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 March 31, 2002 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 3,860,558 shares of common stock outstanding at April 30, 2002.
MEGATECH CORPORATION
QUARTERLY REPORT FORM 10-Q
March 31, 2002
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited) Page
Balance Sheet - March 31, 2002 and December 31, 2001 3
Statement of Operations- for the three months ended 4
March 31, 2002 and March 31, 2001
Statement of Cash Flows- for the three months ended 5
March 31, 2002 and March 31, 2001
Notes to Financial Statements- March 31, 2002 6
ITEM 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosures About 9
Market Risk
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
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEGATECH CORPORATION
BALANCE SHEET
MARCH 31, 2002 DEC. 31, 2001
(UNAUDITED) (AUDITED)
---------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 47,045 $ 64,138
Accounts receivable:
Trade 214,831 254,061
Other 3,824 3,697
Inventories 494,323 216,506
Prepaid expenses 5,336 7,710
---------------------------------
Total current assets 765,359 546,112
Property, plant and equipment, net 67,924 71,233
Other assets 7,666 7,666
---------------------------------
Total Assets $ 840,949 $ 625,011
=================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade $ 209,159 $ 50,160
Affiliate 22,912 0
Accrued Liabilities 40,484 51,964
Line of credit 100,000 0
---------------------------------
Total current liabilities 372,555 102,124
---------------------------------
Long-Term Debt 37,500 37,500
---------------------------------
Stockholders' equity:
Common Stock, par value $.0143
per share, 5,000,000 shares
authorized; 3,840,558 shares
issued and outstanding, 54,920 54,920
Additional paid-in capital 4,016,948 4,016,948
Deficit (3,640,974) (3,586,481)
---------------------------------
Stockholders' equity net 430,894 485,387
---------------------------------
Total liabilities and
stockholders' equity $ 840,949 $ 625,011
================================
See notes to financial statements
3
MEGATECH CORPORATION
STATEMENT OF OPERATIONS (UNAUDITED)
QUARTER ENDED
MARCH 31, 2002 MARCH 31, 2001
----------------------------------
Sales $ 319,760 $ 365,022
Cost of sales 110,004 172,104
----------------------------------
Gross profit 209,756 192,918
----------------------------------
Operating expenses:
Selling 214,602 187,949
General and administrative 44,898 45,382
Research and development 3,809 5,564
----------------------------------
Total operating expenses 263,309 238,895
----------------------------------
Income (loss) from operations (53,553) (45,977)
----------------------------------
Other income (expense):
Interest income 0 86
Interest expense (750) (881)
Other income (expense) (190) (190)
----------------------------------
Other income (expense), net (940) (985)
----------------------------------
Net income (loss) $ (54,493) $ (46,962)
==================================
Net income (loss) per share - basic
and diluted $ (0.014) $ (0.012)
==================================
Weighted average number of common
shares outstanding 3,840,558 3,813,708
==================================
See notes to financial statements.
4
MEGATECH CORPORATION
STATEMENT OF CASH FLOWS (Unaudited)
QUARTER ENDED
MARCH 31, 2002 MARCH 31, 2001
----------------------------------
Cash flows from operating activities:
Net income (loss) $ (54,493) $ (46,962)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 5,700 4,617
Changes in operating assets and
liabilities:
Accounts receivable 39,103 54,110
Prepaid expenses 2,374 3,585
Inventories (277,817) (23,038)
Accounts payable 181,911 26,817
Accrued liabilities (11,480) 4,286
----------------------------------
Net cash provided by (used in)
operating activities (114,702) 23,415
----------------------------------
Cash flows from investing activities:
Purchases of property and equipment (2,391) (2,890)
----------------------------------
Net cash used by investing activities (2,391) (2,890)
----------------------------------
Cash flows from financing activities:
Advances on line of credit 100,000 0
----------------------------------
Net cash provided by financing
activities 100,000 0
----------------------------------
Net increase (decrease) in cash and
cash equivalents (17,093) 20,525
Cash & cash equivalents, beginning
of period 64,138 27,585
----------------------------------
Cash & cash equivalents, end of period $ 47,045 $ 48,110
==================================
See notes to financial statements.
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MEGATECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
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.
Certain amounts in the statement of operations for the quarter ended
March 31, 2001 have been reclassified to conform to the current
quarter's presentation.
2. INVENTORIES:
-------------------------------------------
Inventories consisted of the following:
MARCH 31, 2002 DEC. 31, 2001
---------------------------------
Raw materials $163,840 $119,082
Work in process 262,237 37,096
Finished goods 68,246 60,328
---------------------------------
$494,323 $216,506
=================================
3. MAJOR CUSTOMER INFORMATION:
-------------------------------------------
For the period ended March 31, 2002 and 2001, sales to one and three
unrelated sales representatives comprised 81% and 75% of total sales,
respectively.
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ITEM 2.
MEGATECH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR QUARTERS ENDED MARCH 31, 2002 AND 2001
RESULTS OF OPERATIONS:
- -------------------------------------------------
Quarter Ended March 31, 2002 compared to quarter ended March 31, 2001
Sales for the quarter ended March 31, 2002 were $319,760, compared to
$365,022 for the same quarter last year. The decrease was primarily due to
a decrease in international sales. Domestic sales in the quarter ended
March 31, 2002 were $317,730 or 99% of total sales, compared to $325,802 or
89% of total sales for the same period last year. International sales in
the quarter ended March 31, 2002 were $2,030 or 1% of total sales, compared
to $39,220 or 11% of total sales for the same period last year.
Gross profit for the quarter ended March 31, 2002 was $209,756 or 66% of
sales, compared to $192,918 or 53% of sales, for the same quarter last
year. The increase as a percentage of sales is the result of lower
materials and labor costs. Material costs decreased due to better
purchasing decisions, and labor costs decreased due to changes in
production staffing.
Selling and marketing expenses for the quarter ended March 31, 2002 were
$214,602 or 67% of sales, compared to $187,949 or 51% of sales for the same
period last year. The increase is due to increased commissions due to
increased business with Snap On Corporation, as well as changes in
marketing staff.
General and administrative expenses for the quarter ended March 31, 2002
were $44,898 or 14% of sales, compared to $45,382 or 12% of sales for the
same period last year. No major changes in the level of general and
administrative expenses were noted in comparison to the previous year.
Research and development expenses for the quarter ended March 31, 2002 were
$3,809 or 1% of sales, compared to $5,564 or 1% of sales, for the same
quarter last year. No major changes in the level of research and
development expenses were noted in comparison to the previous year.
The net loss for the quarter ended March 31, 2002 was $54,493 compared to a
net loss of $46,962 for the same quarter last year. The decrease is the
result of the items discussed above.
7
LIQUIDITY AND CAPITAL RESOURCES:
- -------------------------------------------------
Working capital as of March 31, 2002 was $392,804 compared to $443,988 in
working capital at December 31, 2001. The decrease was attributable to
the net loss for the quarter.
The company maintains a secured line of credit in the amount of $200,000.
At March 31, 2002, $100,000 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 March 31, 2002 was approximately $2,909,232
compared to $255,155 for the same period ended in 2001. The increase in
backlog is the result of $2.6 million in orders from Snap On Corporation
for automotive trainers to be delivered to the Venezuelan government from
April to June of 2002. Megatech began building products for these orders
in March, 2002 which resulted in substantial increases in inventory,
accounts payable, and the line of credit as of March 31, 2002.
Through Megatech's partnership with Snap On Corporation to market worldwide
transportation trainers that are designed and manufactured by Megatech, the
demand for Megatech trainers is increasing throughout the world. The
fundamental strength of the partnership with Snap On is based on the
synergism that exists between the two product lines. The Snap On product
line combined with Megatech trainers makes a unique package which provides
a training facility with it's tools from Snap On and it's trainers from
Megatech.
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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.
- --------------------------------------------------------------
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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)
April 30, 2002 /s/ Vahan V. Basmijian
- --------------------- ------------------------------
Date Vahan V. Basmajian
President, Treasurer
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