U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-KSB

(Mark One)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934 [Fee Required]

For the fiscal year ended July 31, 1998

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]

For the transition period from to

Commission file number: 0-8289

The Rovac Corporation

(Name of small business issuer in its charter)

Delaware 59-1461320

(State or other jurisdiction of (I.R.S. Employer

incorporation or organization) Identification No.)

1030 Stafford Street, Rochdale MA 01542

(Address of principal executive offices)

Issuer's telephone number: (508) 892-1121

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 $0.01 per share

(Title of class)

Check whether the issuer (1) filed all reports required to be for such shorter period that the Registrant was required to file reports, and (2) been subject to such filing requirement for the past 90 days.

Yes_____No__X__

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ X ]

State issuer's revenues for its most recent fiscal year: $39,901

The aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold within the past 60 days was $ 1,426,927 as of January 31, 2000.

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

The number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date, January 31, 2000, was 39,943,073 shares of Common Stock, $0.01 par value.

DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-KSB into which the document is incorporated: (1) any annual report to security holders; (2) any proxy of information statement; and (3) any prospectus filed pursuant to Rule 424 (b) or (c) of the Securities Act of 1933 ("Securities Act"). NONE.

PART I

Item 1. Description of Business.

(a) General Development of Business

The ROVAC Corporation ("the Company") is a Delaware corporation, which was organized in 1972 and has been involved in the research and development of a variety of mechanical devices. During the last several years, the Company has been engaged in activities leading up to the manufacture and marketing of a new type of mechanical pipe connector. The Company's patented CinchLockâ pipe connectors consist of mechanical devices, which join pipes and joints of assorted size and shapes without glue or solder to permit the flow of fluid under different conditions and amounts of pressures. The Company has begun to produce key CinchLockâ pipe connector components in its existing facilities in Rochdale, Massachusetts. The Company has only one business segment.

(b) Business of Issuer

During the fiscal year ending July 31, 1998, the Company signed its first Exclusive Sales Agreement with NIBCO of Elkhart, Indiana for products applicable to the North American and European compressed air and irrigation markets. This agreement represents the initial commercialization of ROVAC products for these two markets. A fee for market exclusivity and an initial stocking purchase order were elements of the agreement. Key components of CinchLockâ are being manufactured by ROVAC in Massachusetts. NIBCO will incorporate CinchLockâ components into their products and will market and distribute the products to the compressed air and irrigation markets. The company also produced key CinchLockâ components for field testing.

At the close of the fiscal year, the Company continued with field testing of its pipe connecting technology for several potential customers. While there can be no assurance, the Company expects that all of the field testing results will be favorable and could produce future sales.

At the end of the fiscal year, The ROVAC Corporation had 4 employees who worked full time for the Company. The company has numerous domestic and foreign patents issued as well as a number of other patent applications pending for its CinchLockâ pipe connectors. The Company has a number of patents both pending and granted which cover the Company's technology.

Research and development expenses for the years ended July 31, 1998 and July 31, 1997 were $12,012 and $49,726, respectively. This decrease of $37,714 is due to the fact that the majority of pipe connector testing and development has been completed.

Item 2. Description of Property.

The Company's product development facilities and administrative offices are located in Rochdale, Massachusetts and occupy approximately 6,520 square feet. ROVAC rents the space which it occupies from its controlling shareholder, Stafford Industries, Inc., ("Stafford").

Item 3. Legal Proceedings.

There are no pending or threatened legal proceedings against the Registrant.

Item 4. Submission of Matters to a Vote of Security Holders

None.

THE REMAINDER OF THIS PAGE IS INTENTIONALLY OMITTED

PART II

Item 5. Market for Common Equity and Related Stockholder Matters

Common Stock

The Company has authorized 40,000,000 shares of Common Stock ($0.01 par value per share), of which 39,943,073 shares of Common Stock were reported issued and outstanding as of July 31, 1998. In addition, there are 40,000 shares of Common Stock issuable as of July 31, 1998. All of the issuable shares will have restrictions against transfer pursuant to Regulation D and/or will be exempt from registration under the Securities Act of 1933, as amended.

Market for Common Stock

The Company's Common Stock has been traded in the over-the-counter market since 1974, and is presently listed in the "pink sheets" by approximately eight (8) broker-dealers. The following is the range of low and high bid prices for a share of the Company's stock for quarters ended:

During the fiscal year, the range of low and high bid price for the Company's Common Stock was between $ 0.155 and $ 0.22 per share. Prices represent quotations from the "pink sheets" without adjustment for retail mark-ups, markdowns, or commissions and do not represent actual transactions. The number of stockholders of record as of July 31, 1998 was approximately 3,634. The Company has paid no dividends on its Common Stock for the last three fiscal years and does not expect to pay any dividend during the coming fiscal year.

As of July 31, 1998, Stafford held of record 22,792,500 shares of the Common Stock ($0.01 par value per share) of the Company and 12,000 shares of Preferred Stock ($100 par value per share) of the Company.

There is no trading market contemplated for the preferred shares and the conversion value of the preferred shares shall not exceed par value. The company, by action of its Board of Directors, may call or redeem the whole or any part of the Preferred Stock, at any time, or from time to time, at $100 per share plus a sum equal to all accumulated and unpaid dividends thereon to the date fixed for redemption. In the event that the Board of Directors calls or redeems the whole or any part of the Preferred Stock, the Board shall be required to take such action onor within ten (10) years from issue.

(a) Plan of Operation

The Company's operations in the past several years have been focused on designing and Developing its CinchLockâ pipe connectors. This activity has not generated significant revenues and the Company has been dependent on cash advances from licensing income and loans from officers of the Company to meet working capital and liquidity needs. There can be no assurance that officers and/or affiliate of the Company will continue to provide loans and capital to the Company.

The Company continued to explore potential capital sources in order to continue its operations. The Company has been involved in activities to obtain financing and capital sources in order to meet its working capital requirement needs so that it may implement the proposed CinchLockâ pipe connector project. The Company's preliminary financing plan includes securing working capital through an isolated sale of Common Stock to qualified investors in private placement. There can be no assurance that the Company will be able to implement its financing plans.

Financial Statements

Report of Independent Auditors F-1

Balance Sheet - July 31, 1998 and July 31, 1997 F-2, F-3

Statements of Operations for the Years Ended

July 31, 1998, 1997 F-4

Statements of Stockholders' Deficit for the Years

Ended July 31, 1998, 1997 F-5

Statements of Cash Flows for the Years Ended

July 31, 1998, 1997 F-6, F-7

Notes to Financial Statements F-8 to F-10

Item 8. Changes in and disagreements with Accountants on Accounting and Financial Disclosure.

None.

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders

The ROVAC Corporation

We have audited the accompanying balance sheets of The ROVAC Corporation as of July 31, 1998 and 1997, and the related statements of operations, stockholders' deficit, and cash flows for the years then ended. 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 generally accepted auditing standards. 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 financial statements referred to above present fairly, in all material respects, the financial position of The ROVAC Corporation as of July 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency. These conditions raise substantial doubts about the Company's ability to continue as a going concern. Management's plan in regard to these matters is described in Note 1. The financial statements do not include any adjustments that might arise from the outcome of this uncertainty.

MOTTLE McGRATH BRANEY & FLYNN, P.C.

Worcester, Massachusetts

February 17, 2000

F-1

THE ROVAC CORPORATION

Balance Sheets

July 31, 1998 and 1997

Assets 1998 1997

Current assets:

Accounts receivable $ 695 $ 833

Loan receivable - officer 37,188 2,705

Total current assets 37,883 3,538

Property and equipment:

Machinery and equipment 72,112 72,112

Furniture and fixtures 30,283 30,283

Leasehold improvements 28,121 28,121

130,516 130,516

Less accumulated depreciation 120,701 118,018

Net property and equipment 9,815 12,498

Patents and patent applications, net of

accumulated amortization of $11,641 in 1998

and $9,029 in 1997 66,144 $ 61,433

Total assets $ 113,842 $ 77,469

See accompanying notes to financial statements.

F-2

THE ROVAC CORPORATION

Balance Sheets (continued)

July 31, 1998 and 1997

Liabilities and Stockholders' Deficit 1998 1997

Current liabilities:

Cash overdraft 4,830 2,944

Notes payable - officer (note 3) 663,141 660,341

Notes payable - other 3,250 11,250

Accounts payable:

Trade 101,187 107,580

Parent company 719,914 594,535

Accrued expenses (note 4) 841,607 734,895

Total current liabilities 2,333,929 2,111,545

Commitments and contingencies (note 1)

Stockholders' deficit (note 5):

8%, nonvoting preferred stock, $100

par value. Authorized 25,000 shares,

issued and outstanding 12,000 shares

each year 1,200,000 1,200,000

Common stock, $.01 par value. Authorized

40,000,000 shares, issued and outstanding

39,943,073 shares in 1998 and 39,943,073

shares in 1997 399,431 399,431

Common stock issuable, $.01 par value,

40,000 shares in 1998 and 40,000 shares

in 1997 400 400

Additional paid-in capital 8,269,432 8,269,432

Accumulated deficit ( 12,089,350) (11,903,339)

Total stockholders' deficit (2,220,087) (2,034,076)

Total liabilities and stockholders' deficit $ 113,842 $ 77,469

See accompanying notes to financial statements.

F-3

THE ROVAC CORPORATION

Statements of Operations

Years ended July 31, 1998 and 1997

1998 1997

Revenues:

Contract income $ 36,000 $ 10,000

Product 3,901 5,231

Total revenues 39,901 15,231

Operating expenses:

Cost of sales 8,689 11,315

General and administrative 120,591 111,542

Research and development 12,012 49,726

Depreciation 2,683 2,683

Amortization 2,612 2,058

Total operating expenses 146,587 177,324

Operating loss (106,686) (162,093)

Other income (expense):

Interest expense (79,325) (81,205)

Net loss $(186,011) $(243,298)

Loss per share of common stock $ (.005) $ (.006)

See accompanying notes to financial statements.

F-4

THE ROVAC CORPORATION

Statements of Stockholders' Deficit

Years ended July 31, 1998 and 1997

Preferred Stock Common Stock Common Stock Issuable Additional

Number Number Number Paid-in Accumulated

of Shares Par Value of Shares Par value of Shares Par Value Capital Deficit Total

Balance at July 31, 1996 12,000 $1,200,000 39,943,073 $399,431 40,000 $ 400 $8,269,432 $(11,660,041) $(1,790,778)

Net loss - - - - - - - (243,298) (243,298)

Balance at July 31, 1997 12,000 1,200,000 39,943,073 399,431 40,000 400 8,269,432 (11,903,339) (2,034,076)

Net loss - - - - - - ____ (186,011) ; (186,011)

Balance at July 31, 1998 12,000 $1,200,000 39,943,073 $399,431 40,000 400 $ 8,269,432 $(12,089,350) $(2,220,087) $(1,790,778 )

See accompanying notes to financial statements.

THE ROVAC CORPORATION

Statements of Cash Flows

Years ended July 31, 1998 and 1997

Increase (Decrease) in Cash

1998 1997

Cash flows from operating activities:

Net loss $(186,011) $(243,298)

Adjustments to reconcile net loss to

net cash used in operating activities:

Depreciation and amortization 5,295 4,741

Services in exchange for common stock or note payable (8,000) 8,000

(Increase) decrease in assets:

Accounts and loan receivable (34,345) (758)

Increase (decrease) in liabilities:

Accounts payable 118,986 118,543

Accrued expenses 106,712 99,815

Total adjustments 188,648 230,341

Net cash provided by (used in)

operating activities: 2,637 (14,499)

Cash flows from investing activities:

Costs of patents and patent applications (7,323) (11,934)

Net cash used in investing activities (7,323) ( 11,934)

Cash flows from financing activities:

Proceeds from notes payable - officers 2,800 12,200

Net cash provided by financing activities 2,800 12,200

Net change in cash (1,886) (12,691)

Cash (cash overdraft), beginning of year (2,944) 9,747

Cash (cash overdraft), end of year $ (4,830) $ (2,944)

F-6

THE ROVAC CORPORATION

Statements of Cash Flows (continued)

Years ended July 31, 1998 and 1997

1998 1997

Supplemental disclosures of cash flow information:

Cash paid during the year for:

Interest $ 1,150 $ 51

Supplemental disclosure of noncash investing and

financing activities:

Note payable issued for services (canceled) (8,000) 8,000

See accompanying notes to financial statements.

THE ROVAC CORPORATION

Notes to Financial Statements

(1) Basis of Presentation

(2) Summary of Significant Accounting Policies

(a) Property and equipment

(b) Patent applications

THE ROVAC CORPORATION

Notes to Financial Statements

(2) Summary of Significant Accounting Policies (continued)

(c) Income taxes

(d) Loss per share of common stock

(3) Notes Payable - Officer

(4) Accrued Expenses

1998 1997

Interest to officer $655,255 $573,517

Professional fees 21,000 14,000

Payroll taxes 19,326 20,182

Directors' fees 24,300 24,300

Salaries 117,457 98,521

Other 4,269 4,375

$841,607 $734,895

THE ROVAC CORPORATION

Notes to Financial Statements

Year Amount

1999 979,000

2000 436,000

2001 566,000

2002 368,000

2003 444,000

2004 388,000

2005 265,000

2006 68,000

2007 146,000

2008 273,000

2009 52,000

2010 236,000

2011 130,000

1. 150,000

2013 86,000

(6) Related Party Transactions

PART III

Item 9. Directors, Executive Officers, Promoters and Control Person, Compliance with Section 16(a) of the Exchange Act.

The last Annual Meeting of the Shareholders of the Company was held on March 31, 1989, when Mr. Shea, Sr., Mr. Riesner, Mr. Spillane, and Mr. Shea, Jr., were re-elected as directors and Mr. Loscocco was elected a new director of the Company. These directors were elected by the shareholders to serve until the next annual meeting or until their successors are elected and qualified. The following information is furnished with respect to current directors and officers of the Company.

Name Age Position Period of Service

Raymond E. Shea, Sr. 80 Chief Executive May, 1984

Officer, Director to date

Robert Riesner 69 Secretary, September 1982

Director to date

S. John Loscocco 74 Director March 1989

to date

John W. Spillane 67 Director May, 1984

to date

Raymond E. Shea, Jr. 39 Vice President April 1985

Treasurer, Director to date

Raymond E. Shea, Sr., is the Chairman of the Board of Directors and Chief Executive Officer of the Company. Mr. Shea has been an officer and director of the Company since 1984. Mr. Shea is an entrepreneur and inventor. He is a businessman associated with the commercialization of technical products and business turnarounds.

Robert Riesner, Secretary and Director of the Company, is a financial consultant and workout specialist supervising various corporate transactions and reorganizations. Mr. Riesner has been an officer and director of the Company since 1982. Since April 1983, he has been a principal of PBR Financial Services.

S. John Loscocco is a Director who is an investor with extensive experience in the field of venture capital. Mr. Loscocco has served as President of Acquivest Group, Inc., a venture management organization for more than the past nine years. Mr. Loscocco is also a director of Seatrain Lines, Inc. and Hermitage Group, Inc.

John W. Spillane is a Director of the Company and serves the Company as its General Counsel. Mr. Spillane has been a Director of the Company since 1984. He is a member of the Massachusetts State and Federal Bar, and has been a practicing attorney in Worcester, Massachusetts for 40 years.

Raymond E. Shea, Jr. is Vice President, Treasurer and Director of the Company and is the son of Raymond E. Shea, Sr. He has been an officer and director of the Company since April 1985 and has served the Company in a variety of key operating and managerial positions during the past ten years. Mr. Shea is also a Treasurer and Director of Stafford Industries, Inc.

Item 10. Executive Compensation

All officers and directors of the Company received the following compensation (both cash and deferred) during fiscal year 1998:

Summary Compensation Table

The chief executive officer has not drawn a salary in the three year period ending July 31, 1998.

No officer or director earned in excess of $100,000 in the three year period ending July 31, 1998.

The aggregate amount of other compensation paid to each officer and director during the last fiscal year did not exceed the lesser of $25,000 or 10% of cash compensation. There are no plans in effect or proposed under which the issuer paid or will pay cash, non-cash, or other compensation to any person, including the above named individuals and group specified in this Item. Notwithstanding the foregoing, directors accrue $300.00 of compensation for their services in attending each directors' meeting. 

Item 11. Security Ownership of Certain Beneficial Owners and Management.

A change in control of the Registrant was approved on May 14, 1984 when Stafford Industries, Inc., of Rochdale, Massachusetts ("Stafford") acquired a majority of shares of common stock of the Company. As of July 31, 1998, Stafford owned 22,792,500 shares of common stock of the Company and 12,000 shares of preferred stock of the Company. The identity of the officers and directors of Stafford is as follows:

Raymond E. Shea, Sr., President and Director,

342 Silver Lane

Royal Palms, Boca Raton, FL 33432;

Raymond E. Shea, Jr., Treasurer and Director,

175 Southbridge Road

North Oxford, MA 01537;

John W. Spillane, Clerk and Director

11 Dennison Road

Worcester, MA 01609

Raymond E. Shea, Sr., President and Chairman of the Board of Stafford, is the controlling stockholder of Stafford. Mr. Shea, Sr. owns 5,157 shares of common stock of Stafford, which is 31.25% of the number of shares of Stafford issued and outstanding. Mr. Shea, Sr. owned the same number of shares of Stafford common stock at the close of the fiscal year ending July 31, 1998.

The authorized capital stock of the Company consists of 40,000,000 shares of common stock, par value $0.01 per share, and 25,000 shares of preferred stock, $100 per share. As of July 31, 1998, Stafford owned 57% of the common stock of the Company and all of the preferred stock issued by the Company.

The following table shows the amount of common stock of the Company owned of record and beneficially as of July 31, 1998 by each Director and all Directors and Officers as a group, consisting of five persons:

(1) Mr. Shea, Sr. owns 31.25% of all of the shares of common stock of Stafford, which holds 22,792,500 shares of common stock of ROVAC.

(5) Mr. Loscocco has previously disclaimed ownership in 120 shares of common stock of Stafford which were issued to Mr. Loscocco and subsequently transferred to Acquivest Holding II, Ltd., with which Mr. Loscocco is affiliated. The 120 shares of common stock of Stafford represents 0.72% of the issued and outstanding shares of Common Stock of Stafford and represents 165,763 shares of Common Stock of the Company held by Stafford.

There were no transactions in excess of $130,000 with related parties.

None.

None.

None.

2. Subsidiaries

None.

THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY OMITTED.

In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned.

(Registrant) THE ROVAC CORPORATION

By (Signature and Title) /Raymond E. Shea, Sr./

Raymond E. Shea, Sr., President

Date March 2, 2000

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicates.