SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
(FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
(NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission File No. 0-9646
MEGATECH CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2461059
(State or other jurisdiction of (IRS. Employer identification No.)
incorporation of organization)
555 Woburn Street, Tewksbury, Massachusetts 01876
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 937-9600
Securities registered pursuant to section 12(b) of the Act: NONE
Securities registered pursuant to section 12(g) of the Act: NONE
Common Stock, Par Value .0143
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock held by non-
affiliates of the registrant based upon the closing sale price of the Common
Stock on March 21, 2001 was approximately $230,221 based on the average of
the closing bid and asked quotations of the Common Stock in the over the
counter market. The number of shares held by nonaffiliates was 2,558,008.
Shares of Common Stock held by each officer and director and by each person
who owns 5% or more of the outstanding Common Stock have been excluded in
that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
The number of shares of par value $.0143 common stock outstanding as of
March 21, 2001 was 3,815,408.
Portions of the registrant's definitive Proxy Statement for its Annual
Meeting of the stockholders to be held on May 14, 2001 (the "Proxy
Statement") are incorporated by reference into Part III.
PART I
Item 1 - Description of Business
(a) General Development of Business
Megatech Corporation (Megatech or the Company) was established in 1970
and is engaged in the production and sale of educational training programs
and equipment in the energy power and transportation areas sold domestically
and internationally to educational institutions and government agencies.
Megatech manufactures educational training equipment which consist of
modular technology workstations which are designed to provide students with
hands-on experience working with various technologies such as: automotive,
environmental, fiber-optic, microwave, laser, alternate energies,
electronic, personal computer kits and multi-media. In conjunction with the
educational equipment, Megatech produces over 200 video training programs
and student manuals which enable students to follow a self-paced self-guided
program to learn the technologies described above.
The Company competes with a number of major suppliers of school
training equipment and several small single product line companies through
the uniqueness of its products, and the quality of its training programs.
Most of the sales to states, cities, towns and school districts are the
results of having submitted sealed bids and having been awarded the sale
based on being the lowest bidder, directly or through independent sales rep
organizations.
There were two customers which accounted for 63% of sales for the year
ended December 31, 2000, and one customer which accounted for 36% and 28% of
sales for the years ended December 31, 1999 and 1998, respectively. No other
customers accounted for more than 10% of sales in each of the years ended
December 31, 2000, 1999 and 1998.
Approximately 28%, 39% and 46% of sales during the years ended
December 31, 2000, 1999 and 1998, respectively, were from international
sales.
The Company's backlog as of December 31, 2000 and 1999 was $216,434
and $803,524, respectively.
As of December 31, 2000, the Company had 9 full-time and 0 part-time
employees, in addition to it's independent domestic and international sales
rep organizations.
(b) Financial Information About Industry Segments
N/A
(c) Narrative Description of Business
See (a) above.
(d) Financial Information About Foreign and Domestic Operations and
Exports Sales
The Company presently has no operations in foreign countries.
Export sales of the Company were as follows:
Percent of
Year Amount Total Sales
----------------------------------
2000 $571,127 28%
1999 $699,214 39%
1998 $847,077 46%
Most of these sales are made upon receipt of Irrevocable Letters of
Credit or prepayments.
Item 2 - Properties
The Company's administrative, sales and marketing, research and
development, and manufacturing facility is located in Tewksbury,
Massachusetts and consists of approximately 20,000 square feet under a lease
with a related party which expired in November, 1999. The company now leases
the facility on a tenant at will basis. The current facility will
accommodate twice the current production levels. There is ample expansion
capability beyond the current capacity for additional square footage for
manufacturing.
Item 3 - Legal Proceedings
None
Item 4 - Submission of Matters to a Vote of Security Holders:
During the fourth quarter of 2000, no matters were submitted to a vote
of the security holders through the solicitation of proxies or otherwise.
PART II
Item 5 - Market for the Registrant's Common Equity and Related Stockholders
Matters
The Company's Common Stock is traded in the over-the-counter market,
National Association of Security Dealers through the NASD electronic
bulletin board under the symbol MGTC. The following table sets forth the
periods indicated, the closing high and low Bid Quotations of the Common
Stock in the over-the-counter market. These Quotations represent prices
between dealers, do not include retail markup, markdowns or commissions and
do not necessarily represent actual transactions.
High Low
------------
2000 1st Quarter .50 .12
2nd Quarter .50 .12
3rd Quarter .31 .09
4th Quarter .16 .07
1999 1st Quarter .31 .06
2nd Quarter .50 .13
3rd Quarter .44 .13
4th Quarter .38 .13
1998 1st Quarter .25 .05
2nd Quarter .25 .05
3rd Quarter .25 .03
4th Quarter .25 .04
As of March 20, 2001, there were approximately 841 Shareholders based
upon the number of record holders as of that date. The Company has paid no
cash dividends since it's inception in 1970. At the present time, the
Company intends to retain all potential earnings for future growth of the
business.
Item 6 - Selected Financial Data
The following table summarizes certain financial data which are
qualified by more detailed financial statements included herein.
2000 1999 1998 1997 1996
-------------------------------------------------------------------------
Sales 2,075,724 1,794,553 $1,844,782 $2,097,454 $2,216,978
Income (Loss) from operations 73,378 1,992 (99,081) (130,842) (94,578)
Net Income (Loss) 67,712 1,593 (99,535) (129,606) (95,633)
Net Income (Loss) per Common
share 0.018 0.001 (0.026) (0.034) (0.025)
Weighted average shares
outstanding 3,813,719 3,805,239 3,792,308 3,790,122 3,784,566
Total Assets 700,821 795,247 788,374 936,784 1,052,450
Long Term Obligations -0- 37,500 -0- -0- -0-
Stockholders' equity 481,019 412,880 410,287 545,733 660,255
Cash Dividends Per Share -0- -0- -0- -0- -0-
Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operation
2000 Compared with 1999
Sales for 2000 increased from the corresponding period of 1999 by
$0.28 million or 16%, to $2.1 million. This increase was primarily due to an
increase in overall sales volume. Domestic sales in 2000 were $1.5 million
or 72% of total sales, compared to $1.1 million or 61% of total sales in
1999. International sales in 2000 were $0.6 million or 28% of total sales,
compared to $0.7 million or 39% of total sales in 1999. The Company believes
that the increase in overall sales is due to increased domestic sales.
Gross profit for 2000 increased from the corresponding period of 1999
by $0.29 million, or 38%, to $1.0 million. As a percentage of total sales,
gross profit was 50% and 42% for 2000 and 1999, respectively. 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 2000 increased from the
corresponding period of 1999 by approximately $0.2 million or 36% to $0.8
million. As a percentage of total sales, selling and marketing expenses
increased to 37% for 2000 compared to 32% for 1999. The increase is
primarily due to changes in marketing staff and increased commissions.
General and administrative expenses for 2000 decreased from the
corresponding period of 1999 by $.01 million, or 4% to $0.16 million. The
decrease in G & A expenses is the result of changes in office staff. As a
percentage of total sales, G & A expenses decreased to 7.7% in 2000 compared
to 9.3% in 1999.
Research and development expenses for 2000 increased from the
corresponding period of 1999 by $.01 million or 61%. As a percentage of
sales, R & D expenses increased to 2% of sales in 2000 compared to 1% of
sales in 1999.
Income from operations for 2000 as compared to the same period of 1999
increased by $.07 million. As a percentage of total sales, operating income
increased to 3.5% for 2000 compared to .11% for 1999. Operating income is
the result of the factors indicated above.
1999 Compared with 1998
Sales for 1999 decreased from the corresponding period of 1998 by
$0.05 million or 3%, to $1.8 million. This decrease was primarily due to a
decrease in international sales. Domestic sales in 1999 were $1.1 million or
61% of total sales, compared to $1 million or 54% of total sales in 1998.
International sales in 1999 were $0.7 million or 39% of total sales,
compared to $0.8 million or 46% of total sales in 1998.
Gross profit for 1999 increased from the corresponding period of 1998
by $0.04 million, or 5%, to $0.8 million. As a percentage of total sales,
gross profit increased to 42% in 1999 compared to 39% in 1998. 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 1999 decreased from the
corresponding period of 1998 by approximately $0.06 million or 9% to $0.6
million. As a percentage of total sales, selling and marketing expenses
decreased to 32% for 1999 compared to 34% for 1998. The decrease is
primarily due to a decrease in commissions paid to sales reps.
General and administrative expenses for 1999 remained steady at $.16
million and 9% of sales in 1999 and 1998.
Research and development expenses for 1999 remained steady at $.02
million and 1% of sales in 1999 and 1998.
Income from operations for 1999 as compared to the same period of 1998
increased by $.10 million. As a percentage of total sales, operating income
increased to .11% for 1999 compared to operating losses of 5.4% in 1998. The
operating income in 1999 are a result of the factors indicated above.
Liquidity and capital resources
Working capital at December 31, 2000 was $397,809 as compared to
$376,983 in working capital at December 31, 1999. The increase was
attributable to the net income for the year ended December 31, 2000.
The Company maintains a $200,000 line-of-credit agreement with a bank.
The line is collateralized by a security interest in substantially all
assets of the Company. Interest is payable monthly at the bank's prime rate
plus 1.5%. There were no borrowings outstanding on this line at December 31,
2000.
Capital expenditures totaled approximately $27,000 in 2000 and $16,000
in 1999. No material purchase or capital commitments exist at December 31,
2000.
The Company believes that cash generated from operations, together
with the existing sources of debt financing, will be sufficient to meet
foreseeable cash requirements through 2001.
Item 7a - Quantitative and Qualitative Disclosures about Market Risk
Not appicable.
Item 8 - Financial Statements and Supplementary Data
Financial statements and schedules together with the auditors' reports
thereon are referred to Part IV and are attached hereto.
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
1. Disagreements with Accountants on Accounting and Financial
Disclosure:
None
2. Changes in Registrant's Certifying Accountants
None
PART III
Item 10 - Directors, Executive Officers of the Registrant
The information required with respect to the Directors and the
Executive Officers of the Company is incorporated herein by reference to
"Executive Officers" in the Proxy Statement and is incorporated herein by
reference.
Item 11 - Executive Compensation
The information required with respect to executive compensation of the
Company is incorporated herein by reference to "Executive Officer
Compensation" in the Proxy Statement and is incorporated herein by
reference.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
The information required by this item with respect to security
ownership and management and certain beneficial owners of the Company is
incorporated by reference to the caption "Stock Ownership of Directors,
Executive Officers and Principal Stockholders" contained in the Proxy
Statement and is incorporated herein by reference.
The Company knows of no arrangements, including any pledge by any
person of securities of the Company, the operation of which may at a
subsequent date result in a change in control of the Company. The Company
also knows of no agreements among its shareholders which relate to voting or
investment power of its shares of Common Stock.
Item 13 - Certain Relationships and Related Transactions
Commissions paid to a related entity for the years ended December 31,
2000, 1999 and 1998 were approximately $1,800, $12,000 and $27,000,
respectively.
The Company has entered into a lease agreement for its Tewksbury,
Massachusetts facility with Lorig Corporation, which is owned by members of
the family of an officer and majority stockholder of the Company. The
Company believes the lease agreement is either favorable or comparable to
others based on a market value of the facility. The lease expired in
November, 1999 and the Company now leases the facility on a tenant at will
basis.
PART IV
Item 14 - Exhibits, Financial Statements, Schedules and Reports on Form 8-K
Page
a) The following documents are filed as a part
of this Report:
1. Financial Statement:
Report of Independent Certified Public Accountants 9
Balance sheet at December 31, 2000 and 1999 10
Statement of operations for the years
ended December 31, 2000, 1999 and 1998 11
Statement of Stockholders' equity for the years
ended December 31, 2000, 1999 and 1998 12
Statement of cash flows for the years
ended December 31, 2000, 1999 and 1998 13
Notes to Financial Statements 14
2. Schedules for the years ended December 31, 2000,
1999 and 1998
Schedule II - Valuation and Qualifying Accounts 19
All other schedules called for under Regulation S-X are
not submitted because they are not applicable or not
required, or because the required information is included
in the Consolidated financial statements and notes
thereto.
3. Exhibits:
The following exhibits are filed herewith:
None
b) Reports on Form 8-K:
The Company filed no Reports on Form 8-K with the Securities and
Exchange Commissions during the quarter ended December 31, 2000.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Megatech Corporation
We have audited the accompanying balance sheet of Megatech Corporation
as of December 31, 2000 and 1999, and the related statements of operations,
stockholders' equity and cash flows for the years ended December 31, 2000,
1999 and 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Megatech
Corporation as of December 31, 2000 and 1999, and the results of its
operations and its cash flows for the years ended December 31, 2000, 1999
and 1998 in conformity with accounting principles generally accepted in the
United States of America.
Our audits, referred to above, also include the financial schedules
listed in the Index at Item 14(a)(2). In our opinion, based on our audit,
such financial schedules present fairly the information required to be set
forth therein.
SULLIVAN BILLE, P.C.
Tewksbury, Massachusetts
February 26, 2001
MEGATECH CORPORATION
BALANCE SHEET, DECEMBER 31, 2000 AND 1999
2000 1999
----------------------------
A S S E T S
CURRENT ASSETS:
Cash and cash equivalents $ 27,585 $ 75,857
Accounts receivable:
Trade (less allowance for doubtful
accounts: 2000, $14,075; 1999, $9,934) 332,577 280,389
Other 7,763 3,581
Inventories 243,827 357,662
Prepaid expenses 5,859 4,361
----------------------------
Total current assets 617,611 721,850
PROPERTY AND EQUIPMENT - Net 75,544 65,731
OTHER ASSETS 7,666 7,666
----------------------------
TOTAL $ 700,821 $ 795,247
============================
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
CURRENT LIABILITIES:
Accounts payable - trade $ 95,381 $ 77,192
Accrued liabilities:
Customer advanced payments 14,405 172,953
Accrued commissions 8,820 24,055
Other 63,696 70,667
Current portion of long-term debt 37,500
----------------------------
Total current liabilities 219,802 344,867
----------------------------
LONG-TERM DEBT 37,500
----------------------------
STOCKHOLDERS' EQUITY:
Common stock, authorized, 5,000,000
shares of $.0143 par value;
issued and outstanding:
2000, 3,815,408 shares;
1999, 3,812,308 shares 54,560 54,516
Additional paid-in capital 4,015,044 4,014,661
Deficit (3,588,585) (3,656,297)
----------------------------
Stockholders' equity - net 481,019 412,880
----------------------------
TOTAL $ 700,821 $ 795,247
============================
See notes to financial statements.
MEGATECH CORPORATION
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
------------------------------------------
SALES $2,075,724 $1,794,553 $1,844,782
COST OF SALES 1,029,285 1,034,245 1,123,575
------------------------------------------
GROSS PROFIT 1,046,439 760,308 721,207
------------------------------------------
OPERATING EXPENSES:
Selling and marketing 777,660 569,882 626,836
General and administrative 160,464 166,726 168,048
Research and development 34,937 21,708 25,404
------------------------------------------
Total operating expenses 973,061 758,316 820,288
------------------------------------------
INCOME (LOSS) FROM OPERATIONS 73,378 1,992 (99,081)
OTHER EXPENSE - Net 5,666 399 454
------------------------------------------
NET INCOME (LOSS) $ 67,712 $ 1,593 $ (99,535)
==========================================
NET INCOME (LOSS) PER SHARE - Basic and
diluted $ .018 $ .001 $ (.026)
==========================================
See notes to financial statements.
MEGATECH CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
COMMON STOCK ADDITIONAL
---------------------- PAID-IN STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY - NET
-------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 3,792,308 $54,230 $4,049,858 $(3,558,355) $545,733
COMPENSATION 8,714 8,714
STOCK OPTIONS
TERMINATED (44,625) (44,625)
NET LOSS FOR THE YEAR (99,535) (99,535)
-------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998 3,792,308 54,230 4,013,947 (3,657,890) 410,287
ISSUANCE OF COMMON STOCK 20,000 286 714 1,000
NET INCOME FOR THE YEAR 1,593 1,593
-------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999 3,812,308 54,516 4,014,661 (3,656,297) 412,880
ISSUANCE OF COMMON STOCK 3,100 44 383 427
NET INCOME FOR THE YEAR 67,712 67,712
-------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2000 3,815,408 $54,560 $4,015,044 $(3,588,585) $481,019
=========================================================================
See notes to financial statements.
MEGATECH CORPORATION
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
-----------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 67,712 $ 1,593 $ (99,535)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Non-cash charges (credit) to net income (loss):
Depreciation and amortization 17,546 19,092 20,509
Compensation funded by stock options - net (35,911)
Common stock awarded as compensation 427 1,000
Loss on sale of property and equipment 3,225
Decrease (increase) in current assets:
Accounts receivable (56,370) (168,319) 241,030
Inventories 113,835 42,206 9,683
Prepaid expenses (1,498) 1,103 16,693
Increase (decrease) in current liabilities:
Accounts payable 18,189 (86,537) (109,654)
Accrued liabilities (180,754) 53,317 121,690
-----------------------------------------
Net cash provided by (used in) operating activities (20,913) (133,320) 164,505
-----------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES - Additions to
property and equipment (27,359) (15,903) (6,951)
-----------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on line of credit - net (25,000)
Proceeds from issuance of long-term debt 37,500
-----------------------------------------
Net cash provided by (used in) financing activities 37,500 (25,000)
-----------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (48,272) (111,723) 132,554
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 75,857 187,580 55,026
-----------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 27,585 $ 75,857 $ 187,580
=========================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 3,437 $ 839 $ 892
Taxes paid 404 351 715
See notes to financial statements.
MEGATECH CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998
1. OPERATIONS
Megatech Corporation is engaged in the production and sale of
educational training programs in the energy, power and transportation areas
which are sold domestically and internationally to educational institutions
and government agencies. Inherent in the line of business in which the
Company is engaged is the risk of product line obsolescence due to
technological advances. There also exists the risk that certain customers,
such as governmental agencies, which are funded by tax revenues, may be
subject to budget reductions. The Company grants credit to its customers.
Approximately 28%, 39% and 46% of sales during the years ended December 31,
2000, 1999 and 1998, respectively, were from international sales.
There were two customers that accounted for 63% of sales for the year
ended December 31, 2000 and one customer that accounted for 36% and 28% of
sales for the years ended December 31, 1999 and 1998, respectively. No
other customers accounted for more than 10% of sales in each of the years
ended December 31, 2000, 1999 and 1998.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Revenue Recognition
Revenue from product sales are recognized upon shipment. Revenue for
maintenance and service and other revenues are recognized as the services
are performed.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents
include cash and all highly liquid investments with original maturities of
three months or less.
Inventories
Inventories are valued at the lower of cost (first-in-first-out
method) or market.
Property and Equipment
Property and equipment are recorded at cost. Depreciation and
amortization are computed principally on the straight-line method for
financial accounting purposes, and accelerated methods for tax purposes,
over the estimated useful lives of the assets.
Leasehold improvements are amortized on the straight-line method over
their respective lives or the lease terms, whichever is shorter.
Costs of maintenance and repairs are charged to expense while costs of
significant renewals and betterments are capitalized.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date. A valuation allowance is used to reduce
deferred tax assets when it is "more likely than not" that some portion or
all of the deferred tax assets will not be realized.
3. INVENTORIES
Inventories consisted of the following:
December 31,
----------------------
2000 1999
----------------------
Raw material $146,722 $182,614
Work in Process 8,993 29,903
Finished goods 88,112 145,145
----------------------
Total $243,827 $357,662
======================
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
December 31,
----------------------
2000 1999
----------------------
Machinery and equipment $245,855 $242,571
Office equipment 140,938 134,684
Leasehold improvements 69,776 69,776
Automobiles 44,765 26,944
----------------------
Total 501,334 473,975
Less accumulated depreciation and
amortization 425,790 408,244
----------------------
Property and equipment - net $ 75,544 $ 65,731
======================
The useful lives employed for computing depreciation and amortization on
principal classes of property and equipment are as follows:
Class Description Years
-------------------------------------------
Machinery and equipment 5 - 7
Office equipment 5 - 7
Leasehold improvements 10
Automobiles 5
5. LINE OF CREDIT
The Company has a $200,000 ($100,000 at 1999) line-of-credit agreement
with a bank. The line is collateralized by a security interest in
substantially all assets of the Company. Interest is payable monthly at the
bank's prime rate plus 1.5%. There were no borrowings outstanding on this
line at December 31, 2000 and 1999.
6. LONG-TERM DEBT
Long-term debt of $37,500 at December 31, 1999, classified as current
at December 31, 2000, consisted of 8% convertible notes payable. Interest
is payable quarterly and the outstanding principle balance is due June 2001.
The notes are convertible at the option of the holder into shares of the
Company's common stock at a conversion rate of $1 per share. If at anytime
prior to the notes maturity date or conversion by the holder, the Company's
common stock has market price of at least $2 for five consecutive trading
days, the notes are convertible at the option of the Company into shares of
the Company's common stock at a conversion rate of $1 per share.
7. LEASE AGREEMENTS
The Company leased its office, research and production facility in
Tewksbury, Massachusetts from a related party, under a five- year operating
lease which expired in November 1999. The Company now leases the facility
on a tenant-at-will basis. The Company is responsible for all operating
expenses and maintenance costs. Rent expense was approximately $85,000,
$85,000 and $86,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.
8. INCOME TAXES
The Company has available federal net operating loss carryforwards of
approximately $548,100 expiring through December 2018 and state operating
loss carryforwards of approximately $253,600 expiring through December 2003.
Significant components of the Company's deferred tax assets and
liabilities are as follows:
December 31,
------------------------
2000 1999
------------------------
Deferred income tax assets:
Federal and state net operating loss carryforwards $ 209,900 $ 647,800
Allowance for doubtful accounts, reserves and accruals 31,400 42,100
------------------------
Total deferred income tax assets 241,300 689,900
Deferred income tax liabilities - tax over book depreciation (5,000) (9,000)
Valuation allowance for deferred tax assets (236,300) (680,900)
------------------------
Net recognized deferred income tax benefit $ -0- $ -0-
========================
9. RELATED PARTY TRANSACTIONS
Commissions paid to a related entity were approximately $1,800,
$12,000 and $27,000 during the years ended December 31, 2000, 1999 and 1998,
respectively.
10. EMPLOYEE BENEFIT PLAN
The Company has a SIMPLE IRA Plan (the Plan), which covers all
employees who meet certain requirements. Under the terms of the Plan, the
Board of Directors determines annually the amount of the matching
contribution. The matching contribution for the years ended December 31,
2000, 1999 and 1998 were approximately $5,400, $4,400 and $6,300,
respectively.
11. NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share has been computed using the weighted
average number of common shares outstanding.
Diluted net income (loss) per share gives effect to all dilutive
potential common shares that were outstanding during the period. None of
the convertible debt or options outstanding at period end were included in
the diluted net income (loss) per share calculation for the years ended
December 31, 2000, 1999 and 1998, since they were anti-dilutive.
The weighted average number of shares outstanding is as follows:
Year Ended Number of
December 31, Shares
--------------------------------
2000 3,813,719
1999 3,805,239
1998 3,792,308
12. STOCK OPTIONS PLANS
The Company had issued stock options to various directors, officers,
employees and others under various stock option plans. Under the terms of
the plans, one third of the options become exercisable one year from the
date of grant, two thirds two years from the date of grant and all options
expire three years from the date of grant.
The following table summarizes stock option activity:
Stock Price
Options Per Share
---------------------------
Outstanding at December 31, 1997 42,000 $1.00 - $2.75
Expired (42,000) 1.00 - 2.75
----------------------------
Outstanding at December 31, 1998, 1999 and 2000 -0- $ -0-
============================
SCHEDULE II
MEGATECH CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
--------------------------------------------------------------------------------------------------
ADDITIONS
BALANCE -----------------------
AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
--------------------------------------------------------------------------------------------------
Year Ended December 31, 1998:
Reserve for obsolescence $10,000 $ -0- $-0- $-0- $10,000
Allowance for doubtful accounts $11,070 $ -0- $-0- $904 $10,166
Year Ended December 31, 1999:
Reserve for obsolescence $10,000 $ -0- $-0- $-0- $10,000
Allowance for doubtful accounts $10,166 $ -0- $-0- $232 $ 9,934
Year Ended December 31, 2000:
Reserve for obsolescence $10,000 $ -0- $-0- $-0- $10,000
Allowance for doubtful accounts $ 9,934 $4,141 $-0- $-0- $14,075
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MEGATECH CORPORATION
(Registrant)
By: /s/ Vahan V. Basmajian
Vahan V. Basmajian, President,
Treasurer and Director
Date:______________________________
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
By: /s/ Vahan V. Basmajian
Vahan V. Basmajian, President, Treasurer and Director
By: /s/ Ralph E. Hawes
Ralph E. Hawes, Director
By: /s/ Dennis A. Humphrey
Dennis A. Humphrey, Director & Clerk
By: /s/ Henry P. Ingwersen
Henry P. Ingwersen, Director
By: /s/ Varant Z. Basmajian
Varant Z. Basmajian, Director
Date:______________________________