10-Q 1 mega-q2.txt FORM 10-Q FOR JUNE 30, 2002 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 -2- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MEGATECH CORPORATION BALANCE SHEET

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

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

See notes to financial statements. -5- MEGATECH CORPORATION NOTES TO FINANCIAL STATEMENTS June 30, 2002 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: 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. -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, 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. ------------------------------------------- -9- 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 -10-

MEGATECH CORP 10-Q