SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1997 Commission File Number 0-9643
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MEGATECH CORPORATION
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(Exact name of registrant as specified in its charter)
Massachusetts 04-2461059
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(State or other jurisdiction of (IRS. Employer
incorporation of organization) Identification No.)
555 WOBURN Street, TEWKSBURY, MA 01876
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 937-9600
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N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the 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 XX NO
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The number of shares of the registrant's common stock outstanding as
of April 30, 1997 was 3,788,808.
MEGATECH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
(UNAUDITED) AUDITED
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $111,883 $ 90,770
Accounts receivable:
Trade (less allowance for doubtful
accounts of $11,580) 324,346 407,169
Affiliate 0 50,945
Other receivables 2,160 2,024
Inventories at lower of cost (first-in first-out) 365,031 380,379
or market
Prepaid expenses 28,981 17,127
-------------------------
Total current assets 832,401 948,414
-------------------------
Property, plant and equipment, at cost net
of accumulated depreciation of $335,922 100,461 96,370
in 1996 & $361,403 in 1997.
Security deposits 7,666 7,666
-------------------------
Total Assets $940,528 $1,052,450
=========================
</TABLE>
See accompanying notes to consolidated financial statements.
MEGATECH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
(UNAUDITED) AUDITED
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade 243,586 309,562
Affiliate 0 8,701
Accrued commissions 32,622
Other accrued liabilities 34,010 40,058
Current obligation under capital lease 1,252
----------------------------
Total current liabilities 277,596 392,195
----------------------------
Stockholders' equity:
Common Stock, authorized, 5,000,000 shares
of $.0143 par value; issued and outstanding,
1996, 3,788,808 shares; 1995, 3,761,558, shares 54,180 54,180
Additional paid-in capital 4,034,824 4,034,824
Deficit (3,428,749) (3,428,749)
Profit (Loss) 2,677
----------------------------
Stockholders' equity - net 662,932 660,255
----------------------------
Total Liabilities and Stockholders' Equity $ 940,528 $1,052,450
============================
</TABLE>
See accompanying notes to consolidated financial statements.
MEGATECH CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1996
----------------------------
<S> <C> <C>
Sales $ 569,607 $ 531,217
Cost of goods sold 323,587 366,603
----------------------------
Gross profit 246,020 164,614
Operating expenses:
Selling, general and administrative expenses 241,123 243,453
Research and development 3,789 5,698
----------------------------
Total operating expenses 244,912
Profit (loss) from operations 1,108 (84,537)
Other income and (expense):
Interest (1,692) 337
Other 0 0
Legal 124 0
----------------------------
Total other income and (expense) 1,568 (337)
Net profit (loss) $ 2,676 $ (84,874)
============================
Net profit (loss) per share $ 0.001 $ (0.023)
============================
Weighted average number of shares outstanding 3,784,566 3,731,425
============================
</TABLE>
MEGATECH CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1996
----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net profit (loss) $ 2,677 $(84,874)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,481 6,765
Changes in operating assets and liabilities:
Accounts receivable, trade 133,769 60,851
Accounts receivable, other (27) (2,572)
Prepaid expenses (11,964) (17,748)
Inventories 15,019 18,440
Accounts payable (74,348) (7,220)
Accrued expenses (23,013) 9,044
---------------------------
Net cash provided (used) by operating activities 47,594 (17,314)
Cash flows from investing activities:
Property, plant and equipment (9,572) (1,646)
Cash flows from financing activities:
Payments on capital lease obligations (1,230) (649)
Principal payments on long-term debt 0 (14,897)
Proceeds from issuance of common stock 0 3,299
---------------------------
Net cash used by financing activities (1,230) (12,247)
Net increase (decrease) in cash and 37,113 (31,207)
cash equivalents
Cash & cash equivalents, beginning of period 90,770 55,578
---------------------------
Cash & cash equivalents, end of period $127,883 $ 24,371
===========================
</TABLE>
MEGATECH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete Financial Statements.
In the opinion of management, all adjustments necessary to present
fairly the financial position, results of operations and cash flows at
March 31, 1997 and for all periods presented have been made. The results
of operation for the three months ended March 31, 1997 are not
necessarily indicative of the operating results that may be expected for
the year ended December 31, 1997. It is suggested that the condensed
consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's December
31, 1996 annual report.
2. INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
-------- -----------
<S> <C> <C>
Raw materials 137,780 357,045
Work in process 65,093 0
Finished goods 172,158 23,334
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375,031 380,379
Less reserve for obsolescence 10,000 10,000
-------------------
365,031 370,379
===================
</TABLE>
MEGATECH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARCH 31, 1997
RESULTS OF OPERATIONS:
THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH
THREE MONTHS ENDED MARCH 31, 1996
Consolidated net sales for the quarter ended March 31, 1997 increased
from the corresponding period of 1996 by $.04 million or 7%. This
increase was primarily due to increases in overall sales.
Gross profit for the quarter ended March 31, 1997 increased from the
corresponding period of 1996 by $.08 million. As a percentage of total
sales, gross profit was 43% in the quarter ended March 31, 1997 as
compared to 31% in the corresponding period of 1996. The increase is
due to product mix, where higher percentage of sales for 1997 were items
with larger gross profit margins, and also due to lower direct labor
costs.
Selling, General & Administrative expenses for the quarter ended March
31, 1997 decreased slightly from the corresponding period of 1996 by
$ .01 million. The decrease is primarily a result of pay cutting
measures taken by management for certain salaried personnel.
Research and Development expenses for the quarter ended March 31, 1997
decreased from the corresponding period of 1996 by $.002 million. The
decrease is attributable to a reduction in R & D activities.
MEGATECH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
MARCH 31, 1997
LIQUIDITY AND CAPITAL RESOURCES:
Working capital for the quarter ended March 31, 1997 was $554,805 as
compared to $530,094 in working capital at December 31, 1996. The
increase was primarily attributable to cash balnces and reduced
accounts payables.
The company maintains a $ 200,000 line of credit with a bank. The
line is collaterized by a security interest in substantially all assets
of the Company. The company believes that cash generated from
operations, together with existing sources of debt financing, will be
sufficient to meet foreseeable cash requirements for the next twelve
months.
The firm's backlog as of March 31, 1997 was approximately $247,570
compared to $ 163,700 same period ended in 1996.
3. MAJOR CUSTOMER INFORMATION:
For the period ended March 31, 1997, sales to one representative in
Mexico comprised 35% of total sales for the quarter.
No other single customer accounted for more than 10% of the Company's
sales for the same period in 1997.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings: Not applicable
___________________________
Item 2. Changes in Securities: Not applicable
_______________________________
Item 3. Defaults Upon Senior Securities: Not applicable
_________________________________________
Item 4. Submission of Matters to a
Vote of Security Holders: Not applicable
___________________________________
Item 5. Other Information: Not applicable
___________________________
Item 6. Exhibits and Reports in Form 8-K: Not applicable
__________________________________________
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 thereunto duly authorized.
MEGATECH CORPORATION
(Registrant)
April 30, 1997 /s/ Vahan V. Basmajian
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Date Vahan V. Basmajian
President, Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 111,883
<SECURITIES> 0
<RECEIVABLES> 324,346
<ALLOWANCES> 11,580
<INVENTORY> 365,031
<CURRENT-ASSETS> 832,401
<PP&E> 100,461
<DEPRECIATION> 361,403
<TOTAL-ASSETS> 940,528
<CURRENT-LIABILITIES> 277,596
<BONDS> 0
0
0
<COMMON> 54,180
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 940,528
<SALES> 569,607
<TOTAL-REVENUES> 2,676
<CGS> 323,587
<TOTAL-COSTS> 244,912
<OTHER-EXPENSES> 124
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,692)
<INCOME-PRETAX> 2,676
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,676
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,676
<EPS-PRIMARY> 0.001
<EPS-DILUTED> 0.001
</TABLE>
