-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QVon2KQ5XPqcgeROEdGduEvZIeCtVfIOHLUUWLaLm6gRwmwWx5UycP19//FeSa2k 6O86wvCE8eIuMmqpih0DNg== 0000910647-04-000254.txt : 20040514 0000910647-04-000254.hdr.sgml : 20040514 20040514134756 ACCESSION NUMBER: 0000910647-04-000254 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEGATECH CORP CENTRAL INDEX KEY: 0000064708 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PUBLISHING [2741] IRS NUMBER: 042461059 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09643 FILM NUMBER: 04806238 BUSINESS ADDRESS: STREET 1: 525 WOBURN STREET CITY: TEWKSBURY STATE: MA ZIP: 01876 BUSINESS PHONE: 6172731900 MAIL ADDRESS: STREET 1: 525 WOBURN STREET CITY: TEWKSBURY STATE: MA ZIP: 01876 10-Q 1 mega-q1.txt FORM 10-Q FOR MARCH 31. 2004 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, 2004 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 XX No __ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes __ No XX There were 3,906,958 shares of common stock outstanding at May 5, 2004. MEGATECH CORPORATION -------------------- QUARTERLY REPORT FORM 10-Q MARCH 31, 2004 Page ---- PART 1. FINANCIAL INFORMATION - ------------------------------- ITEM 1. Financial Statements (Unaudited) Balance Sheet - March 31, 2004 and December 31, 2003 3 Statement of Operations- for the three months ended 4 March 31, 2004 and March 31, 2003 Statement of Cash Flows- for the three months ended 5 March 31, 2004 and March 31, 2003 Notes to Financial Statements- March 31, 2004 6 ITEM 2. Management's Discussion and Analysis of Financial 9 Condition and Results of Operations ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 10 ITEM 4. Controls and Procedures 10 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 11 ITEM 2. Changes in Securities and Use of Proceeds 11 ITEM 3. Defaults Upon Senior Securities 11 ITEM 4. Submission of Matters to a Vote of Security Holders 11 ITEM 5. Other Information 11 ITEM 6. Exhibits and Reports on Form 8-K 11 Signature Page 12 Certification 13 -2- PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MEGATECH CORPORATION BALANCE SHEET
MAR 31, 2004 DEC. 31, 2003 (UNAUDITED) (AUDITED) ------------ ------------- ASSETS Current assets: Cash and cash equivalents $ 49,437 $ 202,158 Accounts receivable: Trade 189,658 113,037 Other 1,805 20,630 Inventories 463,747 418,713 Prepaid expenses 2,996 5,026 ----------- ----------- Total current assets 707,643 759,564 Property and equipment, net 55,172 62,100 Other assets 7,666 7,666 ----------- ----------- Total Assets $ 770,481 $ 829,330 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable - trade 85,700 38,062 Accrued liabilities 71,917 116,337 Customer advance payments 21,144 12,487 ----------- ----------- Total current liabilities 178,761 166,886 ----------- ----------- Stockholders' equity: Common Stock, par value $.0143 per share, 5,000,000 shares authorized; 3,906,958 shares issued and outstanding 55,869 55,869 Additional paid-in capital 4,028,822 4,028,822 Deficit (3,492,971) (3,422,247) ----------- ----------- Total stockholders' equity 591,720 662,444 ----------- ----------- Total liabilities and stockholders' equity $ 770,481 $ 829,330 =========== ===========
-3- MEGATECH CORPORATION STATEMENT OF OPERATIONS (UNAUDITED)
QUARTER ENDED MARCH 31, 2004 MARCH 31, 2003 -------------- -------------- Sales $ 338,382 $1,568,394 Cost of sales 198,666 678,744 ---------- ---------- Gross profit 139,716 889,650 ---------- ---------- Operating expenses: Selling & Marketing 160,410 651,782 General and administrative 45,961 60,870 Research and development 4,103 12,239 ---------- ---------- Total operating expenses 210,474 724,891 ---------- ---------- Income (loss) from operations (70,758) 164,759 ---------- ---------- Other income (expense): Interest income 296 820 Interest expense (262) (1,075) Other income (expense) 0 57 ---------- ---------- Other income (expense), net 34 (198) ---------- ---------- Net income (loss) $ (70,724) $ 164,561 ========== ========== Net income (loss) per share - basic and diluted $ (0.018) $ 0.042 ========== ========== Weighted average number of common shares outstanding 3,906,958 3,886,802 ========== ==========
See notes to financial statements. -4- MEGATECH CORPORATION STATEMENT OF CASH FLOWS (UNAUDITED)
QUARTER ENDED MARCH 31, 2004 MARCH 31, 2003 -------------- -------------- Cash flows from operating activities: Net income (loss) $ (70,724) $ 164,561 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 6,928 5,700 Loss on sale of property and equipment 0 1,170 Changes in operating assets and liabilities: Accounts receivable (57,796) (225,445) Prepaid expenses 2,030 (15,948) Inventories (45,034) 404,194 Accounts payable- trade 47,638 (69,745) Accrued liabilities (44,420) (13,412) Customer advance payments 8,657 (90,109) --------- --------- Net cash provided by (used in) operating activities (152,721) 160,966 --------- --------- Cash flows from investing activities: Purchases of property and equipment 0 (5,646) --------- --------- Net cash used in investing activities 0 (5,646) --------- --------- Cash flows from financing activities: Payments on line of credit 0 (170,000) Advances on line of credit 0 70,000 --------- --------- Net cash provided by (used in) financing activities 0 (100,000) --------- --------- Net increase (decrease) in cash and cash equivalents (152,721) 55,320 Cash & cash equivalents, beginning of period 202,158 30,327 --------- --------- Cash & cash equivalents, end of period $ 49,437 $ 85,647 ========= =========
See notes to financial statements. -5- MEGATECH CORPORATION NOTES TO FINANCIAL STATEMENTS MARCH 31, 2004 1 NATURE OF THE BUSINESS ---------------------- Megatech Corporation began its operations in 1970 and went public in 1972. It was originally organized to develop and sell its proprietary and patented oil-less, multi-fueled, transparent engine. The inventors are M.I.T. graduates, well known for their technological expertise. Megatech developed the nation's first modular technology program focusing on energy conversion devices and alternative energies, such as: solar thermal, solar photovoltaic, wind, hydro and geothermal systems. Following these modules, Megatech added to its product line 40 more modules covering communications technology in fiber optics, laser, ultrasonic, microwave, and satellite systems. Due to limited resources, however, the Company elected to withhold these modules since they require highly skilled staff to train instructors and initiate production. The transportation industry has undergone tremendous changes in the past decade. New innovation in braking systems, steering and suspension, computer-controlled engines, and safety features have fueled the demand for high-tech trainers. Megatech's automotive division has come to the aid of schools and industry alike to meet these needs and capitalize on this tremendous business potential. Megatech Corporation provides instructional programs, along with training equipment, as a turnkey system for the transportation industry. Automotive programs based on gas/diesel engines have been delivered with either GM, VW, Ford or Cummins engines to schools; truck diesel trainers have been delivered to nationally prominent training centers, the U.S. Military and to the Middle East. In addition, Megatech provides programs for marine diesel, auto gasoline, and various hydraulic trainers for transportation technology programs. Since the transportation industry brought vast changes in electronics and computerized vehicle management systems, it created a large demand for training students and technicians in both schools and industry. Because Megatech pioneered in Technology Education Modules, the Company applied its knowledge towards creating new designs for automotive training of students and dealership technicians. During the past 15 years, Megatech has been developing and marketing a comprehensive line of Automotive Trainers for schools, U.S. military, government and industry. Approximately 4000 schools in the United States and well over 20 nations around the world have bought Megatech automotive/technology modules. -6- Megatech recently entered new markets with several custom designed trainers for both the U.S. military and the automotive industry. The Company successfully completed new Basic Knowledge and Skills modules at Aberdeen Proving Grounds. This was the first large scale military project the Company has secured in the electronics area. In addition, the Company developed Ford Motor Company's first complete electricity and electronics training program which will be used worldwide in the Ford Factory Training Centers, Maintenance and Light Repair Programs, and Ford Asset Programs. Snap On Corporation, one of the largest manufacturer in the U.S. of automotive tools and diagnostic equipment, has an agreement with Megatech to market Megatech trainers to the transportation industry, government, and public education. Snap On considers Megatech automotive trainers complimentary to their line of tools and diagnostic equipment and believes the trainers will enhance the sale of Snap On products to public education. 2 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. 3 SIGNIFICANT ACCOUNTING POLICIES ------------------------------- Revenue recognition - ------------------- Revenue from product sales are recognized upon shipment. Inventories - ----------- Inventories are valued at lower of cost (first-in-first-out) or market. Property and equipment - ---------------------- Property and equipment are recorded at cost. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the assets. Costs of maintenance and repairs are charged to expense while costs of significant renewals and betterments are capitalized. -7- 4 INVENTORIES ----------- Inventories consisted of the following:
MARCH 31, 2004 DEC. 31, 2003 -------------- ------------- Raw materials $236,305 $247,703 Work in process 20,571 23,175 Finished goods 206,871 147,835 -------- -------- $463,747 $418,713 ======== ========
5 PROPERTY AND EQUIPMENT ---------------------- Property and equipment consisted of the following:
MARCH 31, 2004 DEC. 31, 2003 -------------- ------------- Machinery and equipment $ 21,207 $ 21,207 Office equipment 49,073 49,073 Leasehold improvements 71,054 71,054 Automobiles 60,374 60,374 -------- -------- Total 201,708 201,708 Less accumulated depreciation 146,536 139,608 -------- -------- Property and equipment - net $ 55,172 $ 62,100 ======== ========
6 MAJOR CUSTOMER INFORMATION -------------------------- For the period ended March 31, 2004 and 2003, sales to five and one unrelated sales representative comprised 82% and 94% of total sales, respectively. -8- ITEM 2. MEGATECH CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR QUARTERS ENDED MARCH 31, 2004 AND 2003 RESULTS OF OPERATIONS --------------------- Quarter Ended March 31, 2004 compared to quarter ended March 31, 2003 Sales for the quarter ended March 31, 2004 were $338,382, compared to $1,568,394 for the same quarter last year. The decrease was primarily due to a decrease in international sales. Domestic sales in the quarter ended March 31, 2004 were $302,832 or 89% of total sales, compared to $406,067or 26% of total sales for the same period last year. International sales in the quarter ended March 31, 2004 were $35,550 or 11% of total sales, compared to $1,162,327 or 74% of total sales for the same period last year. The decrease in international sales is attributable to sales through Snap On International of training equipment and programs to the national colleges of Venezuela in the first quarter of 2003. Gross profit for the quarter ended March 31, 2004 was $139,716 or 41% of sales, compared to $889,650 or 57% of sales, for the same quarter last year. The decrease as a percentage of sales is the result of increased material costs. Currently, there are no known future increases in costs of materials, labor or other price increases which could have an effect on sales other than normal inflation increases. Selling and marketing expenses for the quarter ended March 31, 2004 were $160,410 or 47% of sales, compared to $651,782 or 42% of sales for the same period last year. Major changes compared to the prior year include a decrease in commission expense as a percentage of sales to 22% from 36% in the prior year. The overall increase as a percentage of sales is due to fixed selling expenses accompanied by a decrease in sales. General and administrative expenses for the quarter ended March 31, 2004 were $45,961 or 14% of sales, compared to $60,870 or 4% of sales for the same period last year. Major changes compared to prior year include a decrease in legal fees, accounting fees, and salaries. The overall increase as a percentage of sales is due to fixed G & A expenses accompanied by a decrease in sales. Research and development expenses for the quarter ended March 31, 2004 were $4,103 or 1% of sales, compared to $12,239 or 1% of sales, for the same quarter last year. The decrease is due to the reduction of engineering staff. The net loss for the quarter ended March 31, 2004 was $70,724 compared to a net income of $164,561 for the same quarter last year. The decrease is the result of the items discussed above. -9- LIQUIDITY AND CAPITAL RESOURCES ------------------------------- Working capital as of March 31, 2004 was $528,882 compared to $592,678 in working capital at December 31, 2003. The decrease was primarily the result of the net loss for the quarter. The Company maintains a secured line of credit in the amount of $500,000. At March 31, 2004, 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. There were no capital expenditures for the three months ended March 31, 2004, compared to $5,600 for the same period in 2003. No material purchase or capital commitments exist at March 31, 2004. The Company's backlog as of March 31, 2004 was $132,000 compared to $694,000 for the same period ended in 2003. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not applicable. ITEM 4. CONTROLS AND PROCEDURES The Company's disclosure controls and procedures have been evaluated. Based on the evaluation, it was determined the Company's disclosure controls and procedures are effective in ensuring information required to be disclosed by the Company in its Exchange Act reports is accumulated and communicated to the Company's management as appropriate to allow timely decisions regarding required disclosures. The Company's internal control structure has been evaluated. Based on the evaluation, it was determined that there were no significant changes in the Company's internal controls or in other factors that could affect these controls subsequent to the date of the evaluation, including any corrective action with regard to significant deficiencies and material weaknesses. -10- 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: (a) The following exhibits are filed herewith: 31 Certification 32 Certification of Chief Executive Officer (b) Report on Form 8-K None. -11- 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 5, 2004 /s/ Vahan V. Basmajian - ----------- ------------------------------------ Date Vahan V. Basmajian President, Treasurer -11- EX-31 2 meg1q311.txt EXHIBIT 31 Exhibit 31 CERTIFICATION I, Vahan V. Basmajian, certify that: 1) I have reviewed this quarterly report on Form 10-Q of Megatech Corporation; 2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4) I, the registrant's certifying officer, am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and I have: a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant is made known to me by others within the registrant particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on on such evaluation, and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5) I, the registrant's certifying officer, have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the registrant's board of directors: a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 5, 2004 /s/ Vahan V. Basmajian ----------- ------------------------------------ Vahan V. Basmajian President and Chief Executive Officer -13- EX-32 3 meg1q321.txt EXHIBIT 32 Exhibit 32 Certification of Chief Executive Officer In connection with the periodic report of Megatech Corporation (the "Company") on Form 10-Q (the "Report") for the period ended March 31, 2004 as filed with the Securities and Exchange Commission, I, Vahan Basmajian, President, Treasurer, Chairman of the Board, Chief Executive Officer, and Chief Financial Officer, of the Company, hereby certify as of the date hereof, solely for the purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge: (1) the Report fully complies with the requirements of Section 13 (a) or 15 (d), as applicable, of the Securities Exchange Act of 1934, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. Dated: May 5, 2004 /s/ Vahan V. Basmajian ---------------------------------- Vahan V. Basmajian President, Treasurer & Chairman of the Board Chief Executive Officer & Chief Financial Officer -14- -----END PRIVACY-ENHANCED MESSAGE-----