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, 1998 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 3,792,308 shares of common stock outstanding at May 7,
1998.
MEGATECH CORPORATION
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QUARTERLY REPORT FORM 10-Q
March 31, 1998
PART 1. FINANCIAL INFORMATION
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ITEM 1. Financial Statements (Unaudited) Page
----
Balance Sheet - March 31, 1998 and December 31, 1997 3
Statement of Operations- for the three months ended 4
March 31, 1998 and March 31, 1997
Statement of Cash Flows- for the three months ended March 5
31, 1998 and March 31, 1997
Notes to Financial Statements- March 31, 1998 6
ITEM 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosures About Market 8
Risk
PART II. OTHER INFORMATION
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ITEM 1. Legal Proceedings 8
ITEM 2. Changes in Securities and Use of Proceeds 8
ITEM 3. Defaults Upon Senior Securities 8
ITEM 4. Submission of Matters to a Vote of Security Holders 8
ITEM 5. Other Information 8
ITEM 6. Exhibits and Reports on Form 8-K 8
Signature Page 9
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEGATECH CORPORATION
BALANCE SHEET
MARCH 31, 1998 DEC. 31, 1997
(UNAUDITED) (AUDITED)
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ASSETS
Current assets:
Cash and cash equivalents $ 71,716 $ 55,026
Accounts receivable:
Trade 324,418 335,891
Affiliate 355 355
Other 13,836 20,435
Inventories 392,606 409,551
Prepaid expenses 433 22,157
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Total current assets 803,364 843,415
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Property, plant and equipment, net 80,808 85,703
Other assets 7,666 7,666
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Total Assets $ 891,838 $ 936,784
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note Payable - bank $ 25,000
Accounts Payable:
Trade $ 272,174 258,179
Affiliate 3,514 15,204
Accrued Expenses 58,569 85,527
Other Liabilities 2,247 7,141
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Total current liabilities 336,504 391,051
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Stockholders' equity:
Common Stock, par value $.0143 per share,
5,000,000 shares authorized; 3,792,308
shares issued and outstanding, 54,230 54,230
Additional paid-in capital 4,049,858 4,049,858
Deficit (3,548,754) (3,558,355)
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Total stockholders' equity 555,334 545,733
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Total liabilities and stockholders' equity $ 891,838 $ 936,784
=============================
See notes to financial statements.
MEGATECH CORPORATION
STATEMENT OF OPERATIONS (UNAUDITED)
QUARTER ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
Sales $ 619,714 $ 569,607
Cost of sales 362,595 323,587
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Gross profit 257,119 246,020
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Operating expenses:
Selling 194,311 191,821
General and administrative 45,744 49,302
Research and development 7,261 3,789
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Total operating expenses 247,316 244,912
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Income from operations 9,803 1,108
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Other income (expense):
Interest (242) 1,692
Other 40 (124)
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Other income (expense), net (202) 1,568
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Net income $ 9,601 $ 2,676
===========================
Net income per share - basic and diluted $ 0.003 $ 0.001
===========================
Weighted average number of common
shares outstanding 3,792,308 3,784,566
===========================
See notes to financial statements.
MEGATECH CORPORATION
STATEMENT OF CASH FLOWS
QUARTER ENDED
MARCH 31, 1998 MARCH 31, 1997
--------------------------------
Cash flows from operating activities:
Net income (loss) $ 9,601 $ 2,676
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,895 5,482
Changes in operating assets and liabilities:
Accounts receivable 18,072 133,742
Prepaid expenses 21,724 (11,964)
Inventories 16,945 15,019
Accounts payable 2,305 (74,348)
Accrued expenses (31,852) (23,013)
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Net cash provided (used) by operating activities 41,690 47,594
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Cash flows from investing activities:
Purchases of property and equipment 0 (9,572)
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Cash flows from financing activities:
Payments on capital lease obligations 0 (1,230)
Principal payments on notes payable (25,000) 0
-------------------------
Net cash used by financing activities (25,000) (1,230)
-------------------------
Net increase (decrease) in cash and
cash equivalents 16,690 37,113
Cash & cash equivalents, beginning of period 55,026 90,770
-------------------------
Cash & cash equivalents, end of period $ 71,716 $127,883
=========================
See notes to financial statements.
MEGATECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
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:
MARCH 31, 1998 DEC. 31, 1997
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Raw materials $195,889 $199,841
Work in process 16,520 0
Finished goods 180,197 209,710
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392,606 409,551
==========================
3. MAJOR CUSTOMER INFORMATION:
------------------------------
For the period ended March 31, 1998 and 1997, sales to one unrelated
sales representative comprised 31% and 35% of total sales,
respectively.
ITEM 2.
MEGATECH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR QUARTER ENDED MARCH 31, 1998 AND 1997
RESULTS OF OPERATIONS:
- ----------------------
Quarter Ended March 31, 1998 compared to quarter ended March 31, 1997
Sales for the quarter ended March 31, 1998 were $619,714, compared to $569,607
for the same quarter last year. The increase was primarily due to an increase
in sales in the PC area.
Gross profit for the quarter ended March 31, 1998 was $257,119 or 41% of
sales, compared to $246,020 or 43% of sales, for the same quarter last year.
The decrease is the result of sales of lower margin products.
Operating expenses for the quarter ended March 31, 1998 were $247,316 or 40%
of sales, compared to $244,912 or 43% of sales, for the same quarter last
year. The increase is attributable to an increase in research and
development costs.
The net income for the quarter ended March 31, 1998 was $9,601 compared to a
net income of $2,676 for the same quarter last year. The increase is the
result of the items discussed above.
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
Working capital as of March 31, 1998 was $466,860 compared to $452,364 in
working capital at December 31, 1997. The increase was attributable to the
net income for the quarter.
The company maintains a secured line of credit in the amount of $200,000. At
March 31, 1998, 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 March 31, 1998 was approximately $306,226 compared
to $247,570 for same period ended in 1997.
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.
--------------------------------
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
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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)
May 12, 1998 /s/ Vahan V. Basmajian
- -------------------------------------------------------------
Date Vahan V. Basmajian
President, Treasurer