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 September 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)
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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 ( )
There were 3,813,708 shares of common stock outstanding at November 6, 2000.
<PAGE> -1-
MEGATECH CORPORATION
QUARTERLY REPORT FORM 10-Q
September 30, 2000
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited) Page
----
Balance Sheet - September 30, 2000 and December 31, 1999 3
Statement of Operations- for the quarter and nine months
ended September 30, 2000 and September 30, 1999 4
Statement of Cash Flows- for the nine months ended
September 30, 2000 and September 30, 1999 5
Notes to Financial Statements- September 30, 2000 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
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
<PAGE> -2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEGATECH CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
Sept 30, 2000 Dec. 31, 1999
(UNAUDITED) (AUDITED)
------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 77,085 $ 75,857
Accounts receivable:
Trade 313,720 280,389
Other 4,355 3,581
Inventories 253,000 357,662
Prepaid expenses 8,455 4,361
----------------------------
Total current assets 656,615 721,850
----------------------------
Property, plant and equipment, net 57,244 65,731
Other assets 7,666 7,666
----------------------------
Total Assets $ 721,525 $ 795,247
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts Payable:
Trade $ 49,689 77,192
Affiliate 120 0
Accrued Liabilities 85,378 267,675
----------------------------
Total current liabilities 135,187 344,867
----------------------------
Note payable 37,500 37,500
Stockholders' equity:
Common Stock, par value $.0143 per
share, 5,000,000 shares authorized;
3,813,708 shares issued and outstanding, 54,536 54,516
Additional paid-in capital 4,014,949 4,014,661
Deficit (3,520,647) (3,656,297)
----------------------------
Total stockholders' equity 548,838 412,880
----------------------------
Total liabilities and stockholders' equity $ 721,525 $ 795,247
============================
</TABLE>
See notes to financial statements.
<PAGE> -3-
MEGATECH CORPORATION
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED QUARTER ENDED
-------------------------------- --------------------------------
Sept. 30, 2000 Sept. 30, 1999 Sept. 30, 2000 Sept 30, 1999
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<S> <C> <C> <C> <C>
Sales $1,780,976 $1,472,339 $ 512,044 $ 488,322
Cost of sales 867,656 815,581 181,689 278,886
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Gross profit 913,320 656,758 330,355 209,436
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Operating expenses:
Selling 619,026 421,261 214,950 117,155
General and administrative 127,325 122,503 43,524 39,749
Research and development 26,002 15,923 7,951 5,047
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Total operating expenses 772,353 559,687 266,425 161,951
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Income from operations 140,967 97,071 63,930 47,485
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Other income (expense):
Interest (1,107) 3,659 (820) 729
Other (4,210) (3,225) (4,210) 0
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Other income (expense), net (5,317) 434 (5,030) 729
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Net income $ 135,650 $ 97,505 $ 58,900 $ 48,214
================================================================
Net income per share - basic and diluted $ 0.036 $ 0.026 $ 0.015 $ 0.013
================================================================
Weighted average number of common
shares outstanding 3,813,708 3,812,308 3,813,708 3,812,308
================================================================
</TABLE>
See notes to financial statements.
<PAGE> -4-
MEGATECH CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------------
Sept. 30, 2000 Sept 30, 1999
-------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 135,650 $ 97,505
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Non-cash charges (credits) to net income:
Depreciation and amortization 14,694 13,569
Common stock issued as compensation 308 0
Changes in operating assets and liabilities:
Accounts receivable (34,105) (194,571)
Prepaid expenses (4,094) 1,411
Inventories 104,662 78,210
Accounts payable (27,383) 541
Accrued expenses (182,297) (121,353)
--------------------------
Net cash provided (used) by operating activities 7,435 (124,688)
--------------------------
Cash flows from investing activities:
Purchases of property and equipment (6,207) (14,753)
Sales of property and equipment 0 3,226
--------------------------
Net cash provided (used) by investing activities (6,207) (11,527)
--------------------------
Cash flows from financing activities:
Advances on notes payable 0 37,500
--------------------------
Net cash provided by financing activities 0 37,500
--------------------------
Net increase (decrease) in cash and
cash equivalents 1,228 (98,715)
Cash & cash equivalents, beginning of period 75,857 187,580
--------------------------
Cash & cash equivalents, end of period $ 77,085 $ 88,865
==========================
</TABLE>
See notes to financial statements.
<PAGE> -5-
MEGATECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 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>
Sept. 30, 2000 Dec. 31, 1999
-------------------------------
<S> <C> <C>
Raw materials $180,294 $182,614
Work in process 8,613 29,903
Finished goods 64,093 145,145
--------------------------
253,000 357,662
==========================
</TABLE>
3. MAJOR CUSTOMER INFORMATION:
---------------------------
For the period ended September 30, 2000 and 1999, sales to two and
one unrelated sales representatives comprised 61% and 44% 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 NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
RESULTS OF OPERATIONS:
----------------------
Quarter Ended September 30, 2000 compared to quarter ended
September 30, 1999
Sales for the quarter ended September 30, 2000 were $512,044 compared to
$488,322 for the same quarter last year. The increase was primarily due to
an increase in domestic sales.
Gross profit for the quarter ended September 30, 2000 was $330,355 or 65%
of sales, compared to $209,436 or 43% of sales, for the same quarter last
year. The increase is the result of lower material and labor costs.
Operating expenses for the quarter ended September 30, 2000 were $266,425
or 52% of sales, compared to $161,951 or 33% of sales, for the same quarter
last year. The increase is due to an increase in selling and marketing
costs.
The net income for the quarter ended September 30, 2000 was $58,900
compared to a net income of $48,214 for the same quarter last year. The
profits were derived from increased sales and better profit margins.
Nine months Ended September 30, 2000 compared to nine months ended
September 30, 1999
Sales for the nine months ended September 30, 2000 were $1,780,976,
compared to $1,472,339 for the same period last year. The increase was due
to an increase in domestic sales.
Gross profit for the nine months ended September 30, 2000 was $913,320 or
51% of sales, compared to $656,758 or 45% of sales, for the same period
last year. The increase is the result of a decrease in direct labor costs
and material costs.
Operating expenses for the nine months ended September 30, 2000 were
$772,355 or 43% of sales, compared to $559,687 or 38% of sales, for the
same period last year. The increase is attributable to an increase in
selling and marketing expenses.
The net income for the nine months ended September 30, 2000 was $135,650
compared to net income of $97,505 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 September 30, 2000 was $521,428 compared to $376,983
in working capital at December 31, 1999. The increase is attributable to
the net income for the year.
The company maintains a secured line of credit in the amount of $200,000.
At September 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 foreseeable
cash requirements for the next twelve months.
The firm's backlog as of September 30, 2000 was approximately $94,130
compared to $264,129 for 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.
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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)
November 6, 2000 /s/ Vahan V. Basmajian
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Date Vahan V. Basmajian
President, Treasurer
<PAGE> -10-
