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 ACT
      OF 1934

      FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003 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 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:

                        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  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
                                       ----       ----

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


<PAGE>


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 15, 2004 was approximately $571,800 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
2,722,758. 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 15, 2004 was 3,906,958.

Portions of the registrant's definitive Proxy Statement for its Annual
Meeting of the stockholders to be held on May 10, 2004 (the "Proxy
Statement") are incorporated by reference into Part III.

                         FORWARD LOOKING STATEMENTS

This Annual Report contains forward-looking statements as defined under the
federal securities laws. Actual results could vary materially. Factors that
could cause actual results to vary materially are described herein and in
other documents. Readers should pay particular attention to the
considerations described in the section of this report entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Readers should also carefully review the risk factors
described in the other documents the Company files from time to time with
the Securities and Exchange Commission.

                                   PART I

Item 1- Description of Business
-------------------------------

      (a)   General Development of 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.


<PAGE>  2


      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.

      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 manufacturers 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.

      There was one customer which accounted for 67% and 88% of sales for
the years ended December 31, 2003 and 2002, respectively, and two customers
which accounted for 61% of sales for the year ended December 31, 2001.
Approximately 46%, 58% and 11% of sales during the years ended December 31,
2003, 2002 and 2001, respectively, were from international sales.

      The Company's backlog as of December 31, 2003 and 2002 was $261,709
and $1,610,020, respectively. The backlog as of December 31, 2002 included
approximately $1 million in orders from Snap On Corporation which were
shipped in February, 2003. The Company expects to fill all orders (unless
cancelled) of its current backlog during the 2004 fiscal year.


<PAGE>  3


      As of December 31, 2003, the Company had 11 full-time and 1 part-time
employee, of which 7 were engaged in production activities, 3 in sales and
marketing, and 2 in general and administrative.

      (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:
            --------------------------------------------

<TABLE>
<CAPTION>

                                        Percent of
                  Year      Amount      Total Sales
                  ----      ------      -----------

                  
     <c>               <c>
                  2003    $1,463,975        46%

                  2002    $1,767,891        58%

                  2001    $  198,323        11%
</TABLE>

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 five
year lease with a related party which expires in December, 2006. 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 2003, no matters were submitted to a
vote of the security holders through the solicitation of proxies or
otherwise.


<PAGE>  4


                                   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.

<TABLE>
<CAPTION>

                               High       Low
                               ----       ---

      
     <c>              <c>       <c>
      2003    1st Quarter      0.20      0.20
              2nd Quarter      0.17      0.17
              3rd Quarter      0.20      0.20
              4th Quarter      0.24      0.24

      2002    1st Quarter      0.14      0.10
              2nd Quarter      0.26      0.26
              3rd Quarter      0.28      0.28
              4th Quarter      0.16      0.16

      2001    1st Quarter      0.16      0.11
              2nd Quarter      0.08      0.08
              3rd Quarter      0.04      0.04
              4th Quarter      0.07      0.07
</TABLE>

      As of March 15, 2004, there were approximately 802 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.

<TABLE>
<CAPTION>

                                          2003          2002          2001          2000          1999
                                          ----          ----          ----          ----          ----


                                    <c>           <c>           <c>           <c>           <c>
Sales                                  $3,172,894    $3,052,238    $1,766,579    $2,075,724    $1,794,553
Income from operations                     61,646       110,831         5,383        73,378         1,992
Net Income                                 63,103       101,131         2,104        67,712         1,593
Net Income per Common share                 0.016         0.026         0.001         0.018         0.001
Weighted average shares outstanding     3,887,632     3,856,948     3,825,951     3,813,719     3,805,239


<PAGE>  5


Total Assets                              829,330     1,116,489       625,011       700,821       795,247
Long Term Obligations                         -0-           -0-        37,500           -0-        37,500
Stockholders' equity                      622,444       594,381       485,387       481,019       412,880
Cash Dividends Per Share                      -0-           -0-           -0-           -0-           -0-
</TABLE>

Item 7 - Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
         Results of Operation
         --------------------

Critical Accounting Policies

Revenue Recognition
-------------------

Revenue from product sales is 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.

2003 Compared with 2002

      Sales: Sales for 2003 increased from the corresponding period of 2002
by $.12 million or 4% to $3.2 million. The increase was due to an increase
in domestic sales. Domestic sales were $1.7 million or 54% of total sales,
compared to $1.3 million or 42% of total sales in 2002. International sales
in 2003 were $1.5 million or 46% of total sales, compared to $1.8 million
or 58% of total sales in 2002. The increase in domestic sales is due to an
increase in direct sales which amounted to $359 thousand in 2003 compared
to $210 thousand in 2002. The decrease in international sales is
attributable to international sales through Snap On Corporation which were
$1.1 million in 2003 compared to $1.8 million in 2002. Overall, sales to
Snap On Corporation decreased to 67% in 2003 compared to 88% in 2002.

      Gross Profit: Gross profit for 2003 decreased from the corresponding
period of 2002 by $.18 million or 10% to $1.7 million. As a percentage of
sales, gross profit was 54% and 62% for 2003 and 2002, respectively. The
decrease in gross profit margin as a percentage of sales is due to
increased materials costs offset by decreased labor and overhead costs.
Materials were $1,020,000 in 2003 or 32% compared to $657,000 or 22% in
2002. Labor was $292,000 or 9% in 2003 compared to $359,000 or 12% in 2002.
Overhead was $155,000 or 5% in 2003 compared to $147,000 or 4% in 2002.


<PAGE>  6


      Selling and Marketing Expenses: Selling and marketing expenses
decreased from the corresponding period of 2002 by $.17 million or 11% to
$1.4 million. As a percentage of sales, selling and marketing expenses was
44% and 52% for 2003 and 2002, respectively. The overall decrease in
selling and marketing expenses consists of a decline in commission expense
and salaries offset by an increase in travel expenses. Commission expense
in 2003 was $1 million or 32% of sales, compared to $1.1 million or 36% in
2002. The decrease is due to an increase in direct sales with no
commission. Marketing salaries decreased to $164,000 in 2003 compared to
$241,000 in 2002 due to staffing changes. Travel, meals and entertainment
expenses increased to $64,000 in 2003 from $35,000 in 2002 due to increased
travel to support international sales.

      General and Administrative Expenses: General and administrative
expenses increased to $.21 million in 2003 compared to $.19 million in
2002. The increase is due to increased accounting and audit expense as well
as changes in salary allocations. As a percentage of sales, general and
administrative expenses increased to 7% of sales in 2003 compared to 6% in
2002.

      Research and Development Expenses: Research and development expenses
increased to $26,000 or .8% of sales in 2003 compared to $16,000 or .5%
of sales in 2002. The increase was due to staffing changes.

      Net Income: The net income for the year ended December 31, 2003 was
$63,103 or 2% of sales, compared to $101,131 or 3% of sales for the
previous year. The decrease is the result of the items discussed above.

2002 Compared with 2001

      Sales: Sales for 2002 increased from the corresponding period of 2001
by $1.3 million or 73% to $3.1 million. The increase was due to an increase
in international sales. Domestic sales in 2002 were $1.3 million or 42% of
total sales, compared to $1.6 million or 89% of total sales in 2001.
International sales in 2002 were $1.8 million or 58% of total sales,
compared to $.2 million or 11% of total sales in 2001. The increase in
international sales is attributable to sales through Snap On International
of training equipment and programs to the national Colleges of Venezuela.
Overall, sales to Snap On Corporation increased to 88% in 2002 compared to
49% in 2001.

      Gross Profit: Gross profit for 2002 increased from the corresponding
period of 2001 by $.9 million or 86% to $1.9 million. As a percentage of
sales, gross profit was 62% and 58% for 2002 and 2001, respectively. The
increase in gross profit margin as a percentage of sales is due to
increased efficiencies associated with higher sales volume. Decreases in
materials costs and overhead costs were offset slightly by an increase in
labor costs. Materials were $657,000 in 2002 or 22% compared to $460,000 or
26% in 2001. Labor was $359,000 or 12% in 2002 compared to $179,000 or 10%
in 2001. Overhead was $146,000 or 4% in 2002 compared to $111,000 or 6% in
2001.

      Selling and Marketing Expenses: Selling and marketing expenses
increased from the corresponding period of 2002 by $.8 million or 94% to
$1.6 million. As a percentage of sales, selling and marketing expenses was
52% and 46% for 2002 and 2001, respectively. The increase in selling and


<PAGE>  7


marketing expenses is due to higher commission expense, salaries and rent.
Commission expense in 2002 was 36% of sales compared to 28% in 2001.

      General and Administrative Expenses: General and administrative
expenses were fairly steady in 2002 and 2001 at $.18 million. Major general
and administrative expenses include salaries, rent, audit, accounting and
directors expenses. As a percentage of sales, general and administrative
expenses decreased to 6% of sales in 2002 compared to 10% in 2001. This is
due to general and administrative expenses remaining relatively steady
despite increased sales.

      Research and Development Expenses: Research and development expenses
were stable in 2002 and 2001 at $16,000 or 1% of sales.

      Net Income: The net income for the year ended December 31, 2002 was
$101,131 or 3% of sales, compared to $2,104 or .1% of sales for the
previous year. The increase is the result of the items discussed above.

Liquidity & Capital Resources
-----------------------------

      As of December 31, 2003, the Company had cash and cash equivalents of
$202,158 compared to $30,327 at December 31, 2002. During 2003, the Company
provided $311,000 in cash from operating activities. The Company used
$6,000 for property and equipment acquisitions, and repaid $134,000 on the
Company's line of credit and notes payable.

      The Company maintains a $ 500,000 line-of-credit agreement with a
bank, increased from $275,000 in September, 2003. 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 .75%.
There were no borrowings outstanding on this line at December 31, 2003.
Borrowings outstanding on this line at December 31, 2002 were $100,000.

      Capital expenditures totaled approximately $6,000 in 2003 and $41,000
in 2002. No material purchase or capital commitments exist at December 31,
2003.

      Working capital at December 31, 2003 was $593,000 compared to
$503,000 at December 31, 2002. The increase is primarily the result of the
net income for the year.

      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 2004.

Recent Accounting Pronouncements
--------------------------------

      During November 2002, the Financial Accounting Standards Board issued
FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others," which is an interpretation of FASB Statements No. 5, 57 and 107
and rescission of FASB Interpretation No. 34. The initial recognition and
measurement provisions of this Interpretation are applicable on a
prospective basis to guarantees issued or modified after December 31,


<PAGE>  8


2002, and the disclosure requirements are effective for financial
statements of periods ending after December 15, 2002. This Interpretation
addresses the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under guarantees, and
also clarifies the requirements related to the recognition of a liability
by a guarantor at the inception of a guarantee for the obligations the
guarantor has undertaken in issuing that guarantee. Management does not
believe the adoption of FASB Interpretation No. 45 will have a material
impact on the Company's financial position or results of operations as the
Company does not currently provide any third party guarantees.

      In January 2003, the FASB issued FASB Interpretation No. ("FIN") 46,
"Consolidation of Variable Interest Entities" ("FIN 46"). In December 2003,
FIN 46 was replaced by FASB interpretation No. 46(R) "Consolidation of
Variable Interest Entities." FIN 46(R) clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements,"
to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46(R)
requires an enterprise to consolidate a variable interest entity if that
enterprise will absorb a majority of the entity's expected losses, is
entitled to receive a majority of the entity's expected residual returns,
or both. FIN 46(R) is effective for entities being evaluated under FIN
46(R) for consolidation no later than the end of the first reporting period
that ends after March 15, 2004. Management does not believe the adoption of
FIN 46(R) will have a material impact on the Company's financial position
or results of operations, as the Company does not have any entities that
would be covered under FIN 46.

      On April 30, 2003, the Financial Accounting Standards Board issued
SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities." SFAS No. 149 amends and clarifies accounting for
derivative instruments, including certain derivative instruments embedded
in other contracts, and for hedging activities under SFAS No. 133. The new
guidance amends SFAS No. 133 for decisions made as part of the Derivatives
Implementation Group ("DIG") process that effectively required amendments
to SFAS No. 133, and decisions made in connection with other FASB projects
dealing with financial instruments and in connection with implementation
issues raised in relation to the application of the definition of a
derivative and characteristics of a derivative that contains financing
components. In addition, it clarifies when a derivative contains a
financing component that warrants special reporting in the statement of
cash flows. SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after
June 30, 2003. Adoption of this standard did not have an impact on the
Company's financial statements, as the Company does not currently have such
instruments or activities.

      In May 2003, the Financial Accounting Standards Board issued SFAS No.
150 "Accounting for Financial Instruments with the Characteristics of both
Liabilities and Equities." SFAS No. 150 establishes standards regarding the
manner in which an issuer classifies and measures certain types of
financial instruments having characteristics of both liabilities and
equity. Pursuant to SFAS No. 150, such freestanding financial instruments
(i.e., those entered into separately from an entity's other financial
instruments or equity transactions or that are legally detachable and
separately exercisable) must be classified as liabilities or, in some
cases, assets. In addition, SFAS No. 150 requires that financial
instruments containing obligations to repurchase the issuing entity's
equity shares and, under certain


<PAGE>  9


circumstances, obligations that are settled by delivery of the issuer's
shares be classified as liabilities. Certain provisions of SFAS No. 150
have been indefinitely deferred; however, the Statement is generally
effective for financial instruments entered into or modified after May 31,
2003 and for other instruments at the beginning of the first interim period
beginning after June 15, 2003. The Company does not currently have any
financial instruments that will be impacted by SFAS No. 150. The adoption
of SFAS No. 150 did not have a material impact on the Company's financial
position or results of operations.

      In December 2003, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 104, Revenue Recognition (SAB 104), which
provides guidance on the recognition, presentation and disclosure of
revenue in financial statements filed with the SEC. SAB 104 revises or
rescinds portions of the interpretive guidance that was previously issued
in Staff Accounting Bulletin No. 101, Revenue Recognition in Financial
Statements (SAB 101) that was issued in December 1999 in order to make this
interpretive guidance consistent with current authoritative accounting and
auditing guidance and SEC rules and regulations. The adoption of SAB 104
did not have a significant impact on the Company's financial position or
results of operations.

Item 7A - Quantitative and Qualitative Disclosure of Market Risk
----------------------------------------------------------------

Not applicable.

Item 8 - Financial Statements and Supplementary Data
----------------------------------------------------

      Financial statements 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.


<PAGE>  10


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
------------------------------------------------------------------------
          and Related Stockholder Matters
          -------------------------------

      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.

      We do not maintain any plans, pursuant to which we may grant equity
awards to employees or other persons.

Item 13 - Certain Relationships and Related Transactions
-------------------------------------------------------

      Commissions paid to a related entity for the years ended December 31,
2003, 2002 and 2001 were approximately $ 0, $1,700 and $7,700,
respectively. The Company has entered into a five year lease agreement for
its Tewksbury, Massachusetts facility with Lorig Corporation, which is
owned by members of the family of an officer and major 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
expires in 2006.

Item 14 - Controls and Procedures
---------------------------------

      Our Chief Executive Officer/Chief Financial Officer has concluded,
based on his evaluation within 90 days of the filing date of this report,
that our disclosure controls and procedures are effective to ensure that
information required to be disclosed in the reports that we file or submit
under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. There have been no
significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the date of the
previously mentioned evaluation.


<PAGE>  11


                                   PART IV

Item 15 - Exhibits, Financial Statements, Schedules and Reports on Form 8-K
---------------------------------------------------------------------------

      a)    The following documents are filed as a part of this Report:

            1.    Financial Statement:                                     Page
                                                                           ----

                  Report of Independent Certified Public Accountants        16

                  Balance sheet at December 31, 2003 and 2002               17

                  Statement of operations for the years ended
                   December 31, 2003, 2002 and 2001                         18

                  Statement of stockholders' equity for the years ended
                   December 31, 2003, 2002 and 2001                         19

                  Statement of cash flows for the years ended
                   December 31, 2003, 2002 and 2001                         20

                  Notes to Financial Statements                             21

            2.    Schedules for the years ended December 31, 2003, 2002
                  and 2001

                  All 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:

                  31  Certification of Chief Executive Officer pursuant to
                       section 302 of the Sarbanes-Oxley Act of 2002

                  32.  Certification of Chief Executive Officer pursuant to
                        18 U.S.C. Section 1350, Section 906 of the
                        Sarbanes-Oxley Act of 2002


<PAGE>  12


            4.    Form 8-K

            The company filed no reports on Form 8-K with the Securities
            and Exchange Commission during the quarter ended December 31,
            2003.

Item 16 - Principal Accountant Fees and Services
------------------------------------------------

      The information required with respect to principal accountant fees
and services of the Company is incorporated herein by reference to
"Principal Accountant Fees and Services" in the Proxy Statement and is
incorporated herein by reference.

                                 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: March 15, 2004

      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: March 15, 2004


<PAGE>  13


             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, 2003 and 2002, and the related statements of operations,
stockholders' equity and cash flows for the years ended December 31, 2003,
2002 and 2001. 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, 2003 and 2002, and the results of its
operations and its cash flows for the years ended December 31, 2003, 2002
and 2001 in conformity with accounting principles generally accepted in the
United States of America.



                                       SULLIVAN BILLE, P.C.

March 8, 2004
Tewksbury, Massachusetts


<PAGE>  14


                            MEGATECH CORPORATION

                  BALANCE SHEET, DECEMBER 31, 2003 AND 2002

<TABLE>
<CAPTION>

                                                                 2003           2002
---------------------------------------------------------------------------------------

                                 A S S E T S


                                                           <c>            <c>
CURRENT ASSETS:
  Cash and cash equivalents                                   $  202,158     $   30,327
  Accounts receivable:
    Trade (less allowance for doubtful accounts of $6,200)       113,037        146,482
    Other                                                         20,630          8,643
  Inventories (less reserve of $10,000)                          418,713        839,753
  Prepaid expenses                                                 5,026             52
                                                              ----------     ----------

      Total current assets                                       759,564      1,025,257

PROPERTY AND EQUIPMENT - Net                                      62,100         83,566

OTHER ASSETS                                                       7,666          7,666
                                                              ----------     ----------

      TOTAL                                                   $  829,330     $1,116,489
                                                              ==========     ==========

                         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:
  Note payable - line of credit                                              $  100,000
  Accounts payable - trade                                    $   38,062        218,508
  Accrued liabilities:
    Salaries and wages                                            35,245         35,365
    Commissions                                                   44,148          1,649
    Other                                                         36,944         42,102
  Customer advanced payments                                      12,487         90,109
  Current portion of long-term debt                                              34,375
                                                              ----------     ----------

      Total current liabilities                                  166,886        522,108
                                                              ----------     ----------

STOCKHOLDERS' EQUITY:
  Common stock, authorized, 5,000,000 shares of $.0143
   par value; issued and outstanding: 2003, 3,906,958
   shares; 2002, 3,885,958 shares                                 55,869         55,569
  Additional paid-in capital                                   4,028,822      4,024,162
  Deficit                                                     (3,422,247)    (3,485,350)
                                                              ----------     ----------

      Stockholders' equity - net                                 662,444        594,381
                                                              ----------     ----------

      TOTAL                                                   $  829,330     $1,116,489
                                                              ==========     ==========
</TABLE>

                     See notes to financial statements.


<PAGE>  15


                            MEGATECH CORPORATION

                           STATEMENT OF OPERATIONS
            FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

<TABLE>
<CAPTION>

                                               2003          2002          2001
----------------------------------------------------------------------------------


                                         <c>           <c>           <c>
SALES                                       $3,172,894    $3,052,238    $1,766,579

COST OF SALES                                1,467,474     1,162,396       750,163
                                            ----------    ----------    ----------

GROSS PROFIT                                 1,705,420     1,889,842     1,016,416
                                            ----------    ----------    ----------

OPERATING EXPENSES:
  Selling and marketing                      1,405,402     1,577,331       814,005
  General and administrative                   212,000       185,410       180,262
  Research and development                      26,372        16,270        16,766
                                            ----------    ----------    ----------

      Total operating expenses               1,643,774     1,779,011     1,011,033
                                            ----------    ----------    ----------

INCOME FROM OPERATIONS                          61,646       110,831         5,383

OTHER INCOME (EXPENSE) - Net                     1,457        (9,700)       (3,279)
                                            ----------    ----------    ----------

NET INCOME                                  $   63,103    $  101,131    $    2,104
                                            ==========    ==========    ==========

NET INCOME PER SHARE - Basic and diluted    $     .016    $     .026    $     .001
                                            ==========    ==========    ==========
</TABLE>

                     See notes to financial statements.


<PAGE>  16


                            MEGATECH CORPORATION

                      STATEMENT OF STOCKHOLDERS' EQUITY
            FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

<TABLE>
<CAPTION>

                                    COMMON STOCK        ADDITIONAL
                                --------------------     PAID-IN                      STOCKHOLDERS'
                                 SHARES       AMOUNT     CAPITAL        DEFICIT       EQUITY - NET
                                 ------       ------    ----------      -------       -------------


                             <c>          <c>        <c>           <c>               <c>
BALANCE AT DECEMBER 31, 2000    3,815,408    $54,560    $4,015,044    $(3,588,585)      $481,019

ISSUANCE OF COMMON STOCK           25,150        360         1,904                         2,264

NET INCOME FOR THE YEAR                                                     2,104          2,104
                                ---------    -------    ----------    -----------       --------

BALANCE AT DECEMBER 31, 2001    3,840,558     54,920     4,016,948     (3,586,481)       485,387

ISSUANCE OF COMMON STOCK           45,400        649         7,214                         7,863

NET INCOME FOR THE YEAR                                                   101,131        101,131
                                ---------    -------    ----------    -----------       --------

BALANCE AT DECEMBER 31, 2002    3,885,958     55,569     4,024,162     (3,485,350)       594,381

ISSUANCE OF COMMON STOCK           21,000        300         4,660                         4,960

NET INCOME FOR THE YEAR                                                    63,103         63,103
                                ---------    -------    ----------    -----------       --------

BALANCE AT DECEMBER 31, 2003    3,906,958    $55,869    $4,028,822    $(3,422,247)      $662,444
                                =========    =======    ==========    ===========       ========
</TABLE>

                     See notes to financial statements.


<PAGE>  17


                            MEGATECH CORPORATION

                           STATEMENT OF CASH FLOWS
            FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

<TABLE>
<CAPTION>

                                                                  2003          2002          2001
                                                                  ----          ----          ----


                                                            <c>           <c>           <c>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                   $  63,103     $ 101,131     $  2,104
  Adjustments to reconcile net income to net cash provided
   by (used in) operating activities:
    Non-cash charges (credit) to net income:
      Depreciation and amortization                               26,442        25,634       20,834
      Common stock awarded as compensation                         4,960         7,863        2,264
      (Gain) loss on sale of property and equipment                 (507)        2,735
    Changes in operating assets and liabilities:
      Accounts receivable                                         21,458       102,633       82,582
      Inventories                                                421,040      (623,247)      27,321
      Prepaid expenses                                            (4,974)        7,658       (1,851)
      Accounts payable                                          (180,446)      168,348      (45,221)
      Accrued liabilities                                         37,221        27,152      (34,957)
      Customer advanced payments                                 (77,622)       90,109
                                                               ---------     ---------     --------

        Net cash provided by (used in) operating activities      310,675       (89,984)      53,076
                                                               ---------     ---------     --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of property and equipment                           (6,143)      (40,702)     (16,523)
  Proceeds from disposal of property and equipment                 1,674
                                                               ---------     ---------     --------

      Net cash used in operating activities                       (4,469)      (40,702)     (16,523)
                                                               ---------     ---------     --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from (payments on) line of credit                    (100,000)      100,000
  Principal payments of long-term debt                           (34,375)       (3,125)
                                                               ---------     ---------     --------

        Net cash provided by (used in) financing activities     (134,375)       96,875
                                                               ---------     ---------     --------

NET INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS                                                     171,831       (33,811)      36,553

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                    30,327        64,138       27,585
                                                               ---------     ---------     --------

CASH AND CASH EQUIVALENTS AT END OF YEAR                       $ 202,158     $  30,327     $ 64,138
                                                               =========     =========     ========

SUPPLEMENTAL CASH FLOW INFORMATION:
  Interest paid                                                $   1,746     $   9,566     $  3,417
  Taxes paid                                                       1,130           480          696
</TABLE>

                     See notes to financial statements.


<PAGE>  18


                            MEGATECH CORPORATION

                        NOTES TO FINANCIAL STATEMENTS
                      DECEMBER 31, 2003, 2002 AND 2001

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, the
transportation industry 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 46%, 58% and 11% of sales during the years
ended December 31, 2003, 2002 and 2001, respectively, were from
international sales.

There was one customer that accounted for approximately 67% and 88% of sales
for the years ended December 31, 2003 and 2002, respectively. There were two
customers that accounted for 61% of sales for the year ended December 31,
2001. No other customers accounted for more than 10% of sales in each of the
years ended December 31, 2003, 2002 and 2001.

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. Costs of maintenance and repairs are charged to expense while costs
of significant renewals and betterments are capitalized.


<PAGE>  19


2.  SIGNIFICANT ACCOUNTING POLICIES (Continued)

Long-Lived Assets - The Company assesses the impairment of long-lived
assets, whenever events or changes in circumstances indicate that their
carrying value may not be recoverable. The determination of related
estimated useful lives and whether or not these assets are impaired involves
significant judgments, related primarily to the future profitability and/or
future value of the assets. Changes in the Company's strategic plan and/or
market conditions could significantly impact these judgments and could
require adjustments to recorded asset balances.

Advertising - The Company expenses the costs of advertising as incurred,
except for the costs of its product catalogs, which are accounted for as
prepaid supplies until they are distributed to customers or are no longer
expected to be used. Advertising costs, including the costs of the Company's
participation at industry trade shows, were approximately $20,900, $39,100
and $27,900 for 2003, 2002 and 2001, respectively.

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.

Earnings per Share - Pursuant to Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" (SFAS 128), the Company provides dual
presentation of "Basic" and "Diluted" Earnings Per Share (EPS). Basic EPS
excludes dilution from common stock equivalents and is computed by dividing
income available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution from common stock equivalents. Common stock equivalents consisted
of convertible notes payable for the years ended December 31, 2002 and 2001.

Fair Value of Financial Instruments - The recorded amounts of financial
instruments, including cash equivalents, accounts receivable, short-term
debt, accounts payable, and accrued liabilities, approximate their fair
value because of the short maturity of these instruments. The fair value of
the Company's long-term debt approximates its carrying value.

Recent Accounting Pronouncements - During November 2002, the Financial
Accounting
Standards Board issued FASB Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others," which is an interpretation of FASB Statements No.
5, 57 and 107 and rescission of FASB Interpretation No. 34. The initial
recognition and measurement provisions of this Interpretation are applicable
on a prospective basis to guarantees issued or modified after December 31,
2002, and the disclosure requirements are effective for financial statements
of periods ending


<PAGE>  20


2.  SIGNIFICANT ACCOUNTING POLICIES (Continued)

after December 15, 2002. This Interpretation addresses the disclosures to be
made by a guarantor in its interim and annual financial statements about its
obligations under guarantees, and also clarifies the requirements related to
the recognition of a liability by a guarantor at the inception of a
guarantee for the obligations the guarantor has undertaken in issuing that
guarantee. Management does not believe the adoption of FASB Interpretation
No. 45 will have a material impact on the Company's financial position or
results of operations as the Company does not currently provide any third
party guarantees.

In January 2003, the FASB issued FASB Interpretation No. ("FIN") 46,
"Consolidation of Variable Interest Entities" ("FIN 46"). In December 2003,
FIN 46 was replaced by FASB interpretation No. 46(R) "Consolidation of
Variable Interest Entities." FIN 46(R) clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to
certain entities in which equity investors do not have the characteristics
of a controlling financial interest or do not have sufficient equity at risk
for the entity to finance its activities without additional subordinated
financial support from other parties. FIN 46(R) requires an enterprise to
consolidate a variable interest entity if that enterprise will absorb a
majority of the entity's expected losses, is entitled to receive a majority
of the entity's expected residual returns, or both. FIN 46(R) is effective
for entities being evaluated under FIN 46(R) for consolidation no later than
the end of the first reporting period that ends after March 15, 2004.
Management does not believe the adoption of FIN 46(R) will have a material
impact on the Company's financial position or results of operations, as the
Company does not have any entities that would be covered under FIN 46.

On April 30, 2003, the Financial Accounting Standards Board issued SFAS No.
149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities." SFAS No. 149 amends and clarifies accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133. The new guidance
amends SFAS No. 133 for decisions made as part of the Derivatives
Implementation Group ("DIG") process that effectively required amendments to
SFAS No. 133, and decisions made in connection with other FASB projects
dealing with financial instruments and in connection with implementation
issues raised in relation to the application of the definition of a
derivative and characteristics of a derivative that contains financing
components. In addition, it clarifies when a derivative contains a financing
component that warrants special reporting in the statement of cash flows.
SFAS No. 149 is effective for contracts entered into or modified after June
30, 2003 and for hedging relationships designated after June 30, 2003.
Adoption of this standard did not have an impact on the Company's financial
statements, as the Company does not currently have such instruments or
activities.

In May 2003, the Financial Accounting Standards Board issued SFAS No. 150
"Accounting for Financial Instruments with the Characteristics of both
Liabilities and Equities." SFAS No. 150 establishes standards regarding the
manner in which an issuer classifies and measures certain types of financial
instruments having characteristics of both liabilities and equity. Pursuant
to SFAS No. 150, such freestanding financial instruments (i.e., those
entered into separately from an entity's other financial instruments or
equity transactions or that are legally detachable and


<PAGE>  21


2.  SIGNIFICANT ACCOUNTING POLICIES (Continued)

separately exercisable) must be classified as liabilities or, in some cases,
assets. In addition, SFAS No. 150 requires that financial instruments
containing obligations to repurchase the issuing entity's equity shares and,
under certain circumstances, obligations that are settled by
delivery of the issuer's shares be classified as liabilities. Certain
provisions of SFAS No. 150 have been indefinitely deferred; however, the
Statement is generally effective for financial instruments entered into or
modified after May 31, 2003 and for other instruments at the beginning of
the first interim period beginning after June 15, 2003. The Company does not
currently have any financial instruments that will be impacted by SFAS No.
150. The adoption of SFAS No. 150 did not have a material impact on the
Company's financial position or results of operations.

In December 2003, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 104, Revenue Recognition (SAB 104), which provides
guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the SEC. SAB 104 revises or rescinds
portions of the interpretive guidance that was previously issued in Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
(SAB 101) that was issued in December 1999 in order to make this
interpretive guidance consistent with current authoritative accounting and
auditing guidance and SEC rules and regulations. The adoption of SAB 104 did
not have a significant impact on the Company's financial position or results
of operations.

3.  INVENTORIES

Inventories consisted of the following:

<TABLE>
<CAPTION>

                                          December 31,
                                     ----------------------
                                       2003          2002
                                       ----          ----

      
                            <c>           <c>
      Raw material                   $247,703      $248,588
      Work in Process                  23,175        31,765
      Finished goods                  147,835       559,400
                                     --------      --------
            Total                    $418,713      $839,753
                                     ========      ========
</TABLE>

4.  PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

<TABLE>
<CAPTION>

                                                             December 31,
                                                        ----------------------
                                                          2003          2002
                                                          ----          ----

      
                                               <c>           <c>
      Machinery and equipment                           $ 21,207      $ 16,391
      Office equipment                                    49,073        48,573
      Leasehold improvements                              71,054        70,226
      Automobiles                                         60,374        63,175
                                                        --------      --------

            Total                                        201,708       198,365

      Less accumulated depreciation and amortization     139,608       114,799
                                                        --------      --------
      Property and equipment - net                      $ 62,100      $ 83,566
                                                        ========      ========
</TABLE>


<PAGE>  22


4.  PROPERTY AND EQUIPMENT (Continued)

The useful lives employed for computing depreciation and amortization on
principal classes of property and equipment are as follows:

<TABLE>
<CAPTION>

         Class Description             Years
         -----------------             -----

      
                              <c>
      Machinery and equipment          5 - 7
      Office equipment                 5 - 7
      Leasehold improvements            10
      Automobiles                        5
</TABLE>

5.  LINE OF CREDIT

The Company has a $500,000 (2002, $275,000) 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 .75% (2002, 1.5%). Borrowings outstanding on this line were $100,000 at
December 31, 2002. There were no borrowings outstanding on this line at
December 31, 2003.

6.  LONG-TERM DEBT

Long-term debt of $34,375 at December 31, 2002, classified as current at
December 31, 2002, consisted of 8% convertible notes payable. Interest was
payable quarterly and the outstanding principle balance was extended to June
2003. The notes were 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 were convertible at the option of the Company into
shares of the Company's common stock at a conversion rate of $1 per share.
The note was paid in full during 2003.

7.  LEASE AGREEMENTS

The Company leases its office, research and production facility in
Tewksbury, Massachusetts from a related party, under a five- year operating
lease which expires December 2006. The Company is responsible for all
operating expenses and maintenance costs. Rent expense was approximately
$120,000 for each of the years ended December 31, 2003 and 2002 and
approximately $85,000 for the year ended December 31, 2001.

Based on the lease currently in effect, the future minimum rental commitment
is as follows:

<TABLE>
<CAPTION>

                    Year Ended
                   December 31,         Amount
                   ------------         ------

                   
                 <c>
                   2004                $140,000
                   2005                 140,000
                   2006                 140,000
                                       --------

                       Total           $420,000
                                       ========
</TABLE>


<PAGE>  23


8.  INCOME TAXES

A reconciliation of the federal statutory rate of 34% to the provision for
income taxes for the years ended December 31, 2003, 2002 and 2001 is as
follows:

<TABLE>
<CAPTION>

                                                    2003         2002         2001
                                                    ----         ----         ----


                                               <c>          <c>          <c>
Federal taxes at statutory rates                  $ 21,500     $ 34,400     $ 700
State benefit, net of federal tax effect             3,900        6,300       100
Graduated tax rate effect                          (10,700)     (11,700)     (400)
Federal and state operating loss carryforwards     (14,700)     (29,000)     (400)
                                                  --------     --------     -----

    Provision for income tax - net                $    -0-     $    -0-     $ -0-
                                                  ========     ========     =====
</TABLE>

Significant components of the Company's deferred tax assets and liabilities
are as follows:

<TABLE>
<CAPTION>

                                                                     December 31,
                                                                -----------------------
                                                                   2003          2002
                                                                   ----          ----


                                                             <c>           <c>
Deferred income tax assets:
  Federal and state net operating loss carryforwards            $ 116,400     $ 137,700
  Allowance for doubtful accounts, reserves and accruals           18,000        27,500
                                                                ---------     ---------

    Total deferred income tax assets                              134,400       165,200

Deferred income tax liabilities - tax over book depreciation       (7,400)       (3,200)
Valuation allowance for deferred tax assets                      (127,000)     (162,000)
                                                                ---------     ---------

Net recognized deferred income tax benefit                      $     -0-     $     -0-
                                                                =========     =========
</TABLE>

The Company has available federal net operating loss carryforwards of
approximately $342,400 expiring through December 2018 .

9.  RELATED PARTY TRANSACTIONS

Commissions paid to a related entity were approximately $1,700 and $7,700
during the years ended December 31, 2002 and 2001, respectively. No
commissions were paid during 2003.

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. There
were no contributions during the years ended December 31, 2003, 2002 and
2001.


<PAGE>  24


11.  NET INCOME PER SHARE

Basic net income per share has been computed using the weighted average
number of common shares outstanding.

Diluted net income per share gives effect to all dilutive potential common
shares that were outstanding during the period. Convertible debt outstanding
at December 31, 2002 and 2001 was not included in the diluted net income per
share calculation for the years then ended, since they were anti-dilutive.

The weighted average number of shares outstanding is as follows:

<TABLE>
<CAPTION>

                    Year Ended           Number of
                   December 31,            Shares
                   ------------          ---------

                       
               <c>
                       2003              3,887,632
                       2002              3,856,948
                       2001              3,825,951
</TABLE>


<PAGE>  25