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, 1999 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, 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 6,
1999.
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MEGATECH CORPORATION
QUARTERLY REPORT FORM 10-Q
March 31, 1999
Page
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PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Balance Sheet - March 31, 1999 and December 31, 1998 3
Statement of Operations- for the three months ended 4
March 31, 1999 and March 31, 1998
Statement of Cash Flows- for the three months ended 5
March 31, 1999 and March 31, 1998
Notes to Financial Statements- March 31, 1999 6
ITEM 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 8
PART II. OTHER INFORMATION
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
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEGATECH CORPORATION
BALANCE SHEET
MARCH 31, 1999 DEC. 31, 1998
(UNAUDITED) (AUDITED)
--------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 169,726 $ 187,580
Accounts receivable:
Trade 197,769 101,502
Affiliate 0 355
Other 1,914 13,794
Inventories 387,610 399,868
Prepaid expenses 18,236 5,464
--------------------------
Total current assets 775,255 708,563
--------------------------
Property, plant and equipment, net 67,528 72,145
Other assets 7,666 7,666
--------------------------
Total Assets $ 850,449 $ 788,374
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note Payable - bank $ 0 $ 0
Accounts Payable:
Trade 169,672 163,729
Affiliate 10,743 0
Accrued Liabilities 252,037 214,358
--------------------------
Total current liabilities 432,452 378,087
--------------------------
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 4,013,946 4,013,947
Deficit (3,650,179) (3,657,890)
--------------------------
Total stockholders' equity 417,997 410,287
--------------------------
Total liabilities and stockholders'
equity $ 850,449 $ 788,374
==========================
See notes to financial statements.
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MEGATECH CORPORATION
STATEMENT OF OPERATIONS (UNAUDITED)
QUARTER ENDED
MARCH 31, 1999 MARCH 31, 1998
--------------------------------
Sales $ 520,654 $ 619,714
Cost of sales 304,470 362,595
----------------------------
Gross profit 216,184 257,119
----------------------------
Operating expenses:
Selling 168,305 194,311
General and administrative 36,447 45,744
Research and development 5,389 7,261
----------------------------
Total operating expenses 210,141 247,316
----------------------------
Income from operations 6,043 9,803
----------------------------
Other income (expense):
Interest 1,667 (242)
Other 0 40
----------------------------
Other income (expense), net 1,667 (202)
----------------------------
Net income $ 7,710 $ 9,601
============================
Net income per share - basic and
diluted $ 0.002 $ 0.003
============================
Weighted average number of common
shares outstanding 3,792,308 3,792,308
============================
See notes to financial statements.
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MEGATECH CORPORATION
STATEMENT OF CASH FLOWS
QUARTER ENDED
MARCH 31, 1999 MARCH 31, 1998
--------------------------------
Cash flows from operating activities:
Net income (loss) $ 7,710 $ 9,601
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,617 4,895
Changes in operating assets and liabilities:
Accounts receivable (84,032) 18,072
Prepaid expenses (12,772) 21,724
Inventories 12,258 16,945
Accounts payable 16,686 2,305
Accrued liabilities 37,679 (31,852)
--------------------------
Net cash provided (used) by operating
Activities (17,854) 41,690
--------------------------
Cash flows from investing activities:
Purchases of property and equipment 0 0
--------------------------
Cash flows from financing activities:
Payments on capital lease obligations 0 0
Principal payments on notes payable 0 (25,000)
--------------------------
Net cash used by financing activities 0 (25,000)
--------------------------
Net increase (decrease) in cash and
cash equivalents (17,854) 16,690
Cash & cash equivalents, beginning of
period 187,580 55,026
--------------------------
Cash & cash equivalents, end of period $169,726 $ 71,716
==========================
See notes to financial statements.
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MEGATECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
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, 1999 DEC. 31, 1998
-------------------------------
Raw materials $141,586 $186,176
Work in process 102,488 37,477
Finished goods 143,536 176,215
--------------------------
387,610 399,868
==========================
3. MAJOR CUSTOMER INFORMATION:
---------------------------
For the period ended March 31, 1999 and 1998, sales to one unrelated
sales representative comprised 65% and 31% 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 ENDED MARCH 31, 1999 AND 1998
RESULTS OF OPERATIONS:
- ----------------------
Quarter Ended March 31, 1999 compared to quarter ended March31, 1998
Sales for the quarter ended March 31, 1999 were $520,654, compared to
$619,714 for the same quarter last year. The decrease was primarily due to
an decrease in domestic sales.
Gross profit for the quarter ended March 31, 1999 was $216,184 or 41% of
sales, compared to $257,119 or 41% of sales, for the same quarter last
year. The decrease is the result of lower sales.
Operating expenses for the quarter ended March 31, 1999 were $210,141 or
40% of sales, compared to $247,316 or 40% of sales, for the same quarter
last year. The decrease is attributable to a decrease in selling and
marketing costs.
The net income for the quarter ended March 31, 1999 was $7,710 compared to
a net income of $9,601 for the same quarter last year. The decrease is the
result of the items discussed above.
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
Working capital as of March 31, 1999 was $349,091compared to $330,476 in
working capital at December 31, 1998. The increase was attributable to
the net income for the quarter.
The company maintains a secured line of credit in the amount of $100,000.
At March 31, 1999, 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 forseeable
cash requirements for the next twelve months.
The firm's backlog as of March 31, 1999 was approximately $399,513 compared
to $306,226 for the same period ended in 1998.
The Company is taking steps in 1999 to address Year 2000 readiness
regarding manufacturing operations and internal systems. Outside computer
consultants will be utilized to upgrade hardware and software required to
become Year 2000 compliant. The estimated cost of such upgrades is
approximately $15,000. In addition to internal systems upgrades, key
suppliers of raw materials for manufacturing operations will be contacted
to determine their readiness for Year 2000. In the event that a key
supplier experiences Year 2000 problems, the Company believes that it has
sufficient alternative suppliers to satisfy raw material needs.
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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.
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Item 2. Changes in Securities: None.
- ------------------------------
Item 3. Defaults Upon Senior Securities: None.
- ----------------------------------------
Item 4. Submission of Matters to a
Vote of Security Hold None.
- ----------------------------------
Item 5. Other Information: None.
- --------------------------
Item 6. Exhibits and Reports on Form 8-k: None.
- -----------------------------------------
<PAGR> -8-
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)
May 10, 1999 /s/ Vahan V. Basmajian
- -------------------------------------------------------------------
Date Vahan V. Basmajian
President, Treasurer
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