10-Q 1 mega10q2.txt FORM 10Q FOR JUNE 30, 2001 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, 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 3,815,408 shares of common stock outstanding at August 1, 2001. MEGATECH CORPORATION QUARTERLY REPORT FORM 10-Q June 30, 2001 PART 1. FINANCIAL INFORMATION ITEM 1. Financial Statements (Unaudited) Page Balance Sheet - June 30, 2001 and December 31, 2000 3 Statement of Operations- for the quarter and six months ended June 30, 2001 and June 30, 2000 4 Statement of Cash Flows- for the six months ended June 30, 2001 and June 30, 2000 5 Notes to Financial Statements- June 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 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 -2- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MEGATECH CORPORATION BALANCE SHEET

~~MARCH~~June 3130, 2001 DEC. 31, 2000 (UNAUDITED) (AUDITED) ------------- -------------~~-----~~ ASSETS Current assets: Cash and cash equivalents $ 4822,~~110~~656 $ 27,585 Accounts receivable: Trade ~~274~~239,~~675~~238 332,577 Other 11,~~555~~307 7,763 Inventories ~~266~~246,~~865~~722 243,827 Prepaid expenses 210,~~274~~140 5,859 ----------------------------- Total current assets ~~603~~530,~~479~~063 617,611 Property, plant and equipment, net 7382,~~817~~200 75,544 Other assets 7,666 7,666 ----------------------------- Total Assets $ ~~684~~619,~~962~~929 $ 700,821 ============================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts ~~Payable~~payable - ~~trade~~Trade $ ~~122~~47,~~198~~560 $ 95,381 Accrued Liabilities 9169,~~207~~174 86,921 Current portion of long-term debt 37,500 37,500 ----------------------------- Total current liabilities ~~250~~154,~~905~~234 219,802 ----------------------------- Stockholders' equity: Common Stock, par value $.0143 per share, 5,000,000 shares authorized; 3,815,408 shares issued and outstanding, 54,560 54,560 Additional paid-in capital 4,015,044 4,015,044 Deficit (3,~~635~~603,~~547~~909) (3,588,585) ----------------------------- Total stockholders' equity ~~434~~465,~~057~~695 481,019 ----------------------------- Total liabilities and stockholders' equity $ ~~684~~619,~~962~~929 $ 700,821 =============================

See notes to financial statements. -3- MEGATECH CORPORATION STATEMENT OF OPERATIONS (UNAUDITED)

SIX MONTHS ENDED QUARTER ENDED ~~MARCH~~------------------------------ 31------------------------------ June 30, 2001 ~~MARCH~~June 3130, 2000 June 30, 2001 June 30, 2000 ------------- ------------- ------------- ------------- Sales $ ~~365~~845,~~022~~562 $1,268,932 ~~681~~$ 480,~~465~~539 $ 587,467 Cost of sales ~~172~~363,~~104~~145 ~~374~~685,~~756~~966 191,041 311,210 ----------------------------------------------------------- Gross profit ~~192~~482,~~918~~417 ~~306~~582,~~709~~966 289,498 276,257 ----------------------------------------------------------- Operating expenses: Selling ~~187~~389,~~949~~839 ~~204~~404,~~985~~076 201,890 199,091 General and administrative 4596,~~382~~536 4083,~~624~~803 51,153 43,179 Research and development 59,~~564~~397 918,~~211~~050 3,834 8,839 ----------------------------------------------------------- Total operating expenses ~~238~~495,~~895~~772 ~~254~~505,~~820~~929 256,877 251,109 ----------------------------------------------------------- Income (loss) from operations (4513,~~977~~355) 5177,~~889~~037 32,621 25,148 ----------------------------------------------------------- Other income (expense): Interest income 86138 ~~930~~1,295 52 365 Interest expense (~~881~~1,917) (~~832~~1,582) ~~Other~~(1,036) ~~income~~ (~~expense~~750) Other (190) 0 0 0 ----------------------------------------------------------- Other income (expense), net (~~985~~1,969) 98(287) (984) (385) ----------------------------------------------------------- Net income (loss) $ (4615,~~962~~324) $ 5176,~~987~~750 $ 31,637 $ 24,763 =========================================================== Net income (loss) per share - basic and diluted $ (0.~~012~~004) $ 0.~~014~~020 $ 0.008 $ 0.006 =========================================================== Weighted average number of common ~~shares~~3,815,408 ~~outstanding~~3,813,708 3,815,408 3,813,708 ===========================================================

See notes to financial statements. -4- MEGATECH CORPORATION STATEMENT OF CASH FLOWS

~~QUARTER~~SIX MONTHS ENDED ~~MARCH~~------------------------------ 31June 30, 2001 ~~MARCH~~June 3130, 2000 ------------- -------------~~------~~ Cash flows from operating activities: Net income (loss) $(4615,~~962~~324) $ 5176,~~987~~750 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 49,~~617~~234 49,~~617~~234 Common stock issued as compensation 0 308 Changes in operating assets and liabilities: Accounts receivable 5489,~~110~~795 77(70,~~789~~052) Prepaid expenses 3(4,~~585~~281) (65,~~068~~259) Inventories (232,~~038~~895) 3886,~~317~~300 Accounts payable 26(47,~~817~~821) 6130,~~795~~291 Accrued liabilities 4(17,~~286~~746) (~~191~~172,~~786~~868) --------------------------- Net cash provided (used) by operating activities 2310,~~415~~962 36(45,~~959~~296) --------------------------- Cash flows from investing activities: Purchases of property and equipment (215,~~890~~891) (23,~~800~~902) -------------------------- Net cash provided (used) by investing activities (15,891) (3,902) -------------------------- Cash flows from financing activities: Principal payments on notes payable (45,000) 0 Advances on notes payable 45,000 0 -------------------------- Net cash used by financing activities 0 0 -------------------------- Net increase (decrease) in cash and cash equivalents 20(4,~~525~~929) 34(49,~~159~~198) Cash & cash equivalents, beginning of period 27,585 75,857 --------------------------- Cash & cash equivalents, end of period $ 4822,~~110~~656 $ ~~110~~26,~~016~~659 ===========================

See notes to financial statements. -5- MEGATECH CORPORATION NOTES TO FINANCIAL STATEMENTS June 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:

~~MARCH~~June 3130, 2001 ~~DEC~~Dec. 31, 2000 ------------- -------------~~------~~ Raw materials $~~134~~140,~~535~~856 $146,722 Work in process 3817,~~385~~368 8,993 Finished goods 9388,~~945~~498 88,112 ---------------------------- $~~266~~246,~~865~~722 $243,827 ============================

3. MAJOR CUSTOMER INFORMATION: --------------------------------- For the period ended June 30, 2001 and 2000, sales to two unrelated sales representatives comprised 63% and 65% of total sales, respectively. -6- ITEM 2. MEGATECH CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR QUARTER AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000 RESULTS OF OPERATIONS: ---------------------- Quarter Ended June 30, 2001 compared to quarter ended June 30, 2000 Sales for the quarter ended June 30, 2001 were $480,539, compared to $587,467 for the same quarter last year. The decrease was primarily due to a decrease in domestic sales. Gross profit for the quarter ended June 30, 2001 was $289,498 or 60% of sales, compared to $276,257 or 47% of sales, for the same quarter last year. The increase is the result of lower direct labor and materials costs. Operating expenses for the quarter ended June 30, 2001 were $256,877 or 53% of sales, compared to $251,109 or 43% of sales, for the same quarter last year. The increase is due to an increase in selling and marketing costs. The net income for the quarter ended June 30, 2001 was $31,637 compared to net income of $24,763 for the same quarter last year. The increase is the result of the items discussed above. Six months Ended June 30, 2001 compared to six months ended June 30, 2000 Sales for the six months ended June 30, 2001 were $845,562, compared to $1,268,932 for the same period last year. The decrease was due to a decrease in international sales. Gross profit for the six months ended June 30, 2001 was $482,417 or 57% of sales, compared to $582,966 or 46% 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 six months ended June 30, 2001 were $495,772 or 59% of sales, compared to $505,929 or 40% of sales, for the same period last year. The increase as a percentage of sales is attributable to an increase in selling and marketing costs. The net loss for the six months ended June 30, 2001 was $15,324 compared to net income of $76,750 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 June 30, 2001 was $375,828 compared to $397,809 in working capital at December 31, 2000. The decrease is attributable to the net loss for the year. The company maintains a secured line of credit in the amount of $200,000. At June 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 June 30, 2001 was approximately $340,643 compared to $371,950 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) August 1, 2001 /s/ Vahan V. Basmjian -------------- ------------------------------------ Date Vahan V. Basmajian President, Treasurer -9-

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