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, 1997 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)
(508) 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 uch
filing requirements for the past 90 days. Yes ____ No ____
There were 3,791,808 shares of common stock outstanding at September 30, 1997.
1
MEGATECH CORPORATION
QUARTERLY REPORT FORM 10-Q
September 30, 1997
Page
----
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Balance Sheet - September 30, 1997 and December 31, 1996 3
Statement of Operations- for the three and nine months ended
September 30, 1997 and September 30, 1996 4
Statement of Cash Flows- for the nine months ended Septemer 30,
1997 and September 30, 1996 5
Notes to Financial Statements- September 30, 1997 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
PART II. OTHER INFORMATION
ITEM 1. Legal proceedings 9
ITEM 2. Changes in securities 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
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
MEGATECH CORPORATION
BALANCE SHEET
SEPT. 30, 1997 DEC. 31, 1996
-------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 63,428 $ 90,770
Accounts receivable:
Trade 226,398 407,169
Affiliate 355 50,945
Other 11,978 2,024
Inventories 407,087 380,379
Prepaid expenses 0 17,127
-----------------------------
Total current assets 709,246 948,414
-----------------------------
Property, plant and equipment, net 89,083 96,370
Other assets 7,666 7,666
-----------------------------
Total Assets $ 805,995 $ 1,052,450
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts Payable:
Trade 155,997 309,562
Affiliate 4,254 8,701
Accrued Expenses 37,776 32,622
Other Liabilities 1,693 40,058
Current obligation under capital lease 0 1,252
-----------------------------
Total current liabilities 199,720 392,195
-----------------------------
Stockholders' equity:
Common Stock, par value $.0143 per share, 5,000,000
shares authorized; 3,791,808 & 3,788,808 shares
issued and outstanding, respectively. 54,180 54,180
Additional paid-in capital 4,034,824 4,034,824
Deficit (3,482,729) (3,428,749)
-----------------------------
Total stockholders' equity 606,275 660,255
-----------------------------
Total liabilities and stockholders' equity $ 805,995 $ 1,052,450
=============================
See notes to financial statements.
3
MEGATECH CORPORATION
STATEMENT OF OPERATIONS (UNAUDITED)
QUARTER ENDED NINE MONTHS ENDED
-------------------------------- --------------------------------
SEPT. 30, 1997 SEPT. 30, 1996 SEPT. 30, 1997 SEPT. 30, 1996
-------------- -------------- -------------- --------------
Sales $ 453,431 $ 587,748 $ 1,545,503 $ 1,486,802
Cost of sales 257,537 306,194 878,431 891,270
----------------------------------------------------------------
Gross profit 195,894 281,554 667,072 595,532
----------------------------------------------------------------
Operating expenses:
Selling 168,969 195,735 569,620 521,281
General and administrative 43,135 49,928 140,711 144,022
Research and development 4,528 9,965 11,645 18,206
----------------------------------------------------------------
Total operating expenses 216,632 255,628 721,976 683,509
----------------------------------------------------------------
Net income (loss) from operations (20,738) 25,926 (54,904) (87,977)
Other income (expense):
Interest income 0 3 1,754 5
Other expense (733) (1,253) (830) (1,754)
----------------------------------------------------------------
Other income (expense), net (733) (1,250) 924 (1,749)
----------------------------------------------------------------
Net income (loss) $ (21,471) $ 24,676 $ (53,980) $ (89,726)
================================================================
Net income (loss) per share $ (0.01) $ 0.01 $ (0.01) $ (0.02)
================================================================
Weighted average number of common
shares outstanding 3,788,808 3,785,208 3,788,808 3,785,208
================================================================
See notes to financial statements.
4
MEGATECH CORPORATION
STATEMENT OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED
--------------------------------
SEPT. 30, 1997 SEPT. 30, 1996
-------------- --------------
Cash flows from operating activities:
Net income (loss) $ (53,980) $ (89,726)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,366 25,857
Changes in operating assets and liabilities:
Accounts receivable 221,407 132,117
Prepaid expenses 17,127 (14,617)
Inventories (26,708) (18,697)
Accounts payable (158,012) (4,722)
Accrued expenses (33,211) 25,109
----------------------------
Net cash provided (used) by operating activities (24,011) 55,321
Cash flows from investing activities:
Purchases of property and equipment (2,079) (6,719)
Cash flows from financing activities:
Payments on capital lease obligations (1,252) (2,116)
Proceeds from issuance of common stock 0 3,301
Principal payments on notes payable 0 (37,000)
----------------------------
Net cash used by financing activities (1,252) (35,815)
Net increase (decrease) in cash and cash equivalents (27,342) 12,787
Cash & cash equivalents, beginning of period 90,770 55,578
----------------------------
Cash & cash equivalents, end of period $ 63,428 $ 68,365
============================
See notes to financial statements.
5
MEGATECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
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:
SEPT. 30, 1997 DEC. 31, 1996
-------------- -------------
Raw materials $ 176,861 $ 367,045
Work in process 40,791 0
Finished goods 199,435 23,334
--------------------------
417,087 390,379
Less reserve for obsolescence 10,000 10,000
--------------------------
$ 407,087 $ 380,379
==========================
3. MAJOR CUSTOMER INFORMATION:
---------------------------
For the period ended September 30, 1997, sales to one unrelated sales
representative comprised 20% of total sales.
For the period ended September 30, 1996, sales to four unrelated sales
representatives comprised 14%, 17%, 12%, and 18% of total sales,
respectively.
6
ITEM 2.
MEGATECH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR QUARTER ENDED AND NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996
RESULTS OF OPERATIONS:
- ----------------------
Quarter Ended September 30, 1997 compared to quarter ended September 30, 1996
Sales for the quarter ended September 30, 1997 were $453,431, compared to
$587,748 for the same quarter last year. The decrease was primarily due to a
decrease in domestic sales in the technology education area.
Gross profit for the quarter ended September 30, 1997 was $195,894 or 43% of
sales, compared to $281,554 or 48% of sales, for the same quarter last year.
The decrease is the result of lower sales of lower margin products.
Operating expenses for the quarter ended September 30, 1997 were $216,632 or
48% of sales, compared to $255,628 or 43% of sales, for the same quarter last
year. The decrease is mainly attributable to lower selling and marketing
expenses as a result of lower sales.
The net loss for the quarter ended September 30, 1997 was $21,471 compared to
net income of $24,676 for the same quarter last year. The decrease is the
result of the items discussed above.
Nine months ended September 30, 1997 compared to nine months ended
September 30, 1996
Sales for the nine months ended September 30, 1997 were $1,545,503 compared to
$1,486,802 for the same period last year. The increase is due to an increase in
international sales in the automotive area.
Gross profit for the nine months ended September 30, 1997 was $667,072 or 43%
of sales, compared to $595,532 or 40% of sales for the same period last year.
The slight increase was due to higher sales of higher margin products.
Operating expenses for the nine months ended September 30, 1997 were $721,976
or 47% of sales, compared with $683,509 or 46% of sales, for the same period
last year. The increase is mainly due to higher selling and marketing expenses
as a result of increased sales.
The net loss for the nine months ended September 30, 1997 was $53,980 compared
to a net loss of $89,726 for the same period last year. The improvement is due
to an increase in the gross profit margin.
7
MEGATECH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1997
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
Working capital for the nine months ended September 30, 1997 was $509,526
compared to $556,219 in working capital at December 31, 1996. The decrease was
primarily attributable to the net loss.
The company maintains a secured line of credit in the amount of $200,000. At
September 30, 1997, 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, 1997 was approximately $335,412 compared
to $455,981 for same period ended in 1996.
8
MEGATECH CORPORATION
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.
- -----------------------------------------
9
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)
November 11, 1997 /s/ VAHAN V. BASMAJIAN
- ----------------------------------- --------------------------------
Date Vahan V. Basmajian
President, Treasurer
10