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, 2001 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 3,840,558 shares of common stock outstanding at October 29, 2001.
MEGATECH CORPORATION
--------------------
QUARTERLY REPORT FORM 10-Q
September 30, 2001
PART 1. FINANCIAL INFORMATION
-------------------------------
ITEM 1. Financial Statements (Unaudited) Page
----
Balance Sheet - September 30, 2001 and December 31, 2000 3
Statement of Operations- for the quarter and nine
months ended September 30, 2001 and September 30, 2000 4
Statement of Cash Flows- for the nine months ended
September 30, 2001 and September 30, 2000 5
Notes to Financial Statements- September 30, 2001 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 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
-2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEGATECH CORPORATION
BALANCE SHEET
Sept. 30, 2001 Dec. 31, 2000
(UNAUDITED) (AUDITED)
-------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 93,568 $ 27,585
Accounts receivable:
Trade 262,288 332,577
Other 4,498 7,763
Inventories 184,530 243,827
Prepaid expenses 10,204 5,859
-----------------------------
Total current assets 555,088 617,611
Property, plant and equipment, net 77,132 75,544
Other assets 7,666 7,666
-----------------------------
Total Assets $ 639,886 $ 700,821
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 27,901 $ 95,381
Accrued Liabilities 63,988 86,921
Current portion of long-term debt 37,500 37,500
-----------------------------
Total current liabilities 129,389 219,802
-----------------------------
Stockholders' equity:
Common Stock, par value $.0143 per
share, 5,000,000 shares authorized;
3,840,558 (3,815,408 at 2000) shares
issued and outstanding 54,920 54,560
Additional paid-in capital 4,016,947 4,015,044
Deficit (3,561,370) (3,588,585)
-----------------------------
Total stockholders' equity 510,497 481,019
-----------------------------
Total liabilities and
stockholders' equity $ 639,886 $ 700,821
=============================
See notes to financial statements.
-3-
MEGATECH CORPORATION
STATEMENT OF OPERATIONS (UNAUDITED)
NINE MONTHS ENDED QUARTER ENDED
-------------------------------- --------------------------------
Sept. 30, 2001 Sept. 30, 2000 Sept. 30, 2001 Sept. 30, 2000
-------------- -------------- -------------- --------------
Sales $1,342,768 $1,780,976 $ 497,207 $ 512,044
Cost of sales 574,309 867,656 211,164 181,689
----------------------------------------------------------------
Gross profit 768,459 913,320 286,043 330,355
----------------------------------------------------------------
Operating expenses:
Selling 591,641 619,026 201,802 214,950
General and administrative 133,959 127,325 37,423 43,524
Research and development 12,925 26,002 3,528 7,951
----------------------------------------------------------------
Total operating expenses 738,525 772,353 242,753 266,425
----------------------------------------------------------------
Income from operations 29,934 140,967 43,290 63,930
----------------------------------------------------------------
Other income (expense):
Interest income 138 0 0 0
Interest expense (2,667) (1,107) (750) (820)
Other (190) (4,210) 0 (4,210)
----------------------------------------------------------------
Other income (expense), net (2,719) (5,317) (750) (5,030)
----------------------------------------------------------------
Net income $ 27,215 $ 135,650 $ 42,540 $ 58,900
================================================================
Net income per share - basic
and diluted $ 0.007 $ 0.036 $ 0.011 $ 0.015
================================================================
Weighted average number of common 3,827,983 3,813,708 3,832,083 3,813,708
================================================================
-4-
MEGATECH CORPORATION
STATEMENT OF CASH FLOWS (Unaudited)
NINE MONTHS ENDED
--------------------------------
Sept. 30, 2001 Sept. 30, 2000
-------------- --------------
Cash flows from operating activities:
Net income $ 27,215 $ 135,650
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 14,934 14,694
Common stock issued as compensation 2,263 308
Changes in operating assets and liabilities:
Accounts receivable 73,554 (34,105)
Prepaid expenses (4,345) (4,094)
Inventories 59,297 104,662
Accounts payable (67,480) (27,383)
Accrued liabilities (22,933) (182,297)
--------------------------
Net cash provided (used) by operating activities 82,505 7,435
--------------------------
Cash flows from investing activities:
Purchases of property and equipment (16,522) (6,207)
--------------------------
Net cash provided (used) by investing activities (16,522) (6,207)
--------------------------
Cash flows from financing activities:
Principal payments on notes payable (70,000) 0
Advances on notes payable 70,000 0
--------------------------
Net cash used by financing activities 0 0
--------------------------
Net increase (decrease) in cash and
cash equivalents 65,983 1,228
Cash & cash equivalents, beginning of period 27,585 75,857
--------------------------
Cash & cash equivalents, end of period $ 93,568 $ 77,085
==========================
See notes to financial statements.
-5-
MEGATECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
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, 2001 Dec. 31, 2000
-------------- -------------
Raw materials $141,063 $146,722
Work in process 4,037 8,993
Finished goods 39,430 88,112
--------------------------
$184,530 $243,827
==========================
3. MAJOR CUSTOMER INFORMATION:
---------------------------
For the period ended September 30, 2001 and 2000, sales to three and
two unrelated sales representatives comprised 82% and 61% of total
sales, respectively.
-6-
ITEM 2.
MEGATECH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
RESULTS OF OPERATIONS:
----------------------
Quarter Ended September 30, 2001 compared to quarter ended September 30, 2000
Sales for the quarter ended September 30, 2001 were $497,207, compared to
$512,044 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, 2001 was $286,043 or 58%
of sales, compared to $330,355 or 65% of sales, for the same quarter last
year. The decrease is the result of adjustments to inventory in the prior
year.
Operating expenses for the quarter ended September 30, 2001 were $242,753
or 49% of sales, compared to $266,425 or 52% of sales, for the same quarter
last year. The decrease is due to a decrease in selling and marketing
costs, specifically commission expense and travel expense.
The net income for the quarter ended September 30, 2001 was $42,540
compared to net income of $58,900 for the same quarter last year. The
decrease is the result of the items discussed above.
Nine months Ended September 30, 2001 compared to nine months ended
September 30, 2000
Sales for the nine months ended September 30, 2001 were $1,342,768,
compared to $1,780,976 for the same period last year. The decrease was due
to a decrease in international sales.
Gross profit for the nine months ended September 30, 2001 was $768,459 or
57% of sales, compared to $913,320 or 51% of sales, for the same period
last year. The increase as a percentage of sales is the result of a
decrease in direct labor and materials costs.
Operating expenses for the nine months ended September 30, 2001 were
$738,525 or 55% of sales, compared to $772,353 or 43% of sales, for the
same period last year. The increase as a percentage of sales is
attributable to an increase in commission expense as a percentage of sales.
The net income for the nine months ended September 30, 2001 was $27,215
compared to net income of $135,650 for the same period last year. The
decrease is the result of the items discussed above.
-7-
LIQUIDITY AND CAPITAL RESOURCES:
--------------------------------
Working capital as of September 30, 2001 was $425,699 compared to $397,809
in working capital at December 31, 2000. The increase is attributable to
the net income for the year.
The company maintains a secured line of credit in the amount of $200,000.
At September 30, 2001, 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, 2001 was approximately $206,254
compared to $94,130 for same period ended in 2000.
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.
-------------------------------------------
-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)
October 29, 2001 /s/ Vahan V. Basmajian
---------------- ------------------------------
Date Vahan V. Basmajian
President, Treasurer
-9-