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 June 30, 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 X NO ___
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The number of shares of the registrant's common stock outstanding as
of June 30, 1997 was 3,788,808.
MEGATECH CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
(UNAUDITED) AUDITED
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 92,140 $ 90,770
Accounts receivable :
Trade (less allowance for doubtful
accounts of $13,047) 258,043 407,169
Affiliate 0 50,945
Other receivables 9,365 2,024
Inventories at lower of cost (first-in
first-out) or market 373,832 380,379
Prepaid expenses 6,342 17,127
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Total current assets 739,722 948,414
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Property, plant and equipment, at cost
(net of accumulated depreciation
of $366,884) 95,768 96,370
Security deposits 7,666 7,666
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Total Assets $ 843,156 $1,052,450
=========================================================================
</TABLE>
MEGATECH CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
(UNAUDITED) AUDITED
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Trade 179,662 309,562
Affiliate 0 8,701
Accrued commissions 6,999 32,622
Other accrued liabilities 28,749 40,058
Current obligation under capital lease 0 1,252
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Total current liabilities 215,410 392,195
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Stockholders' equity:
Common Stock, par value $.0143 per share,
5,000,000 shares authorized;
3,785,208 & 3,762,258 shares issued and
outstanding 54,180 54,180
Additional paid-in capital 4,034,824 4,034,824
Deficit (3,461,258) (3,428,749)
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Total stockholders' equity 627,746 660,255
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Total Liabilities and
Stockholders' Equity $ 843,156 $1,052,450
=========================================================================
</TABLE>
MEGATECH CORPORATION
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
(UNAUDITED) (UNAUDITED)
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<S> <C> <C>
Sales $1,092,071 $ 899,053
Cost of goods sold 620,893 585,076
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Gross profit 471,178 313,977
Operating expenses:
Selling, general and administrative expenses 498,227 425,964
Research and development 7,117 8,241
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Profit (loss) from operations (34,166) (120,229)
Other income and (expense):
Interest 1,706 (630)
Other 75 0
Legal (124) 0
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Total other income and (expense) 1,657 (630)
Net profit (loss) ($ 32,509) ($ 120,858)
========================================================================
Net profit (loss) per share ($ 0.009) ($ 0.032)
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Weighted average number of shares
outstanding 3,784,566 3,785,208
========================================================================
</TABLE>
MEGATECH CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
(UNAUDITED) (UNAUDITED)
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<S> <C> <C>
Cash flows from operating activities:
Net profit (loss) ($ 32,509) ($120,858)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 10,962 16,311
Changes in operating assets and liabilities:
Accounts receivable, trade 200,072 257,191
Accounts receivable, other (2,619) (3,066)
Prepaid expenses 6,062 (8,829)
Inventories 6,218 18,468
Notes payable (22) (38,344)
Accounts payable (138,272) (73,851)
Accrued expenses (20,932) (4,335)
Security deposit 0 0
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Net cash provided (used) by operating
activities 28,960 42,688
Cash flows from investing activities:
Purchases of property and equipment (10,359) (5,268)
Cash flows from financing activities:
Payments on capital lease obligations (1,230) 0
Proceeds from issuance of common stock 0 315
Additional paid in capital 0 2,985
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Net cash used by financing activities (1,230) 3,300
Net increase (decrease) in cash and
cash equivalents 17,371 40,720
Cash & cash equivalents, beginning of period 90,770 55,578
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Cash & cash equivalents, end of period $108,141 $ 96,298
=======================================================================
</TABLE>
MEGATECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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
June 30, 1997 and for all periods presented have been made.
The results of operation for the three months ended June 30, 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 financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's 1996
annual report.
2. INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
-------------------------------------------------------
<S> <C> <C>
Raw materials 150,724 357,045
Work in process 78,709 0
Finished goods 154,399 23,334
---------------------------------------------------
383,832 380,379
Less reserve for obsolescence 10,000 10,000
---------------------------------------------------
373,832 370,379
===================================================
</TABLE>
3. MAJOR CUSTOMER INFORMATION:
For the period ended June 30, 1997, sales to three unrelated sales
representatives comprised 9%, 10%, and 25% of total sales,
respectively.
For the period ended June 30, 1996, sales to two unrelated sales
representatives comprised 11% and 26%, respectively.
MEGATECH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR SIX MONTHS ENDED JUNE 30, 1997 AND 1996
RESULTS OF OPERATIONS:
Sales for the six months ended June 30, 1997 increased by $193
thousand or 21% from the corresponding period of 1996 to $1.1 million.
This increase was primarily due to an increase in overall sales,
specifically in the automotive area.
Gross profit for the six months ended June 30, 1997 increased from the
corresponding period of 1996 by $157 thousand. As a percentage of total
sales, gross profit was 43% in the six months ended June 30, 1997 as
compared to 35% in the corresponding period of 1996. The increase
was primarily due to lower direct labor and overhead costs relative to
the operations.
Selling, General & Administrative expenses for the six months ended
June 30, 1997 increased from the corresponding period of 1996 by
$79 thousand or 19% to $.5 million. The increase is primarily a result of
higher selling and marketing expenses due to increased sales.
Research and Development expenses for the six months ended June 30,
1997 remained fairly steady compared to the corresponding period of 1996
at $8 thousand and $7 thousand, respectively.
LIQUIDITY AND CAPITAL RESOURCES:
Working capital for the six months ended June 30, 1997 was $524,312 as
compared to $500,166 in working capital at June 30, 1996. The increase was
primarily attributable to higher inventory, offset slightly by lower
accounts receivable.
The company maintains a secured line of credit in the amount of
$200,000. At June 30, 1997, no borrowings were outstanding under this line.
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 June 30, 1997 was approximately $313,370
compared to $437,661 for the same period ended in 1996.
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)
June 30, 1997 /s/ Vahan V. Basmajian
Date Vahan V. Basmajian
President, Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 92,140
<SECURITIES> 0
<RECEIVABLES> 258,043
<ALLOWANCES> 13,047
<INVENTORY> 373,832
<CURRENT-ASSETS> 739,722
<PP&E> 95,768
<DEPRECIATION> 366,884
<TOTAL-ASSETS> 843,156
<CURRENT-LIABILITIES> 215,410
<BONDS> 0
0
0
<COMMON> 54,180
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 843,156
<SALES> 1,092,071
<TOTAL-REVENUES> 1,093,852
<CGS> 620,893
<TOTAL-COSTS> 505,344
<OTHER-EXPENSES> 124
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,706
<INCOME-PRETAX> (32,509)
<INCOME-TAX> 0
<INCOME-CONTINUING> (32,509)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,509)
<EPS-PRIMARY> (0.009)
<EPS-DILUTED> (0.009)
</TABLE>
