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 SEPTEMBER 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
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The number of shares of the registrant's common stock outstanding as of
SEPTEMBER 30, 1996 was 3,784,808.
MEGATECH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30 DECEMBER 31
1996 1995
(UNAUDITED) AUDITED
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ASSETS
Current assets:
Cash and cash equivalents $ 68,365 $ 55,578
Accounts receivable - net: 397,501 531,429
Other receivable 4,778 2,967
Prepaid expenses 20,156 5,539
Inventories at lower of cost (first-in first-out) or market 346,033 327,336
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Total current assets 836,833 922,849
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Property, plant and equipment, at cost net of accumulated
depreciation of $354,192.79 in 1996 and $328,336 in 1995 99,393 118,531
Security deposits 7,666 7,666
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Total Assets $ 943,892 $1,049,046
===========================
<F*> See accompanying notes to consolidated financial statements.
MEGATECH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 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 860 2,976
Trade Accounts Payable 234,867 239,589
Accrued expenses 62,030 36,734
Accrued State Income Taxes (187)
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Total current liabilities 297,570 316,299
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Equipment lease, net of current portion 1,230 1,230
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Total liabilities $ 298,801 $ 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 (3,422,842) (3,333,116)
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Total stockholders' equity 645,091 731,517
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Total Liabilities and Stockholders' Equity $ 943,892 $1,049,046
===========================
<F*> See accompanying notes to consolidated financial statements.
MEGATECH CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED QUARTER ENDED
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SEPT. 1996 SEPT. 1995 SEPT. 1996 SEPT. 1995
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Sales $1,486,802 $2,106,285 $ 587,749 $ 592,826
Cost of goods sold 891,270 1,209,929 306,194 356,711
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Gross profit 595,532 896,356 281,555 236,115
Operating expenses:
Selling, general and administrative expenses 665,304 898,732 245,664 284,199
Research and development 18,206 51,458 9,965 15,201
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Profit (loss) from operations (87,978) (53,834) 25,926 (63,285)
Other income and (expense):
Interest (1,034) (2,965) (404) (749)
Other 0 (12,762) 0 (4,640)
Legal (846) 2,003 (846) 0
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Total other income and (expense) (1,879) (13,724) (1,250) (5,389)
Net profit (loss) ($ 89,857) ($ 67,558) $ 24,676 ($ 68,674)
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Net profit (loss) per share ($ 0.024) ($ 0.018) $ 0.007 ($ 0.019)
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Weighted average number of shares outstanding 3,784,808 3,671,258 3,785,208 3,671,258
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MEGATECH CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
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SEPT. 1996 SEPT. 1995
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Cash flows from operating activities:
Net profit (loss) $ 24,676 $ 1,116
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,546 10,295
Changes in operating assets and liabilities:
Accounts receivable, trade (138,505) (75,805)
Accounts receivable, other 1,514 (1,086)
Prepaid expenses (6,048) (12,614)
Inventories (37,165) 158,149
Notes payable - current (772) (11,105)
Accounts payable 69,129 (92,084)
Accrued expenses 51,143 (86,308)
Security deposit - Rent Building 0 (2,033)
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Net cash provided (used) by operating activities (26,482) (111,476)
Cash flows from investing activities:
Purchases of property and equipment (1,451) (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 0 1,330
Additional paid in capital 0 72,521
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Net cash used by financing activities 0 70,575
Net increase (decrease) in cash and cash equivalents (27,932) (115,784)
Cash & cash equivalents, beginning of period 96,298 189,051
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Cash & cash equivalents, end of period $ 68,365 $ 73,267
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MEGATECH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 September
30, 1996 and for all periods presented have been made. The results of
operation for the nine months ended September 30, 1996 are not necessarily
indicative of the operating results that may be expected for the year ended
December 31, 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:
SEPT. 30 DEC. 31
1996 1995
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Raw materials 142,643 226,359
Work in process 74,062 0
Finished goods 139,327 110,977
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356,033 337,336
Less reserve for obsolescence 10,000 10,000
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346,033 327,336
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MEGATECH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1996
RESULTS OF OPERATIONS:
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NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH
NINE MONTHS ENDED SEPTEMBER 30, 1995
Consolidated net sales for the nine months ended September 30, 1996
decreased by $.6 million compared to the corresponding period of 1995. This is
primarily due to lower overall international sales, specifically from Mexico.
Gross profit for the nine months ended September 30, 1996 decreased by 3%
compared to the corresponding period in 1995. As a percentage of total sales,
gross profit was 40% in the nine months ended September 30, 1996 as compared to
43% in the corresponding period of 1995. The decrease is due to product mix,
where higher percentage of resale items were sold carrying lower gross profit
margins.
Selling, General & Administrative expenses for the nine months ended
September 30, 1996 decreased from the corresponding period of 1995 by $ .27
million or 28%. The decrease is primarily a result of lower sales commissions
which were due to the decreased overall sales.
Research and Development expenses for the nine months ended September 30,
1996 decreased from the corresponding period of 1995 by $.03 million. The
decrease is attributable to reduction in research projects.
MEGATECH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1996
LIQUIDITY AND CAPITAL RESOURCES:
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Working capital for the nine months ended September 30, 1996 was $539,263
as compared to $596,642 in working capital at September 30, 1995. The decrease
was primarily attributable to lower accounts receivables.
The company maintains a secured line of credit in the amount of $200,000.
At September 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.
The firm's backlog as of September 30, 1996 was approximately $455,981
compared to $ 407,691 for same period ended in 1995.
3. MAJOR CUSTOMER INFORMATION:
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For the period ended September 30, 1996, sales to four unrelated sales
representatives in California, Arizona, Mississippi and Mexico comprised 14%,
17%, 12% and 18% 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)
SEPTEMBER 30, 1996 /s/ VAHAN V. BASMAJIAN
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Date Vahan V. Basmajian
President, Treasurer