SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998 or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _______________
Commission file number 0-9643
MEGATECH CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2461059
(State or other jurisdiction of (IRS. Employer
incorporation of organization) Identification No.)
555 WOBURN Street, TEWKSBURY, MA 01876
(Address of principal executive offices) (Zip Code)
(978) 937-9600
(Registrant's telephone number, including area code)
----------------------------------------------
(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
There were 3,792,308 shares of common stock outstanding at
August 10, 1998.
MEGATECH CORPORATION
--------------------
QUARTERLY REPORT FORM 10-Q
June 30, 1998
PART I. FINANCIAL INFORMATION
- -------------------------------
ITEM 1. Financial Statements (Unaudited) Page
----
Balance Sheet - June 30, 1998 and December 31, 1997 3
Statement of Operations- for the quarter and six months ended 4
June 30, 1998 and June 30, 1997
Statement of Cash Flows- for the six months ended June 5
30, 1998 and June 30, 1997
Notes to Financial Statements- June 30, 1998 6
ITEM 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 9
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 9
ITEM 2. Changes in Securities and Use of Proceeds 9
ITEM 3. Defaults Upon Senior Securities 9
ITEM 4. Submission of Matters to a Vote of Security Holders 9
ITEM 5. Other Information 9
ITEM 6. Exhibits and Reports on Form 8-K 9
Signature Page 10
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEGATECH CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, 1998 DEC. 31, 1997
(UNAUDITED) (AUDITED)
------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 90,771 $ 55,026
Accounts receivable:
Trade 315,028 335,891
Affiliate 355 355
Other 4,933 20,435
Inventories 373,125 409,551
Prepaid expenses 16,309 22,157
----------------------------
Total current assets 800,521 843,415
----------------------------
Property, plant and equipment, net 82,863 85,703
Other assets 7,666 7,666
----------------------------
Total Assets $ 891,050 $ 936,784
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note Payable - bank $ 35,000 $ 25,000
Accounts Payable:
Trade $ 158,113 258,179
Affiliate 3,771 15,204
Accrued Expenses 103,608 85,527
Other Liabilities 8,693 7,141
----------------------------
Total current liabilities 309,185 391,051
----------------------------
Stockholders' equity:
Common Stock, par value $.0143 per share,
5,000,000 shares authorized; 3,792,308
shares issued and outstanding, 54,230 54,230
Additional paid-in capital 4,049,858 4,049,858
Deficit (3,522,223) (3,558,355)
----------------------------
Total stockholders' equity 581,865 545,733
----------------------------
Total liabilities and stockholders' equity $ 891,050 $ 936,784
============================
</TABLE>
See notes to financial statements.
MEGATECH CORPORATION
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED QUARTER ENDED
JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales $1,081,677 $1,092,071 461,963 522,464
Cost of sales 604,452 620,893 241,857 297,306
-------------------------------------------------------------
Gross profit 477,225 471,178 220,106 225,158
-------------------------------------------------------------
Operating expenses:
Selling 353,997 400,651 159,685 208,829
General and administrative 75,829 97,576 30,085 48,275
Research and development 11,080 7,117 3,820 3,328
-------------------------------------------------------------
Total operating expenses 440,906 505,344 193,590 260,432
-------------------------------------------------------------
Income from operations 36,319 (34,166) 26,516 (35,274)
-------------------------------------------------------------
Other income (expense):
Interest 0 1,781 0 0
Other (189) (124) 14 88
-------------------------------------------------------------
Other income (expense), net (189) 1,657 14 88
-------------------------------------------------------------
Net income $ 36,130 $ (32,509) $ 26,530 $ (35,186)
=============================================================
Net income per share - basic and diluted $ 0.010 $ (0.009) $ 0.007 $ (0.009)
=============================================================
Weighted average number of common
shares outstanding 3,792,308 3,784,566 3,792,308 3,784,566
=============================================================
</TABLE>
See notes to financial statements.
MEGATECH CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 36,130 $ (32,509)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 9,791 10,962
Changes in operating assets and liabilities:
Accounts receivable 36,367 197,453
Prepaid expenses 5,848 6,062
Inventories 36,426 6,218
Accounts payable (111,499) (138,272)
Accrued expenses 19,633 (20,932)
Notes payable 0 (22)
--------------------------
Net cash provided (used) by operating activities 32,696 28,960
--------------------------
Cash flows from investing activities:
Purchases of property and equipment (6,951) (10,359)
--------------------------
Cash flows from financing activities:
Payments on capital lease obligations 0 (1,230)
Principal payments on notes payable (25,000) 0
Advances on notes payable 35,000 0
--------------------------
Net cash used by financing activities 10,000 (1,230)
--------------------------
Net increase (decrease) in cash and
cash equivalents 35,745 17,371
Cash & cash equivalents, beginning of period 55,026 90,770
--------------------------
Cash & cash equivalents, end of period $ 90,771 $ 108,141
==========================
</TABLE>
See notes to financial statements.
MEGATECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
1. BASIS OF PRESENTATION:
----------------------
The accompanying unaudited 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 considered necessary for
a fair presentation of the financial position, results of operations
and cash flows have been included. Operating results for interim
periods are not necessarily indicative of the operating results that
may be expected for the full year. For further information, refer to
the financial statements and footnotes thereto included in the
Company's annual report on Form 10-K.
2. INVENTORIES:
------------
Inventories consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, 1998 DEC. 31, 1997
-------------------------------
<S> <C> <C>
Raw materials $263,090 $199,841
Work in process 16,725 0
Finished goods 93,310 209,710
--------------------------
373,125 409,551
==========================
</TABLE>
3. MAJOR CUSTOMER INFORMATION:
---------------------------
For the period ended June 30, 1998 and 1997, sales to four unrelated
sales representatives comprised 50% and 35% of total sales,
respectively.
ITEM 2.
MEGATECH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR QUARTER AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
RESULTS OF OPERATIONS:
----------------------
Quarter Ended June 30, 1998 compared to quarter ended June 30, 1997
Sales for the quarter ended June 30, 1998 were $461,963, compared to
$522,464 for the same quarter last year. The decrease was primarily due to
a decrease in international sales.
Gross profit for the quarter ended June 30, 1998 was $220,106 or 48% of
sales, compared to $225,158 or 43% of sales, for the same quarter last year.
The decrease is the result of a decrease in sales.
Operating expenses for the quarter ended June 30, 1998 were $193,590 or 42%
of sales, compared to $260,432 or 50% of sales, for the same quarter last
year. The decrease is attributable mainly to a decrease in selling and
marketing costs.
The net income for the quarter ended June 30, 1998 was $26,530 compared to a
net loss of $35,186 for the same quarter last year. The increase is the
result of the items discussed above.
Six months Ended June30, 1998 compared to six months ended June 30, 1997
Sales for the six months ended June 30, 1998 were $1,081,677, compared to
$1,092,071 for the same period last year. The decrease was primarily due to
a decrease in international sales.
Gross profit for the six months ended June 30, 1998 was $477,225 or 44% of
sales, compared to $471,178 or 43% of sales, for the same period last year.
The increase is the result of sales of higher margin products.
Operating expenses for the six months ended June 30, 1998 were $440,906 or
41% of sales, compared to $505,344 or 46% of sales, for the same period last
year. The decrease is attributable mainly to a decrease in selling and
marketing costs.
The net income for the six months ended June 30, 1998 was $36,130 compared
to a net loss of $32,509 for the same period last year. The increase is the
result of the items discussed above.
LIQUIDITY AND CAPITAL RESOURCES:
---------------------------------
Working capital as of June 30, 1998 was $491,336 compared to $452,364 in
working capital at December 31, 1997. The increase was attributable to the
net income for the quarter.
The company maintains a secured line of credit in the amount of $200,000.
At June 30, 1998, $35,000 in 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, 1998 was approximately $326,670 compared
to $313,370 for same period ended in 1997.
MEGATECH CORPORATION
ITEM 3. QUANITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK
Not applicable.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings: None.
------------------
Item 2. Changes in Securities: None.
----------------------
Item 3. Defaults Upon Senior Securities: None.
--------------------------------
Item 4. Submission of Matters to a
Vote of Security Holders: None.
--------------------------
Item 5. Other Information: None.
------------------
Item 6. Exhibits and Reports on Form 8-K: None.
---------------------------------
SIGNATURES
----------
Pursuant to the requirement of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
MEGATECH CORPORATION
(Registrant)
August 11, 1998 /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-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 90,771
<SECURITIES> 0
<RECEIVABLES> 315,383
<ALLOWANCES> 10,166
<INVENTORY> 373,125
<CURRENT-ASSETS> 800,521
<PP&E> 82,863
<DEPRECIATION> 380,896
<TOTAL-ASSETS> 891,050
<CURRENT-LIABILITIES> 309,185
<BONDS> 0
0
0
<COMMON> 54,230
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 891,050
<SALES> 1,081,677
<TOTAL-REVENUES> 1,081,677
<CGS> 604,452
<TOTAL-COSTS> 440,906
<OTHER-EXPENSES> 189
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 243
<INCOME-PRETAX> 36,130
<INCOME-TAX> 0
<INCOME-CONTINUING> 36,130
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,130
<EPS-PRIMARY> 0.010
<EPS-DILUTED> 0.010
</TABLE>
