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, 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 he 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 November 9, 1998.
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MEGATECH CORPORATION
QUARTERLY REPORT FORM 10-Q
September 30, 1998
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited) Page
Balance Sheet - September 30, 1998 and December 31, 1997 3
Statement of Operations - for the quarter and nine
months ended September 30, 1998 and September 30, 1997 4
Statement of Cash Flows- for the nine months ended
September 30, 1998 and September 30, 1997 5
Notes to Financial Statements- September 30, 1998 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 9
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 I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEGATECH CORPORATION
BALANCE SHEET
SEPT 30, 1998 DEC. 31, 1997
(UNAUDITED) (AUDITED)
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 69,357 $ 55,026
Accounts receivable:
Trade 142,059 335,891
Affiliate 355 355
Other 3,896 20,435
Inventories 333,125 409,551
Prepaid expenses 10,513 22,157
------------------------------
Total current assets 559,305 843,415
------------------------------
Property, plant and equipment, net 77,967 85,703
Other assets 7,666 7,666
------------------------------
Total Assets $ 644,938 $ 936,784
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note Payable - bank $ 0 $ 25,000
Accounts Payable:
Trade 97,151 258,179
Affiliate 1,593 15,204
Accrued Expenses 89,176 85,527
Other Liabilities 1,139 7,141
------------------------------
Total current liabilities 189,059 391,051
------------------------------
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 4,023,608 4,049,858
Deficit (3,621,959) (3,558,355)
------------------------------
Total stockholders' equity 455,879 545,733
------------------------------
Total liabilities and
stockholders' equity $ 644,938 $ 936,784
==============================
See notes to financial statements.
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MEGATECH CORPORATION
STATEMENT OF OPERATIONS (UNAUDITED)
NINE MONTHS ENDED QUARTER ENDED
-------------------------------- --------------------------------
SEPT 30, 1998 SEPT 30, 1997 SEPT 30, 1998 SEPT 30, 1997
------------- ------------- ------------- -------------
Sales $1,353,367 $1,545,503 $ 271,689 $ 453,431
Cost of sales 817,081 878,431 212,629 257,537
-------------------------------------------------------------------
Gross profit 536,286 667,072 59,060 195,894
-------------------------------------------------------------------
Operating expenses:
Selling 462,684 569,620 108,687 168,969
General and administrative 118,572 140,711 42,743 43,135
Research and development 17,798 11,645 6,717 4,528
-------------------------------------------------------------------
Total operating expenses 599,054 721,976 158,147 216,632
-------------------------------------------------------------------
Income from operations (62,768) (54,904) (99,087) (20,738)
-------------------------------------------------------------------
Other income (expense):
Interest (892) 1,754 (649) 0
Other 54 (830) 0 (733)
-------------------------------------------------------------------
Other income (expense), net (838) 924 (649) (733)
-------------------------------------------------------------------
Net income ($ 63,606) ($ 53,980) ($ 99,736) ($ 21,471)
===================================================================
Net income per share - basic
and diluted ($ 0.017) ($ 0.014) ($ 0.026) ($ 0.006)
===================================================================
Weighted average number of
common shares outstanding 3,792,308 3,788,808 3,792,308 3,788,808
===================================================================
See notes to financial statements.
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MEGATECH CORPORATION
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED
--------------------------------
SEPT 30, 1998 SEPT 30, 1997
------------- -------------
Cash flows from operating activities:
Net income (loss) ($ 63,606) ($ 53,980)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Non-cash charges (credits) to net loss:
Expiration of stock options (26,250) 0
Depreciation and amortization 14,687 9,366
Changes in operating assets and
liabilities:
Accounts receivable 210,371 221,407
Prepaid expenses 11,644 17,127
Inventories 76,426 (26,708)
Accounts payable (174,639) (158,012)
Accrued expenses (2,351) (33,211)
----------------------------
Net cash provided (used) by operating
activities 46,282 (24,011)
----------------------------
Cash flows from investing activities:
Purchases of property and equipment (6,951) (2,079)
----------------------------
Cash flows from financing activities:
Payments on capital lease obligations 0 (1,252)
Principal payments on notes payable (60,000) 0
Advances on notes payable 35,000 0
----------------------------
Net cash used by financing activities (25,000) (1,252)
----------------------------
Net increase (decrease) in cash and
cash equivalents 14,331 (27,342)
Cash & cash equivalents, beginning
of period 55,026 90,770
----------------------------
Cash & cash equivalents, end of period $ 69,357 $ 63,428
============================
See notes to financial statements.
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MEGATECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 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:
SEPT 30, 1998 DEC. 31, 1997
------------- -------------
Raw materials $162,692 $199,841
Work in process 12,740 0
Finished goods 157,693 209,710
--------------------------
333,125 409,551
==========================
3. MAJOR CUSTOMER INFORMATION:
---------------------------
For the year ended September 30, 1998 and 1997, sales to two and one
unrelated sales representatives comprised 26% and 20% 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 QUARTER
AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
RESULTS OF OPERATIONS:
- ----------------------
Quarter Ended September 30, 1998 compared to
quarter ended September 30, 1997
Sales for the quarter ended September 30, 1998 were $271,689, compared to
$453,431 for the same quarter last year. The decrease was primarily due to
a decrease in domestic sales.
Gross profit for the quarter ended September 30, 1998 was $59,060 or 22% of
sales, compared to $195,894 or 43% of sales, for the same quarter last year.
The decrease is the result of a writeoff of inventory of $70,409 in the
quarter ended September 30, 1998. Gross profit for the quarter ended
September 30, 1998 prior to the writedown was 47%.
Operating expenses for the quarter ended September 30, 1998 were $158,147 or
58% of sales, compared to $216,632 or 48% of sales, for the same quarter
last year. The decrease is attributable mainly to a decrease in selling
and marketing costs.
The net loss for the quarter ended September 30, 1998 was $99,736 compared
to a net loss of $21,471 for the same quarter last year. The increase in
the net loss is the result of the items discussed above.
Nine months ended September 30, 1998 compared to
nine months ended September 30, 1997
Sales for the nine months ended September 30, 1998 were $1,353,367, compared
to $1,545,503 for the same period last year. The decrease was primarily due
to a decrease in domestic sales.
Gross profit for the nine months ended September 30, 1998 was $536,286 or
40% of sales, compared to $667,072 or 43% of sales, for the same period last
year. The decrease is the result of a writeoff of inventory in the quarter
ended September 30, 1998. Gross profit for the year ended September 30,
1998 prior to the writeoff was 45%.
Operating expenses for the nine months ended September 30, 1998 were
$599,054 or 44% of sales, compared to $721,976 or 47% of sales, for the same
period last year. The decrease is attributable mainly to a decrease in
selling and marketing costs, and general and administrative costs.
The net loss for the nine months ended September 30, 1998 was $63,606
compared to a net loss of $53,980 for the same period last year. The
increase in the net loss is the result of the items discussed above.
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LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
Working capital as of September 30, 1998 was $370,246 compared to $452,364
in working capital at December 31, 1997. 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 September 30, 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 September 30, 1998 was approximately $196,435
compared to $334,908 for same period ended in 1997.
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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)
November 9, 1998 /s/ VAHAN V. BASAMAJIAN
- ---------------- -----------------------
Date Vahan V. Basmajian
President, Treasurer
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