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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 June 30, 2002 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 3,860,558 shares of common stock outstanding at August 6, 2002.
MEGATECH CORPORATION
QUARTERLY REPORT FORM 10-Q
June 30, 2002
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited) Page
Balance Sheet - June 30, 2002 and December 31, 2001 3
Statement of Operations- for the quarter and six 4
months ended June 30, 2002 and June 30, 2001
Statement of Cash Flows- for the six months ended June 30, 5
2002 and June 30, 2001
Notes to Financial Statements- June 30, 2002 6
ITEM 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosures About Market 9
Risk
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
June 30, 2002 DEC. 31, 2001
(UNAUDITED) (AUDITED)
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 137,658 $ 64,138
Accounts receivable:
Trade 213,738 254,061
Other 8,256 3,697
Inventories 457,768 216,506
Prepaid expenses 14,763 7,710
----------- -----------
Total current assets 832,183 546,112
Property, plant and equipment, net 66,418 71,233
Other assets 7,666 7,666
----------- -----------
Total Assets $ 906,267 $ 625,011
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - Trade $ 183,051 $ 50,160
Accrued Liabilities 60,679 51,964
----------- -----------
Total current liabilities 243,730 102,124
----------- -----------
Long term debt 37,500 37,500
Stockholders' equity:
Common Stock, par value $.0143 per share,
5,000,000 shares authorized;
2002, 3,860,558; 2001, 3,840,558
shares issued and outstanding 55,206 54,920
Additional paid-in capital 4,020,262 4,016,948
Deficit (3,450,431) (3,586,481)
----------- -----------
Stockholders' equity, net 625,037 485,387
----------- -----------
Total liabilities and
stockholders' equity $ 906,267 $ 625,011
=========== ===========
See notes to financial statements.
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MEGATECH CORPORATION
STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED QUARTER ENDED
June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001
------------- ------------- ------------- -------------
Sales $1,906,389 $ 845,562 $1,586,629 $ 480,539
Cost of sales 739,548 363,145 629,544 191,041
---------- ---------- ---------- ----------
Gross profit 1,166,841 482,417 957,085 289,498
---------- ---------- ---------- ----------
Operating expenses:
Selling 925,846 389,839 711,244 201,890
General and administrative 89,258 96,536 44,360 51,153
Research and development 7,650 9,397 3,841 3,834
---------- ---------- ---------- ----------
Total operating expenses 1,022,754 495,772 759,445 256,877
---------- ---------- ---------- ----------
Income (loss) from operations 144,087 (13,355) 197,640 32,621
---------- ---------- ---------- ----------
Other income (expense):
Interest income 0 138 0 52
Interest expense (7,871) (1,917) (7,121) (1,036)
Other (166) (190) 24 0
---------- ---------- ---------- ----------
Other income (expense), net (8,037) (1,969) (7,097) (984)
---------- ---------- ---------- ----------
Net income (loss) $ 136,050 $ (15,324) $ 190,543 $ 31,637
========== ========== ========== ==========
Net income (loss) per share - basic
and diluted $ 0.035 $ (0.004) $ 0.049 $ 0.008
========== ========== ========== ==========
Weighted average number of common 3,849,729 3,815,408 3,858,800 3,815,408
See notes to financial statements.
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MEGATECH CORPORATION
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED
June 30, 2002 June 30, 2001
------------- -------------
Cash flows from operating activities:
Net income (loss) $ 136,050 $(15,324)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 11,401 9,234
Common stock issued as compensation 3,600 0
Changes in operating assets and liabilities:
Accounts receivable 35,764 89,795
Prepaid expenses (7,053) (4,281)
Inventories (241,262) (2,895)
Accounts payable 132,891 (47,821)
Accrued liabilities 8,715 (17,746)
--------- --------
Net cash provided by operating activities 80,106 10,962
--------- --------
Cash flows from investing activities:
Purchases of property and equipment (6,586) (15,891)
--------- --------
Net cash used by investing activities (6,586) (15,891)
--------- --------
Cash flows from financing activities:
Principal payments on notes payable (100,000) (45,000)
Advances on notes payable 100,000 45,000
--------- --------
Net cash used by financing activities 0 0
--------- --------
Net increase (decrease) in cash and cash
equivalents 73,520 (4,929)
Cash & cash equivalents, beginning of period 64,138 27,585
--------- --------
Cash & cash equivalents, end of period $ 137,658 $ 22,656
========= ========
See notes to financial statements.
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MEGATECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2002
1. BASIS OF PRESENTATION:
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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:
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Inventories consisted of the following:
June 30, 2002 Dec. 31, 2001
------------- -------------
Raw materials $151,541 $119,082
Work in process 50,897 37,096
Finished goods 255,330 60,328
-------- --------
$457,768 $216,506
======== ========
3. MAJOR CUSTOMER INFORMATION:
---------------------------------------------------------------------
For the period ended June 30, 2002 and 2001, sales to one and two
unrelated sales representatives comprised 93% and 63% 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 SIX MONTHS ENDED JUNE 30, 2002 AND 2001
RESULTS OF OPERATIONS:
- ---------------------------------------------------------------------------
Quarter Ended June 30, 2002 compared to quarter ended June 30, 2001
Sales for the quarter ended June 30, 2002 were $1,586,629, compared to
$480,539 for the same quarter last year. The increase was due to an
increase in international sales to Snap On Corporation.
Gross profit for the quarter ended June 30, 2002 was $957,085 or 60% of
sales, compared to $289,498 or 60% of sales for the same quarter last year.
The increase is the result of higher sales.
Selling and marketing expenses for the quarter ended June 30, 2002 were
$711,244 or 45% of sales, compared to $201,890 or 42% of sales, for the
same quarter last year. The increase is due to higher sales commissions,
salaries, and rent expense.
General and administrative expenses for the quarter ended June 30, 2002
were $44,360 or 3% of sales, compared to $51,153 or 11% of sales for the
same quarter last year. The decrease is due to a decrease in salaries.
Research and development expenses for the quarter ended June 30, 2002 were
stable at $3,841 or .2% of sales, compared to $3,834 or .8% of sales, for
the same quarter last year.
The net income for the quarter ended June 30, 2002 was $190,543 compared to
net income of $31,637 for the same quarter last year. The increase is the
result of the items discussed above.
Six months Ended June 30, 2002 compared to six months ended June 30, 2001
Sales for the six months ended June 30, 2002 were $1,906,389, compared to
$845,562 for the same period last year. The increase was due to an
increase in international sales to Snap On Corporation.
Gross profit for the six months ended June 30, 2002 was $1,166,841 or 61%
of sales, compared to $482,417 or 57% of sales, for the same period last
year. The increase is the result of a decrease in direct labor and
materials costs, and increased sales.
-7-
Selling and marketing expenses for the six months ended June 30, 2002 were
$925,846 or 49% of sales, compared to $389,839 or 46% of sales, for the
same period last year. The increase is the result of increased sales
commissions to Snap On Corporation, as well as an increase in other
marketing expenses such as office supplies, salaries, show and exhibit
expense, and sales promotion.
General and administrative expenses for the six months ended June 30, 2002
were $89,258 or 5% of sales, compared to $96,536 or 11% of sales for the
same period last year. The decrease is due to a decrease in salaries.
Research and development expenses for the six months ended June 30, 2002
were $7,650 or or .4% of sales, compared to $9,397 or 1% of sales, for the
same period last year.
The net income for the six months ended June 30, 2002 was $136,050 compared
to a net loss of $15,324 for the same period last year. The increase is
the result of the items discussed above.
LIQUIDITY AND CAPITAL RESOURCES:
- ---------------------------------------------------------------------------
Working capital as of June 30, 2002 was $588,453 compared to $443,988 in
working capital at December 31, 2001. The increase is attributable to the
net income for the period.
The company maintains a secured line of credit in the amount of $200,000.
At June 30, 2002, no borrowings were outstanding under this line. The
company believes that cash generated from operations, together with
existing resources of debt financing, will be sufficient to meet
foreseeable cash requirements for the next twelve months.
The firm's backlog as of June 30, 2002 was approximately $1,535,600
compared to $349,643 for same period ended in 2001.
-8-
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)
August 6, 2002 /s/ Vahan V. Basmajian
- -------------- ------------------------------------
Date Vahan V. Basmajian
President, Treasurer
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