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 February 29, 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.
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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 of (Internal Revenue Service incorporation or
organization) Employer Identification No.)
278A New Dorp Lane, Staten Island, NY 10306
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(Address of principal Executive offices Zip Code)
(718) 667-9117
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Issuer's telephone number, including area code
(NOT APPLICABLE)
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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 February 29,2000
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 February 29, 2000, and the results of the operations and cash
flows for the three and six month periods ended February 29, 2000 and February
28, 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.
2
<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.
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(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
3
<PAGE>
Mega Holding Corp. & Subsidiaries
MDA Section - February 2000 Review
Results of Operations
Six Months Ended February 29, 2000 Compared to Six Months Ended February 28,
1999
--------------------------------------------------------------------------------
Revenues for the six months ended February 29, 2000 increased $145,184 or 95.6%
when compared to the six months ended February 28, 1999. During the six months
ended February 29, 2000, the Company generated $296,807 (99.9%) of its revenues
from business and financial consulting services, $ 300 (0.1%) of its revenues
from mortgage brokering activities, and $ -0- (0.0%) from its mining royalty
interest. During the six months ended February 28, 1999, the Company generated
$134,831 (88.7%) of its revenues from business and financial consulting
services, $ -0- (0.0%) of its revenues from mortgage brokering activities, and
$17,092 (11.3%) from its mining royalty interest.
Business and financial consulting service revenues increased by $161,976
(120.1%) due to everyday operating activities. Additionally, mortgage brokering
activity revenues increased $300 due to minimal activity during the first six
months of fiscal 1999 whereas mining royalty revenues decreased $17,092 (100.0%)
due to normal activity.
Cost of sales for the six months ended February 29, 2000 increased by $10,792
(106.2%) when compared to the six months ended February 28, 1999. General and
administrative expenses however, decreased by $15,502 (10.3%) for the six months
ended February 29, 2000 when compared to the six months ended February 28, 1999
As a percentage of sales, cost of sales decreased from 7.5% for the six months
ended February 28, 1999 to 7.1% for the six months ended February 29, 2000
whereas general and administrative expenses decreased from 111.8% for the six
months ended February 28, 1999 to 45.8% for the six months ended February 29,
2000. These percentage changes are attributable to the Company showing higher
revenues and lower general and administrative costs for the six months ended
February 29, 2000 as compared to the six months ended February 28, 1999.
Marketable securities decreased at February 29, 2000 when compared to February
28, 1999 due to the disposal of various securities during the interim period.
Due to a decline in market price of these newly acquired marketable securities,
a negative valuation allowance has been created. Accordingly, an unrealized
holding loss has been accounted for as other comprehensive income / (loss) for
the six month periods ended February 29, 2000.
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 six months ended
February 29, 2000 decreased $403,068 from the same period in the prior fiscal
year. This decrease is attributable to the fact that the Company disposed of a
portion of their portfolio. As of August 31, 1999, management classifies these
<PAGE>
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.
These 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 six months ended February 29, 2000, the Company's net unrealized loss
decreased $281,629 (82.0%) when compared to the six months ended February 28,
1999.
Liquidity and Capital Resources
----------------------------------
At February 29, 2000, the Company's current assets exceeded its current
liabilities by $319,861. Cash constituted $295,354 of current assets with the
remainder being comprised of various receivables and inventory.
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 February 29, 2000, the Company had no material commitments for capital
expenditures.
During the six months ended February 29, 2000, the Company received
approximately $250,000 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 continuing 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 until such time that
the restrictions are lifted. These shares will only be available for sale if and
when the restriction is lifted 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 February 29, 2000, royalties due from Quaker Holding Company, Inc.
represented 14.0% of the Company's total assets. Based upon Quaker Holding's
prior history in payment of like kind transactions, management believes that all
royalties will be collected on a timely basis.
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, 2001. 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
ASSETS
<TABLE>
<CAPTION>
February 29, August 31,
2000 1999
(Unaudited) (Audited)
---------- ----------
<S> <C> <C>
Current Assets:
Cash $ 295,354 $ 252,500
Royalties Receivable 407 407
Inventory 10,710 10,710
Notes Receivable 16,700 16,700
Employee Advances 500 500
Due From Affiliate 74,835 -
Prepaid Expenses 937 1,250
---------- ----------
Total Current Assets 399,443 282,067
---------- ----------
Property and Equipment:
Office Equipment at Cost 125,603 92,737
Less: Accumulated Depreciation (66,252) (62,447)
---------- ----------
Total Property and Equipment 59,351 30,290
---------- ----------
Investments and Other Assets:
Deferred Tax Asset 173,791 220,078
Marketable Securities 268,352 235,259
Marketable Securities - Valuation Allowance (61,759) (107,978)
Restricted Securities - par value 109,124 109,124
Royalties Receivable 153,660 153,660
---------- ----------
Total Investments & Other Assets 643,168 610,143
---------- ----------
Total Assets $1,101,962 $ 922,500
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Expenses $ 13,442 $ 13,442
Advance From Shareholder 40,099 -
Officer's Loan 24,500 24,500
Payroll Taxes Payable 1,541 1,129
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Total Current Liabilities 79,582 39,071
---------- ----------
Long - Term Liabilities:
Deferred Taxes 439,080 418,227
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Total Long - Term Liabilities 439,080 418,227
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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) (511,966) (630,064)
---------- ----------
Total Stockholder's Equity 583,300 465,202
---------- ----------
Total Liabilities and Stockholders' Equity $1,101,962 $ 922,500
========== ==========
</TABLE>
See accompanying notes.
<PAGE>
MEGA HOLDING CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- --------------------------
February 29, February 28, February 29, February 28, August 31,
2000 1999 2000 1999 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Sales $ 294,999 $ 5,350 $ 295,300 $ 134,831 $ 404,971
Cost Of Sales 11,837 6,059 20,953 10,161 47,394
---------- ---------- ---------- ---------- ----------
Gross Profit 283,162 (709) 274,347 124,670 357,577
---------- ---------- ---------- ---------- ----------
General and Administrative Expenses:
Advertising and Promotion 1,688 3,150 2,563 3,150 557
Bad Debt - - - - 21,310
Commissions 5,490 46,025 13,395 75,666 97,247
Consulting Fees - - 409 - 390,000
Dues 80 145 509 545 2,109
Executive Compensation - - - - 14,801
Exposition / Shows - - - - 3,150
Insurance 1,838 1,665 2,283 2,461 4,612
Licenses and Application Fees 305 1,270 1,349 1,464 725
Miscellaneous 5,262 961 7,619 1,017 1,385
Office Expense 11,401 11,223 24,028 18,720 41,990
Payroll and Associated Costs 13,018 3,313 21,436 8,222 17,755
Postage 2,067 1,448 2,832 3,185 5,913
Printing - 1,331 3,481 1,331 -
Legal and Professional 26,908 - 28,408 - 23,132
Rent 3,941 3,941 7,882 7,882 15,765
Taxes 163 351 163 351 350
Telephone and Utilities 2,475 4,540 4,983 7,373 11,557
Travel and Entertainment 8,317 7,278 10,137 14,583 24,109
Depreciation 1,705 2,417 3,805 4,834 10,755
---------- ---------- ---------- ---------- ----------
Total Operating Expenses 84,658 89,058 135,282 150,784 687,222
---------- ---------- ---------- ---------- ----------
Earnings Before Unrealized Holding Loss on Marketable
Securities, Other Income, Income Taxes, and
Other Comprehensive Income (net of taxes) 198,504 (89,767) 139,065 (26,114) (329,645)
Loss on Sale of Marketable Securities (2,892) (50,902) (1,854) (74,438) (212,542)
---------- ---------- ---------- ---------- ----------
Other Income:
Royalties Income - 4,585 - 4,585 4,585
Interest Income - Royalties - 12,374 - 12,374 12,374
Interest Income - Other 625 36 1,807 133 (405)
---------- ---------- ---------- ---------- ----------
Total Other Income 625 16,995 1,807 17,092 16,554
---------- ---------- ---------- ---------- ----------
Income Before Income Taxes 196,237 (123,674) 139,018 (83,460) (525,633)
---------- ---------- ---------- ---------- ----------
Provision For Income Taxes 8,692 (42,022) 20,853 (28,376) (154,157)
---------- ---------- ---------- ---------- ----------
Net Income / (Loss) 187,545 (81,652) 118,165 (55,084) (371,476)
---------- ---------- ---------- ---------- ----------
Unrealized Holding Gain / (Loss) 46,873 (86,122) (67) (226,636) (61,691)
---------- ---------- ---------- ---------- ----------
Comprehensive Income / (Loss) $ 234,418 $ (167,774) $ 118,098 $ (281,720) $ (433,167)
========== ========== ========== ========== ==========
Net Earnings / (Loss) Per Share:
Net Earnings / (Loss) $ 0.05 $ (0.02) $ 0.03 $ (0.02) $ (0.10)
Weighted Average Number of Common
Shares Outstanding 3,834,933 3,630,250 3,834,933 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 February 29, 2000 Shares Dollar Value Capital Earnings / (Deficit) Equity
------------------------------ --------------- -------------- -------------- -------------------- --------------
<S> <C> <C> <C> <C> <C>
Total Stockholders' Equity
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
Net Income - February 2000 118,165 118,165
Unrealized Holding Loss (67) (67)
--------------- -------------- -------------- ----------------- --------------
Total Stockholders' Equity
As of February 29, 2000 3,858,450 $ 38,585 $ 1,056,681 $ (511,966) $ 583,300
=============== ============== ============== ================= ==============
</TABLE>
See accompanying notes.
<PAGE>
MEGA HOLDING CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED
<TABLE>
<CAPTION>
February 29, August 31,
2000 1999
(Unaudited) (Audited)
-------------- --------------
<S> <C> <C>
Cash Flow from Operating Activities:
Net Income / (Loss) $ 118,165 $ (371,476)
Adjustments To Reconcile Net Income / (Loss) To Net
Cash (Used) / Provided in Operating Activities:
Depreciation 3,805 10,755
Stock Issued for Services Rendered - 390,000
Unrealized Holding Gain / (Loss) on
Marketable Securities - AFS (67) (61,691)
(Increase) / Decrease in Marketable Securities (33,093) 519,176
(Increase) / Decrease in Marketable Securities -
Valuation Allow. (46,219) (86,423)
(Increase) / Decrease in Inventory - (10,710)
Property Dividends - (117,591)
(Increase) / Decrease in Accounts Receivable - 12,810
(Increase) / Decrease in Employee Advance - (500)
(Increase) / Decrease in Royalties Receivable (Current) - (31)
(Increase) / Decrease in Royalties Receivable (Long-Term) - 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. - 2,010
Increase / (Decrease) in Payroll Taxes Payable 412 753
Increase / (Decrease) in Deferred Tax Liability 20,853 (97,118)
-------------- --------------
Total Adjustments (7,709) 437,308
-------------- --------------
Net Cash (Used) / Provided by Operating Activities 110,456 65,832
Cash Flow From Investing Activities:
(Purchase) / Disposal of Property, Plant, & Equipment (32,866) (22,944)
(Increase) / Decrease in Notes Receivable - 11,500
-------------- --------------
Net Cash Provided / (Used) by Investing Activities (32,866) (11,444)
Cash Flow From Financing Activities:
Proceeds from Sale of Common Stock - 180,500
Increase / (Decrease) in Advance From Shareholder 40,099 -
(Increase) / Decrease in Due From Affiliate (74,835) -
Increase / (Decrease) in Officer's Loan Payable - (2,000)
-------------- --------------
Net Cash Provided by Financing Activities (34,736) 178,500
-------------- --------------
Net Increase / (Decrease) in Cash 42,854 232,888
Cash at the Beginning of the Period 252,500 19,612
-------------- --------------
Cash at the End of the Period $ 295,354 $ 252,500
============== ==============
Additional Disclosure of Operating Cash Flow Cash paid
during the periods ended:
Tax Expense . . . . . . . . . . . . . . . . . $ - $ 350
</TABLE>
See accompanying notes.
<PAGE>
MEGA HOLDING CORP. & SUBSIDIARIES
Notes To the Consolidated Financial Statements
February 29, 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 February 29, 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 six months of fiscal year 1999, various shareholders
have advanced the Company money. These advances carry no interest and
are payable upon demand. At February 29, 2000, a balance of $40,099
exists.
