (Deficit) Equity
------------------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
September 1, 1996 $ 36,303 $ 488,463 $ 18,939 $ 543,705
Net Loss - 1997 (137,803) (137,803)
---------- ---------- ------------ ----------
Total Stockholders' Equity
As of August 31, 1997 36,303 488,463 (118,864) 405,902
Dividends 0 0 (311,516) (311,516)
Net Earnings 0 0 448,735 448,735
Unrealized Holding Loss 0 0 (97,661) (97,661)
---------- ---------- ------------ ----------
Total Stockholders' Equity
As Of August 31, 1998 36,303 488,463 (79,306) 445,460
Issuance of Common Stock 682 169,818 0 170,500
Issuance of Common Stock
for Services Rendered 1,560 388,440 0 390,000
Net Earnings 0 0 (812,852) (812,852)
Unrealized Holding Loss 0 0 (8,434) (8,434)
---------- ---------- ------------ ----------
Total Stockholders' Equity
As Of May 31, 1999 $ 38,545 $1,046,721 $ (900,592) $ 184,674
========== ========== ============ ==========
</TABLE>
See accompanying notes
<PAGE>
MEGA HOLDING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED
May 31, August 31,
1999 1998
(Unaudited) (Audited)
----------- ----------
Cash Flow from Operating Activities:
Net Income / (Loss) $(812,852) $ 448,735
Adjustments To Reconcile Net Income /
(Loss) To Net Cash (Used) /
Provided in Operating Activities:
Depreciation 7,544 12,500
Unrealized Holding (Gain) / Loss on
Marketable Securities (8,434) (97,661)
(Increase) / Decrease in Marketable
Securities 586,817 (722,670)
(Increase) / Decrease in Marketable
Securities - Valuation All (97,806) 194,401
(Increase) / Decrease in Notes
Receivable 3,000 100,000
(Increase) / Decrease in Restricted
Securities 0 (100,000)
Property Dividends 0 (311,516)
(Increase) / Decrease in Accounts
Receivable (500) 38,861
(Increase) / Decrease in Royalties
Receivable 0 (1)
(Increase) / Decrease in Royalties
Receivable 0 377
(Increase) / Decrease in Inventory (21,280) 0
(Increase) / Decrease in Deferred
Tax Asset 68,364 (96,740)
Increase / (Decrease) in Accounts Payable (10,490) 11,432
Increase / (Decrease) in Payroll
Taxes Payable (1) 188
Increase / (Decrease) in Deferred
Tax Liabilities 0 513,112
-------- ---------
Total Adjustments 527,214 (457,717)
-------- ---------
Net Cash (Used) / Provided by
Operating Activities (285,638) (8,982)
Cash Flow From Investing Activities:
(Purchase) / Disposal of Property,
Plant, & Equipment (3,663) (3,129)
(Increase) / Decrease in Marketable
Securities 0 1,000
(Increase) / Decrease in Restricted
Securities 0 (5,837)
-------- ---------
Net Cash Provided by Investing Activities (3,663) (7,966)
Cash Flow From Financing Activities:
Increase / (Decrease) in Notes Payable 4,000 0
Increase / (Decrease) in Officer's
Loan Payable (1,000) 21,500
Proceeds From Sale of Common Stock 560,500 0
Net Cash Provided by Financing Activities 563,500 21,500
-------- ---------
Net Increase / (Decrease) in Cash 274,199 4,552
======== =========
Cash at the Beginning of the Period 19,612 15,060
======== =========
Cash at the End of the Period $293,811 $ 19,612
======== =========
See accompanying notes
<PAGE>
MEGA HOLDING CORP.
Notes To the Consolidated Financial Statements
May 31, 1999
Note 1 - Basis of Presentation:
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, 1999 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, 1998, included with the Company's Form 10-KSB, as filed with
the Securities and Exchange Commission.
Note 2 - Business Combinations:
In December 1998, the Company formed and began operations of a wholly
owned subsidiary, Securus Corp. Securus Corp. operates as a marketing
and sales organization for its security-related product as well as
for such products produced by other manufacturers.
Note 3 - Capitalization Activities:
On February 26, 1999, the Company initiated a stock offering in
accordance with the Securities and Exchange Commission rule 506 under
the guidelines of Rule 501(a) of Regulation D under the Securities Act
of 1933. The Company is offering 200,000 units at $2.50 per unit until
April 30, 1999 or all units have been sold whichever occurs first. The
proceeds from this offering will be used to fund the activities of its
wholly owned subsidiary, to provide bridge financing to clients, and
for working capital.
Note 4 - Subsequent Events:
On May 13, 1999 a merger between Ecoboard Holdings, Inc. (EHI), a
wholly owned subsidiary of the Company, and American Ecoboard, Inc.
(AEB), a manufacturer of alternative wood products, was completed. As
compensation, the Company received 411,500 shares of AEB common stock
with no value at present. Subsequent to May 31, 1999, the Company will
distribute to professionals and shareholders 232,837 of these shares as
payment for services rendered and property dividends.
<PAGE>
Mega Holding Corp.
MDA Section - May 1999 Review
Results of Operations
Nine Months Ended May 31, 1999 Compared to Nine Months Ended May 31, 1998
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Revenues for the nine months ended May 31, 1999 decreased $238,593 or 60.4% when
compared to the nine months ended May 31, 1998. During the nine months ended May
31, 1999, the Company generated $156,591 (90.0%) of its revenues from business
and financial consulting services, $17,384 (10.0%) of its revenues from its
mining royalty interest, and $ -0- (0.0%) of its revenues from mortgage
brokering activities. During the nine months ended May 31, 1998, the Company
generated $364,682 (88.8%) of its revenues from business and 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.
Business and financial consulting services revenues decreased by $208,091
(42.9%) due to a slower third quarter. Revenues from the Company's mining
royalty interest increased by $1,734 (11.1%) 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 decreased
$30,520 due to the Company issuing no mortgages to date.
Cost of sales for the nine months ended May 31, 1999 decreased by $8,382 (11.9%)
when compared to the nine months ended May 31, 1998. General and administrative
expenses however, increased by $581,992 (546.6%) for the nine months ended May
31, 1999 when compared to the nine months ended May 31, 1998 due to normal
operating activities and the operational expenses of Securus Corp., the
Company's wholly owned subsidiary, during its initial states. Additionally,
consulting fees increased $390,000 (100.0%) for the nine months ended May 31,
1999 when compared to the nine months ended May 31, 1998 due to the use of
outside consultants during the third fiscal quarter to further strengthen the
Company's business strategy.
As a percentage of sales, cost of sales increased from 17.8% for the nine months
ended May 31, 1998 to 39.6% for the nine months ended May 31, 1999 and general
and administrative expenses increased from 26.95% for the nine months ended May
31, 1998 to 439.7% for the nine months ended May 31, 1999. These percentage
decreases are attributable to the Company showing lower revenues for the nine
months ended May 31, 1999 as compared to the nine months ended May 31, 1998.
Marketable securities decreased at May 31, 1999 when compared to May 31, 1998
due to the sale and depreciation of various securities during the interim
period. Accordingly, an unrealized holding loss has been shown for the periods
ended May 31, 1999 and 1998.
<PAGE>
Mega Holding Corp.
MDA Section - May 1999 Review
The Company gains interests in other companies by acquiring shares of such
companies' stocks as payment for services rendered. Prior to August 31, 1998,
the Company acquired these securities with the intent to resell them within the
next twelve months. At August 31, 1998, however, the Company has decided it will
hold these securities as long as possible; until it requires cash flow for
operations. The Company's marketable securities for the nine months ended May
31, 1999 decreased $332,290 from the same period in the prior fiscal year. This
decrease is attributable to the fact that the Company sold securities as well as
previously held securities depreciating in value. As of August 31, 1998,
management classifies these marketable securities as available-for-sale because
the Company now intends to hold these securities until a time when cash is
required to continue operations. For the period ended May 31, 1998, management
has classified these marketable securities as trading securities because the
Company acquired these securities principally for the purpose of reselling them
in the near term. During both periods, the securities are reported on the
balance sheet at their fair market values. At May 31, 1998, any unrealized
holding gains and losses were included in current earnings. At May 31, 1999,
however, any unrealized holding gains and losses are included in other
comprehensive income that is a component of stockholders' equity. As a result,
for the nine months ended May 31, 1999, the Company maintained a net unrealized
holding loss of $7,492 compared to a net unrealized holding gain of $126,282 for
the nine months ended May 31, 1998.
Liquidity and Capital Resources
- -------------------------------
As of May 31, 1999, the Company's current assets exceeded its current
liabilities by $323,160 with $293,811 of current assets being 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, 1999, the Company had no material commitments for capital
expenditures.
During the nine months ended May 31, 1999, the Company received approximately
$129,475 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.
<PAGE>
Mega Holding Corp.
MDA Section - May 1999 Review
At May 31, 1999, royalties due from Powderhorn International represented 21.1%
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.
As noted in the financial statements, the Company suffered a loss of $812,853
for the nine months ended May 31, 1999. As noted earlier, general and
administrative expenses increased greatly primarily due to an increase in
consulting fees thus generating 47.9% of this loss. In addition to the immediate
aforementioned, the Company has also realized a realized loss on the sale of its
marketable securities of $190,338 for the three months ended May 31, 1999 and a
realized loss on the sale of its marketable securities of $264,777 for the nine
months ended May 31, 1999.
Item 3. Description of Properties
The Company maintains its principal executive offices at 278A New Dorp Lane,
Staten Island, NY in an approximately 1,300 square foot office facility pursuant
to a lease originally entered into in January, 1984, and thereafter renewed
periodically. The current renewal term expires on January 31, 2000. The annual
rental is $8,400 per annum ($700 per month) plus tenant's proportionate share of
Real Estate Taxes and escalations for the subject premises in the amount of
$602.29 per month for a total annual rental of $15,627.48.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001027642
<NAME> Mega Holding Corp.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1997
<PERIOD-END> MAY-31-1999
<CASH> 293,811
<SECURITIES> 276,742
<RECEIVABLES> 193,002
<ALLOWANCES> (96,595)
<INVENTORY> 21,280
<CURRENT-ASSETS> 353,977
<PP&E> 73,456
<DEPRECIATION> 59,236
<TOTAL-ASSETS> 730,836
<CURRENT-LIABILITIES> 30,817
<BONDS> 0
0
0
<COMMON> 38,545
<OTHER-SE> 146,129
<TOTAL-LIABILITY-AND-EQUITY> 730,836
<SALES> 156,591
<TOTAL-REVENUES> 173,975
<CGS> 61,952
<TOTAL-COSTS> 750,427
<OTHER-EXPENSES> 264,777
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,500
<INCOME-PRETAX> (841,228)
<INCOME-TAX> 28,376
<INCOME-CONTINUING> (812,852)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (812,852)
<EPS-BASIC> (0.221)
<EPS-DILUTED> (0.221)
</TABLE>
