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, 2000 or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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 and 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 3,813,708 shares of common stock outstanding at August 2, 2000.
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MEGATECH CORPORATION
QUARTERLY REPORT FORM 10-Q
June 30, 2000
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited) Page
Balance Sheet - June 30, 2000 and December 31, 1999 3
Statement of Operations- for the three and six months
ended June 30, 2000 and June 30, 1999 4
Statement of Cash Flows- for the six months ended 5
June 30, 2000 and June 30, 1999
Notes to Financial Statements- June 30, 2000 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 8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 8
ITEM 2. Changes in Securities and Use of Proceeds 8
ITEM 3. Defaults Upon Senior Securities 8
ITEM 4. Submission of Matters to a Vote of Security Holders 8
ITEM 5. Other Information 8
ITEM 6. Exhibits and Reports on Form 8-K 8
Signature Page 9
<PAGE> -2-
PART 1. FINANICIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEGATECH CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, 2000 DEC. 31, 1999
(UNAUDITED) (AUDITED)
------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 26,659 $ 75,857
Accounts receivable:
Trade 350,116 280,389
Other 3,906 3,581
Inventories 271,362 357,662
Prepaid expenses 9,620 4,361
---------------------------
Total current assets 661,663 721,850
---------------------------
Property, plant and equipment, net 60,399 65,731
Other assets 7,666 7,666
---------------------------
Total Assets $ 729,728 $ 795,247
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts Payable:
Trade $ 106,918 77,192
Affiliate 565 0
Accrued Liabilities 94,807 267,675
---------------------------
Total current liabilities 202,290 344,867
---------------------------
Long-Term Debt 37,500 37,500
Stockholders' equity:
Common Stock, par value $.0143 per
share, 5,000,000 shares authorized;
3,813,708 (3,812,308 @ 1999) shares issued and outstanding 54,536 54,516
Additional paid-in capital 4,014,949 4,014,661
Deficit (3,579,547) (3,656,297)
---------------------------
Total stockholders' equity 489,938 412,880
---------------------------
Total liabilities and stockholders' equity $ 729,728 $ 795,247
===========================
</TABLE>
See notes to financial statements.
<PAGE> -3-
MEGATECH CORPORATION
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED QUARTER ENDED
------------------------------ ------------------------------
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000 JUNE 30, 1999
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $1,268,932 $ 984,016 $ 587,467 $ 463,362
Cost of sales 685,966 536,694 311,210 232,224
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Gross profit 582,966 447,322 276,257 231,138
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Operating expenses:
Selling 404,076 304,106 199,091 142,088
General and administrative 83,803 82,754 43,179 40,019
Research and development 18,050 10,876 8,839 5,487
-------------------------------------------------------------
Total operating expenses 505,929 397,736 251,109 187,594
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Income from operations 77,037 49,586 25,148 43,544
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Other income (expense):
Interest income 1,295 2,930 365 1,263
Interest expense (1,582) 0 (750) 0
Other 0 (3,225) 0 (3,225)
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Other income (expense), net (287) (295) (385) (1,962)
-------------------------------------------------------------
Net income $ 76,750 $ 49,291 $24,763 $ 41,582
=============================================================
Net income per share - basic
and diluted $ 0.020 $ 0.013 $ 0.006 $ 0.011
=============================================================
Weighted average number of common 3,813,708 3,812,308 3,813,708 3,812,308
shares outstanding =============================================================
</TABLE>
See notes to financial statements.
<PAGE> -4-
MEGATECH CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
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JUNE 30, 2000 JUNE 30, 1999
-----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 76,750 $ 49,291
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 9,234 8,952
Common stock issued as compensation 308 0
Changes in operating assets and liabilities:
Accounts receivable (70,052) 14,802
Prepaid expenses (5,259) 510
Inventories 86,300 89,358
Accounts payable 30,291 (59,637)
Accrued liabilities (172,868) (129,708)
---------------------
Net cash used by operating activities (45,296) (26,432)
--------------------
Cash flows from investing activities:
Purchases of property and equipment (3,902) (6,224)
Sales of property and equipment 0 3,226
Net cash used by investing activities (3,902) (2,998)
Cash flows from financing activities:
Advances on notes payable 0 25,000
----------------------
Net cash provided by financing activities 0 25,000
Net decrease in cash and cash equivalents (49,198) (4,430)
Cash & cash equivalents, beginning of period 75,857 187,580
----------------------
Cash & cash equivalents, end of period $ 26,659 $183,150
======================
</TABLE>
See notes to financial statements.
<PAGE> -5-
MEGATECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
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, 2000 DEC. 31, 1999
------------------------------
<S> <C> <C>
Raw materials $157,876 $182,614
Work in process 27,438 29,903
Finished goods 86,048 145,145
-------------------------
$271,362 $357,662
=========================
</TABLE>
3. MAJOR CUSTOMER INFORMATION:
---------------------------
For the period ended June 30, 2000 and 1999, sales to two and one unrelated
sales representative comprised 65% and 66% of total sales, respectively.
<PAGE> -6-
ITEM 2.
MEGATECH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR QUARTER AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
RESULTS OF OPERATIONS:
----------------------
Quarter Ended June 30, 2000 compared to quarter ended June 30, 1999
Sales for the quarter ended June 30, 2000 were $587,467, compared to
$463,362 for the same quarter last year. The increase was primarily due to
an increase in domestic sales.
Gross profit for the quarter ended June 30, 2000 was $276,257 or 47% of
sales, compared to $231,138 or 50% of sales, for the same quarter last
year. The increase is the result of lower materials and labor costs.
Operating expenses for the quarter ended June 30, 2000 were $251,109 or 43%
of sales, compared to $187,594 or 40% of sales, for the same quarter last
year. The increase is attributable to an increase in selling and marketing
costs.
The net income for the quarter ended June 30, 2000 was $24,763 compared to
a net income of $41,582 for the same quarter last year. The decrease is the
result of the items discussed above.
Six Months Ended June 30, 2000 compared to six months ended June 30, 1999
Sales for the six months ended June 30, 2000 were $1,268,932 compared to
$984,016 for the same period last year. The increase was primarily due to
an increase in domestic sales.
Gross profit for the six months ended June 30, 2000 was $582,966 or 46% of
sales, compared to $447,322 or 45% of sales, for the same period last year.
The increase is the result of lower materials and labor costs.
Operating expenses for the six months ended June 30, 2000 were $505,929 or
40% of sales, compared to $397,736 or 40% of sales, for the same period
last year. The increase is attributable to an increase in selling and
marketing costs.
The net income for the six months ended June 30, 2000 was $76,750 compared
to a net income of $49,291 for the same period last year. The increase is
the result of the items discussed above.
<PAGE> -7-
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Working capital as of June 30, 2000 was $459,373 compared to $376,983 in
working capital at December 31, 1999. The increase was attributable to
the net income for the six months.
The company maintains a secured line of credit in the amount of $100,000.
At June 30, 2000, 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 forseeable
cash requirements for the next twelve months.
The firm's backlog as of June 30, 2000 was approximately $371,950 compared
to $535,290 for the same period ended in 1999.
<PAGE> -8-
MEGATECH CORPORATION
ITEM 3. QUANITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK
Not applicable.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings: None.
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Item 2. Changes in Securities: None.
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Item 3. Defaults Upon Senior Securities: None.
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Item 4. Submission of Matters to a
Vote of Security Holders: None.
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Item 5. Other Information: None.
-----------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K: None.
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<PAGE> -9-
SIGNATURES
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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 2, 2000 /s/ Vahan V. Basmajian
--------------------------------------------------------------
Date Vahan V. Basmajian
President, Treasurer
<PAGE> -10-
