SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 2054
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                                   FORM 10KSB

     [/]  ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
EXCHANGE ACT OF 1934. For the fiscal year ended August 31, 1998

                        Commission File Number: 001-12509

                               MEGA HOLDING CORP.
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                 (Name of Small Business Issuer 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, New York                         10306
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       (Address of principal executive Offices)           (Zip Code)

     Issuer's telephone number: (718) 667-9117

     Securities registered pursuant to Section 12(b) of the Act: None

     Securities registered pursuant to Section 12(g) of the Act:
Common Shares, $.01 par value per share

     Check  whether  the issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act 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.
     [x] Yes [ ] No

     Check  if  disclosure  of  delinquent  filers  in  response  to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [x]

     State issuer's revenues for its most recent fiscal year $1,530,610.

     State the aggregate market value of the voting stock held by non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked  prices of such stock,  as of a specified  date within the past 60
days.

     As of August 31, 1998, there were approximately  1,123,681 shares of common
stock held by non-affiliates  ("Shares")  outstanding having an aggregate market
value of $-0-.

     Documents incorporated by reference:
     None


<PAGE>

                                     PART I

Item 1. Description of Business

     General
     -------
     Mega Holding Corp.  (the  "Company") has been a mortgage broker since 1987,
has provided business and financial consulting services since 1970 and retains a
royalty interest in a coal mine that it acquired in 1973 and sold in 1980.

     Mortgage Brokerage
     ------------------
     Since 1987,  the Company  has been  licensed by the New York State  Banking
Department  as a mortgage  broker.  The Company  deals in both  residential  and
commercial  mortgages.  The Company also conducts  commercial mortgage brokerage
activities throughout the United States on a co-brokerage basis with brokers who
are licensed to do business in states other than New York.  The  Company's  fees
for its service as a mortgage broker vary with each transaction.  These fees are
computed as a percentage (each percentage point referred to as a "point") of the
amount  of  the  mortgage.  The  number  of  points  charged  varies  with  each
transaction  depending on a variety of factors,  including,  but not limited to,
the  applicant's  credit,  value of property and term and type of mortgage loan.
Points range from 1% to 3% of the principal amount of the mortgage.

     The Company  places its mortgages  with a number of banks and other lending
institutions,  including  Greenpoint  Bank,  Ford Consumer  Finance and Republic
National Bank.  Mortgages placed by the Company  generally carry a fixed rate of
interest and are self-amortizing.

     The Company does not advertise its mortgage brokering services,  but rather
receives  most of its business  through  referrals  from  professionals  such as
attorneys and accountants.

     Business and Financial Consulting Services
     ------------------------------------------
     The Company provides business and consulting services,  including advice on
the  structure  and  conduct of private  offerings  of  securities,  mergers and
acquisitions and other strategic  business areas.  Most of the Company's clients
use a  combination  of these  services and pay fees to the Company for rendering
such  services.  From time to time,  the Company's fees are taken in the capital
stock of the client company or a combination of cash and stock. In addition, the
Company may begin a relationship with a client on an business advisory basis and
subsequently proceed to provide acquisition or financing services to the client.

     In the process of providing financial  consulting  activities,  the Company
performs  due  diligence  and assists the client in  preparing a business  plan,
which typically includes an analysis of the client's business,  its history, the
market  for its  products,  the  competitive  environment  in which  the  client
operates  and a  breakdown  of how  funds  from  a  potential  placement  of its
securities will be used. The Company does not raise funds for clients;  however,
the Company may refer clients to financial  institutions such as banks and other
lenders and/or investment banks.

                                       2
<PAGE>

     Rule 504 Offerings 
     ------------------ 
     One method of  financing  recommended  by the Company to clients  which are
seeking  to raise up to  $1,000,000  is an  offering  of stock  pursuant  to the
exemption  from  registration  provided by Rule 504 ("Rule 504") of Regulation D
under the  Securities  Act of 1933 (the  "Securities  Act").  The Securities and
Exchange  Commission (the "Commission") is considering  proposals to modify Rule
504 so that the securities  issued  pursuant to an offering under Rule 504 would
not be freely tradable.

     Under  Rule  504,  as  presently  constituted,  a  company  that  is not an
investment  company, a blank check company (i.e., a company that has no specific
business) or a company  subject to the reporting  requirements of the Securities
Exchange Act of 1934 (the "Exchange  Act"),  can raise up to $1,000,000  through
the  sales of its  securities  in any  twelve  month  period.  Rule 504 does not
require  investors to purchase the stock with  investment  intent.  Accordingly,
provided that a company sells its stock in one or more jurisdictions that permit
the sale without requiring  investment  intent on the part of the investor,  the
shares can be sold to investors without resale restrictions.

     Consulting  services provided by the Company relating to Rule 504 offerings
include educating the client on its availability,  benefits and restrictions and
introducing the client to attorneys, accountants and selling agents. The Company
also may assist  its  clients in  finding  registered  broker  dealers to make a
market in the clients'  stock.  The Company  generally plans to spin-off some or
all of the shares transferred from such clients to its shareholders.  Securities
spun-off to the Company's shareholders require registration under the Securities
Act (see "Spin-offs") below).

     During the fiscal year ended  August 31,  1998,  the  Company has  provided
consulting  services to four companies relating to Rule 504 offerings:  Advanced
Lubrication   Technologies,   Inc.,   ("Advanced"),   Ifield  Technologies  Ltd.
("Ifield"),   Quantum  Aviation   International  Ltd.  ("Quantum")  and  Parkway
Technology Corporation  ("Parkway").  Advanced owns a license to manufacture and
distribute  synthetic automotive  lubrication and engine additives.  An offering
memorandum  for Advanced has been  finalized  and is being  distributed.  Ifield
designs  and   manufactures   high   performance   variable  speed   hydrostatic
pump/transmissions,  using patented and proprietary technology.  Quantum intends
to service a special niche within the airline  industry,  namely the acquisition
and refurbishment of pre-owned  aircraft and the resale of aircraft to qualified
end users. Quantum is preparing an offering memorandum.  Parkway is a subsidiary
of Mega Holding Corp. and is in a very preliminary stage of acquiring a European
- based Company.

     On August 28, 1998  Fleetclean  Systems,  Inc. was approved by the National
Association of Securities Dealers, Inc. ("NASD") to commence trading on the NASD
electronic  bulletin  board (the  "Bulletin  Board")  under the  trading  symbol
"FLSY."  Fleetclean is a manufacturer and distributor of truck washing equipment
and chemicals.  The Company gave assistance to Fleetclean in its attempt to gain
approval from the NASD to trade on the Bulletin Board

                                       3
<PAGE>

     On April 30, 1998,  Southeast Tire  Recycling,  Inc.  ("Southeast")  (which
traded on the Bulletin Board under the symbol "STHT")  completed its merger with
Millennium  Integration  Technologies,  Inc.  On May 18,  1998,  Southeast  Tire
changed its name to Clearworks Technologies,  Inc.("Clearworks") and changed its
trading symbol to "CLWK."  Clearworks is a provider of  information  technology,
offering  state of the art solutions for voice,  data and video  communications.
The  Company  gave  assistance  to  Southeast  on  becoming  a trading  company,
introduced its management to Millennium and helped structure the merger.

     Reverse Acquisitions
     --------------------
     The Company has also been  involved in  purchasing,  selling and  brokering
"shell"  companies  for reverse  acquisitions.  A shell company is a corporation
that, for one reason or another, no longer has substantive  business operations,
but has many  shareholders  and issued  and  outstanding  shares,  many of which
shares are free  trading or  eligible to be free  trading  under Rule 144 of the
Securities  Act.  In a  reverse  acquisition,  the  shareholders  of  a  private
corporation with an existing or proposed business, exchange all of the shares of
the private company or its business for a significant  number (generally between
85% and 95%) of the shell company's  stock. In form, the shell company  acquires
100% of the stock or the business of the private company but, in substance,  the
shareholders of the private company have acquired  control of the shell company.
Reverse  acquisitions  are  attractive  to a private  company  that is seeking a
trading market for its securities  without having to undergo the  time-consuming
and costly  process of filing a  registration  statement with the Securities and
Exchange Commission (the "Commission") and without having to find an underwriter
willing  and capable of selling  its shares to the  public.  The trading  market
enhances  the  ability of the private  company  (now a  subsidiary  of the shell
company) to raise funds. Such funds are often raised through Rule 504 offerings.

     Where the  Company  acquires  control of a shell  company,  it  purchases a
majority  block of stock of the  shell  company  from  some or all of the  shell
company's  principal  stockholders.  The  Company  then  "cleans  up" the  shell
company;  it reviews and  updates the  company's  corporate  books,  revives the
company's  corporate  charter (if voided) and, where  necessary,  files back tax
returns and pays any back taxes. Once the shell company has been cleaned up, the
Company seeks private companies for potential reverse acquisitions.

     The Company finds shell companies and private  companies  seeking to effect
reverse acquisitions through the business contacts of its executive officers and
from other professionals, primarily accountants.

                                       4
<PAGE>
      
     Spin-Off Transactions
     ---------------------
     One of the potential problems dealing with shell companies is the inability
to be completely  certain that there are no undisclosed  problems or liabilities
that may be inherited by the new shareholders of a private company that acquires
control of a shell company in a reverse acquisition. To alleviate this potential
problem and still provide a trading  market for corporate  clients,  the Company
does spin-off transactions. In a spin-off transaction, one company ("Company A")
acquires  stock of another  company  ("Company B").  Company A then  distributes
shares of  Company  B to  Company  A's  shareholders.  Assuming  Company A has a
significant number of shareholders,  Company B will have a significant number of
shareholders following the spin-off transaction,.

     The Company's spin-off transactions have generally been and are intended to
be structured in a standard pattern. For each transaction. the Company creates a
new  wholly-owned   subsidiary  (the   "Subsidiary").   Pursuant  to  a  reverse
acquisition, the private company either becomes a wholly-owned subsidiary of the
Subsidiary  or is  merged  into the  Subsidiary.  As a result  of this  "reverse
acquisition,"  the former  shareholders of the private company would own between
91% and 95% of the  Subsidiary's  issued and outstanding  shares of common stock
and the  Company  would own  between  5% and 9% of the  Subsidiary's  issued and
outstanding  common  stock.  Thereafter,  the  Company  would  spin-off  to  its
shareholders  approximately  25-50% of its holdings of the  Subsidiary's  common
stock. In essence,  the Company anticipates  retaining between  approximately 4%
and 7% of the  common  stock of the  Subsidiary  after  the  Company  makes  its
distribution to its shareholders.

     Spin-off  transactions  require  registration  under  the  Securities  Act.
Accordingly,  before the shares of the  Subsidiary  distributed to the Company's
shareholders may trade, the Company must file a registration  statement with the
Commission;  and the  registration  statement must be declared  effective by the
Commission.

     Before agreeing to conduct a spin-off transaction, the Company will conduct
standard due diligence on the private  corporation,  including the review of the
private  company's  corporate  and tax  records,  material  agreements,  audited
financial   statements  and  background  of  the  private  company's   executive
management.   The  Company   anticipates  that  it  will  not  conduct  spin-off
transactions with start-up  companies unless they have substantial gross assets,
experienced management and a well-developed business plan.

     As a result of the foregoing  activities,  especially the proposed spin-off
transactions, the Company could be deemed to be an "underwriter" as that term is
defined  under the Act.  Under  federal  securities  laws,  other laws and court
decisions  with respect to  underwriters'  liabilities  and  limitations  on the
indemnification  of  underwriters,  an  underwriter  is subject  to  substantial
potential  liability  for  misstatements  or  omissions  of  material  facts  in
prospectuses and other  communications  with respect to offerings in which it is
deemed to have acted as an underwriter.

     On November 11, 1997, a merger  agreement was entered into between Southern
Security  Financial Corp. a Mega  Subsidiary,  and Southern  Security Bank Corp.
(SSBC) a Florida bank holding  company.  SSBC is in the process of  completing a
private placement to expand its branch operations in Florida.

                                       5
<PAGE>

     The Company has two spin-off candidates at present.  The Company has formed
two Delaware corporations:  Phoenix Energy Corp. and Western American Resources,
Inc. The Company has not spun-off any shares nor have either subsidiary combined
with a target company.

     Korean Project
     --------------
     The Company,  in conjunction  with certain others entered into an agreement
with a Korean corporation pursuant to which it would provide management services
related to a proposed  construction  project in Korea.  Due to adverse  business
conditions in South Korea, the Company's activity in the Korean Project has been
terminated.

     Government Program Consulting
     -----------------------------
     The Company also assists  clients in obtaining  funding and other  benefits
from federal and state programs.  In this regard,  the Company was retained by a
power boat company to assist it in obtaining a credit line from the Rhode Island
Economic Development Corporation. The credit line has not been obtained and this
area of business has not developed.

     Financial Consulting/Advisory Services
     --------------------------------------
     The  Company  entered  into a  consulting  agreement  with  Eagle  Wireless
International,   Inc.  wherein  the  company  is  providing  certain  consulting
activities which include financing, mergers and acquisitions.

     The Company has entered into an agreement with South Beach Concepts,  Inc.,
in which the Company is providing  consulting  services relating to the offering
of its securities and trading on the Bulletin Board.

     The Company  arranged for a $2.1  million  dollar loan for a State Island -
based supper club for which the Company received a fee of $15,000.

     A $661,000  loan was arranged by the Company for Brooklyn  based  physician
for which the Company received a fee of $13,220.

     The Company is in early stage negotiations for the possible  acquisition of
the  business  of a company  involved in the  manufacture  and  distribution  of
security systems.

     On September 30 1998 the Company formed  Environmental Power Group, Inc., a
Delaware corporation, which is, at present, inactive.

                                       6
<PAGE>

     Colorado Coal Mine Royalties
     ----------------------------
     In 1973, the Company  purchased a coal mine located in Palisade,  Colorado.
In  1980,  the  Company  disposed  of its  interest  in the  mine to  Powderhorn
International, Inc. ("Powderhorn"), a professional mine operator, but retained a
royalty  interest.  Pursuant  to the  settlement  of a dispute  relating  to the
royalties,  Powderhorn  is  required  to pay the  Company  additional  royalties
totaling  $624,044 at the rate of $12,750  per annum,  payable on January 1st of
each year as a  non-production  royalty  through the year 2043. As of August 31,
1998,  the unpaid  balance of the  additional  royalties  totaled  $570,144.  In
addition,  the Company is to receive a royalty ("Production  Royalties") of four
and  one-quarter  cents  ($.0425) per ton of coal for each ton over 300,000 tons
produced  per year,  which  royalty is due and  payable in January of each year.
During the fiscal year ended August 31, 1998,  the Company  received  Production
Royalties of $2,900. In January, 1998, Powderhorn was acquired by Quaker Holding
Company, Inc. Coal production for 1998 has increased  approximately 61% over the
1997 level.

     Competition
     -----------
     The  Company  encounters  significant  competition  in all  aspects  of its
business  and  competes  directly  with many other  mortgage  brokers,  mortgage
companies,  banks and investment banking and financial consulting firms, most of
which have  significantly  greater  financial and personnel  resources  than the
Company and most of which are more  widely  known than the  Company.  Such other
companies may offer their clients a more extensive range of financial  services,
have  substantially  greater financial  resources and may have greater operating
efficiency than the Company.  In addition,  many of the companies with which the
Company  competes are able to dedicate  significant  resources  to  advertising,
active solicitation of potential clients and distribution of investment research
publications.  The Company  also  competes  with a number of small and  regional
mortgage brokers, mortgage companies, banks and investment firms which may offer
a wider range of services than the Company.

     Marketing
     ---------
     The Company  conducts no  advertising.  Business  consulting  and  mortgage
banking revenues and sales  activities are generated by the Company's  executive
officers through personal  contacts and from referrals from former clients,  and
from attorneys and accountants  who have been involved in transactions  with the
Company,  and, from time to time, from various banks with which the Company does
business.

     Government Regulation
     ---------------------
     Mortgage brokers are regulated by the state in which they do business. As a
mortgage  broker in the State of New York,  the  Company is  licensed by the New
York State  Banking  Department.  The Company is  required  to provide  specific
disclosure  and  follow  specified  procedures  with  regard to all  residential
mortgage  applicants.  The Company is also required to keep and maintain records
of all mortgage transactions.  The Company is subject to periodic examination by
the  New  York  State  Banking   Department  to  assure   compliance   with  its
requirements.

                                       7
<PAGE>

     On  residential  loans in states  where the Company is not licensed and the
loan is effected  through a third  party  lender,  the Company  signs a referral
co-broker agreement with the borrower. This agreement must be fully disclosed to
all parties. Commercial loans do not require licensing.

     The Company has not registered as a  broker-dealer  under either federal or
state  securities  laws with respect to its business  and  financial  consulting
activities because its management does not believe that the Company comes within
the  definition of either a "broker" or a "dealer" as those terms are defined in
the rules and regulations under the Exchange Act. The Company's most significant
activities  are  acting  as  advisor  for  acquisitions,   particularly  reverse
acquisitions,  and  arranging  for  clients'  financing,  as opposed to actually
raising  money  for its  clients.  The  Company  does not have a client  base of
investors  to whom it  presents a customer  as a  possible  investment  vehicle;
rather,  the Company  may refer the client to a  broker-dealer  or other  entity
which  may  decide to raise the  money  for that  customer.  For both  services,
advising on reverse  acquisitions  and  referring  customers to  capital-raising
entities,  the Company may receive fees  consisting  of cash and/or  stock.  The
Company is not a "broker" because it does not effect securities transactions for
the account of others in any fashion.  The Company is not a "dealer" because the
Company's activities consist of acting only as an advisor, and do not consist of
buying  and  selling  securities  in the  traditional  sense  as any  securities
received by the Company are received as a fee for  services  rendered as opposed
to being acquired from the issuer.

     If the  Company  were deemed to be a broker or a dealer it would be subject
to extensive  regulation under federal and state laws. The principal  purpose of
regulation and discipline of  broker-dealers  is the protection of customers and
the securities  markets rather than protection of creditors and  stockholders of
broker-dealers. The Securities and Exchange Commission (the "Commission") is the
federal agency charged with  administration of the federal securities laws. Much
of  the   regulation  of   broker-dealers,   however,   has  been  delegated  to
self-regulatory  organizations,  such as the National  Association of Securities
Dealers, Inc. (the "NASD") and national securities exchanges.

     The  NASD  most  likely  would  be the  Company's  primary  self-regulatory
organization  if the  Company  were  deemed to be a broker  or a  dealer.  These
self-regulatory  organizations adopt rules (which are subject to approval by the
Commission)  which  govern the  industry and conduct  periodic  examinations  of
member  broker-dealers.  Broker-dealers  are also subject to regulation by state
securities  commissions  in  the  states  in  which  they  are  registered.  The
regulations  to which  broker-dealers  are  subject  cover  all  aspects  of the
securities business, including net capital requirements,  sales methods, trading
practices among  broker-dealers,  capital structure of securities firms,  record
keeping and the conduct of directors, officers and employees. The Commission and
the  self-regulatory  bodies may conduct  administrative  proceedings  which can
result in censure,  fine,  suspension  or expulsion of a  broker-dealer  and its
officers or  employees.  If the Company  were deemed to be a broker or dealer by
the Commission or any state securities  commission,  the Company would not be in
compliance  with  requisite  federal  or  state  laws  and  regulations  or  the
regulations  of  self-regulatory  bodies  and the  Company's  business  would be
materially and adversely affected.

                                       8
<PAGE>

     Employees
     ---------
     As of August 31, 1998, the Company had seven full-time employees consisting
of five executives and two staff members at its office located in Staten Island,
New York.

     Seasonality
     -----------
     The  Company's  business and revenues are  determined  by  consummation  of
contemplated transactions and, thus, are not seasonal.

     Item 2. Description of Property

     The Company  maintains  its  principal  executive  offices at 278A New Dorp
Lane,  Staten  Island,  New York 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,
1999.  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.

     Item 3. Legal Proceedings

     None

     Item 4. Submission of Matters to a Vote of Security Holders

     None.


                                       9
<PAGE>
                                    PART II

     Item 5. Market For Common Equity and Related Stockholder Matters

     As of August 31,  1998,  there  were  approximately  279  holders of Common
Shares.  The Common Shares have not and do not trade.  On that date,  there were
outstanding approximately 3,615,000 Shares of Common and -0- Preferred Shares.

     The Company has not declared any cash  dividends  and does not expect to do
so in the foreseeable future. The Company has distributed stock dividends of the
stock of certain corporations of which it is a shareholder as follows: 

Southeast Tire Recycling, Inc.          178,960 shares of common stock
Southern Security Financial Corp.       256,088 shares of common stock
Fleetclean Systems, Inc.                300,000 shares of common stock

     Item 6. Management's Discussion and Analysis or Plan of Operation

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                  for the years ended August 31, 1998 and 1997

     The matters  discussed  in this  Management's  Discussion  and  Analysis of
Financial Condition and Results of Operations contain forward-looking statements
that involve risks and uncertainties.  The Company's actual results could differ
materially from those discussed here.  Factors that could cause or contribute to
such  differences  include,  but are not  limited  to,  those  discussed  in the
sections  entitled  "Business" and " Risk  Factors," as well as those  discussed
elsewhere in this Annual Report on Form 10-KSB. The Company disclaims any intent
or obligation to update these forward-looking statements.

Fiscal Year Ended August 31, 1998 Compared to the Fiscal Year Ended August 31,
1997
--------------------------------------------------------------------------------

     Revenues for the fiscal year ended August 31, 1998 increased  $1,339,112 or
628.2% when compared to the fiscal year ended August 31, 1997. During the fiscal
year ended  August 31,  1998,  the Company  generated  $1,505,950  (97.0%)  from
business  and  financial  consulting  services,  $15,650  (1.0%) from its mining
royalty  interest,  and $30,520 (2.0%) from its mortgage  brokering  activities.
During the fiscal year ended August 31,  1997,  the Company  generated  $200,258
(94.0%)  from  business  consulting  services,  $12,750  (6.0%)  from its mining
royalty interest, and $ - 0 - (- 0 -%) from its mortgage brokering activities.

     Revenues from business and financial consulting services, mining royalties,
and mortgage services increased $1,305,692 (664.5%), $2,900 (22.7%), and $30,520
(100.0%),  respectively.  Business and financial consulting service revenues and
mortgage  revenues  increased due to increased  activities  in their  respective
areas  whereas  mining  royalties  increased  between  these  periods due to the
extraction of coal in excess of the base level of 300,000 tons.

                                       10
<PAGE>

     Cost of sales and general and  administrative  expenses have both increased
for the year ended August 31, 1998 when compared to the fiscal year ended August
31, 1997 by $149,575 (154.5%) and $22,064 (7.8%), respectively.  The increase in
cost of sales is directly attributable to an increase in revenues. Additionally,
commissions,  office  expense,  payroll  and  related  costs,  and  depreciation
increased  whereas executive  compensation,  taxes, and travel and entertainment
decreased by $39,295 (56.9%);  $4,951 (28.2%);  $2,470 (37.1%);  $4,668 (59.6%);
$24,600 (21.7%);  $10,556 (89.2%); and $9,324 (42.6%),  respectively.  While the
changes in office expenses, payroll and related costs, travel and entertainment,
and  depreciation  are  a  result  of  continuing  operations,   the  change  in
commissions is attributable to an increase in revenues.  Executive compensation,
however,  decreased as a result of the Company issuing property dividends in the
form of  investment  stocks to its  shareholders  compared to its  officers  and
directors whereas the decrease in taxes is attributable to penalties paid during
fiscal 1997 incurred in prior periods.

     As a percentage  of sales,  cost of sales  decreased  from 48.37% in fiscal
1997 to 16.1% in fiscal 1998, general and administrative expenses decreased from
141.8% in fiscal 1997 to 20.0% in fiscal 1998,  and  commissions  decreased from
34.5% in fiscal 1997 to 7.1%. These percentage decreases are attributable to the
Company  showing higher  revenues for the year ended August 31, 1998 as compared
to the year ended  August 31, 1997 from the business  strategy of  concentrating
its efforts on spin-off  companies  rather than acquiring and  re-selling  shell
companies.

     Marketable  securities  and  restricted  securities at August 31, 1998 both
increased  when  compared to August 31, 1997 due to the  acquisition  of various
securities during the fiscal year and due to the conversion of a note receivable
into common stock (currently restricted),  respectively, during the fiscal year.
Accordingly,  the fiscal  years  ended  August 31, 1998 and August 31, 1997 show
unrealized   holding   losses   (below   earnings  and  included  in  earnings),
respectively.

     The Company has gained interest in other  companies by acquiring  shares of
such companies'  stocks.  The Company  acquires these securities as compensation
for its business and consulting services.  The Company's  marketable  securities
for the year ended August 31, 1998 increased  $722,670 from the prior year. This
increase is primarily  attributable  to the Company  having a  profitable  year.
Prior  to  September  1,  1997,   management  had  classified  these  marketable
securities as trading  securities because the Company had acquired them with the
intent of  reselling  them in the near future.  The  securities  were  therefore
reported on the balance sheet at fair market value with any  unrealized  holding
gains and losses included in current earnings.  For the fiscal year ended August
31, 1997, this resulted in a $41,127  unrealized holding loss. During the fiscal
year ended August 31, 1998,  management has changed its position on how to carry
these marketable securities; rather than classifying them as trading securities,
management  has elected to treat these  securities as  available-for-sale  which
requires  a  separate  valuation  account on the  balance  sheet to bring  these
securities  to their  fair  market  value  with  the  offset  being  shown as an
unrealized  holding  gain  or  loss  below  net  earnings  of the  statement  of
operations. For the year ended August 31, 1998, the Company showed an unrealized
holding loss of $97,661 (net of tax).

                                       11
<PAGE>

     As a result of the foregoing,  the Company  realized net income of $448,735
and a net comprehensive  income of $351,074 for the fiscal year ended August 31,
1998  compared  to a net loss of $243,874  for the fiscal year ended  August 31,
1997. There was,  however,  no comprehensive  income or loss for the fiscal year
ended August 31, 1997.

Liquidity and Capital Resources
-------------------------------
     As of August 31, 1998, the Company's  current  assets  exceeded its current
liabilities by $22,690;  however, only $19,612 was cash with the remainder being
comprised of various receivables.

     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.

     At August 31,  1998,  the Company had no material  commitments  for capital
expenditures.

     For the fiscal years ended August 31, 1998,  1997,  and 1996,  the value of
fees received by the Company in the form of securities was $1,416,090, $113,216,
and $60,500,  respectively,  of which $- 0 -, $- 0 -, and $10,000,  respectively
were in stock which contain restrictive legends with regard to transfer.  During
the fiscal  year ended  August  31,  1998,  the  amounts  received  in stock are
increasing.  However,  due to the unrestricted nature of these securities,  this
method of  compensation  has no material  effect on the Company's  liquidity and
overall  financial  position.  In the  future,  the  Company  plans to  continue
distributing to its shareholders the majority of the securities that it receives
in other entities.  If the fees received are more in the form of securities than
cash,  and  continue  to be  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 securities  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  becomes
available,  and if and when a market for such securities develops.  Accordingly,
such shares will not be able to be used to meet current cash flow needs.

     At August 31, 1998 and August 31, 1997,  royalties due from Quaker  Holding
Company,  Inc., formerly from Powderhorn  International,  Inc., represented 6.5%
and 37.5% of the Company's total assets, respectively. Based upon Quaker's prior
history in payment pursuant to the royalty agreement,  management  believes that
all royalties will be collected on a timely basis for the foreseeable future.

                                      12
<PAGE>

     Item 7. Financial Statements

     a.   Balance Sheets at August 31, 1998 and 1997

     b.   Statements  of  Operations  for the three years ended August 31, 1998,
          1997 and 1996

     c.   Statements  of Cash Flows for the three years  ended  August 31, 1998,
          1997 and 1996

     d.   Statement of Stockholders' Equity for the three years ended August 31,
          1998, 1997 and 1996

     e.   Notes to Financial Statements

                                       13
<PAGE>



                         Independent Accountant's Report


To the Board of Directors and Stockholders
of Mega Holding Corp.:

     We have audited the accompanying balance sheets of Mega Holding Corp. as of
August  31,  1998  and  1997,   and  the  related   statements  of   operations,
stockholders'  equity,  and cash flows for the years ended August 31, 1998, 1997
and 1996.  These  financial  statements are the  responsibility  of Mega Holding
Corp.'s  management.  Our  responsibility  is to  express  an  opinion  on these
financial statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  based on our audit, the financial  statements  referred to
above present fairly, in all material  respects,  the financial position of Mega
Holding  Corp.  as of  August  31,  1998  and  1997,  and the  results  of their
operations,  stockholders'  equity,  and their  cash  flows for the years  ended
August 31, 1998, 1997 and 1996 in conformity with generally accepted  accounting
principles.




McManus & Co., P.C.
Certified Public Accountants
Morris Plains, New Jersey


November 17, 1998



                                       14
<PAGE>

                               MEGA HOLDING CORP.
                                 BALANCE SHEET
                            AUGUST 31, 1998 AND 1997

 ASSETS
                                                     1998       1997
                                                     ----       ----
   Current  Assets:
      Cash                                       $  19,612  $  15,060
      Accounts Receivable                           12,810     51,671
      Royalties Receivable (Note 2)                    376        375
      Notes Receivable (Note 3)                     28,200    129,200
                                                 ---------- ----------
         Total Current Assets                       60,998    196,306

   Property and  Equipment:
      Office Equipment at Cost (Note 1)             69,793     66,664
      Less: Accumulated Depreciation               (51,692)   (39,192)
                                                 ---------- ----------
         Net Property and Equipment                 18,101     27,472

   Investments and Other Assets:
      Deferred Tax Asset (Note 9)                   96,740         --
      Marketable Securities (Notes 1 & 4)          754,435     31,765
      Marketable Securities -
         Valuation Allowance to FMV               (194,401)        --
      Restricted Marketable  Securities (Note 5)   109,124      3,287
      Royalties Receivable (Note 2)                154,116    154,493
                                                 ---------- ----------
         Total Investments & Other Assets          920,014    189,545
                                                 ---------- ----------
   Total Assets                                  $ 999,113  $ 413,323
                                                 ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY

   Current Liabilities:
      Accrued Expenses                           $  11,432  $      --
      Officer's Loan                                26,500      5,000
      Payroll Taxes Payable                            376        188
                                                 ---------- ----------
         Total Current Liabilities                  38,308      5,188

   Long - Term Liabilities:
      Deferred Taxes (Note 9)                      515,345      2,233
                                                 ---------- ----------
         Total Long - Term Liabilities             515,345      2,233

   Commitments and Contingent Liabilities (Note 8)

   Stockholders' Equity:
      Common Stock - $.01 par value
         Authorized 20,000,000 shares
         Issued 3,630,250 shares                    36,303     36,303
      Paid In Capital                              488,463    488,463
      Retained Earnings                            (79,306)  (118,864)
                                                 ---------- ----------
         Total Stockholders' Equity                445,460    405,902
                                                 ---------- ----------
   Total Liabilities and Stockholders' Equity    $ 999,113  $ 413,323
                                                 ========== ==========

  See accompanying accountant's report and notes to the financial statements.


                                       15
<PAGE>


                               MEGA HOLDING CORP.
                            STATEMENT OF OPERATIONS
                FOR THE YEARS ENDED AUGUST 31, 1998, 1997 & 1996


                                              1998       1997       1996
                                              ----       ----       ----
    Net Sales                             $1,530,610  $ 200,203  $ 659,767

    Cost Of Sales                            246,369     96,794     90,419

      Gross Profit                         1,284,241    103,409    569,348

    General and Administrative  Expenses:
      Advertising                              1,982         27        500
      Commissions                            108,373     69,078    228,094
      Dues and Subscriptions                   2,463        275        275
      Education/Seminars                       1,100         --         --
      Executive Compensation                  88,616    113,216     60,500
      Insurance                                2,667        889      --
      Licenses and Application Fees              579        671      1,153
      Miscellaneous                            2,914      3,860      7,611
      Office Expense                          22,531     17,580      6,722
      Payroll and Related Costs                9,128      6,658      --
      Postage                                  4,092      --         --
      Professional Fees                       10,000      6,000      3,784
      Rent                                    15,765     14,348     15,765
      Taxes                                    1,279     11,835      1,746
      Telephone and Utilities                  9,396      9,728      7,910
      Travel and Entertainment                12,559     21,883     26,483
      Depreciation                            12,500      7,832      7,847

      Total Operating Expenses               305,944    283,880    368,390

    Earnings/(Loss) Before Gains/(Loss)
      on Marketable Securities, Other
      Income, Income Taxes, and
      Comprehensive Income (net of taxes)    978,297   (180,471)   200,958

      Loss on Sale of Marketable
        Securities                           (37,960)        --         --
      Unrealized Holding Gain/(Loss)
        on Marketable Securities (Note 4)         --    (41,127)   102,334

    Other Income:
      Royalties Income                         3,275        375        343
      Interest Income - Royalties             12,375     12,375     12,407
      Interest Income - Other                  5,860         55         --
        Total Other Income                    21,510     12,805     12,750

    Earnings/(Loss) Before Income Taxes      961,847   (208,793)   316,042
      Provision For Income Taxes             513,112    (70,990)    72,168
    Net Earnings/(Loss)                      448,735   (137,803)   243,874

    Comprehensive Income,  net of taxes:
      Unrealized Holding Loss (Note 4)       (97,661)        --         --
    Comprehensive Income                   $ 351,074  $(137,803) $ 243,874


      Net Earnings/(Loss) Per Share:
        Net Earnings/(Loss) - net income   $    0.12  $   (0.04) $    0.07
        Net Earnings/(Loss) -
           comprehensive income            $    0.10  $   (0.04) $    0.07
        Weighted Average Number of 
           Common Shares Outstanding       3,630,250  3,630,250  3,630,250


  See accompanying accountant's report and notes to the financial statements.

                                       16
<PAGE>


                               MEGA HOLDING CORP.
                            STATEMENT OF CASH FLOWS
                FOR THE YEARS ENDED AUGUST 31, 1998, 1997 & 1996

                                                    1998       1997       1996
                                                    ----       ----       ----

Cash Flow from Operating Activities:
  Net Income/(Loss)                             $ 448,735  $(137,803) $ 243,874
  Adjustments To Reconcile Net Income/
   (Loss) To Net Cash Provided/(Used)
   In Operating Activities:
   Depreciation                                    12,500      7,832      7,847
   Unrealized Holding (Gain)/Loss on
     Marketable Securities Trading                     --     41,127   (102,334)
   Unrealized Holding Gain/(Loss) on
     Marketable Securities-AFS                    (97,661)        --         --
   (Increase)/Decrease in Marketable Securities  (722,670)   145,855   (116,413)
   (Increase)/Decrease in Marketable Securities
     - Valuation Allowance                        194,401         --         --
   (Increase)/Decrease in Notes Receivable        100,000         --         --
   (Increase)/Decrease in Restricted Securities  (100,000)        --         --
   Property Dividends                            (311,516)        --         --
   (Increase)/Decrease in Accounts Receivable      38,861     (8,171)   (43,500)
   (Increase)/Decrease in Royalties Receivable
    (Current)                                          (1)       (32)       (26)
   (Increase)/Decrease in Royalties Receivable
    (Long-term)                                       377        375        343
   (Increase)/Decrease in Deferred Tax Asset      (96,740)        --         --
   Increase/(Decrease)in Accounts Payable          11,432     (6,257)    (2,743)
   Increase/(Decrease)in Payroll Taxes Payable        188        188         --
   Increase/(Decrease)in Deferred Tax Liability   513,112    (55,000)    57,233
   Total Adjustments                             (457,717)   125,917   (199,593)

  Net Cash Provided/(Used) by
   Operating Activities                            (8,982)   (11,886)    44,281

Cash Flow from Investing Activities:
    (Purchase)/Disposal of Property, Plant
     & Equipment                                   (3,129)   (15,249)      (367)
    (Increase)/Decrease in Notes Receivable         1,000      5,800    (35,000)
    (Increase)/Decrease in Restricted Securities   (5,837)    26,713    (30,000)

  Net Cash Provided/(Used) by Investing Activities (7,966)    17,264    (65,367)

Cash Flow from Financing Activities:
    Increase/(Decrease) in Officer's Loan Payable  21,500      5,000         --

  Net Cash Provided/(Used)by Financing Activities  21,500      5,000         --

Net Increase/(Decrease)in Cash                      4,552     10,378    (21,086)

Cash at the Beginning of the Year                  15,060      4,682     25,768

Cash at the End of the Year                     $  19,612  $  15,060  $   4,682


                  Additional Disclosure of Operating Cash Flow
                 Cash paid during the year ended August 31, 1998

                        Tax Expense  . . . . . . . .  $   1,279

  See accompanying accountant's report and notes to the financial statements.

                                       17
<PAGE>


                               MEGA HOLDING CORP.
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                FOR THE YEARS ENDED AUGUST 31, 1998, 1997 & 1996

                                          Additional                 Total
September 1, 1996                 Common    Paid In     Retained   Stockholders'
To August 31, 1998                Stock     Capital     Earnings      Equity
------------------                ------   ----------   --------   -------------

August 31, 1995                $  36,303  $ 488,463   $(224,935)    $ 299,831

Net Earnings 1996                                       243,874       243,874
                               ---------  ---------   ----------    ----------
 
Total Stockholders' Equity
As Of August 31, 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                                              (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          $  36,303  $ 488,463   $ (79,306)    $ 445,460

 

 


See accompanying accountant's report and notes to the financial statements.


                                       18
<PAGE>

   
                               MEGA HOLDING CORP.
                       NOTES TO THE FINANCIAL STATEMENTS

Note 1 -  Basis of Presentation and Significant Accounting Policies:

     Mega Holding Corp. (the Company) was incorporated as a New York corporation
and  commenced  business on March 31, 1970.  The Company  offers its services to
corporations 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 advice to 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 Quaker Holding  Company,  Inc.,
formerly Powderhorn International, Inc., located in Prestonsburg, Kentucky.

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 expense as incurred
whereas major improvements are capitalized.

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 that 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
trading  are  reported  in  earnings.  Unrealized  holding  gains and  losses on
securities  classified  as  available-for-sale  were  previously  carried  as  a
separate  component  of  stockholders'  equity.  SFAS No.  115,  as  amended  by
Financial  Accounting  Standards Board issued Statement of Financial  Accounting
Standards No. 130,  "Other  Comprehensive  Income."  Management  determines  the
appropriate  classification of marketable equity and debt securities at the time
of purchase an re-evaluates such designation as of each balance sheet date.\


                                       19
<PAGE>


Note 1 - Basis of Presentation and Significant Accounting Policies: (continued)

C)   Other Comprehensive Income

     In 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting Standards No. 130, "Other Comprehensive  Income," effective
for fiscal years beginning after December 15, 1997. This statement considers the
presentation  of unrealized  holding gains and losses  attributable  to debt and
equity securities  classified as  available-for-sale.  As stated, any unrealized
holding  gains or losses  affiliated to these  securities  are carried below net
income under the caption "Other Comprehensive Income."

D)   Revenue Recognition

     The Company recognizes  revenues at the point in time when the stock in the
newly formed company is sold.

E)   Cost of Sales

     The cost of sales consist  wholly of those  expenditures  accumulated  when
acquiring the original company.

F)   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 between book income and tax income which
relate primarily to the recognition of income.

G)   Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumption  that  affect the  reported  amounts of assets  and  liabilities  and
disclosure  of  contingent  asset and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

H)   Advertising

     All advertising costs are expensed as incurred.  The Company does not incur
any cost for direct-response advertising.



                                       20
<PAGE>


Note 1 -  Basis of Presentation and Significant Accounting Policies: (continued)

I)   Net Earnings/(Loss) Per Common Share

     Net  earnings/(loss)  per common  share is shown as both basic and diluted.
Basic  earnings  per common  share are  computed by dividing net income less any
preferred  stock  dividends (if  applicable)  by the weighted  average number of
shares of common  stock  outstanding.  Diluted  earnings  per  common  share are
computed  by  dividing  net  income  less  any  preferred  stock  dividends  (if
applicable) by the weighted average number of shares of common stock outstanding
plus dilutive potential common shares.

Note 2 -  Royalties Receivable:

     On  September  29, 1994,  the Company  resolved a royalty  dispute  whereby
Powderhorn  Incorporated will pay the Company additional royalties with a future
value of  $624,044.  This  amount  will be  payable  at  $12,750  per  annum for
non-production royalty and an 8.5% royalty should production resume.

                                                                 August 31
                                                             1998         1997
                                                             ----         ----
         Royalties Receivable From Court Settlement:
              Non-interest bearing receivable,
              receivable in annual installments
              of $12,750; due 2043.                       $ 573,044    $ 585,794

              Less unamortized discount based
              on imputed interest rate of 8%.               418,552      430,926

              Royalties receivable less unamortized
              discount.                                     154,492      154,868

              Less:  Current  Portion                           376          375

              Total Long-Term Royalties Receivable        $ 154,116    $ 154,493
                                                            =======      =======

     Due to the large  nature  of Quaker  Holding  Company,  Inc.  and its prior
history in payment of like kind transactions,  management believes all royalties
will be collected on a timely basis.

Note 3 -  Notes Receivable:

     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.  At August 31, 1998,  Bonsangue has repaid
$13,300.

     During 1997,  the Company  received a note from the Berkshire  Group in the
amount of $20,000.  This note is non-interest bearing and is considered current.
At August 31, 1998, the Berkshire Group has repaid $13,500.

                                       21
<PAGE>

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" and Statement of Financial Accounting
Standards (SFAS) No. 130, "Accounting for Other Comprehensive Income." At August
31, 1997 all of the Company's  marketable  equity  securities  are classified as
trading securities; they were purchased with an intent to resell them within the
next year.

     The current  marketable  securities  represents  an  investment  in various
corporations which the Company considers as trading  securities.  The securities
had an original cost of $76,179 at August 31, 1997;  determined  by  multiplying
the number of shares being  purchased by the fair market value of those  shares.
At the  balance  sheet date of August 31,  1997 the  market  value was  $35,052;
determined by multiplying  the number of shares held by the fair market value of
those shares at the respective  balance sheet date.  The difference  between the
cost and fair market value  represents  an unrealized  holding  gain/loss and is
included in current earnings.

     During the year ended August 31, 1998, however, management has reclassified
all  marketable  securities  to be  treated  as  available-for-sale.  During the
transfer of  securities  from trading to  available-for-sale,  no  adjustment is
necessary due to the fact that any gain or loss has previously  been  recognized
in income.

     At August 31,  1998,  the  securities  had an original  basis of  $711,047;
determined by multiplying the number of shares being acquired by the fair market
value of those  shares.  At the August 31, 1998  balance  sheet  date,  the fair
market value of these  securities was $516,646;  determined by  multiplying  the
number of shares  held by the fair market  value of those  shares at the balance
sheet date. The difference  between the cost and fair market value represents an
unrealized  holding  loss and is  included  below  current  earnings  in  "Other
Comprehensive  Income." This unrealized  holding loss of $194,401 is reported on
the balance  sheet as a  marketable  security  valuation  allowance  whereas the
statement of operations carries this loss net of $96,740 tax.

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  $3,287.  The fair market value of the restricted  securities
held at the  balance  sheet  date is  determined  by the  cost  basis  of  those
securities.  If there were no cost basis, the number of shares multiplied by the
given par value would be used.

     Additionally,  the Company has converted a note receivable due from Capitol
Communities Corp. (formerly AWEC) into 55,000 shares of common stock. Based upon
the lack of a readily available market for these shares,  the Company has agreed
to carry these securities with a legend; thus making it restricted from sale.

                                       22
<PAGE>

Note 6 - Executive Compensation:

     As  president,  Thomas  Abate  intermittently  receives  shares of stock as
compensation.  This non-cash  compensation  approximates  $24,375;  $23,000; and
$60,500;  for the years 1998,  1997, and 1996  respectively.  Additionally,  the
Company has issued a property  dividend.  Mr. Abate's portion consists of 35,000
and 79,835 shares of Southern Security  Financial Corp. and Fleetclean  Systems,
Inc.,  respectively,  common stock.  These property dividends had an approximate
value of  $74,918.  Although  value has been given to these  securities,  at the
August 31, 1998 balance sheet date, a portion of these securities were not being
traded.

     In addition to Mr. Abate, other  officers/directors of the Company received
shares of common  stock as  compensation  for the years ended  August 31,  1998,
1997, and 1996. This non-cash compensation  approximates $62,241, $90,216, and $
- 0 -.  Additionally,  the  Company  has  issued a  property  dividend  to other
officer/directors  consisting of 21,633 and 45,578  shares of Southern  Security
Financial Corp. and Fleetclean Systems, Inc., respectively,  common stock. These
property dividends had an approximate value of $44,422.

Note 7 -  Warrants:

     During January 1998, the Company  entered into a consulting  agreement with
Eagle Wireless  International,  Inc. (Eagle),  a supplier of  telecommunications
equipment and related software sold by service providers in the paging and other
wireless personal communications markets. In consideration of the services to be
performed by the Company,  the Company has  received one million  three  hundred
thousand (1,300,000) warrants.

     Each  warrant  gives the  Company  the right to acquire  one share of Eagle
common stock. The warrants, currently restricted with a legend, are comprised of
seven classes containing various exercise prices and periods as shown below:


                         Shares     Exercise   Average     Stock
           Exercise    Underlying    Period     Stock       Days
  Class     Price       Warrants    (Years)     Price      Traded
  -----    --------    ----------  ---------   -------     ------

    A     $  1.50      150,000          1     $  4.00        61
    B        2.00      150,000          1        5.50        61
    C        3.00      200,000          2        7.50        61
    D        5.00      200,000          3       10.00        31
    E        7.00      200,000          3       12.00        31
    F        9.00      200,000          5       14.00        31
    G     $ 11.00      200,000          5     $ 16.00        31

                                       23
<PAGE>

     In order for any warrants to be exercisable, an average stock price must be
attained for  consecutive  days traded as noted above.  Any and all warrants not
exercised during the allocated time period shall become null and void.

Note 8 -  Commitments and Contingent Liabilities:

     The  Company is  engaged in a three year lease for its office  space in the
amount of $1,302.29 per month. This  non-cancelable  lease began January 1, 1996
and expires January 31, 1999.

     Future minimum lease payments are summarized as follows:

                           August 31,                    Amount
                           ----------                    ------
                              1999                     $    6,510
                             Total                     $    6,510
                                                          =======

Note 9 -  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.

     A) The effective tax rate for the Company is  reconcilable to statutory tax
rates as follows:

                                                              August 31,
                                                      1998     1997     1996
                                                       %         %        %
                                                      ----     ----     ----
         U.S. Federal Statutory Tax Rate               34        34       34
         Valuation allowance for deferred tax
            assets allocated to income tax expense     21       (34)     (11)
                                                     -----     -----    -----
         Effective Tax Rate                            53      - 0 -      23
                                                       ===      ===      ===

     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.


Note 10 -  Dividends:

     During the fiscal year,  the board of directors  declared and paid property
dividends to its common  shareholders.  These dividends were comprised of shares
of common stock which had been received as  compensation  by the Company for its
assistance in taking Southern Security  Financial Corp. and Fleetclean  Systems,
Inc. public. Thus, allowing them the immediate opportunity to become tradable on
the NASD  Electronic  Bulletin  Board.  The  issuances  consisted of one hundred
sixty-one  thousand  five hundred  sixteen  (161,516)  common shares of Southern
Security  Financial Corp. and three hundred thousand  (300,000) common shares of
Fleetclean  Systems,  Inc.  The  combined  approximate  value of these  property
dividends is $311,516.

                                       24
<PAGE>

Note 11 -  Risk Factors:

     At August  31,  1998,  the  majority  of the  Company's  business  activity
consists of assisting  companies  to become  publicly  traded.  In doing so, the
Company  receives  compensation  generally  in the form of  stock.  If the stock
market  should take a severe  down-turn in small  company  stocks,  there is the
potential  that this would have an adverse  affect on the Company's  future cash
flows.  Although  this risk  exists,  it is  management's  belief that its other
consulting  activities  would  provide the  necessary  cash flow to continue its
operating activities.

Note 12 -  Subsequent Events:

     Subsequent  to August 31,  1998,  the  Company is  scheduled  to receive an
additional 20,000 shares of ARXA International  Energy, Inc. common stock. These
shares are  currently  under  restriction  which is expected to be lifted in the
near future.

     Additionally,  in September  1998,  the Company has executed a subscription
agreement  for  one  hundred  thousand  (100,000)  shares  of  common  stock  of
Fleetclean  Systems,  Inc.  This  agreement has been given in  consideration  of
financial consulting services to be performed by the Company.

Item 8. Changes in and Disagreement With Accountants

     Not applicable.


                                       25
<PAGE>

                              PART III

     Item 9.  Directors,  Executive  Officers,  Promoters  and Control  Persons:
Compliance with Section 16(a) of the Exchange Act

Directors and Officers
-----------------------

     The following sets forth the names of the Company's directors and officers.
Directors  of the  Company  are elected  annually  by the  shareholders  and the
officers are appointed  annually by the Board of Directors.

Name                        Age            Position                     Since
----                        ---            --------                     -----
Thomas M. Abate             61        President and a Director          1986

James D. Paulsen            59        Executive Vice President,         1991
                                        Secretary and a Director

John M. Seroor              68        Treasurer and a Director          1994

Silvio Codispoti            55        Senior Vice President             1991

Lorraine Zarzana            38        Assistant Secretary               1998

     THOMAS M. ABATE has been  President  and  Director of the Company  from its
inception  and served as Chairman of the Board of Directors of Megatron  Holding
Corp.  (OTC) from 1983 to 1987.  He was the  Manhattan  Area Manager of the U.S.
Treasury Department, SB Division from 1974 to 1984. Mr. Abate received a B.S. in
Finance from Wagner College.

     JAMES D. PAULSEN has been Executive Vice President,  Secretary and Director
of the Company  since 1991,  and has been  associated  with the Company from its
inception.  He was an officer of AIG Risk  Management,  Inc. and  American  Home
Assurance Co. from 1977 to 1991. He is a graduate of The City  University of New
York and The College of Insurance.

     SILVIO  CODISPOTI has been Senior Vice President of the Company since 1991.
From,  1961 to 1991, he was a Vice President,  Commercial  Lending with National
Westminster  Bank, USA. Mr. Codispoti is a graduate of Bernard M. Baruch College
of the City  University of New York where he earned an A.A.S.  in Accounting and
B.B.A. in Finance.

      JOHN M. SEROOR has been Treasurer & Director of the Company since 1994 and
has been associated  with the Company since its inception.  From 1963 to 1968 he
was a  chemist  for the Food and Drug  Administration  in  Cincinnati,  Ohio and
Brooklyn,  New York, and from 1968 to 1994 he was a quality  control  supervisor
for Carter-Wallace, Inc. Mr. Seroor graduated from the University of Connecticut
where he earned a B.A. in Chemistry.

     LORRAINE  ZARZANA has served as Office Manager for the Company since April,
1997. Prior to joining the Company, Ms. Zarzana was a housewife.

                                       26
<PAGE>

     Item 10. Executive Compensation

     The following table shows all the cash  compensation paid by the Company as
well as certain other  compensation  paid during the fiscal years indicated,  to
the  Chief  Executive  Officer  for such  period in all  capacities  in which he
served.  No other  Executive  Officer  received total annual salary and bonus in
excess of $100,000.

SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------
                                                     Long Term Compensation

                              Annual Compensation     Awards          Payouts
--------------------------------------------------------------------------------
 (a)         (b)     (c)    (d)    (e)    (f)          (g)       (h)    (i)
                                   Other   Restricted                    All
 Name and                          Annual  Stock       Options   LTIP   Other
 Principal   Fiscal  Salary  Bonus Compen- Awards      SARs     Payouts Compen-
 Position    Year     ($)    ($)   sation   ($)         (#)       ($)   sation
----------   -----   ------  ----  ------  -----       -------  ------  -------
Thomas M.     1998    (1)     N/A   N/A      0           0        0       0
Thomas M.     1997    (2)     N/A   N/A      0           0        0       0
Abate         1996    (3)     N/A   N/A      0           0        0       0

(1)  Consists of 15,000 shares of the common stock of  ClearWorks  Technologies,
     Inc.,  35,000  shares of the common  stock of Southern  Security  Financial
     Corp.  and 79,835 shares of the common stock of Fleetclean  Systems,  Inc.,
     for a total of $99,293.

(2)  Consists  of  50,000  shares  of the  common  stock  of ARXA for a total of
     $112,500.

(3)  Consists of 75,000 shares of QCS Corp. at fair market value $.50 per share;
     46,000 shares of ARXA International  Energy, Inc. at fair market value $.50
     per share;  50,000  shares of Hiawatha  Industries,  Inc.  (Restricted)  no
     market value.

     The  amount of  securities  distributed  to Mr.  Abate  has been,  and will
continue to be, determined by the Company's Board of Directors.


                                       27
<PAGE>
 

     Item 11. Security Ownership of Certain Beneficial Owners and Management

     The  following  table  sets  forth as of August  31,  1998,  the number and
percentage  of shares of the common  stock of the  Company,  owned of record and
beneficially,  by each  officer  and  directors  of the Company and by any other
person owning more than 5% of the Company's  outstanding common stock and by all
officers and directors as a group.

                                     Shares of
Name and Address                   Common Stock              Percentage(1)
-----------------                  ------------              ------------
Thomas M. Abate                     1,173,405(1)                32.3%
231 Clarke Avenue
Staten Island, NY 10306

James D. Paulsen                      367,000(2)                10.1%
511 East 80th Street
New York, NY 10021

T.G.J. & Associates                   496,664(3)                13.7%
618 74th Street
Brooklyn, New York 11209

Emco Enterprises                      230,000(4)                 6.3%
1388 Paterson Plane Road
Secaucus, NJ 07094

Silvio Codispoti                      127,000(5)                 3.5%
115 Sylvia Street
Staten Island, NY 10312

John M. Seroor                        102,500                    2.8%
11 Emerson Road
Somerset, NJ 08873

Lorraine Zarzana                       10,000                    0.0%
23 State Court
Staten Island, New York 10312


All Officers and Directors
As a Group (6 Persons)              2,538,569                   68.8%


                                       28
<PAGE>

1.   Includes  100,000 shares as joint tenant with Renee Abate and 50,000 shares
     in the  name  of  Renee  Abate,  15,000  shares  as  custodian  for  Amanda
     Alexander,  15,000  shares as custodian  for Megan Abate,  15,000 shares as
     custodian for  Samantha Alexander  and 15,000 shares as custodian for James
     Abate. Mr. Abate has sole investment power and sole voting power over these
     shares.

2.   Includes 25,000 shares as joint tenant with Judith Paulsen and 2,000 in the
     name of Judith  Paulsen.  Mr.  Paulsen has sole  investment  power and sole
     voting power over these shares.

3.   Of  the  Common  Shares  owned  by  TGJ  Associates,   248,332  shares  are
     beneficially  owned by Thomas  Abate and  248,332  shares are  beneficially
     owned by James Paulsen.  Messrs.  Abate and Paulsen share  investment power
     and  shared  voting  power  of  these  shares.  All  of the  shares  of TGJ
     beneficially owned by Messrs.  Abate and Paulsen are included in the shares
     owned by all officers and directors as a group.

4.   Emco Enterprises is owned by Greg Marinelli.

5.   Includes 500 shares as joint tenants with Dina  Codispoti,  4,000 shares in
     the  name of Dina  Codispoti,  500  shares  as  joint  tenant  with  Dennis
     Codispoti,  4,000 shares as  joint tenant with Florence Codispoti and 4,000
     shares in the name of Dennis  Codispoti.  Mr. Codispoti has sole investment
     power and sole voting power over these shares.

    Item 11. Certain Relationships and Related Transactions
    -------------------------------------------------------

     During the fiscal  years  ended  August  31,  1998 and 1997,  there were no
transactions, and there are no proposed transactions to which the Company was or
is to be a party in which any of its directors,  executive  officers,  principal
shareholders or any member of the immediate  family of any such person has or is
to have direct or indirect material interest.
    

                                       29
<PAGE>


                                   SIGNATURES

Pursuant to the  requirements  of Section 12 of the  Securities  Exchange Act of
1934, the Registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, "hereunto duly authorized.

                                             MEGA HOLDING CORP.

Dated: November 30, 1998                     By: /s/ Thomas M. Abate
                                             ------------------------
                                                 Thomas M. Abate
                                                 President and Principal
                                                 Executive Officer

                                             By: /s/John M. Seroor
                                             -------------------------
                                                 John M. Seroor
                                                 Treasurer and Principal
                                                 Financial Officer


                                       30
<PAGE>