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, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE 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 of (Internal Revenue Service
incorporation or organization) Employer Identification No.)
278A New Dorp Lane, Staten Island, NY 10306
---------------------------------------------------
(Address of principal Executive offices Zip Code)
(718) 667-9117
----------------------------------------------
Issuer's telephone number, including area code
(NOT APPLICABLE)
--------------------------------------------------------------------------------
Former name, former address and formal 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 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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the period covered by this report.
Class Number of Shares Outstanding
------ ----------------------------
Common Shares 3,854,450
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 31,2000
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, 2000, and the results of the operations and cash
flows for the three and nine month periods ended May 31, 2000 and May 31, 1999.
The Company's results of operations during the six 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.
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/ Edward T. McManus
-----------------------------------
Edward T. McManus,
President and Principal
Executive Officer
/s/ John M. Seroor
-----------------------------------
John M. Seroor,
Treasurer and Principal
Financial Officer
<PAGE>
Mega Holding Corp. & Subsidiaries
MDA Section - May 2000 Review
Results of Operations
Nine Months Ended May 31, 2000 Compared to Nine Months Ended May 31, 1999
--------------------------------------------------------------------------------
Revenues for the nine months ended May 31, 2000 increased $3,672,806 or 211.1%
when compared to the nine months ended May 31, 1999. During the nine months
ended May 31, 2000, the Company generated $3,833,731 (99.7%) of its revenues
from business and financial consulting services, $12,750 (.3%) of its revenues
from its mining royalty interest, and $300 (0.0%) of its revenues from mortgage
brokering activities. 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.
Business and financial consulting service revenues increased by $3,677,140
(234.8%) due to the receipt of securities. Revenues from the Company's mining
royalty interest decreased by $4,634 (26.7%) due to the extraction of coal in
less than the agreed upon 300,000 tons. The Company, therefore, received the
minimal payment allowed without receiving an additional royalty of $.0425 per
ton in excess of the 300,000 tons. Additionally, mortgage brokering activity
revenues increased $300 due to minimal activity.
Cost of sales for the nine months ended May 31, 2000 increased by $1,897,452
(306.3%) when compared to the nine months ended May 31, 1999. General and
administrative expenses however, decreased by $381,455 (55.4%) for the nine
months ended May 31, 2000 when compared to the nine months ended May 31, 1999
due to normal operating activities and a large decrease in consulting fees of
approximately $390,000 which included the use of outside consultants.
Additionally, bad debt increased $115,550 (100.0%) for the nine months ended May
31, 2000 when compared to the nine months ended May 31, 1999 due to the filing
for bankruptcy of the company who pays annual royalties on the coal mining
activities. This event caused the Company to set up a seventy-five percent
valuation allowance to offset the potential reduction in royalties receivable.
As a percentage of sales, cost of sales increased from 39.6% for the nine months
ended May 31, 1999 to 306.3% for the nine months ended May 31, 2000 and general
and administrative expenses decreased from 439.7% for the nine months ended May
31, 1999 to 8.0% for the nine months ended May 31, 2000. These percentage
decreases are attributable to the Company showing higher revenues for the nine
months ended May 31, 2000 as compared to the nine months ended May 31, 1999.
Marketable securities increased at May 31, 2000 when compared to May 31, 1999
due to the receipt of various securities during the interim period. Although
additional securities were received for the period ended May 31, 2000, an
unrealized holding loss has been shown for the periods ended May 31, 2000 and
1999.
<PAGE>
The Company gains interests in other companies by acquiring shares of such
companies' stocks as payment for services rendered. The Company's marketable
securities for the nine months ended May 31, 2000 increased $1,681,248 from the
same period in the prior fiscal year. This increase is attributable to the
receipt of stock as compensation. Management classifies these marketable
securities as available-for-sale because the Company intends to hold these
securities until a time when cash is required to continue operations. The
securities are reported on the balance sheet at their fair market values whereas
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, 2000, the Company maintained a net unrealized holding loss
of $21,251 compared to a net unrealized holding loss of $7,492 for the nine
months ended May 31, 1999.
Liquidity and Capital Resources
------------------------------------------
As of May 31, 2000, the Company's current assets exceeded its current
liabilities by $150,737 with $184,154 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, 2000, the Company had no material commitments for capital
expenditures.
During the nine months ended May 31, 1999, the Company received approximately
$3,786,000 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 distributing 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, 2000, royalties due from Powderhorn International represented 1.6% of
the Company's total assets. Due to Powderhorn filing for bankruptcy, doubt has
been raised as to the collectability of the receivable. As a result, a
seventy-five percent valuation allowance has been taken with a net of $38,517
being carried on the balance sheet.
<PAGE>
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.
<PAGE>
MEGA HOLDING CORP. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
May 31, August 31,
2000 1999
(Unaudited) (Audited)
------------ ------------
Current Assets:
<S> <C> <C>
Cash .................................................... $ 184,154 $ 252,500
Royalties Receivable - net ............................. 38,517 407
Inventory ............................................... 10,710 10,710
Notes Receivable ....................................... 41,700 16,700
Employee Advances ...................................... 500 500
Due From Affiliate .................................... 76,335 0
Prepaid Expenses ....................................... 937 1,250
------------ ------------
Total Current Assets ................................ 352,853 282,067
------------ ------------
Property and Equipment:
Office Equipment at Cost ............................. 125,603 92,737
Less: Accumulated Depreciation ...................... (67,957) (62,447)
------------ ------------
Total Property and Equipment ....................... 57,646 30,290
------------ ------------
Investments and Other Assets:
Deferred Tax Asset .................................... 173,791 220,078
Marketable Securities .................................. 1,848,866 235,259
Marketable Securities - Valuation Allowance............ (82,942) (107,978)
Restricted Securities - par value ..................... 109,124 109,124
Royalties Receivable ................................... 0 153,660
------------ ------------
Total Investments & Other Assets.................... 2,048,839 610,14
------------ ------------
Total Assets ............................................. $ 2,459,338 $ 922,500
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Expense ................ $ 11,942 $ 13,442
Advance From Shareholder .............................. 188,328 0
Officer's Loan ......................................... 500 24,500
Payroll Taxes Payable ................................. 1,346 1,129
------------ ------------
Total Current Liabilities ........................... 202,116 39,071
------------ ------------
Long - Term Liabilities:
Deferred Taxes ......................................... 655,614 418,227
------------ ------------
Total Long - Term Liabilities ....................... 655,614 418,227
------------ ------------
Commitments and Contingent Liabilities
Stockholders' Equity:
Common Stock - $.01 par value
Authorized 20,000,000 shares
Issued 3,854,450 shares................................ 38,585 38,585
Paid In Capital ....................................... 1,056,681 1,056,681
Retained Earnings / (Deficit) .......................... 506,342 (630,064)
------------ ------------
Total Stockholder's Equity .......................... 1,601,608 465,202
------------ ------------
Total Liabilities and Stockholders' Equity $ 2,459,338 $ 922,500
============ ============
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
MEGA HOLDING CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED
Three Months Ended Nine Months Ended
May 31, May 31, August 31,
2000 1999 2000 1999 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Sales ................................................ $ 3,536,240 $ 21,760 $ 3,831,540 $ 156,591 $ 404,971
Cost Of Sales ........................................... 1,938,451 51,791 1,959,404 61,952 47,394
----------- ---------- ----------- ----------- -----------
Gross Profit ........................................... 1,597,789 (30,031) 1,872,136 94,639 357,577
----------- ---------- ----------- ----------- -----------
General and Administrative Expenses:
Advertising and Promotion ............................. 0 2,309 2,563 5,459 557
Bad Debt ............................................... 115,550 0 115,550 0 21,310
Commissions ............................................. 5,019 62,145 18,414 137,811 97,247
Consulting Fees ........................................ 0 390,000 409 390,000 390,000
Dues .................................................... 60 0 569 545 2,109
Executive Compensation ................................. 0 0 0 0 14,801
Exposition / Shows ...................................... 0 0 0 0 3,150
Insurance ............................................... 690 5,860 2,973 8,320 4,612
Licenses and Application Fees ........................ 7 206 1,355 1,670 725
Miscellaneous ........................................... 14,879 4,950 21,882 5,650 1,385
Office Expense ......................................... 7,768 19,593 31,858 38,623 41,990
Payroll and Associated Costs ......................... 9,534 0 30,970 8,222 17,755
Postage ................................................. 1,379 1,770 4,211 4,954 5,913
Printing ................................................ 0 5,000 3,481 6,331 0
Legal and Professional ................................ 6,336 19,632 34,744 19,632 23,132
Rent .................................................... 4,801 3,941 12,683 11,823 15,765
Taxes ................................................... 0 0 163 351 350
Telephone and Utilities ............................... 2,191 1,698 7,727 9,070 11,557
Travel and Entertainment .............................. 1,820 17,880 11,957 32,469 24,109
Depreciation ............................................ 1,705 2,710 5,510 7,544 10,755
----------- ---------- ----------- ----------- -----------
Total Operating Expenses .............................. 171,739 537,694 307,019 688,474 687,222
----------- ---------- ----------- ----------- -----------
Earnings Before Unrealized Holding Loss on Marketable
Securities, Other Income, Income Taxes, and
Other Comprehensive Income (net of taxes) ............. 1,426,050 (567,725) 1,565,117 (593,835) (329,645)
Gain / (Loss) on Sale of Marketable Securiti ......... 4,074 (190,338) 2,220 (264,777) (212,542)
----------- ---------- ----------- ----------- -----------
Other Income:
Royalties Income ....................................... 407 0 407 4,583 4,585
Interest Income - Royalties ............................ 12,343 0 12,343 12,376 12,374
Interest Income - Other ................................ 685 292 2,491 425 (405)
----------- ---------- ----------- ----------- -----------
Total Other Income .................................... 13,435 292 15,241 17,384 16,554
----------- ---------- ----------- ----------- -----------
Income Before Income Taxes ............................... 1,443,559 (757,771) 1,582,578 (841,228) (525,633)
----------- ---------- ----------- ----------- -----------
Provision For Income Taxes ............................. 0 0 237,387 (28,376) (154,157)
Net Income / (Loss) ...................................... 1,443,559 (757,771) 1,345,191 (812,852) (371,476)
----------- ---------- ----------- ----------- -----------
Unrealized Holding Gain / (Loss) ...................... 16,426 0 (21,251) (8,434) (61,691)
----------- ---------- ----------- ----------- -----------
Comprehensive Income / (Loss) ............................ $ 1,459,985 $ (757,771) $ 1,323,940 $ (821,286) $ (433,167)
=========== ========== =========== =========== ===========
Net Earnings / (Loss) Per Share:
Net Earnings / (Loss) .................................. $ 0.37 $ (0.21) $ 0.35 $ (0.22) $ (0.10)
Weighted Average Number of Common Shares ........... 3,854,450 3,630,250 3,854,450 3,630,250 3,723,500
</TABLE>
See accompanying notes.
<PAGE>
MEGA HOLDING CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Total
September 1, 1997 Common Stock Paid In Retained Stockholders'
To May 31, 2000 Shares Dollar Value Capital Earnings / (Deficit) Equity
------------------- ---------- ------------ ---------- ------------------- --------------
Total Stockholders' Equity
<S> <C> <C> <C> <C> <C>
September 1, 1997.................. 3,630,250 $ 36,303 $ 488,463 $ (118,864) $ 405,902
Dividends ......................... (311,516) (311,516)
Net Earnings 1998................. 448,735 448,735
Unrealized Holding Loss ......... (97,661) (97,661)
--------- ---------- ----------- ----------- ----------
Total Stockholders' Equity
As of August 31, 1998............ 3,630,250 36,303 488,463 (79,306) 445,460
Issuance of Common Stock ....... 72,200 722 179,778 0 180,500
Common Stock Issued
For Services Rendered....... 156,000 1,560 388,440 0 390,000
Dividends ......................... (117,591) (117,591)
Net Loss 1999..................... (371,476) (371,476)
Unrealized Holding Loss ......... (61,691) (61,691)
--------- ---------- ----------- ----------- ----------
Total Stockholders' Equity
As Of August 31, 1999............ 3,858,450 38,585 1,056,681 (630,064) 465,202
Dividends ......................... (187,534) (187,534)
Net Income - May 2000............. 1,345,191 1,345,191
Unrealized Holding Loss ......... (21,251) (21,251)
--------- ---------- ----------- ----------- ----------
Total Stockholders' Equity
As of May 31, 2000............... 3,858,450 $ 38,585 $ 1,056,681 $ 506,342 $1,601,608
========= ========== =========== =========== ==========
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
MEGA HOLDING CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED
May 31, August 31,
2000 1999
(Unaudited) (Audited)
----------- ----------
Cash Flow from Operating Activities:
<S> <C> <C>
Net Income / (Loss) ...................................................... $ 1,345,191 $ (371,476)
Adjustments To Reconcile Net Income / (Loss) To Net
Cash (Used) / Provided in Operating Activities:
Depreciation ............................................................ 5,510 10,755
Stock Issued for Services Rendered .................................. 0 390,000
Property Dividends ..................................................... 0 (117,591)
Cash Dividends ......................................................... (187,534) 0
Unrealized Holding Gain / (Loss) on Marketable Securities - (21,251) (61,691)
(Increase) / Decrease in Marketable Securities ....................... (1,613,607) 519,176
(Increase) / Decrease in Marketable Securities - Valuation A (25,036) (86,423)
(Increase) / Decrease in Notes Receivable ............................ (25,000) 0
(Increase) / Decrease in Inventory .................................... 0 (10,710)
(Increase) / Decrease in Accounts Receivable ......................... 0 12,810
(Increase) / Decrease in Employee Advance ............................ 0 (500)
(Increase) / Decrease in Royalties Receivable (Current) .............. (38,110) (31)
(Increase) / Decrease in Royalties Receivable (Long-Term) ............ 153,660 456
(Increase) / Decrease in Prepaid Expenses ............................ 313 (1,250)
(Increase) / Decrease in Deferred Tax Asset ......................... 46,287 (123,338)
Increase / (Decrease) in Accounts Payable and Acc. Exp ............ (1,500) 2,010
Increase / (Decrease) in Payroll Taxes Payable ...................... 217 753
Increase / (Decrease) in Deferred Tax Liability ..................... 237,387 (97,118)
----------- ----------
Total Adjustments ...................................................... (1,468,664) 437,308
----------- ----------
Net Cash (Used) / Provided by Operating Activities ................... (123,473) 65,832
Cash Flow From Investing Activities:
(Purchase) / Disposal of Property, Plant, & Equipment................ (32,866) (22,944)
(Increase) / Decrease in Notes Receivable ............................ 0 11,500
----------- ----------
Net Cash Provided / (Used) by Investing Activities ................... (32,866) (11,444)
Cash Flow From Financing Activities:
Proceeds from Sale of Common Stock ................................. 0 180,500
Increase / (Decrease) in Advance From Shareholder ................... 188,328 0
(Increase) / Decrease in Due From Affiliate ......................... (76,335) 0
Increase / (Decrease) in Officer's Loan Payable ..................... (24,000) (2,000)
----------- ----------
Net Cash Provided by Financing Activities ............................ 87,993 178,500
----------- ----------
Net Increase / (Decrease) in Cash ........................................ (68,346) 232,888
Cash at the Beginning of the Period ................................... 252,500 19,612
----------- ----------
Cash at the End of the Period ......................................... $ 184,154 $ 252,500
=========== ==========
Additional Disclosure of Operating Cash Flow
Cash paid during the periods ended:
Tax Expense ................................................ $ 0 $ 350
</TABLE>
See accompanying notes.
<PAGE>
MEGA HOLDING CORP. & SUBSIDIARIES
Notes To the Consolidated Financial Statements
May 31, 2000
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
three-month period ended May 31, 2000 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, 1999, included with the Company's Form 10-KSB, as filed with
the Securities and Exchange Commission.
Note 2 - Advance From Shareholders:
During the first nine months of fiscal year 1999, various shareholders
have advanced the Company money. These advances carry no interest and
are payable upon demand. At May 31, 2000, a balance of $188,328 remains
outstanding.
Note 3 - Subsequent Events:
Subsequent to May 31, 2000, Quaker Holding Company, Inc. has filed for
bankruptcy. The Company had previously invested in Quaker and is due to
receive annual mining royalties of no less than $12,750 through 2043
per a 1994 judgement. Until a payment plan is arranged, it is unclear
how much future revenues the Company will receive. As a result a
seventy-five percent valuation allowance has been created.
