ITEM 1. BUSINESS. - - - - - - - - - - - - - - - -----------------
(A) GENERAL DEVELOPMENT OF BUSINESS. ------------------------------------
Megadata Corporation, (the "Company"), a New York corporation founded in 1967, is a supplier of information, data services, and software intended to satisfy the needs of the aviation industry, primarily airlines and their affiliates, and airports. Its principal business is the design, manufacture, sale and service of its PASSUR product line consisting of a real time aircraft monitoring system, as well as the delivery of application software, called PASTRACK, and delivery of data from the existing PASSUR systems.
The Company's primary product is the PASSUR (Passive Secondary Surveillance Radar) System. PASSUR is an integrated operations control and management system used by airlines at their dispatch and station control centers. In addition, major airports worldwide use the PASSUR as part of an integrated noise management and monitoring system as well as for operations control.
The Company, through a 1998 restructuring plan, has developed a new method of delivering information to its customers. The Company is selling subscription services from what is now becoming an international PASSUR Network of flight tracking systems. The Company will also continue to sell stand-alone PASSUR systems at a customer's request.
The Company is transitioning from being a leading supplier of passive surveillance systems (a capital equipment business) to a leading provider of subscription based information and decision support services supplied by its PASSUR Network. These services will leverage the extensive passive surveillance data available through the network of PASSUR installations to provide application-specific "efficiency tools" to airlines, airports and related commercial businesses.
To further enhance this subscription service from the PASSUR Network, the Company provides its own proprietary software suite, called PASTRACK, which enables the customer to incorporate many of the algorithms and functionality already experienced by airline and airport customers over the past several years.
As a result, a larger audience of aviation and aviation-related organizations can utilize the information generated from the PASSUR network, thus creating additional demand for both the subscription services and the resulting software.
Currently, PASSUR flight track coverage is available for 22 of the top 40 airports in the United States.
The Company has incorporated the strictest levels of security over both the information generated by the PASSUR Network and the resulting end users.
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TECHNICAL DESCRIPTION ---------------------
The PASSUR system, without emitting any active signals, receives aircraft identification and altitude information from aircraft transponder transmissions without emitting any active signals, which are interrogated by existing secondary surveillance radars. Received signals are processed in a standard workstation and displayed on a high-resolution color graphics data display to provide real-time identification and tracking of aircraft in flight. The display presentation is similar to that provided to Air Traffic Controllers. The presentation of flight tracks can be in real time or can be switched to a mode that permits observance of historical data for selected time periods.
AIRLINE CUSTOMERS -----------------
The PASSUR application software, called PASTRACK, is an accurate source of critical information to enhance situational awareness. Airlines use the information to drive a number of operating efficiencies that improve performance, increase customer satisfaction, and operating profits. These include: -- Accurate arrival and estimated time of arrival ("ETA") information available for passengers, particularly during irregular operations. The information is also expandable for terminal passenger data services such as Flight Information Display Systems (FIDS) or other displays. -- Greater compliance with the aviation community's goal to provide timely and accurate flight information to customers. -- Accurate arrival data and ETA's for managing airport operations. With better arrival information airlines can more effectively manage connecting flights during push periods. This tool complements gate management and staff scheduling programs and thus, enhances productivity improvements for ground personnel and support functions. -- Accurate information to help manage diversions. A more accurate picture of the terminal airspace and current holding patterns enables airlines to make better decisions about whether to divert aircraft during irregular operations. -- Ability to replay flight events to support post operations analysis. The play back of flight tracks and events will allow airlines to conduct a more thorough analysis of those events and thus, create opportunities to improve the efficiency and safety of operations.
AIRPORT CUSTOMERS -----------------
The PASSUR system can be integrated to work with noise monitoring and measuring equipment in a configuration that will supply a correlation between aircraft location and noise levels generated by the aircraft. With this real-time information, an airport noise abatement officer can enforce the law regarding noise levels emitted by an aircraft. When used as part of an airport noise monitoring system, airport managers and noise control officers can correlate noise events in the local community with specific airline flight tracks.
PASSUR is used by many of the largest airports in the country and in different parts of the world. Currently, over 20 of the largest airports around the world utilize PASSUR as part of their daily operations. Several trials are also underway at several additional airports.
In 2000, the Company introduced an Airport Operations version of PASTRACK. This product provides airports a predictive anticipatory operations decision-making tool to effectively plan for arriving aircraft as well as provide a playback capability for post operational analysis and planning.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. --------------------------------------------------
Not applicable.
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(C) NARRATIVE DESCRIPTION OF BUSINESS. --------------------------------------
The Company is a supplier of information, data services, and software intended to satisfy the needs of the aviation industry, primarily airlines and their affiliates, and airports. Its principal business is the design, manufacture, sale and service of its PASSUR product line consisting of a real time aircraft monitoring system, as well as the delivery of application software, called PASTRACK, and delivery of data from the existing PASSUR systems.
1. PRODUCTS. ------------
The Company is transitioning from being a leading supplier of passive surveillance systems (a capital equipment business) to a provider of subscription based information and decision support services supplied by its PASSUR Network. These services will leverage the extensive passive surveillance data available through the PASSUR Network to provide application-specific efficiency tools to airlines, airports and related commercial businesses.
(i) PASSUR Systems ------------------
The PASSUR system is a reliable and cost effective source of time critical and valuable information about the position and flight path of aircraft. PASSUR is the engine that drives all present and future data, information, and solution products. The Company, under an exclusive license for patented technology owned by a third party, has used its proprietary hardware and software to develop an enhanced line of air traffic monitoring systems. This license agreement, which extends for the life of various patent expirations through the year 2010, is important in protecting the unique nature of the Company's PASSUR product line. These PASSUR (Passive Secondary Surveillance Radar) systems receive and process aircraft identification from aircraft transponder transmissions interrogated by existing secondary surveillance radars.
(ii) Custom Hardware and Software Activities --------------------------------------------
The Company is occasionally involved in specialized research and development projects sponsored and paid for by customers. These projects involve the customization of the Company's standard products to suit specific customer requirements.
2. SERVICES. ------------
(i) Information Services from the PASSUR Network
Information Services include timely, accurate, user-friendly information important to the efficient operation of airlines and airports. The Information Services leverage the PASSUR Network, and are tailored to address specific customer requirements uniquely available from Megadata. The services provide airline and airport customers with specific and timely information needed to efficiently manage their airport airside and ground operations. The ETAs generated from the PASSUR system are an example of an information service currently being used throughout the customer network.
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(ii) Solution Services from the PASSUR Network ----------------------------------------------
The Solution Services are a series of decision support tools and software solutions developed to improve quality and operating efficiency of specific airline and airport operations. Megadata currently provides a complete solution to customers through system integrators, primarily in the airport markets.
(iii) Maintenance Services --------------------------
The Company offers maintenance services pursuant to contractual arrangements or an "on-call" basis. "On-call" services are provided on a time and material basis.
3. SOURCES OF RAW MATERIALS. ----------------------------
The Company obtains its raw materials from component distributors and manufacturers throughout the United States. The Company has multiple sources of supply for a majority of its components.
4. DEPENDENCE ON CERTAIN CUSTOMERS. -----------------------------------
During the fiscal year ended October 31, 2000, three (3) customers (Air Canada, United Airlines, and San Jose International Airport) accounted for 62% of revenue. Those three customers accounted for 40%, 11%, and 11% of revenues. During the fiscal year ended October 31, 1999, three (3) customers accounted for 66% of revenue. Those three customers accounted for 40%, 13%, and 13% of revenues. During the fiscal year ended October 31, 1998, three customers accounted for 52% of the Company's revenue. Those three customers accounted for 28%, 14%, and 10% of revenues.
5. BACKLOG. -----------
The Company's backlog for products and services at October 31, 2000 amounted to approximately $627,000, all of which is scheduled for delivery or performance before October 31, 2001, except for $180,000 scheduled for delivery during fiscal 2002. The backlog at October 31, 1999 and 1998 amounted to approximately $418,000 and $211,000, respectively. Backlog consists of written purchase orders or contracts.
6. COMPETITION. --------------
The Company is offering the PASSUR system for passive detection of aircraft in flight. These products are, to the best of its knowledge, relatively unique with little competition. Depending on the end use of the products, the Company's primary competitors include Dimensions International, Sabre, Inc., BAE, Inc., and Lockheed Martin. The Company also sells to systems integrators, including BAE, Inc, and Lochard Pty, Ltd, some of whom also sell products which are competitive with those offered by the Company. Most of these companies are significantly larger than the Company, and have larger sales forces and greater financial resources.
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7. RESEARCH AND DEVELOPMENT. ----------------------------
The Company's Research and Development ("R&D") effort is focused on enhancing the Company's products primarily for software and hardware enhancements to PASSUR.
During the fiscal year ended October 31, 2000, the Company incurred approximately $149,000 in expenditures for R&D, none of which was customer sponsored. In fiscal year ended October 31, 1999, approximately $121,000 was expended on R&D and in fiscal year 1998 approximately $122,000 was expended on R&D.
8. ENVIRONMENTAL COSTS. -----------------------
The Company is not aware of any environmental issues, which would have a material adverse affect on future capital expenditures or business operations.
9. EMPLOYEES. -------------
As of October 31, 2000, the Company employs 18 full time employees including 6 officers.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES ------------------------------------
The following table sets forth the dollar amount and the percentages attributable to the sale by the Company of its products during the past three fiscal years in and outside the United States:
Net Revenues 2000 1999 1998 - - - - - - - - - - - - - - - -------- ---- ---- ----
Domestic $1,048,527 59.7% $1,054,711 95.8% $ 960,408 91.2%
Exports 708,075 40.3% 45,930 4.2% 92,835 8.8%
Total Revenues: $1,756,602 100.0% $1,100,641 100.0% $1,053,243 100.0% ========== ===== ========== ===== ========== =====
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ITEM 2.
ITEM 2. PROPERTIES.
The Company's manufacturing and research facility is located in a one-story 36,000 square foot building at 35 Orville Drive, Bohemia, New York. The building was owned by the Company and was sold in October 1999 to an unaffiliated buyer. The Company leased back 12,000 square feet at an annual rental cost of $72,000.
The Company's executive offices are located in a three-story office building at 47 Arch Street, Greenwich, Connecticut. Effective October 1998, the Company began leasing space from Field Point Capital Management Company, a company 100% owned by the Company's President at $1,000 per month rent. The Company believes these rates are competitive and are at or below market rates.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS. --------------------------
The Company is not aware of any pending legal proceedings to which the Company or any of its subsidiaries is a party or to which any of their properties are subject.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. ------------------------------------------------------------
The Company did not submit any matter to a vote of its security holders during the fourth quarter of fiscal 2000.
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PART II
ITEM 5.
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. - - - - - - - - - - - - - - - ---------------------------------------------------------------------------
(A) MARKET INFORMATION.
The Company's common shares are traded in the over-the-counter bulletin board.
The following table sets forth the range of high and low bid and asked quotations of the Company's common shares for each quarterly period during the Company's last two fiscal years, as reported by the National Quotation Bureau, Inc.:
P e r i o d Bid Prices* Asked Prices* - - - - - - - - - - - - - - - ----------- ----------- -------------
High Low High Low ---- --- ---- --- FISCAL YEAR ENDED OCTOBER 31, 2000 FIRST QUARTER $1.75 $ .25 $2.00 $ .5625 SECOND QUARTER 3.375 1.375 4.00 1.80 THIRD QUARTER 1.50 .75 3.375 .9375 FOURTH QUARTER 1.09375 .78125 1.96875 1.00
Fiscal Year Ended October 31, 1999 First Quarter $ .375 $ .28125 $ .5625 $ .50 Second Quarter .34375 .15 .50 .50 Third Quarter .15625 .15 .5625 .4375 Fourth Quarter .25 .15625 .5625 .4375
* The quotations represent prices in the over-the-counter bulletin board between dealers in securities, do not include retail markup, markdown, or commission, and do not necessarily represent actual transactions.
(B) HOLDERS. ------------
The number of equity security holders of record at January 19, 2001 was 303.
(C) DIVIDENDS. --------------
The Company has never paid cash dividends on its shares. The Company does not anticipate paying cash dividends in the foreseeable future.
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ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA. --------------------------------
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ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. - - - - - - - - - - - - - - - ---------------------------------------------------------
RESULTS OF OPERATIONS - - - - - - - - - - - - - - - ---------------------
REVENUES - - - - - - - - - - - - - - - --------
Revenue during the fiscal year ended October 31, 2000 ("fiscal 2000") of $1,756,602 increased by $655,961, or 60%, as compared to the fiscal year ended October 31, 1999 ("fiscal 1999"). Net sales of systems increased in fiscal 2000 by $537,480 due to an increase in PASSUR Systems and upgrades offset by decreases in non-PASSUR product line revenue categories. Subscription and maintenance fees have increased in fiscal 2000 by $118,481 as compared to fiscal 1999.
The Company shipped nine and installed six Company-owned PASSUR systems during the year, which are shown on the balance sheet as the "PASSUR network", and is selling the data from these systems to multiple users. With 16 Company owned PASSUR's located at airports at the end of fiscal 2000, the Company believes the revenue stream from PASSUR Subscriptions will continue to increase steadily.
Revenue during fiscal 1999 of $1,100,641 increased by $47,398, or 5%, as compared to the fiscal year ended October 31, 1998 ("fiscal 1998"). The increase was due to additional revenue from most PASSUR related sales categories, which were offset by decreases in non-PASSUR related sales categories. Increases occurred in the following sales categories: PASSUR Systems, PASSUR Maintenance, PASSUR Upgrades, and Miscellaneous Sales. Decreases occurred in Service Sales, Radio Modems, Unix Systems, and Protocol Converters.
COST OF SALES - - - - - - - - - - - - - - - -------------
Cost of sales during fiscal 2000 of $860,487 increased by $621,342 as compared to fiscal 1999. The contributing factors to this increase in cost of sales were: the increased sale of PASSUR Systems; the charge for inventory associated with all non-PASSUR product lines which the Company has decided to discontinue marketing in the amount of $114,549; the charge for certain inventory associated with older PASSUR production models in the amount of $11,042; increased costs associated with the expanding PASSUR Network operation including connection costs in the amount of $144,797; and depreciation charges associated with the Company owned PASSUR Network in the amount of $135,694.
Cost of sales in fiscal 1999 of $239,145 was lower than in fiscal 1998 by $690,874 due to higher production of PASSUR units for sale and for the Company owned PASSUR Network which resulted in a lower cost per unit produced.
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RESEARCH AND DEVELOPMENT - - - - - - - - - - - - - - - ------------------------
The Company's research and development expenses of $148,540 in fiscal 2000 increased by 23% over the $120,536 in fiscal 1999. Research and development costs were $121,789 in fiscal 1998. The Company anticipates continued increases in research and development expenditures as it develops new products associated with PASSUR and expands the current services offered through its PASSUR Network. Research and development efforts include activities associated with enhancement and improvement of the Company's existing hardware and software coupled with customer sponsored research and development expenditures for new product development. No customer sponsored research and development was conducted during fiscal 2000 and fiscal 1999. Research and development expenses are funded through current operations.
SELLING, GENERAL AND ADMINISTRATIVE - - - - - - - - - - - - - - - -----------------------------------
Selling, general and administrative expenditures of $1,218,825 in fiscal 2000 increased by $203,377, or 20%, as compared to fiscal 1999 as the Company continued its aggressive sales and marketing plan for its PASSUR product line. Salaries, professional fees, travel, and advertising expenses accounted for most of the increase.
Selling, general and administrative expenditures of $1,015,448 in fiscal 1999 increased by $381,206 or 60%, as compared to fiscal 1998, as the Company significantly increased sales and marketing for its major PASSUR System product line. Salaries, professional fees, consulting, travel, and advertising expenses accounted for most of the increase.
RESTRUCTURING CHARGE - - - - - - - - - - - - - - - --------------------
In October 1998, the Company announced a Restructuring Plan in which it focused future efforts primarily on the PASSUR line of passive radar systems. As part of this restructuring, the Company moved its corporate headquarters and national sales office to Greenwich, Connecticut. The Company offered for sale its building in Bohemia, New York. The building was sold in October 1999 to an unaffiliated buyer, and the Company leased back 12,000 square feet at an annual rental cost of $72,000.
The restructuring charges in fiscal 1998 include idle plant costs of $93,000 related to the building, severance costs of $53,000, asset write-downs of $24,000 relating to assets to be sold or abandoned, and inventory write-downs of $196,000 associated with the write down of certain non-strategic inventory and product lines (which costs are included in costs of sales for fiscal 1998). As of October 31, 1999, all amounts which had been accrued for the restructuring charge were paid.
INTEREST EXPENSE - - - - - - - - - - - - - - - ----------------
Interest expense - related party of $121,050 in fiscal 2000 increased by $41,013 due to increased borrowings during fiscal 2000. Interest expense decreased by $54,125 in fiscal 2000 due to the Company's repayment of the mortgage on the building, which was sold.
Interest expense - related party of $80,037 in fiscal 1999 increased by $65,037 due to increased borrowings during fiscal 1999.
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INCOME TAXES - - - - - - - - - - - - - - - ------------
The provisions for income taxes for each year relate to state and local minimum taxes. The Company has available approximately $6,800,000 in tax loss carryforwards to offset possible future income. The Company also has available $25,000 in general business tax credit carryforwards. These carryforwards expire in various tax years from 2004 through 2019. The Company has provided a full valuation allowance on the net deferred tax asset which primarily consists of the net operating loss carry-forwards and available tax credits.
NET LOSS - - - - - - - - - - - - - - - --------
The Company incurred a net loss of $582,824, or $.22 per common share, during fiscal 2000, as compared to a net loss of $322,812, or $.13 per common share incurred in fiscal 1999.
During the fiscal year ended October 31, 2000, costs and expenses of $2,227,852 were higher than total revenue and resulted in a loss from operations of $471,250. Total costs and expenses increased by $852,723, or 62%, as compared to such costs in fiscal 1999. Despite the increase in revenue of almost 60%, increased costs associated with the placement, operation, development, and marketing of the Company owned PASSUR Network contributed to the additional loss. In addition, during the year ended October 31, 2000, inventory associated with discontinued products of $114,549 was written off.
During the fiscal year ended October 31, 1999, costs and expenses of $1,375,129 were higher than total revenue and resulted in a loss from operations of $274,488.
IMPACT OF INFLATION - - - - - - - - - - - - - - - -------------------
In the opinion of management, inflation has not had a material effect on the operations of the Company including selling prices, capital expenditures, and operating expenses.
LIQUIDITY AND CAPITAL RESOURCES - - - - - - - - - - - - - - - -------------------------------
At October 31, 2000, the Company's current liabilities exceeded current assets by $1,080,019 and the Company reflected a stockholders' equity of $604,216. For the year ended October 31, 2000, the Company incurred a net loss of $582,824.
Net cash provided by operating activities for fiscal 2000 was approximately $76,000. Non-cash expenses of approximately $213,000 and changes in operating assets and liabilities more than offset the impact of the Company's net loss.
Cash flows used in investing activities for fiscal 2000 were approximately $1,241,000 which consisted primarily of investments in the Company's PASSUR Network.
Cash flows provided by financing activities for fiscal 2000 were approximately $934,000 and consisted primarily of proceeds from notes payable to a related party.
Management is addressing the working capital deficiency and operating losses by aggressively marketing its PASSUR systems and increasing the size of the Company owned PASSUR Network, which should lead to increased data subscription services. In addition, the Company will attempt to obtain external financing, and if such external financing is not consummated, the Company will receive the financial support from one of its stockholders.
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The Company was unprofitable for fiscal 2000. However, the Company anticipates increased revenue which could lead to profitability in fiscal 2001 although no assurances can be provided in this regard. Since the increased sales effort began in August 1998, the Company has seen many positive signs that its PASSUR product line could provide additional revenue. With the Company's decision to establish a network of Company-owned PASSUR sites, additional revenue could be earned through its subscription services. However, increased competition, and continued budget constraints among its clients, could impact this potential revenue.
Interest by potential customers in the Company's PASSUR systems and data obtained from the PASSUR Network remains strong and the Company anticipates an increase in future revenue. However, the Company cannot predict if such revenue will materialize. If sales do not increase, additional losses may occur and could continue. The extent of such profits or losses will be dependent on sales volume achieved.
CERTAIN TRANSACTIONS - - - - - - - - - - - - - - - --------------------
On June 30, 2000, G.S. Beckwith Gilbert, Chairman and Chief Executive Officer of the Company, converted certain promissory notes of the Company which matured on that date into shares of common stock of the Company. The notes were originally issued by the Company between November 1998 and August 1999 in exchange for financing provided by Mr. Gilbert. Mr. Gilbert converted the full principal amount of the two notes and part of the principal amounts of nine other notes, together with interest accrued thereon (an aggregate amount of $583,144, including accrued interest) into 466,515 shares of common stock of the Company, at the conversion rate of $1.25 per share.
On October 31, 2000, Mr. Gilbert exercised a warrant for 500,000 shares of common stock of the Company (at the exercise price of $1.25 per share) in exchange for cancellation of debt owed by the Company to Mr. Gilbert in the amount of $625,000, which debt matured on October 31, 2000. The warrant was originally issued to Mr. Gilbert by the Company in June 1997 as part of a financing agreement with Mr. Gilbert.
In fiscal 2000, Mr. Gilbert loaned the Company $1,000,000 in the aggregate under promissory notes bearing interest at 9% per annum and maturing at various dates from June 30, 2000 to December 31, 2001. The Company made payments of principal during the fiscal year totaling $25,000 due to Mr. Gilbert, and $1,175,000 in principal amounts due were exchanged for equity. As of October 31, 2000, the total notes payable due to Mr. Gilbert totaled $950,000 and are secured by the Company's assets. Maturities of these notes payable for the fiscal years ended October 31 are as follows: 2001 - $800,000 and 2002 - $150,000.
RISK FACTORS; FORWARD LOOKING STATEMENTS - - - - - - - - - - - - - - - ----------------------------------------
The Management's Discussion and Analysis and the information provided elsewhere in this Annual Report on Form 10-K (including, without limitation, in "Item 1. Business" as well as "Liquidity and Capital Resources" above) contain forward-looking statements regarding the Company's future plans, objectives, and expected performance. These statements are based on assumptions that the Company believes are reasonable, but are subject to a wide range of risks and uncertainties, and a number of factors could cause the Company's actual results to differ materially from those expressed in the forward-looking statements referred to above. These factors include, among others, the uncertainties related to the ability of the Company to make new sales of its PASSUR and other product lines due to potential competitive pressure from other companies or other products. Other uncertainties which could impact the Company are uncertainties with respect to future changes in governmental regulation affecting the product and its use in flight dispatch. Additional uncertainties are related to the Company's ability to find and maintain the personnel necessary to sell, manufacture, and service its products.
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ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. - - - - - - - - - - - - - - - --------------------------------------------------------------------
The Company is exposed to market risk from potential changes in interest rates and foreign exchange rates. The Company regularly evaluates these risks. The Company believes the amount of risk and the use of derivative financial instruments are not material to the Company's financial condition or results of operations.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA. - - - - - - - - - - - - - - - ---------------------------------------------------
See Item 14(a)(1) and (2).
ITEM 9.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. - - - - - - - - - - - - - - - -------------------------------------------------------------
None.
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Form 10-K--Item 14(a)(1) and (2)
Megadata Corporation and Subsidiaries
Index to Consolidated Financial Statements
Report of Independent Auditors........................................... F - 2
Consolidated Financial Statements: Balance Sheets........................................................ F - 3 Statements of Operations.............................................. F - 4 Statements of Stockholders' Equity (Deficit).......................... F - 5 Statements of Cash Flows.............................................. F - 6 Notes to Consolidated Financial Statements............................ F - 7
Schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
F - 1
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Report of Independent Auditors
Board of Directors and Stockholders Megadata Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of Megadata Corporation and Subsidiaries as of October 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the three years in the period ended October 31, 2000. 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. 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 that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Megadata Corporation and Subsidiaries at October 31, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended October 31, 2000, in conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP ---------------------
Melville, New York January 19, 2000
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F - 2
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F - 3
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F - 4
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F - 5
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F - 6
Megadata Corporation and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Megadata Corporation (the "Company") is a supplier of information, data services, and software intended to satisfy the needs of the aviation industry, primarily airlines and their affiliates, and airports. Its principal business is the design, manufacture, sale and service of its PASSUR product line consisting of a real time aircraft monitoring system, as well as the delivery of application software, called PASTRACK, and delivery of data from the existing PASSUR systems.
BASIS OF PRESENTATION
At October 31, 2000, the Company's current liabilities exceeded current assets by $1,080,019 and the Company incurred a net loss of $582,824 for the year ended October 31, 2000.
Management is addressing the working capital deficiency and operating losses by aggressively marketing its PASSUR systems and increasing the placement of the Company owned PASSUR Network, which should lead to increased data subscription services. In addition, the Company will attempt to obtain external financing, and if such external financing is not consummated, the Company will receive the financial support from one of its stockholders.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Megadata Corporation and its wholly owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.
F - 7
Megadata Corporation and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost and are depreciated on a straight-line basis over the estimated useful life. Leasehold improvements are amortized on a straight-line basis over the useful life of the improvement or the term of the lease, whichever is shorter.
PASSUR NETWORK
PASSUR network installations are recorded at cost, net of depreciation of $138,382 in fiscal 2000. Depreciation is computed on the straight-line method over the estimated useful life of the asset, which is estimated at 7 years.
F - 8
Megadata Corporation and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
The Company follows the provisions of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This standard establishes the accounting for the impairment of long-lived assets, certain identifiable intangibles and the excess of cost over net assets acquired, related to those assets to be held and used in operations, whereby impairment losses are required to be recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. SFAS No. 121 also addresses the accounting for long-lived assets and certain identifiable intangibles that are expected to be disposed of.
REVENUE RECOGNITION POLICY
The Company recognizes revenue when products are shipped. Service and maintenance revenues are recognized on a straight-line basis over the service contract period. Revenue for data subscription services is recognized pursuant to the specific arrangements with the customer and execution of an agreement and upon their receipt of the data.
COST OF SALES
The Company has not segregated its cost of sales between cost of tangible products and cost of services as it is not practicable to segregate such costs.
INCOME TAXES
The Company and its subsidiaries file a consolidated Federal income tax return. The Company uses the liability method in accounting for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
F - 9
Megadata Corporation and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations as incurred.
NET LOSS/INCOME PER COMMON SHARE INFORMATION
The Company reports basic and diluted net loss/income per common share in accordance with the Financial Accounting Standards Board Statement No. 128, "Earnings Per Share." Net loss per common share was computed using the weighted average number of common shares outstanding during the period. Conversion of the common equivalent shares relating to outstanding stock options and warrants was not assumed since the result would have been antidilutive.
DEFERRED INCOME
Deferred income includes advances received on maintenance agreements, subscription services, and deposits from customers for equipment that will be shipped in the next fiscal year.
2. INVENTORIES
Inventories are summarized as follows:
OCTOBER 31, 2000 1999 ------------------- -----------------
Parts and raw materials $ 67,046 $ 160,141 Work-in-process 6,676 54,308 Finished goods 179,327 234,181 ------------------- ----------------- $ 253,049 $ 448,630 =================== =================
During the year ended October 31, 2000, inventory associated with discontinued products of $114,549 was written off.
F - 10
Megadata Corporation and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 2000
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
The Company recorded depreciation and amortization expense on the assets included in property, plant and equipment of $43,959, $71,727, and $68,103 for the years ended October 31, 2000, 1999, and 1998 respectively.
4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following:
OCTOBER 31, 2000 1999 ---------------- --------------- Accrued payroll, payroll taxes and benefits $ 106,621 $ 75,794 Accrued professional fees 99,000 50,200 Accrued license fees 70,628 50,000 Other accrued liabilities 37,178 50,544 ---------------- --------------- $ 313,427 $ 226,538 ================ ===============
F - 11
Megadata Corporation and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 2000
5. NOTES PAYABLE--RELATED PARTY
On June 30, 2000, G.S. Beckwith Gilbert, Chairman and Chief Executive Officer of the Company converted certain promissory notes of the Company which matured on that date into shares of common stock of the Company. The notes were originally issued by the Company between November 1998 and August 1999 in exchange for financing provided by Mr. Gilbert. Mr. Gilbert converted the full principal amount of the two notes and part of the principal amounts of nine other notes, together with interest accrued thereon (an aggregate amount of $583,144, including accrued interest) into 466,515 shares of common stock of the Company, at the conversion rate of $1.25 per share.
On October 31, 2000, Mr. Gilbert exercised a warrant for 500,000 shares of common stock of the Company (at the exercise price of $1.25 per share) in exchange for cancellation of debt owed by the Company to Mr. Gilbert in the amount of $625,000, which debt matured on October 31, 2000. The warrant was originally issued to Mr. Gilbert by the Company in June 1997 as part of a financing agreement with Mr. Gilbert.
In fiscal 2000, Mr. Gilbert loaned the Company $1,000,000 in the aggregate under promissory notes bearing interest at 9% per annum and maturing at various dates from June 30, 2000 to December 31, 2001. The Company made payments of principal during the fiscal year totaling $25,000 due to Mr. Gilbert, and $1,175,000 in principal amounts due were exchanged for equity. As of October 31, 2000, the total notes payable due to Mr. Gilbert totaled $950,000 and are secured by the Company's assets. Maturities of these notes payable for the fiscal years ended October 31 are as follows: 2001 - $800,000 and 2002 - $150,000.
6. LEASES
The Company's manufacturing and research and development facility is located in leased space in Bohemia, New York, under a lease which expires in October 2002. Minimum rent under this agreement approximates $72,000 per year. This lease provides for additional payments of real estate taxes and other operating expenses over the minimum rental amount and has a renewal option for an additional three years at annual amounts in excess of the minimum annual rental per the original agreement.
F - 12
Megadata Corporation and Subsidiaries
Notes to Consolidated Financial Statements
OCTOBER 31, 2000
7. RESTRUCTURING RELATED CHARGES
In October 1998, the Company announced a Restructuring Plan which focused the future activity of the Company primarily on its PASSUR line of passive radar systems. As part of this restructuring, the Company moved its corporate headquarters and national sales office to Greenwich, Connecticut. The Company had offered for sale its building in Bohemia, New York and such sale was consummated in October 1999.
The Restructuring Charges include exit costs of $93,000 related to the building, severance costs of $53,000, asset write-downs of $24,000 relating to assets to be sold or abandoned, and inventory write-downs of $196,000 associated with the elimination of certain non-strategic inventory and product lines (which costs are included in cost of sales for the year ended October 31, 1998). As of October 31, 1999, all amounts which had been accrued for the restructuring charges were paid.
8. INSTALLMENT NOTES PAYABLE
Installment notes payable represent notes due on financing of insurance premiums and equipment purchases bearing interest at 8.25%, 12.5%, and 13.6% per annum, with the final payments due November 2000, August 2001, and October 2002, respectively.
9. INCOME TAXES
The Company's provision for income taxes in each year consists of current state and local minimum taxes.
At October 31, 2000, the Company has available a federal net operating loss carry-forward of approximately $6,800,000 for income tax purposes which will expire in various tax years from 2004 through 2019. The Company has approximately $25,000 of general business tax credit carry-forwards available which expire in various years through 2008. The Company has provided a full valuation allowance on the net deferred tax asset which primarily consists of the net operating loss carry-forwards and available tax credits.
F - 13
Megadata Corporation and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 2000
10. STOCK OPTIONS
The Company's stock option plans provide for the granting of stock options for up to 802,500 shares of the Company's Common Stock. The option price per share is the fair market value at date of grant, except on the issuance of non-qualified options in which the option price is not less than 85% of the fair market value of the shares. Options granted may be exercised up to a maximum of ten years from the date of grant; however, individuals who own more than 10% of the Company's Common Stock must exercise their options within five years of the date of the grant and these options are exercisable at 110% of the fair market value of the shares.
SFAS No. 123 "Accounting for Stock-Based Compensation", defines a fair value method of accounting for the issuance of stock options and other equity instruments. Under the fair value method, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting period. Pursuant to SFAS No. 123, companies are encouraged, but are not required, to adopt the fair value method of accounting for employee stock-based transactions. Companies are also permitted to continue to account for such transactions under Accounting Principals Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB Opinion No. 25") but are required to disclose in a note to the consolidated financial statements pro forma net income and per share amounts as if the Company had applied the new method of accounting. SFAS No. 123 also requires increased disclosures for stock based compensation arrangements.
The Company has elected to comply with APB Opinion No. 25 and related interpretations in accounting for its stock options because the alternate fair value accounting provided for under SFAS No. 123 requires use of option valuation models which were not developed for use in valuing employee stock options. Under APB Opinion No. 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.
F - 14
Megadata Corporation and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 2000
10. STOCK OPTIONS (CONTINUED)
In accordance with SFAS No. 123, pro forma information regarding net (loss) and net (loss) per common share has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these stock options was estimated at the date of grant, using a Black Scholes option pricing model with the following weighted average assumptions for 2000, 1999, and 1998, respectively: risk-free interest rates of 6.0% for fiscal 2000 and 5.0% for fiscal 1999 and 1998, no dividend yields on the Common Stock, volatility factors of the expected market price of the Company's Common Stock of 1.252 in fiscal 2000, 1.217 in fiscal 1999 and 1.029 in fiscal 1998, and a 10 year weighted average expected life of the options.
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. In management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options due to changes in subjective input assumptions which may materially affect the fair value estimate, and because the Company's employee stock options have characteristics significantly different from those of traded options. For purposes of pro forma disclosure, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information is as follows:
YEAR ENDED OCTOBER 31, 2000 1999 1998 --------------------------------------------
Pro forma net (loss) $(616,000) (324,000) $( 902,000) ============================================ Pro forma net (loss) per common share--basic and diluted $ (.21) $ (.13) $ (.36) ============================================
F - 15
Megadata Corporation and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 2000
10. STOCK OPTIONS (CONTINUED)
Information with respect to options during the years ended December 31, 2000, 1999, and 1998 under SFAS No. 123 is as follows:
As of October 31, 2000, there are 802,500 shares of common stock reserved for future issuance under the Company's stock option plan.
F - 16
Megadata Corporation and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 2000
11. MAJOR CUSTOMERS
The Company sells its products and services primarily to airlines and their affiliates and airports. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Credit losses have historically been immaterial.
During the year ended October 31, 2000, three customers accounted for approximately 40%, 11%, and 11% of revenues. During the year ended October 31, 1999, three customers accounted for approximately 40%, 13%, and 13% of revenues. During the year ended October 31, 1998, three customers accounted for 28%, 14%, and 10% of revenues. The Company had export sales of approximately $708,075, $46,000 and $93,000 in fiscal 2000, 1999, and 1998, respectively.
12. RELATED PARTY TRANSACTIONS
For the year ended October 31, 1998, the Company reimbursed Datatab, Inc., a subsidiary of Data Probe, Inc., which is majority owned by the Company's former president, $47,683 for services rendered to the Company by an employee of Datatab, Inc.
Effective October 1998, the Company began leasing space from Field Point Capital Management Company at $1,000 per month rent. For the years ended October 31, 2000 and 1999, the Company reimbursed Field Point Capital Management Company, a company 100% owned by the Company's President, for services rendered in the amount of $52,000 and $54,000, respectively.
F - 17
Megadata Corporation and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 2000
13. ROYALTY AGREEMENT
The Company is a party to a license agreement whereby the Company is granted the exclusive right and license worldwide to manufacture and sell PASSUR systems for use with airline dispatch arrangements and in other aircraft flight tracking. The Company is also granted an exclusive license to sell PASSUR systems for noise applications in the United States. The Company pays a royalty based on the number of PASSUR systems sold and/or installed and generating subscription revenue subject to a minimum annual royalty of $50,000. This license agreement is in effect until the date of expiration of the last PASSUR patent to expire.
During October 1999, the license agreement was amended primarily with respect to when additional royalties would be payable by the Company for new installations of Company owned systems assuming the minimum annual royalty payment required has been earned. Under the Agreement, these additional royalties are payable based only upon a percentage of the revenue received from each Company owned installation.
F - 18
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
(a) Identification of Directors.
Director Position and Name Age Since Offices With Company - - - - - - - - - - - - - - - -------------------------------------------------------------------------------
G.S. Beckwith Gilbert 58 1997 Chairman of the Board, Chief Executive Officer, and a Director
Richard R. Schilling, Jr. 75 1974 Director
Yitzhak N. Bachana 67 1976 Director
John R. Keller 60 1997 Executive Vice President, and a Director
Bruce N. Whitman 67 1997 Director
Paul L. Graziani 43 1997 Director
James T. Barry 39 2000 Executive Vice President* and a Director
Each director is elected to serve until the succeeding annual meeting of shareholders and until his successor is duly elected and qualifies.
Pursuant to an agreement between Data Probe, Inc. and the Company, dated May 7, 1976, the President of Data Probe, Inc., Yitzhak N. Bachana, is to be nominated as a management nominee for director.
*Effective January 26, 2001, the Company named James T. Barry as Chief Operating Officer. Mr. Barry continues as Executive Vice President and Director.
(b) Identification of Executive Officers.
Officer Position and Offices Name Age Since With Company - - - - - - - - - - - - - - - --------------------------------------------------------------------------------
G. S. Beckwith Gilbert 58 1998 Chairman of the Board, Chief Executive Officer, and a Director
John R. Keller 60 1970 Executive Vice President, Secretary, Treasurer, and a Director
Dr. James A. Cole 60 1988 Senior Vice President of Research & Development
James T. Barry 39 1998 Executive Vice President, Marketing*, and a Director
Herbert E. Shaver 46 1993 Vice President, Controller and Assistant Secretary
Peggy A. Arnold 47 2000 Vice President and Chief Financial Officer
Each officer is elected to serve at the discretion of the Board of Directors.
*Effectively January 26, 2001, the Company named James T. Barry as Chief Operating Officer. Mr. Barry continues as Executive Vice President and Director.
(c) Identification of Certain Significant Employees.
None.
(d) Family Relationship.
None.
(e) Business Experience.
The following sets forth the business experience during the past five years of each director and executive officer;
(f) Involvement in Certain Legal Proceedings.
The Company knows of no event which occurred during the past five years and which is described in Item 401(f) of Regulation S-K relating to any director or executive officer of the Company.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
The Company hereby incorporates by reference into this Item the information contained under the heading "Executive Compensation" in the Proxy Statement.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Company hereby incorporates by reference into this Item the information contained under the heading "Security Ownership of Certain Beneficial Owners and Management" in the 2001 Proxy Statement.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Transactions with management and others.
On June 30, 2000, G.S. Beckwith Gilbert, Chairman and Chief Executive Officer of the Company converted certain promissory notes of the Company which matured on that date into shares of common stock of the Company. The notes were originally issued by the Company between November 1998 and August 1999 in exchange for financing provided by Mr. Gilbert. Mr. Gilbert converted the full principal amount of the two notes and part of the principal amounts of nine other notes, together with interest accrued thereon (an aggregate amount of $583,144, including accrued interest) into 466,515 shares of common stock of the Company, at the conversion rate of $1.25 per share.
On October 31, 2000, Mr. Gilbert exercised a warrant for 500,000 shares of common stock of the Company (at the exercise price of $1.25 per share) in exchange for cancellation of debt owed by the Company to Mr. Gilbert in the amount of $625,000, which debt matured on October 31, 2000. The warrant was originally issued to Mr. Gilbert by the Company in June 1997 as part of a financing agreement with Mr. Gilbert.
In fiscal 2000, Mr. Gilbert loaned the Company $1,000,000 in the aggregate under promissory notes bearing interest at 9% per annum and maturing at various dates from June 30, 2000 to December 31, 2001. The Company made payments of principal during the fiscal year totaling $25,000 due to Mr. Gilbert, and $1,175,000 in principal amounts due were exchanged for equity. As of October 31, 2000, the total notes payable due to Mr. Gilbert totaled $950,000 and are secured by the Company's assets. Maturities of these notes payable for the fiscal years ended October 31 are as follows: 2001 - $800,000 and 2002 - $150,000.
(b) Certain business relationships.
None.
(c) Indebtedness of management.
None.
(d) Transactions with promoters.
Not applicable.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1.Financial Statements Page -------------------------- ----
Included in Part II of this report:
Independent Auditors Report
Consolidated balance sheets as at October 31, 2000 and 1999
Consolidated statements of operations for the years ended October 31, 2000, 1999 and 1998
Consolidated statements of stockholders' equity (deficit) for the years ended October 31, 2000, 1999, and 1998
Consolidated statements of cash flows for the years ended October 31, 2000, 1999 and 1998
Notes to consolidated financial Statements
Schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
(b) Reports Filed On Form 8-K
On June 30, 2000, the Company filed a Form 8-K under Item 5 announcing G.S. Beckwith Gilbert's conversion of certain promissory notes of the Company into shares of common stock of the Company.
On October 31, 2000, the Company filed a Form 8-K under Item 5 announcing G.S. Beckwith Gilbert's exercise of a warrant for shares of common stock of the Company in exchange for cancellation of debt owed by the Company to Mr. Gilbert.
(c) Exhibits
EXHIBITS --------
3.1 The Company's composite Certificate of Incorporation, dated as of January 24, 1990, is incorporated by reference from our 10-K report for the fiscal year ended October 31, 1989.
3.2 The Company's By-laws, dated as of May 16, 1988, are incorporated by reference from our 10-K report for the fiscal year ended October 31, 1998.
10.1 1988 Bonus Pool Plan, is incorporated by reference from our 10-K report for the fiscal year ended October 31, 1998.
10.2 The Company's 1988 Stock Option Plan, is incorporated by reference from our 10-K report for the fiscal year ended October 31, 1998.
10.3 The Company's 1999 Stock Incentive Plan is incorporated by reference from our Schedule 14A dated June 23, 1999.
10.4 Severance Agreement with Yitzhak N. Bachana effective October 2, 1998 (incorporated by reference from a Form 8-K, dated October 6, 1998).
10.5 Letter of Agreement for employment services, dated December 28, 1999, between the Company and Ken J. McNamara is incorporated by reference to Exhibit 10.5 to our report on Form 10-K for the fiscal year ended October 31, 1999.
16 Change in Certifying Accountant (incorporated by reference from a Form 8-K/A, dated October 28, 1998).
21 List of Subsidiaries (incorporated by reference from our 10-K report for the fiscal year ended October 31, 1981).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MEGADATA CORPORATION
DATED: JANUARY 26, 2001. By: /s/ G. S. Beckwith Gilbert ------------------------------ G. S. Beckwith Gilbert, Chairman and Chief Executive Officer
Pursuant to the requirements o Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the date indicated:
DATED: JANUARY 26, 2001. /s/ G. S. Beckwith Gilbert ------------------------------ G. S. Beckwith Gilbert, Chairman and Chief Executive Officer
DATED: JANUARY 26, 2001. /s/ James T. Barry ------------------------------ James T. Barry Chief Operating Officer, Executive Vice President, Director
DATED: JANUARY 26, 2001. /s/ Peggy A. Arnold ------------------------------ Peggy A. Arnold Vice President and Chief Financial Officer
DATED: JANUARY 26, 2001. /s/ Herbert E. Shaver ------------------------------ Herbert E. Shaver, Controller Vice President, Principal Accounting Officer, and Assistant Secretary
DATED: JANUARY 26, 2001. /s/ John R. Keller ------------------------------ John R. Keller, Executive Vice President and Director
DATED: JANUARY 26, 2001. /s/ Richard R. Schilling, Jr. ------------------------------ Richard R. Schilling, Jr., Director
SIGNATURES (CONTINUED)
DATED: JANUARY 26, 2001. /s/ Yitzhak N. Bachana ------------------------------ Yitzhak N. Bachana, Director
DATED: JANUARY 26, 2001. /s/ Bruce A. Whitman ------------------------------ Bruce A. Whitman, Director
DATED: JANUARY 26, 2001. /s/ Paul L. Graziani ------------------------------ Paul L. Graziani, Director