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, 1996 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 [ ]
The number of shares of the registrant's common stock outstanding as of June 30,
1996 was 3,785,208.
MEGATECH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30 DECEMBER 31
1996 1995
(UNAUDITED) AUDITED
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ASSETS
Current assets:
Cash and cash equivalents $ 96,298 $ 55,578
Accounts receivable - net: 274,368 531,429
Other receivable 6,175 2,967
Prepaid expenses 14,225 5,539
Inventories at lower of cost (first-in
first-out) or market 308,868 327,336
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Total current assets 699,934 922,849
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Property, plant and equipment, at cost net
of accumulated depreciation of $344,646.94 107,488 118,531
in 1996 and $328,336 in 1995.
Security deposits 7,666 7,666
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Total Assets $815,089 $1,049,046
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* See accompanying notes to consolidated financial statements.
MEGATECH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30 DECEMBER 31
1996 1995
(UNAUDITED) AUDITED
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 0 $ 37,000
Current portion of lease payable 1,632 2,976
Trade Accounts Payable 165,738 239,589
Accrued expenses 32,398 36,734
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Total current liabilities 199,768 316,299
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Equipment lease, net of current portion 1,230 1,230
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Total liabilities $ 200,998 $ 317,529
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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,
respectively 54,115 53,800
Additional paid-in capital 4,013,819 4,010,833
Deficit (3,453,843) (3,333,116)
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Total stockholders' equity 614,090 731,517
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Total Liabilities and Stockholders' Equity $ 815,089 $ 1,049,046
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* See accompanying notes to consolidated financial statements.
MEGATECH CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, QUARTER ENDED JUNE 30,
1996 1995 1996 1995
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Sales $ 899,053 $ 1,513,459 $ 138,376 $ 342,270
Cost of goods sold 585,076 853,217 85,624 174,551
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Gross profit 313,977 660,241 52,752 167,720
Operating expenses:
Selling, general and administrative expenses 425,964 614,533 66,070 107,596
Research and development 8,241 36,257 1,015 5,544
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Profit (loss) from operations (120,229) 9,452 (14,333) 54,580
Other income and (expense):
Interest 630 2,217 86 209
Other 0 8,123 0 358
Legal 0 (2,003) 0 150
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Total other income and (expense) (630) (8,336) (86) (716)
Net profit (loss) ($ 120,858) $ 1,116 ($ 14,419) $ 53,864
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Net profit (loss) per share ($ 0.032) $ 0.000 ($ 0.004) $ 0.015
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Weighted average number of shares
outstanding 3,785,208 3,671,258 3,785,208 3,671,258
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MEGATECH CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
1996 1995
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Cash flows from operating activities:
Net profit (loss) ($120,858) $ 1,116
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 16,311 10,295
Changes in operating assets and liabilities:
Accounts receivable, trade 257,191 (75,805)
Accounts receivable, other (3,066) (1,086)
Prepaid expenses (8,829) (12,614)
Inventories 18,468 158,149
Notes payable - current (38,344) (11,105)
Accounts payable (73,851) (92,084)
Accrued expenses (4,335) (86,308)
Security deposit - Rent Building 0 (2,033)
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Net cash provided (used) by operating activities 42,688 (111,476)
Cash flows from investing activities:
Purchases of property and equipment (5,268) (74,882)
Cash flows from financing activities:
Payments on capital lease obligations 0 (1,317)
Principal payments on long-term debt 0 (1,959)
Proceeds from issuance of common stock 315 1,330
Additional paid in capital 2,985 72,521
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Net cash used by financing activities 3,300 70,575
Net increase (decrease) in cash and cash 40,720 (115,784)
equivalents
Cash & cash equivalents, beginning of period 55,578 189,051
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Cash & cash equivalents, end of period $ 96,298 $ 73,267
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MEGATECH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
1. BASIS OF PRESENTATION:
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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, 1996 and for all periods presented have been made. The
results of operation for the three months ended June 30, 1996 are not
necessarily indicative of the operating results that may be expected
for the year ended June 30, 1996. It is suggested that the condensed
consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's
December 31, 1995 annual report.
2. INVENTORIES:
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Inventories consist of the following:
JUNE 30 DECEMBER 31
1996 1995
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Raw materials 177,180 226,359
Work in process 32,968 0
Finished goods 108,720 110,977
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318,868 337,336
Less reserve for obsolescence 10,000 10,000
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308,868 327,336
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MEGATECH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 1996
RESULTS OF OPERATIONS:
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SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH
SIX MONTHS ENDED JUNE 30, 1995
Consolidated net sales for the six months ended June 30, 1996
decreased from the corresponding period of 1995 by $.6 million or 40%
to $.9 million. This decrease was primarily due to decreases in
overall sales, specifically from Mexico, due to their economic
downturn.
Gross profit for the six months ended June 30, 1996 decreased from
the corresponding period of 1995 by $.35 million. As a percentage of
total sales, gross profit was 35% in the six months ended June 30,
1996 as compared to 44% in the corresponding period of 1995. The
decrease is due to a combination of product mix, where 14% of sales
for 1996 were resale items at lower gross profit margins, larger
overhead expenses due to the larger facility, and price increases from
our vendors due to inflation. This type of product mix may continue in
the future, as more resale products are being introduced through our
product line to compliment the existing trainers. Offsetting this
change in product mix, the company is attempting to lower the purchase
costs by identifying alternate vendor sources. In addition, the
company is analyzing the cost savings of producing in-house some items
currently purchased outside. Overall, the company believes it can
increase the gross profit margins if these goals are accomplished.
Selling, General & Administrative expenses for the six months ended
June 30, 1996 decreased from the corresponding period of 1995 by $ .2
million or 31% to $.6 million. The decrease is primarily a result of
lower sales commissions which were due to the decreased sales.
Research and Development expenses for the six months ended June 30,
1996 decreased from the corresponding period of 1995 by $.03 million.
The decrease is attributable to a reduction in staff and outside
engineering services.
LIQUIDITY AND CAPITAL RESOURCES:
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Working capital for the six months ended June 30, 1996 was $500,166
as compared to $668,047 in working capital at June 30, 1995. The
decrease was primarily attributable to lower accounts receivable and
cash balances and payments for the current debt.
The company maintains a secured line of credit in the amount of
$200,000. At June 30, 1996, 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.
These requirements include the retirement of the currently delinquent
notes payable to Diagnostic Products Co. for $15,500 in one lump sum
in July 1996 per agreement reached with DPC.
The firm's backlog as of June 30, 1996 was approximately $437,661
compared to $ 565,645 same period ended in 1995.
3. MAJOR CUSTOMER INFORMATION:
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For the period ended June 30, 1996, sales to two unrelated sales
representatives in Mississippi and Mexico comprised 11% and 26% of
total sales, respectively.
No other single customer accounted for more than 10% of the
Company's sales for the same period in 1996.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings: Not applicable
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Item 2. Changes in Securities: Not applicable
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Item 3. Defaults Upon Senior Securities: Not applicable
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Item 4. Submission of Matters to a Vote
of Security Holders: Not applicable
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Item 5. Other Information: Not applicable
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Item 6. Exhibits and Reports in Form 8-K: Not applicable
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SIGNATURES
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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, 1996 /s/ VAHAN V. BASMAJIAN
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Date Vahan V. Basmajian
President, Treasurer