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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2003
or
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-2892
THE DEWEY ELECTRONICS CORPORATION
(Exact name of registrant as specified in charter)
NEW YORK 13-1803974
(State of Incorporation) (I.R.S. Employer Identification No.)
27 Muller Road, Oakland, New Jersey 07436
(Address of principal executive offices) Zip Code
201-337-4700
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $.01 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X
No ___.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K
or any amendment to this Form l0-K.
The aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant,
computed by reference to the price at which the common
stock was sold as of the close of business on September
1, 2003: $3,112,472.
The number of shares outstanding of the registrant's common
stock, $.01 par value was 1,359,531 at September 1, 2003.
Page 1
THE DEWEY ELECTRONICS CORPORATION
TABLE OF CONTENTS
Item Page
PART I
1. Business 3
2. Properties 6
3. Legal Proceedings 6
4. Submission of Matters to a Vote of Security
Holders 6
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters 7
6. Selected Financial Data 8
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
8. Financial Statements and Supplementary Data 20
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 37
9A. Controls and Procedures 37
PART III
10. Directors and Executive Officers of the Registrant 38
11. Executive Compensation 38
12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters 38
13. Certain Relationships and Related Transactions 38
14. Principal Accounting Fees and Services 38
PART IV
15. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 39
16. Signatures 40
PART I
Item 1. BUSINESS
The Dewey Electronics Corporation (the "Company") was
incorporated in the State of New York in 1955. It is a
systems oriented military electronics development, design and
manufacturing organization based in Oakland, New Jersey.
The Company is organized into two operating segments on the
basis of the type of products offered. Each segment is
comprised of separate and distinct businesses: the
electronics segment and the leisure and recreation segment.
In the electronics segment, the Company is a producer of
electronic and electromechanical systems for the Armed
Forces of the United States. The Company provides its
products in this segment either as a prime contractor
or as a subcontractor for the Department of Defense.
The electronics segment is comprised mostly of the 2kW
Generator product line and the Pitometer Log Divisions
products. Pitometer Log is a long-established manufacturer
of ship speed and distance measuring instrumentation. Its
primary customers are the U.S. Navy and other prime
contractors such as shipbuilders. Pitometer Log's business
is derived from various orders, limited in scope and
duration. These are generally for replacement parts and
equipment for previous Company contracts with the Department
of Defense (DOD) as well as business from other projects
performed as a subcontractor.
Under the 2kW diesel operated tactical generator set contract,
the Company has been the sole producer for the Department of
Defense since 1997 under a contract awarded in 1996. In
September 2001, the Company was awarded a new contract to
provide the U.S. Army and other Department of Defense
Agencies with this same 2kW diesel operated generator set.
This new contract is a ten-year indefinite delivery,
indefinite quantity contract which replaces the initial
contract. The total amount of orders placed through August
31, 2003 amount to approximately $9 million. As with the
prior contract, this contract allows for the U.S. Army to
place annual production orders and to place additional interim
orders. However, no assurances can be made that further orders
will be placed or, if they are placed, the timing and amount
of such orders.
In the leisure and recreation segment, the Company, through
its HEDCO Division, designs, manufactures and markets advanced,
sophisticated snowmaking equipment. It also supplies
replacement parts for items no longer covered under warranty.
There are no intersegment sales.
The sales and operating profit of each industry segment and the
identifiable assets attributed to each segment for the last
three fiscal years ended June 30, 2003 are set forth in Note K
- - Operating Segments of the Notes to the Financial Statements.
During the last three fiscal years, there were no material
expenditures for Company sponsored or customer-sponsored
research and development activities.
Compliance with Federal, state and local environmental
provisions has had no material effect upon capital expenditures,
earnings or the competitive position of the Company. In
addition, there are no material capital expenditures
anticipated for environmental control facilities.
As of August 30, 2003, the Company had a work force of 33
employees, of whom 10 were technical or professional personnel.
Last year at the same date, the work force included 34
employees, of whom 9 were technical or professional personnel.
The reduction in workforce is the result of revised production
schedules in the electronics segment of business. Fluctuations
in the work force sometimes also result from the seasonal
nature of the leisure and recreation segment of business.
ELECTRONICS SEGMENT
This segment accounted for 99% of total revenues in fiscal
2003, 95% of total revenues in fiscal year 2002 and 99%
of total revenues in fiscal 2001.
The electronics segment of business provides most of the
Company's revenues. Virtually all of the electronic product
revenues are attributable to business with the Department
of Defense of the Federal Government or with other government
contractors. Aside from replacement part and other short-
term business, the Company's electronics segment revenues
have in recent years been dependent upon single projects.
Thus, until 1997 a single program, the ADCAP torpedo program
with the U.S. Navy, was responsible for all of the Company's
electronics segment revenues from long-term projects, and
currently the tactical generator set program of the U.S.
Army accounts for all such long-term revenues.
Since substantially all of the Company's electronics business
is derived from contracts with various agencies of the
United States Government (the "Government") or subcontracts
with prime Government contractors, the loss of substantial
Government business would have a material adverse effect
on the business.
For the most part, working capital requirements for the
electronics segment of business are funded by progress
payments provided by the Government.
All of the Company's contracts with the Government are subject
to the standard provision for termination at the convenience
of the Government.
Although raw materials are generally available from a number
of suppliers, the Company is at times dependent upon a specific
supplier or a limited number of suppliers of material for a
particular contract and has occasionally experienced some
delays in deliveries. Such delays have not had a material
effect on operations; however, the Company cannot provide any
assurances that future delays, if any, will not have a material
adverse effect.
Reference is made to Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations for
additional information regarding this segment.
LEISURE AND RECREATION SEGMENT
The leisure and recreation segment of business accounted for 1%
of the Company's revenues in fiscal 2003, 5% of the Company's
revenues in fiscal year 2002 and 1% of the Company's revenues
in fiscal 2001.
Snowmaking equipment is sold to ski areas as original
equipment or as replacements for existing equipment. Most
snowmaking equipment is paid for in full at delivery to the
customer. In other cases, such equipment is sold under a
sales contract that provides for a substantial down payment
and retention of a security interest in the equipment until
full payment is received. Typically, full payment is made
within one year. The Company has not experienced any losses
due to resale of the equipment following default by customers.
The Company services the equipment at the purchaser's expense
after a warranty period that typically expires at the end of
the snowmaking season in which the sale occurs.
The Company has sold snowmaking equipment to over three
hundred different locations in the United States and abroad.
Marketing has been performed by the Company's employees
in the domestic market and by distributors and
representatives in foreign markets. In the past several
years, the foreign market represented a small amount of
revenues, all from the sales of parts.
Orders for snowmaking equipment have normally been received
during the first and fourth quarters of the fiscal year,
though this pattern has been changing. For the most part,
shipments are made and revenues recorded during the second
quarter. Production usually takes place in the first and
second quarters, and it is during this period that inventory
is generated and working capital demands are the greatest.
While there may be some temporary delays, problems regarding
source and availability of raw materials have had no material
adverse effect on operations of this segment.
Reference is made to Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations
for additional information regarding this segment.
Item 2. PROPERTIES
The Company's 49,200 square foot facility at 27 Muller Road,
Oakland, New Jersey, located on 90 acres of land owned by the
Company, was constructed in 1981. This facility houses
executive offices and manufacturing operations and is used
primarily for the electronics segment of business.
Approximately 90% of this facility is being utilized
for production (one shift), staging and storage.
Under the terms of a mortgage note to Sovereign Bank described
in Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations, both the land and
building are subject to the lien of a mortgage securing
indebtedness in the amount of $388,672 at June 30, 2003.
The Company also has a line of credit with the Bank, under
which the Company may borrow up to an additional $500,000
that would be secured by a lien on substantially all of
the Company's machinery, equipment and other personal
property.
Item 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the fourth quarter of fiscal year 2003.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded over-the-counter under
the symbol "DEWY.OB".
The table below sets forth the high and low market prices
of the Company's common stock for each quarter during the
last two fiscal years.
Quarterly Common Stock Price Range
Fiscal Year 2003 Fiscal Year 2002
Quarter High Low High Low
1st $4.31 $3.80 $4.45 $3.25
2nd 4.00 3.29 5.00 4.05
3rd 4.10 3.83 4.05 3.55
4th 4.75 3.35 4.35 3.95
Price information is based on over-the-counter market
quotations, which reflect inter-dealer prices, without
retail mark-up, mark-down or commissions, and may
not necessarily represent actual transactions.
There were no dividends declared or paid during the
fiscal years 2003, 2002 and 2001. The Company has
no plans to pay dividends in the foreseeable future.
The number of holders of record of the Company's common
stock as of September 2, 2003 was 589.
Item 6. Selected Financial Data
(In thousands of dollars, except per share amounts)
Year ended June 30,
2003 2002 2001 2000 1999
Revenues $6,362 $8,916 $10,886 $10,409(2) $8,632
Income before
income taxes 477 1,459 1,838 1,543(3) 935
Net income 286 875 1,103 926(2)(3) 561
Net income per
share - basic .21 .65 .82 .69 .42
Net income per
share - diluted .20 .63 .80 .69 .42
Cash dividends per
common share -- -- -- -- --
Total assets $6,352 $6,818 $6,618 $5,325 $5,776
Long-term
Obligations $1,371 $1,674 $2,269 $1,924 $2,427
Working capital $4,028 $4,768 $4,728 $3,227 $2,413
Stockholders'
Equity $4,367(1)$4,253 $3,378 $2,275 $1,349
(1) Stockholders' equity in fiscal year 2003 includes
other comprehensive expense of $184.
(2) Revenues in fiscal year 2000 include $702 as a result
of notification of the final closeout of a contract
with the U.S. Navy.
(3) Income in fiscal year 2000 includes a charge for an
inventory provision in the amount of $353.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
"Selected Financial Data" and the Company's Financial Statements,
including the related notes thereto, appearing elsewhere in this
Annual Report. Certain statements in this report may be deemed
"forward-looking statements" within the meaning of Section 21E
of the Securities Exchange Act of 1934. All statements, other
than statements of historical fact, that address activities,
events or developments that the Company or management intends,
expects, projects, believes or anticipates will or may occur
in the future are forward-looking statements. Such statements
are based upon certain assumptions and assessments made by
management of the Company in light of its experience and
its perception of historical trends, current conditions,
expected future developments and other factors it believes
to be appropriate. The forward-looking statements included
in this report are also subject to a number of material risks
and uncertainties, including but not limited to economic,
governmental, competitive and technological factors affecting
the Company's operations, markets, products, services and
prices and specifically, the factors discussed below under
"Government Defense Business" and "Company Strategy".
Such forward-looking statements are not guarantees of future
performance and actual results, developments and business
decisions may differ from those envisaged by such forward-
looking statements.
The Company's operating cycle is long-term and includes
various types of products and varying delivery schedules.
Accordingly, results of a particular period or period-to-
period comparisons of recorded revenues and earnings may
not be indicative of future operating results. The following
comparative analysis should be viewed in this context.
The sales and operating profit of each industry segment and the
identifiable assets attributed to each segment for the last
three fiscal years ended June 30, 2003, are set forth in
Note K - Operating Segments of the Notes to the Financial
Statements.
Results of Operations
The Company's fiscal year ends on June 30. Accordingly, all
references to years in this Management's Discussion refer
to the fiscal year ended June 30 of the indicated year.
Also, when referred to herein, operating profit means net
sales less operating expenses. Some operating expenses,
including general corporate expenses, have been allocated
by specific identification or based on labor for items
which are not specifically identifiable. In computing
operating profit, none of the following items have been
added or deducted: interest expense, income taxes, and
non-operating other income and expenses.
Revenues
Revenues this year were 29% lower than last fiscal year and
42% lower than fiscal year 2001 which reflects the results in
both the electronic segment and the leisure and recreation
segment. Information about the Company's operations in the
two segments are set forth in Note K - Operating Segments of
the Notes to the Financial Statements and are discussed in
further detail below.
Electronic Products
In the electronics segment, revenues are recorded under defense
contracts using the percentage of completion method of
accounting. Revenues are recorded as work is performed based
on the percentage that actual incurred costs bear in
comparison to estimated total costs utilizing the most recent
estimates of costs and funding. Since contracts typically
extend over multiple reporting periods, revisions in cost
and estimates during the progress of work have the effect
of adjusting earnings applicable to performance in prior
periods in the current period. When the estimated costs
to complete a project indicate a loss, provision is made
for the anticipated loss in the current period. For further
information see Note A of the Notes to Financial Statements.
Electronic product revenues accounted for 99% of total revenues
in 2003, 95% of total revenues in 2002 and 99% of total
revenues in 2001.
In fiscal year 2003, 82% of the electronic product revenues
were derived from production efforts towards providing the
Armed Forces with diesel operated generator sets. These
efforts provided 90% of this segment's revenues in fiscal
year 2002 and 88% in fiscal year 2001. This decline in
contribution to revenues is the result of reduced orders and
the affected production levels. The Company has been
producing under its contract for 2kW generator sets with
deliveries being made according to the government provided
delivery schedule. However, generators are being
manufactured at a lower rate than last year due to declining
customer requirements. Deliveries under production orders
placed through June 30, 2003 are scheduled to continue
through March 2004.
Since 1997, the Company has been the sole producer for the
Department of Defense of 2kW diesel operated generator sets.
In September 2001, the Company was awarded a new contract to
provide the U.S. Army and other Department of Defense Agencies
with this same 2kW diesel operated generator set. This new
contract is a ten-year indefinite delivery, indefinite quantity
contract which replaces the initial contract described above.
As with the prior contract, this contract allows the Army to
place production orders annually and to place additional
interim orders. The total amount of orders that were
placed through June 30, 2003 is approximately $9 million.
The Company experiences variable amounts of material
receipts from time to time during the normal course of
business. Material receipts are dependent upon the receipt
of orders, project requirements and vendor delivery schedules.
As the Company uses the percentage of completion method of
accounting to record revenues, material costs have an impact
upon recorded revenues (see Note A, Revenue Recognition of
the Notes to Financial Statements).
On September 10, 2003, the Company received an additional order
in the amount of approximately $1 million for the production
of 2kW generator sets. Production of this order is anticipated
to be completed in May 2004.
The Company's Pitometer Log Division provided the remaining 18%
of electronic product revenues in 2003, 10% in 2002 and 12%
of electronic product revenues in 2001. Production efforts
in this division have increased compared to recent years as
a result of increased orders from government agencies and
from shipbuilders. These orders are more short term and more
limited in scope and are generally for replacement parts for
previously supplied Department of Defense equipment and other
projects performed as a subcontractor. A large part of these
orders are attributable to the Division's speed and distance
measuring instrumentation for the U.S. Navy.
The aggregate value of the Company's backlog of electronic
products not previously recorded as revenues was approximately
$2 million on June 30, 2003, $4 million on June 30, 2002
and $6 million on June 30, 2001. Almost all of this backlog
was attributable to the U.S. Army contract for diesel
operated tactical generator sets. It is estimated that
the present backlog will be shipped during the next 12
months and recognized as fiscal year 2004 revenues.
Leisure and Recreation
In the leisure and recreation segment, there were no snowmaking
machine sales made during fiscal year 2003. The sale of
snowmaking machines accounted for revenues of $380,500 in
fiscal year 2002 and $42,000 in revenues in 2001. There
were no export sales of snowmaking machines during the last
three fiscal years.
During 2003, the Company completed a review of this segment
and its position in this market. Following this review,
enhancements were designed to simplify the operation of the
snowmaker, and provide the option of remote control and
monitoring. Furthermore, marketing efforts were revised.
Since the end of fiscal year 2003, the first phase of
snowmaker enhancements has been completed, and will be
in all new models.
The remaining revenues in this segment were derived from the
sale of replacement parts no longer covered under warranty.
As of June 30, 2003 and 2002, the Company had no backlog of
orders for snowmaking machines. As of June 30, 2001, the
Company had $81,000 backlog of orders for snowmaking machines.
Since the end of fiscal year 2003, the Company has received
orders for snowmaking machines in the amount of $243,200.
Gross Profit
Gross Profit was 27% in 2003, 31% in 2002 and 27% in 2001.
In the electronics segment, gross profit was 27% of revenues
as a result of continued production efforts towards the
contract for diesel operated tactical generator sets. In 2002,
gross profit was 32% and in 2001, gross profit was 27%.
Selling, General and Administrative Expenses
In 2003, selling, general and administrative expenses of
$1,185,869 were 19% of revenues. In 2002 these expenses of
$1,264,189 were 14% of revenues, and in 2001 they were
$1,017,002 or 9% of revenues. The reduction of expenses
this year is the result of the Company's cost reduction program.
Operating Profit
Operating profit for the fiscal year ended June 30, 2003 was
$500,263 or 8% of revenues. In fiscal year 2002, operating
profit was $1,538,923 or 17% of revenues and in fiscal year
2001, $1,970,037 or 18% of revenues. A lower gross profit is
being realized on the efforts made toward the generator set
contract with the U.S. Army. This is partially attributed to
the lower volume requirements.
The Company has initiated and presented an alternate delivery
schedule for existing generator orders, which has been accepted
by its customer. This revised delivery schedule is intended
to allow the Company to focus production, during its first and
second fiscal quarters of 2004, on snowmaking machines for sales
and inventory purposes. As a result, the Company anticipates
a reduced production level towards the generator sets during the
first fiscal quarter, and a condensed production schedule
beginning late in the second fiscal quarter and continuing
through the fiscal year.
The revenues and operating profit of each industry segment and
the identifiable assets attributed to each segment for the
last three fiscal years ended June 30, 2003 are set forth in
Note K - Operating Segments of the Notes to the Financial
Statements.
Interest Expense
Interest expense for the past three years amounted to $57,079
in 2003, $97,242 in 2002, and $153,681 in 2001. This reduction
in interest expense is attributed to principal reduction
payments made towards the Company's mortgage note combined
with a reduced interest rate, which was effective in December
2001.
Other Income - Net
Amounts reported as other income represent the net effect of
interest and miscellaneous items such as the sale of scrap,
bank transaction fees and other like items.
In fiscal year 2003, other income of $34,218 includes interest
income of $32,088 and the net effect of miscellaneous fees
and net discounts of $2,130 income.
Other income of $17,511 for fiscal year 2002 was comprised
of interest income of $20,432 and the net expense of
miscellaneous fees and discounts of $2,921.
Other income of $21,836 for fiscal year 2001 was comprised of
interest income of $7,785 and the net effect of miscellaneous
items and scrap sales of $14,051.
Income Taxes
Deferred income taxes reflect the net tax effects of (a)
temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
amounts used for income tax purposes, and (b) operating
loss and tax credit carryforwards.
The provision for income taxes for the fiscal years 2003,
2002, and 2001 was at an effective rate of 40%.
Inflation
Historically, inflation and price changes have not had a
material effect on operations.
Liquidity and Capital Resources
The Company's principal capital requirements are to fund working
capital needs and any debt servicing requirements and capital
expenditures. The Company's borrowing capacity has remained
above its use of outside financing. Management believes that
the Company's future cash flow from operations, combined with
its existing line of credit will be sufficient to support
working capital requirements and capital expenditures at
their current or expected levels.
Management also believes that it can continue to meet the
Company's short-term liquidity needs through a combination of
progress payments on government contracts (based on costs
incurred) and billings at the time of delivery of products.
At June 30, 2003, the Company's working capital was $4,028,421
compared to $4,768,198 at June 30, 2002.
The ratio of current assets to current liabilities was 7.56
to 1 at June 30, 2003 and 6.35 to 1 the prior year.
During fiscal year 2003, operations used $269,342 net cash
compared to operations providing net cash of $2,359,268 in
2002 and $1,074,114 net cash provided in 2001.
During 2003, net cash used in operations was comprised
primarily of net income before depreciation and amortization
and a decrease in (billing of) contract costs and related
estimated profits in excess of billings. These amounts
were more than offset primarily by an increase in (not yet
collected) accounts receivable, a decrease in (payment of)
accounts payable and a decrease (payments made) in pension
costs accrued.
During 2002, net cash provided by operations consisted
primarily of net income before depreciation and
amortization, collections of accounts receivable and
the billing and collection of contract costs and related
estimated profits in excess of applicable billings. These
costs were billed as deliveries were made on the Company's
long-term projects.
In 2001, net cash provided by operations consisted primarily
of net income before depreciation and amortization,
collections of accounts receivable, reductions in inventories
and the accrual of corporate income taxes, all of which
were almost entirely offset by an increase in unbilled
contract costs and related estimated profits in excess
of applicable billings.
During 2003, investing activities used $694,666 in net cash,
Which was used for expenditures for plant, property and
equipment. Included in this amount was $577,352, which was
used by the Company to continue to invest in efforts to
improve technologies in its generator product line.
These efforts primarily involve engineering and design
related to the generator and other related fields of
business. The Company intends to continue investing in
development efforts and anticipates that future spending
toward the ongoing efforts will be approximately $200,000,
though actual amounts may vary.
The Company is also anticipating making further capital
expenditures for equipment in the amount of approximately
$200,000 during its fiscal year 2004. This includes a
commitment as of June 30, 2003 to purchase a new machining
center for use in manufacturing in the amount of
approximately $150,000. The Company plans to fund
anticipated expenditures for development efforts and
equipment from its operating activities.
During 2002, investing activities used $327,447 in net
cash. This amount consisted of capital expenditures for
building improvements, tooling and equipment, which
included the Company's investment in the expansion of
existing technologies related to its businesses and to
support new business development. In fiscal year 2001,
net cash of $63,252 was used in investing activities
for capital expenditures for building improvements,
tooling and equipment.
Net cash used in financing activities during 2003 amounted to
$549,376. Principal payments made towards the Company's long-
term debt of $560,938 includes a voluntary principal reduction
payment of $500,000. Proceeds from the sale of treasury
stock sold through the Company's employee stock option
plan amounted to $11,562.
Net cash used in financing activities in 2002 amounted to
$618,985 of principal payments made toward the Company's
long-term debt. In 2001, net cash used in financing activities
amounted to $97,090.
On December 27,2001, the Company and Sovereign Bank agreed to
revised terms of the mortgage note agreement. The renewed
agreement, among other items, revised the interest rate
from a fixed rate of 8.25% to the Bank's prime rate plus
..5% with a floor of 6%. In addition, the maturity date
was extended from October 2002 to January 2005.
The Company also has a line of credit agreement with Sovereign
Bank in the amount of $500,000 at the rate of .25% plus the
Bank's prime rate, which may be renewed on October 31 of
each year. The Bank had also agreed to extend the Company's
line of credit of $500,000 through October 2003 at the rate
of the Bank's prime rate plus .25%. As of June 30, 2003,
there were no outstanding borrowings against this line of
credit facility. Management believes that this line of
credit agreement will again be renewed.
The Mortgage Note is secured by a first mortgage on all of the
Company's land and it's building. Borrowings under the line
of credit arrangement are secured by a first lien on all of
the Company's machinery, equipment and other personal property.
The Company also has a note payable to a co-founder (shareholder)
in the amount of $200,000, bearing the interest rate of 9% per
annum. This note is unsecured and has been classified on the
balance sheet as a long-term liability because it is
subordinate to the mortgage note with the Bank.
The Company owns approximately 90 acres of land and the
building, which it occupies in Bergen County, New Jersey,
adjacent to an interchange of Interstate Route 287. The
Company is continuing to actively pursue possible methods
of monetizing this property by its sale and/or development.
The Company has retained one of the largest commercial real
estate brokerage houses serving the New York - New Jersey
region to assist in these efforts.
Recent Pronouncements
On June 29, 2001, SFAS No. 142, "Goodwill and Other Intangible
Assets" was approved by the FASB. SFAS No. 142 changes its
accounting for goodwill from an amortization method
to an impairment-only approach. Amortization of goodwill,
including goodwill recorded in past business combinations,
will cease upon adoption of this statement. The Company
implemented SFAS No. 142 on July 1, 2002 and this statement
had no material impact on its financial position or
results of operations.
On June 29, 2001, SFAS No. 143 "Accounting for Asset
Retirement Obligations" was approved by the FASB. SFAS No.
143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which
it is incurred if a reasonable estimate of fair value can
be made. The associated asset retirement costs are
capitalized as part of the carrying amount of the long-
lived asset. The Company adopted SFAS No. 143 on
July 1, 2002 and this statement had no material impact
on its financial position or results of operations.
In October 2001, the FASB issued SFAS No. 144 "Accounting
for the Impairment or Disposal of Long-Lived Assets".
SFAS No. 144 replaces SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of" and establishes accounting and reporting
standards for long-lived assets to be disposed of by
sale. This standard applies to all long-lived assets,
including discontinued operations. SFAS No. 144 requires
that those assets be measured at the lower of carrying
amount or fair value less cost to sell. SFAS No. 144
also broadens the reporting of discontinued operations to
include all components of an entity with operations that
can be distinguished from the rest of the entity that
will be eliminated from the ongoing operations of the
entity in a disposal transaction. The Company implemented
SFAS No. 144 on July 1, 2002, and this statement did not
have a material impact on its results of operations or
financial position.
In April 2002, the FASB issued SFAS No. 145, "Rescission
of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections". In addition
to amending and rescinding other existing authoritative
pronouncements to make various technical corrections,
clarify meanings, or describe their applicability under
changed conditions, SFAS No. 145 precludes companies
from recording gains and losses from the extinguishments
of debt as an extraordinary item. The Company adopted
SFAS No. 145 effective June 1, 2002. The adoption of
this pronouncement did not have a material impact
on the results of operations or its financial position.
In June 2002, the FASB issued SFAS No. 146, "Accounting
for Costs Associated with Exit or Disposal Activities".
The standard requires companies to recognize costs
associated with exit or disposal activities when they
are incurred rather than at the date of a commitment to
an exit or disposal plan. Examples of costs covered by
the standard include lease termination costs and certain
employee severance costs that are associated with a
restructuring, discontinued operation, plant closing,
or other exit or disposal activity. SFAS No. 146 is to
be applied prospectively to exit or disposal activities
initiated after December 31, 2002. The Company's adoption
of this pronouncement did not have a material effect on
the results of operations or financial position.
In November 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness
of Others- an Interpretation of FASB Statements No. 5, 57,
and 107 and Rescission of FASB Interpretation No. 34"
("FIN 45"). FIN 45 elaborates on the disclosures to be
made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees
that it has issued. It also clarifies that a guarantor
is required to recognize, at the inception of a guarantee,
a liability for the fair value of the obligation
undertaken in issuing the guarantee. The initial
recognition and initial measurement provisions of FIN 45
are applicable on a prospective basis to guarantees issued
or modified after December 31, 2002, irrespective of the
guarantor's fiscal year-end. However, the disclosure
requirements in FIN 45 are effective for financial statements
of interim or annual periods ending after December
15, 2002. Management has determined that FIN 45 is not
applicable as the Company is not currently a guarantor of
indebtedness or other obligations.
In December 2002, the FASB issued SFAS No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure".
SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based
Compensation,"(SFAS No. 123) and is effective immediately
upon issuance. SFAS No. 148 provides alternative methods of
transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation
as well as amending the disclosure requirements of Statement
No. 123 to require interim and annual disclosures about the
method of accounting for stock based compensation and the
effect of the method used on reported results. The Company
follows the requirements of APB Opinion No. 25 and the
disclosure only provision of SFAS No. 123, as amended by
SFAS No. 148.
In January 2003, the FASB issued FASB Interpretation No. 46, "
Consolidation of Variable Interest Entities - an Interpretation
of ARB No. 51" ("FIN 46"). FIN 46 addresses consolidation by
business enterprises of variable interest entities (formerly
special purpose entities or SPEs). In general, a variable
interest entity is a corporation, partnership, trust, or any
other legal structure used for business purposes that either
(a) does not have equity investors with voting rights or (b)
has equity investors that do not provide sufficient financial
resources for the entity to support its activities. The
objective of FIN 46 is not to restrict the use of variable
interest entities but to improve financial reporting by
companies involved with variable interest entities. FIN 46
requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk
of loss from the variable interest entity's activities or
entitled to receive a majority of the entity's residual returns
or both. The consolidation requirements of FIN 46 apply to
variable interest entities created after January 31, 2003.
The consolidation requirements apply to older entities in
the first fiscal year or interim period beginning after
June 15, 2003. However, certain of the disclosure requirements
apply to financial statements issued after January 31, 2003,
regardless of when the variable interest entity was
established. Management has determined that FIN 46 is not
applicable as the Company is not currently associated with
any variable interest entities.
In April 2003, the FASB issued SFAS No. 149, "Amendments of
Statement 133 on Derivative Instruments and Hedging
Activities." SFAS No. 149 amends and clarifies financial
accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other
contracts and for hedging activities under SFAS No. 133,
"Accounting for Derivative Instruments and Hedging
Activities." This Statement is effective for contracts
entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003.
The Company does not believe the adoption of this
standard will have a material impact on the Company's
consolidated financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity." This Statement establishes
standards for how an issuer classifies and measures
certain financial instruments with characteristics of
both liabilities and equity. It requires that an
issuer classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances).
The Statement is effective for financial instruments
entered into or modified after May 31, 2003. It applies
in the first interim period beginning after June 15, 2003,
to entities with financial instruments acquired
before May 31, 2003. The adoption of this statement did
not have a material impact on the Company's results of
operation or financial condition.
Government Defense Business
The electronics segment of business provides most of the
Company's revenues and is comprised of business with the
U.S. Department of Defense or with other government
contractors. It consists of long-term contracts and
short-term business such as replacement parts.
Long-term contracts have been dependent upon single projects
and until 1997, a single program, the ADCAP torpedo program
with the U.S. Navy was the primary source of the Company's
revenues. In 1996, the Company was awarded a contract
with the U.S. Army to provide diesel operated tactical
generator sets. This program has since become the
Company's primary source of revenues.
On September 7, 2001, the Company was awarded a ten-year
contract to provide the U.S. Army and other Department of
Defense Agencies with 2kW diesel operated generator sets.
This ten-year indefinite delivery, indefinite quantity
contract replaces the initial contract under which the
Company has been the sole producer of this generator for
the Army since 1997. These generators are currently
being fielded by both active and reserve components of
the U.S. Armed Forces.
As with the prior contract, this new contract to supply 2kW
diesel operated generator sets allows for the U.S. Army to
place production orders annually and to place additional
interim orders. Orders under this new contract were
received as final deliveries were being made on the prior
contract and production of these orders has begun. The
amount of orders received under this contract is
approximately $9 million through June 30, 2003. An
additional order of approximately $1 million was
received on September 10, 2003.
The Army has been ordering 2kW generators at a reduced volume
when compared to previous years. Thus, the Company is
currently delivering at a reduced rate, which is responsible
for the reduction in revenues. As the contract allows,
additional orders may be made by the Army, although no
assurances can be made that it will do so, or if there are
additional orders, the amount and timing thereof. Moreover,
periods of heightened national security and war have often
introduced new priorities and demands, external delays, and
increased uncertainty into the defense contracting
marketplace. Management is continuing to explore additional
sources of revenue as discussed below in the section
"Company Strategy".
It should be recognized that Department of Defense business is
subject to changes in military procurement policies and
objectives and to government budgetary constraints and
that the Company bids for Department of Defense business
in competition with many defense contractors, including
firms that are larger in size and have greater financial
resources.
All of the Company's contracts with the United States
Government (the "Government") are subject to the standard
provision for termination at the convenience of the
Government.
Since substantially all of the Company's electronics business
has been derived from contracts with various agencies of the
Government or subcontracts with prime Government contractors,
the loss of substantial Government business (including a
material reduction of orders under existing contracts)
would have a material adverse effect on the business.
Company Strategy
During this past fiscal year, the Company has continued to
invest in its efforts to improve its products and existing
technologies. This effort is focused primarily on the
existing generator set product line and involves market
research, engineering and design. The scope of these
efforts includes the development of an improved product,
which is in accordance with current customer interests and
future requirements. The areas of such development include
sound reduction, reduced weight, fuel and environmental
requirements. The Company has been working with government
representatives to coordinate our efforts.
The Company has also increased its government sales and
marketing capacity. This is part of its existing strategy
to build stronger relations with its customers, while
working to develop new business.
Other companies have announced intentions of developing similar
products. Some of these companies have greater financial and/
or technical resources than we do. However, management
believes that despite inherent risks and uncertainties, these
efforts are important to the Company's business and future
growth. As with all projects of this nature, no assurances
can be made that such product development work will be
successful or that the Company will achieve its desired
results. See the discussion above under "Liquidity and
Capital Resources".
The Department of Defense budgeting process is one of an
extended time frame. The process of including expenditures
in its budget could take a minimum of 12 to 24 months. In
addition, approval of this budget does not guarantee the
expenditure actually being made and particularly the
receipt of an award by the Company.
The Company has many years of experience in contracting with
the Department of Defense and has received many contracts to
provide various types of products and services. Utilizing
some of this experience, the Company is continuing to explore
other areas of business, which are capable of providing
continued stability and growth.
Other Developments
On September 9, 2003, the Company was awarded a "cost plus
fixed fee" research and development contract. This contract
with the U.S. Army Communications - Electronic Command,
CECOM Acquisition Center, Washington is in the amount of
approximately $1.8 million. The contract is for the research
and development of improvements to the current 2kW diesel
operated generator set. Work on this contract will be
performed at the Company's location in Oakland, New Jersey
and is expected to continue into next fiscal year ending
2005.
Critical Accounting Policies and Estimates
Our financial statements and accompanying notes are prepared
in accordance with accounting principles generally accepted in
the United States of America. Preparing financial statements
requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses.
These estimates and assumptions affect the application of our
accounting policies. Actual results could differ from these
estimates. Our significant accounting policies are described
in the Notes to the Financial Statements contained herein.
Critical accounting policies are those that require
application of management's most difficult, subjective or
complex judgments, often as a result of matters that are
inherently uncertain and may change in subsequent periods.
The Company's critical accounting policies include revenue
recognition on contracts and contract estimates, pensions,
long-lived assets, and valuation of deferred tax assets
and liabilities.
In the electronics segment, revenues and estimated earnings
are recorded under defense contracts using the percentage of
completion method of accounting, measured as the percentage
of costs incurred to estimated total costs at completion
of each contract. See Note A to the Financial Statements.
The Company has a defined benefit pension plan covering
substantially all of its employees. The Company accounts
for its defined benefit pension plan in accordance with
SFAS No. 87 - "Employers' Accounting for Pensions," which
requires that amounts recognized in financial statements
be determined on an actuarial basis, rather than as
contributions are made to the plan. A significant element
in determining the Company's pension income or expense in
accordance with SFAS No. 87 is the expected return on plan
assets. The Company has assumed, based upon the types of
securities the plan assets are invested in and the long-
term historical returns of these investments, that its
assumed discount rate will be 5.83% in 2003, compared with
7.0% in 2002. The assumed long-term rate of return on
assets is applied to the market-related value of plan
assets at the end of the previous year. This produces
the expected return on plan assets that is included in
annual pension income or expense for the current year.
The cumulative difference between this expected return
and the actual return on plan assets is deferred and
amortized into pension income or expense over future
periods. Today's volatile and declining market is having
a greater impact on the Company. As noted above, since
the value of the Company's pension assets at fiscal year-
end 2003 was less than the accumulated pension benefit
obligation, the Company recorded a $183,642 non-cash
charge to stockholders' equity and an additional long-
term pension liability of $306,071. The charge to equity
did not affect net income and is recorded net of deferred
taxes. See Note G of the Notes to Financial Statements for
additional pension disclosures.
Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Page
Independent Auditors' Report 21
Financial Statements:
Balance Sheets, June 30, 2003 and 2002 22
Statements of Income, Years Ended June 30, 2003,
2002 and 2001 23
Statements of Stockholders' Equity, Years Ended June
30, 2003, 2002 and 2001 23
Statements of Cash Flows, Years Ended June 30, 2003,
2002 and 2001 24
Notes to the Financial Statements 25
All other schedules are omitted because they are not
applicable or the required information is shown in the
Financial Statements or the Notes thereto.
Independent Auditors' Report
Board of Directors of
The Dewey Electronics Corporation
Oakland, New Jersey
We have audited the accompanying balance sheets of The Dewey
Electronics Corporation as of June 30, 2003 and 2002, and
the related statements of income, stockholders' equity
and cash flows for each of the three years in the period
ended June 30, 2003. 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 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 Dewey Electronics Corporation at June 30,
2003 and 2002 and the results of its operations and its
cash flows for each of the three years in the period ended
June 30, 2003 in conformity with accounting principles
generally accepted in the United States of America.
/s/Deloitte & Touche LLP
September 18, 2003
Parsippany, New Jersey
The Dewey Electronics Corporation
Balance Sheets June 30,
2003 2002
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $1,989,703 $3,503,087
Accounts receivable (includes
U.S. Government receivable of
approximately $750,000 in 2003
and $100,000 in 2002) less
allowance for doubtful accounts
of $10,138 in 2003 and $20,000
in 2002 756,265 267,331
Inventories 552,180 506,817
Contract costs and related
estimated profits in
excess of billings 1,079,702 1,272,569
Deferred tax asset 105,682 30,563
Prepaid expenses and other
current assets 158,905 78,421
TOTAL CURRENT ASSETS 4,642,437 5,658,788
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements 601,577 591,149
Building and improvements 1,873,333 1,873,333
Machinery and equipment 3,364,329 2,692,119
Furniture and fixtures 194,717 182,689
6,033,956 5,339,290
Less accumulated depreciation 4,378,125 4,302,531
1,655,831 1,036,759
OTHER NON-CURRENT ASSETS 54,019 122,148
TOTAL ASSETS $6,352,287 $6,817,695
LIABILITIES AND STOCKHOLDERS'
EQUITY:
CURRENT LIABILITIES:
Trade accounts payable $ 336,445 $ 467,427
Accrued expenses and other
Liabilities 195,354 149,016
Accrued corporate income taxes 15,223 100,166
Accrued pension costs 6,056 113,043
Current portion of long-term
Debt 60,938 60,938
TOTAL CURRENT LIABILITIES 614,016 890,590
LONG-TERM DEBT 327,734 888,672
LONG-TERM PENSION LIABILITY 278,913 61,172
DEFERRED TAX LIABILITY 564,214 524,212
DUE TO RELATED PARTY 200,000 200,000
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1.00;
authorized 250,000 shares,
issued and outstanding, none -- --
Common stock, par value $.01;
authorized 3,000,000 shares;
issued and outstanding 1,693,397
in 2003 and 2002 16,934 16,934
Paid-in capital 2,817,474 2,835,307
Accumulated earnings 2,207,346 1,920,905
Accumulated other comprehensive
Loss (183,642) --
4,858,112 4,773,146
Less: Treasury stock, 333,866
shares in 2003 and 353,866 shares
in 2002, at cost (490,702) (520,097)
TOTAL STOCKHOLDERS' EQUITY 4,367,410 4,253,049
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $6,352,287 $6,817,695
See notes to the financial statements
The Dewey Electronics Corporation
Statements of Income
Years ended June 30,
2003 2002 2001
Revenues $6,361,832 $8,916,049 $10,886,100
Cost of revenues 4,675,700 6,112,937 7,899,061
Gross profit 1,686,132 2,803,112 2,987,039
Selling, general and
administrative expenses 1,185,869 1,264,189 1,017,002
Operating profit 500,263 1,538,923 1,970,037
Interest expense (57,079) (97,242) (153,681)
Other income - net 34,218 17,511 21,836
Income before income
tax provision 477,402 1,459,192 1,838,192
Provision for income tax (190,961) (583,677) (735,277)
NET INCOME $286,441 $875,515 $1,102,915
NET INCOME PER COMMON
SHARE - BASIC $.21 $.65 $.82
NET INCOME PER COMMON
SHARE - DILUTED $.20 $.63 $.80
See notes to the financial statements
Statements of Stockholders' Equity
Common Treasury stock
Stock Accumulated Other Accumu- at cost
Paid-in Earnings/ Compre- lated Shares Amount
Shares Amount capital (Deficit) hensive Other
(income)Comprehen-
sive
(loss)
Balance,
June 30,
2000 1,693,397 $16,934 $2,835,307 $(57,525)$ -- $ -- 353,866 $(520,097)
Net
Income -- -- -- 1,102,915 -- -- -- --
Balance,
June 30,
2001 1,693,397 16,934 2,835,307 1,045,390 -- -- 353,866 (520,097)
Net
income -- -- -- 875,515 -- -- -- --
Balance,
June 30,
2002 1,693,397 16,934 2,835,307 1,920,905 -- -- 353,866 (520,097)
Net
income -- -- -- 286,441 286,441 -- -- --
Other
Comprehensive
expense,
net of
tax:
Minimum
Pension
liability
adjustment -- -- -- (183,642) (183,642) -- --
Exercise
of stock
options -- -- (17,833) -- -- -- (20,000) 29,395
Balance,
June 30,
2003 1,693,397 16,934 $2,817,474 2,207,346 102,799 183,642) 333,866 (490,702)
See notes to the financial statements
The Dewey Electronics Corporation
Statements of Cash Flows
Years ended June 30,
2003 2002 2001
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $286,441 $ 875,515 $1,102,915
Adjustments to reconcile net
income to net cash (used
in)/provided by
operating activities:
Depreciation 75,594 83,725 112,170
Amortization 10,811 4,182 4,182
Deferred income tax
(benefit)/provision (35,117) (20,505) 223,888
(Increase)/Decrease in
accounts receivable (479,072) 959,273 123,361
(Decrease) in doubtful
accounts (9,862) -- --
(Increase)/Decrease in
inventories (45,363) (5,137) 32,501
Decrease/(Increase) in
contract costs and
related estimated
profits in excess
of applicable billings 192,867 517,882 (702,588)
(Increase) in prepaid expenses
and other current assets (80,484) (23,893) (20,679)
(Decrease)/Increase in accounts
payable (130,982) 149,369 (16,643)
Increase/(Decrease) in accrued
expenses and other liabilities 46,338 (39,077) 29,890
(Decrease)/Increase in pension
costs accrued (15,570) (46,000) 3,271
(Decrease)/Increase in corporate
income taxes (84,943) (96,066) 181,846
Total adjustments (555,783) 1,483,753 (28,801)
Net cash (used in)/provided by
operating activities (269,342) 2,359,268 1,074,114
CASH FLOWS FROM INVESTING
ACTIVITIES:
Expenditures for plant,
property and equipment (694,666) (327,447) (63,252)
Net cash (used in) investing
Activities (694,666) (327,447) (63,252)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Principal payments of
long-term debt (560,938) (618,985) (97,090)
Treasury stock sold 11,562 -- --
Net cash (used in)
financing activities (549,376) (618,985) (97,090)
NET (DECREASE)/INCREASE
IN CASH AND CASH
EQUIVALENTS (1,513,384) 1,412,836 913,772
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 3,503,087 2,090,251 1,176,479
CASH AND CASH EQUIVALENTS
AT END OF YEAR $1,989,703 $3,503,087 $2,090,251
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Interest paid $59,889 $103,271 $157,786
Interest received $32,088 $10,443 $7,785
Corporate income taxes paid $220,325 $685,000 $329,543
See notes to the financial statements.
The Dewey Electronics Corporation
Notes to the Financial Statements
Years ended June 30, 2003, 2002 and 2001
A. Summary of Significant Accounting Policies
1. Revenue Recognition
Revenues and estimated earnings under defense contracts are
recorded using the percentage-of-completion method of
accounting, measured as the percentage of costs incurred
to estimated total costs for each contract. Provisions
for estimated losses on uncompleted contracts are made in
the period in which such losses are determined. Changes
in job performance, job conditions, and estimated
profitability may result in revisions to costs and income
and are recognized in the period in which the revisions are
determined.
In the Leisure and Recreation segment, revenues and earnings
are recorded when deliveries are made and title and risk of
loss have been transferred to the customer and collection is
probable.
2. Cash and Cash Equivalents
The Company considers all highly liquid debt instruments
with a maturity of three months or less at the date of
purchase to be cash equivalents.
3. Fair Value of Financial Instruments
The fair values of the Company's long-term debt and line
of credit borrowings are estimated based upon interest rates
currently available for borrowings with similar terms
and maturities and approximate the carrying values.
Due to the short-term nature of cash, accounts receivable,
accounts payable, accrued expenses and other current
liabilities, their carrying value is a reasonable
estimate of fair value.
4. Inventories
Cost is determined by the first-in, first-out (FIFO) method.
Inventories are valued at the lower of cost or market.
Components of cost include materials, direct labor and
factory overhead.
5. Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United
States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
6. Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Allowance
for depreciation is provided on a straight-line basis over
estimated useful lives of three to ten years for machinery and
equipment, ten years for furniture and fixtures, and twenty
years for building and improvements.
7. Loan Fees
Loan fees are capitalized by the Company and amortized utilizing
the straight-line basis over the term of the loan.
8. Long-Lived Assets
Whenever events or changes in circumstances indicate that the
carrying values of long-lived assets may not be recoverable,
the Company evaluates the carrying values of such assets
using future undiscounted cash flows. Management believes
that, as of June 30, 2003, the carrying values of such
assets are not impaired.
9. Recent Pronouncements
On June 29, 2001, SFAS No. 142, "Goodwill and Other Intangible
Assets" was approved by the FASB. SFAS No. 142 changes its
accounting for goodwill from an amortization method to an
impairment-only approach. Amortization of goodwill,
including goodwill recorded in past business combinations,
will cease upon adoption of this statement. The Company
implemented SFAS No. 142 on July 1, 2002 and this statement
had no material impact on its financial position or
results of operations.
On June 29, 2001, SFAS No. 143 "Accounting for Asset
Retirement Obligations" was approved by the FASB. SFAS
No. 143 requires that the fair value of a liability for
an asset retirement obligation be recognized in the period
in which it is incurred if a reasonable estimate of fair
value can be made. The associated asset retirement
costs are capitalized as part of the carrying amount
of the long-lived asset. The Company adopted SFAS No. 143 on
July 1, 2002 and this statement had no material impact
on its financial position or results of operations.
In October 2001, the FASB issued SFAS No. 144 "Accounting for
the Impairment or Disposal of Long-Lived Assets". SFAS No.
144 replaces SFAS No. 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" and establishes accounting and reporting
standards for long-lived assets to be disposed of by
sale. This standard applies to all long-lived assets,
including discontinued operations. SFAS No. 144 requires
that those assets be measured at the lower of carrying
amount or fair value less cost to sell. SFAS No. 144
also broadens the reporting of discontinued operations to
include all components of an entity with operations that
can be distinguished from the rest of the entity that will
be eliminated from the ongoing operations of the entity
in a disposal transaction. The Company implemented SFAS No.
144 on July 1, 2002, and this statement did not have a
material impact on its results of operations or financial
position.
In April 2002, the FASB issued SFAS No. 145, "Rescission
of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections". In addition to
amending and rescinding other existing authoritative
pronouncements to make various technical corrections,
clarify meanings, or describe their applicability under
changed conditions, SFAS No. 145 precludes companies from
recording gains and losses from the extinguishments of debt
as an extraordinary item. The Company adopted SFAS No. 145
effective June 1, 2002. The adoption of this pronouncement
did not have a material impact on the results of operations
or financial position.
In June 2002, the FASB issued SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities". The
standard requires companies to recognize costs associated with
exit or disposal activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan.
Examples of costs covered by the standard include lease
termination costs and certain employee severance costs that
are associated with a restructuring, discontinued operation,
plant closing, or other exit or disposal activity. SFAS
No. 146 is to be applied prospectively to exit or disposal
activities initiated after December 31, 2002. The Company's
adoption of this pronouncement did not have a material effect
on the results of operations or financial position.
In November 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness
of Others- an Interpretation of FASB Statements No. 5, 57,
and 107 and Rescission of FASB Interpretation No. 34"
("FIN 45"). FIN 45 elaborates on the disclosures to be
made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees
that it has issued. It also clarifies that a guarantor
is required to recognize, at the inception of a guarantee,
a liability for the fair value of the obligation undertaken
in issuing the guarantee. The initial recognition and
initial measurement provisions of FIN 45 are applicable
on a prospective basis to guarantees issued or modified
after December 31, 2002, irrespective of the guarantor's
fiscal year-end. However, the disclosure requirements in
FIN 45 are effective for financial statements of interim
or annual periods ending after December 15, 2002. Management
has determined that FIN 45 is not applicable as the Company
is not currently a guarantor of indebtedness or other
obligations.
In December 2002, the FASB issued SFAS No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure".
SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based
Compensation,"(SFAS No. 123) and is effective immediately
upon issuance. SFAS No. 148 provides alternative methods of
transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation
as well as amending the disclosure requirements of Statement
No. 123 to require interim and annual disclosures about the
method of accounting for stock based compensation and the
effect of the method used on reported results. The Company
follows the requirements of APB Opinion No. 25 and the
disclosure only provision of SFAS No. 123, as amended by
SFAS No. 148.
In January 2003, the FASB issued FASB Interpretation No. 46,
" Consolidation of Variable Interest Entities - an
Interpretation of ARB No. 51" ("FIN 46"). FIN 46 addresses
consolidation by business enterprises of variable interest
entities (formerly special purpose entities or SPEs). In
general, a variable interest entity is a corporation,
partnership, trust, or any other legal structure used for
business purposes that either (a) does not have equity
investors with voting rights or (b) has equity investors
that do not provide sufficient financial resources for
the entity to support its activities. The objective of
FIN 46 is not to restrict the use of variable interest
entities but to improve financial reporting by companies
involved with variable interest entities. FIN 46
requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the
risk of loss from the variable interest entity's activities
or entitled to receive a majority of the entity's residual
returns or both. The consolidation requirements of FIN
46 apply to variable interest entities created after
January 31, 2003. The consolidation requirements apply
to older entities in the first fiscal year or interim
period beginning after June 15, 2003. However, certain
of the disclosure requirements apply to financial statements
issued after January 31, 2003, regardless of when the variable
interest entity was established. Management has determined
that FIN 46 is not applicable as the Company is not
currently associated with any variable interest entities.
In April 2003, the FASB issued SFAS No. 149, "Amendments of
Statement 133 on Derivative Instruments and Hedging Activities.
" SFAS No. 149 amends and clarifies financial accounting
and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts and for
hedging activities under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This
Statement is effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships
designated after June 30, 2003. The Company does not
believe the adoption of this standard will have a
material impact on the Company's consolidated financial
position or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting
for Certain Financial Instruments with Characteristics
of both Liabilities and Equity." This Statement
establishes standards for how an issuer classifies
and measures certain financial instruments with
characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument
that is within its scope as a liability (or an asset in
some circumstances). The Statement is effective for
financial instruments entered into or modified after
May 31, 2003. It applies in the first interim period
beginning after June 15, 2003, to entities with financial
instruments acquired before May 31, 2003. The adoption of
this statement did not have a material impact on the
Company's results of operation or financial condition.
B. Inventories
Inventories consist of:
June 30,
2003 2002
Finished goods $93,288 $68,258
Work in progress 100,308 137,268
Raw materials 358,584 301,291
$552,180 $506,817
C. Costs and Estimated Earnings on Uncompleted Contracts
June 30,
2003 2002
Costs incurred on
contracts in progress $10,332,794 $29,699,515
Estimated contract
Profit 2,346,080 10,583,373
12,678,874 40,282,888
Less: billings to date 11,599,172 39,010,319
$1,079,702 $ 1,272,569
Included in the accompanying balance sheets under the
following caption:
June 30,
2003 2002
Contract costs and
related estimated
profits in excess
of applicable
billings $1,079,702 $1,272,569
D. Stock Option Plan
On December 2, 1998, the Employee Stock Option Committee
Adopted a Stock Option Plan of 1998 which granted incentive
stock options to various executives and key employees to
purchase shares of common stock. Options were granted at
fair market value of the stock on the date of grant and
are exercisable over a ten-year period beginning
December 2, 1999 to September 26, 200312, 2010. At the
Annual Meeting of Stockholders on December5, 2001,
this stock option plan was amended and restated among
other things to increase the number of shares which may
be issued under the plan by 25,000 shares, from 60,000
to 5,000.
The changes in the number of shares under option are
as follows:
Number of Shares Exercise Price
Balance, June 30, 2000 27,500 $.5781
Granted during 2001 13,000 $1.625
Exercised -- --
Balance, June 30, 2001 40,500 $.9141 Weighted
average
Granted during 2002 -- --
Exercised -- --
Balance, June 30, 2002 40,500 $.9141 Weighted
average
Granted during 2003 22,000 $3.93
Exercised (20,000) $(.5781)
Balance June 30, 2003 42,500 $2.034 Weighted
average
Exercisable at June 30,
2003 20,500 $1.241 Weighted
average
Also, at the Annual Meeting of Stockholders on December 5,
2001, the Company adopted a Stock Option Plan for Non-
Employee Directors. The number of shares issuable upon
exercise of options, which may be granted under this Plan,
shall not exceed 50,000 shares of common stock. No
options have been granted under this plan.
Listed below is a summary of the stock options outstanding
and exercisable at June 30, 2003.
Outstanding
Exercise Weighted Weighted
Price Average Average
Range Options Exercise Remaining
Price Life-Years
$.578125 7,500 $.578125 6.5
$1.625 13,000 $1.625 7.2
$3.93 22,000 $3.93 9.5
42,500
Exercisable
Weighted
Exercise Average
Price Exercise
Range Options Price
$.578125 7,500 $.578125
$1.625 13,000 $1,625
20,500
For purposes of the disclosure required under SFAs No. 148, the
fair value of each option was estimated on the grant date using
the Black-Scholes option-pricing model. The weighted average
fair value of options granted was $3.93 per option in 2003,
and $1.625 per option in 2001.
E. Long-Term Debt
Long-term debt at June 30, consists of:
2003 2002
Mortgage Note payable to
Sovereign Bank due in
monthly installments of
$5,078 plus interest with
a final maturity in January 2005. $388,672 $949,610
Less current portion: 60,938 60,938
$327,734 $888,672
On December 27, 2001, the Company and its primary Bank
agreed to revised terms of its Mortgage Note agreement.
The renewed agreement, among other items, revised the interest
rate from a fixed rate of 8.25% to the Bank's prime rate plus
..5% with a floor of 6%. In addition, the maturity date was
extended from October 2002 to January 2005.
The Bank had also agreed to provide a $500,000 line-of-credit
facility to be evidenced by promissory notes. This line of
credit, which may be renewed on an annual basis, was renewed
in November 2002 at a rate of .25% plus the prime rate. The
prime rate at June 30, 2003 was 4.00%. There were no
outstanding borrowings against the line-of-credit facility at
June 30, 2003. Any outstanding borrowings under the line of
credit will become due and payable on October 31 of each year.
The Mortgage Note is secured by a first mortgage on the
Company's land and its building. Borrowings under the
line-of-credit arrangement are secured by a first lien on
all of the Company's machinery, equipment and other
personal property. This borrowing arrangement with the
bank contains no financial ratio or other debt covenants.
The Company made voluntary principal reduction payments
of $500,000 in June 2000, August 2001 and November 2002.
Aggregate annual principal payments applicable to long-term
debt for the years subsequent to June 30, 2003, based on the
mortgage loan agreement in place at June 30, 2003 are:
2004 $ 60,938
2005 327,734
$388,672
Management has evaluated its indebtedness and has determined
based on interest rates and related terms that the fair
value of such debt approximates its carrying value.
F. Taxes on Income
Deferred income taxes reflect the net tax effects of (a)
temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
amounts used for income tax purposes, and b) operating loss
and tax credit carryforwards.
Based on pre-tax income of $477,402, $1,459,192, and $1,838,192
for the years ended June 30, 2003, 2002 and 2001, respectively,
the relevant income and balance sheet accounts are detailed
below:
Provision for income taxes
Years ended June 30,
2003 2002 2001
Deferred
Federal ($34,609) ($16,795) $215,048
State ($508) ($3,710) $8,840
Current
Federal $182,603 $468,238 $337,112
State $43,475 $135,944 $174,277
$190,961 $583,677 $735,277
Deferred tax assets and liabilities as of June 30, 2003
and June 30, 2002 consisted of the following:
Deferred tax assets: (Current) 2003 2002
Vacation accrual $32,082 $ 30,563
Pension payments made
over expense 73,600 --
Total $105,682 $ 30,563
Deferred tax liabilities:
(Non-Current)
Depreciation $564,214 $ 524,212
Reconciliation of the U.S. statutory rate with the Company's
effective tax rate is summarized as follows:
Years ended June 30,
2003 2002 2001
Federal statutory rate 34.0% 34.0% 34.0%
State income taxes net
of federal benefit 6.0% 6.0% 6.0%
Effective Rate 40.0% 40.0% 40.0%
G. Pension Plan
The Company has a non-contributory defined benefit retirement
plan covering all its employees. The plan is qualified under
the Internal Revenue Code. The method of determining the
accrued benefit of an employee is the amount equal to .8%
of an employee's average monthly salary times the number
of years employed by the Company, to a maximum of 35 years.
The Company's policy is to contribute the amounts allowable
under Internal Revenue Service regulations. The plan
assets are invested primarily in a fixed income investment
account.
Net pension expense consists of the following:
Years ended June 30,
2003 2002 2001
Service cost $25,488 $22,753 $17,700
Interest cost on
projected benefit
obligations 55,516 56,801 52,666
Expected return on
Assets (35,869) (37,745) (37,503)
Net amortization
and deferrals 14,403 26,763 21,788
Net pension expense $59,538 $68,572 $54,651
SFAS 87, "Employers' Accounting for Pensions," requires that
a minimum pension liability be recorded if the value
of pension assets is less than the accumulated pension
benefit obligation. Since this condition existed as
of June 30, 2003, the Company recorded a non-
cash charge of $183,642 to stockholders' equity and a
long-term pension liability of $306,071. The accrued
pension obligation includes the additional long-term
pension liability and is net of prepaid pension costs.
The charge to equity did not affect net income and is
recorded net of deferred taxes of $122,429.
June 30,
2003 2002
Actuarial present value of
benefit obligations:
Accumulated benefit
Obligation $976,632 $756,561
Projected benefit obligation 1,050,379 835,513
Plan assets at fair value,
consisting of investments
held in a fixed income
investment account 691,663 498,686
Projected benefit obligation
in excess of plan assets 358,716 336,827
Unrecognized net (loss) (352,660) (172,984)
Prior service cost not yet
recognized in net periodic
pension cost -- (7,325)
Adjustment required to
recognize minimum
liability 278,913 101,357
Accrued pension cost $284,969 $257,875
Weighted average assumptions
as of December 31:
Expected long-term rate of
return on plan assets: 7.5% 7.5%
Discount rate: 5.83% 7.00%
Salary increase: 3.0% 3.5%
H. Income Per Share
Net income per share has been presented pursuant to the
Financial Accounting Standards Board Statement of
Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share". Basic net income per share is
computed by dividing reported net income available to
common shareholders by weighted average shares outstanding
for the period. Diluted net income per share is computed
by dividing reported net income available to common
shareholders by weighted average shares outstanding for
the period, adjusted for the dilutive effect of common
stock equivalents, which consist of stock options, using
the treasury stock method.
The tables below set forth the reconciliation of the numerators
and denominators of the basic and diluted net income per
common share computations.
Twelve Months Ended June 30, 2003
Income Shares Per Share Amount
Basic net income
per common share $286,441 1,359,531 $.21
Effect of dilutive
Securities -- 43,275 $(.01)
Diluted net income
per common share $286,441 1,402,806 $.20
Twelve Months Ended June 30, 2002
Income Shares Per Share Amount
Basic net income
per common share $875,515 1,339,531 $.65
Effect of dilutive
Securities -- 40,500 --
Diluted net income
per common share $875,515 1,380,031 $.63
Twelve Months Ended June 30, 2001
Income Shares Per Share Amount
Basic net income
per common share $1,102,915 1,339,531 $.82
Effect of dilutive
Securities -- 37,900 --
Diluted net income
per common share $1,102,915 1,377,431 $.80
I. Related Party Transaction
Due to Related Party represents notes payable to a founder
(stockholder) of the Company, at an interest rate of 9%
per annum. The notes are due upon demand and are
subordinate to the mortgage note held by Sovereign
Bank. The founder (stockholder) agreed not to seek
repayment of the notes until the mortgage loan has been
repaid. Accordingly, the notes have been classified
as long-term obligations.
J. Other Income
Other income/(expense) consists of the following for the
year ended June 30:
2003 2002 2001
Sales of scrap and
miscellaneous income/
(expense)-net $2,130 $(2,921) $14,051
Interest 32,088 20,432 7,785
$34,218 $17,511 $21,836
K. Operating Segments
The Company operates in two industries: electronics, and
leisure and recreation. Operations in the electronics
industry is primarily related to supplying electronics and
electrical products and systems for the United States
Government as a prime contractor or subcontractor. Operations
in the leisure and recreation industry involve the production
and sale of snowmaking machinery and servicing of such
machinery at the purchaser's expense beyond the warranty
period. Total revenue by industry represents sales to
unaffiliated customers, as reported in the Company's
Statements of Income. There are no inter-segment sales.
Some operating expenses, including general corporate expenses,
have been allocated by specific identification or based on
direct labor for items which are not specifically
identifiable. In computing operating profit, none of the
following items have been added or deducted: interest
expense, income taxes, and non-operating income.
Depreciation and amortization for the electronics industry
and the leisure and recreation industry, respectively, was
approximately $79,000 and $7,000 in 2003, $80,000 and $8,000
in 2002 and $105,000 and $11,000 in 2001. Capital
expenditures were approximately $695,000 in 2003,
$327,000 in 2002 and $63,000 in 2001.
Identifiable assets by industry are those assets that are
used in the Company's operations in each industry. Corporate
assets are principally cash, prepaid expenses, and other
current assets.
The following tables present information about reported
segment revenues, operating profit or loss, and assets,
and reconcile such segment information to the Company's
consolidated totals:
Year ended June 30, 2003
(in thousands)
Leisure
Electronics and Total
Recreation Company
Total revenue $6,270 $92 $6,362
Operating profit/(loss) $607 $(107) 500
Interest expense and
other income-net (23)
Profit before income
Taxes $477
Identifiable assets at
June 30, 2003 $3,427 $671 $4,098
Corporate assets 2,223
Total assets at
June 30, 2003 $6,321
Year ended June 30, 2002
(in thousands)
Leisure
Electronics and Total
Recreation Company
Total revenue $8,446 $ 470 $8,916
Operating profit/(loss) $1,555 $ (16) $1,539
Interest expense
and other income-net (80)
Profit before
income taxes $ 1,459
Identifiable assets
at June 30, 2002 $2,465 $740 $3,205
Corporate assets 3,613
Total assets at
June 30, 2002 $6,818
Year ended June 30, 2001
(in thousands)
Leisure
Electronics and Total
Recreation Company
Total revenue $10,761 $ 125 $10,886
Operating profit
/(loss) $2,040 $ (70) 1,970
Interest expense and
other income-net (132)
Profit before
income taxes $ 1,838
Identifiable assets
at June 30, 2001 $3,875 $563 $4,438
Corporate assets 2,180
Total assets at
June 30, 2001 $6,618
L. Unaudited Quarterly Financial Data
2003 Revenue Gross profit Net income Earnings per share
Basic Diluted
Sept. 30 $1,991,665 $438,086 $109,885 $.08 $.08
Dec. 31 1,679,185 484,836 88,064 .07 .06
Mar. 31 1,030,157 466,420 86,918 .06 .06
Jun. 30 1,660,825 296,790 1,574 .00 .00
Year $6,361,832 $1,686,132 $286,441 $.21 $.20
2002 Revenue Gross profit Net income Earnings per share
Basic Diluted
Sept. 30 $2,666,053 $685,152 $255,580 $.19 $.19
Dec. 31 2,148,712 846,169 239,201 .18 .17
Mar. 31 1,922,849 709,392 236,419 .18 .17
Jun. 30 2,178,435 562,399 144,315 .10 .10
Year $8,916,049 $2,803,112 $875,515 $.65 $.63
2001 Revenue Gross profit Net income Earnings per share
Basic Diluted
Sept. 30 $2,267,404 $636,965 $234,520 $.18 $.18
Dec. 31 2,365,480 722,418 233,840 .17 .17
Mar. 31 3,440,125 713,832 242,182 .18 .18
Jun. 30 2,813,091 913,824 392,373 .29 .27
Year $10,886,100 $2,987,039 $1,102,915 $.82 $.80
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
The Company carried out, under the supervision and with the
participation of the Company's management, including its
Chief Executive Officer and Treasurer, an evaluation of the
effectiveness of the design and operation of the Company's
disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934) as of the end of the fiscal year covered by this
Annual Report. Based upon that evaluation, the Chief
Executive Officer and Treasurer concluded that, as of
June 30, 2003, the design and operation of these disclosure
controls and procedures were effective. During the fourth
fiscal quarter covered by this Annual Report, there have
been no changes in the Company's internal control over
financial reporting that have materially affected, or are
reasonably likely to materially affect, the Company's
internal control over financial reporting.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Directors and Executive Officers of the
Registrant is incorporated herein by reference from the
Company's definitive proxy statement for the 2003 Annual
Meeting of Stockholders.
Item 11. EXECUTIVE COMPENSATION
Executive compensation information is incorporated herein by
reference from the Company's definitive proxy statement for
the 2003 Annual Meeting of Stockholders.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Item 403 of Regulation S-K
Information concerning security ownership of certain
beneficial owners and management is incorporated herein by
reference from the Company's definitive proxy statement
for the 2003 Annual Meeting of Stockholders.
Item 201(d) of Regulation S-K
Plan category (a) (b) (c)
Number of Weighted Number of
securities average securities
to be issued exercise remaining
upon exercise price of available for
of outstanding outstanding future issuance
options, warrants options, under equity
and rights warrants compensation
and rights plans (excluding)
securities
reflected in
column (a))
Equity
compensation
plans
approved
by
security
holders 42,500 $2.034 72,500
Equity
compensation
plans not
approved
by security
holders 0 0 0
Total 42,500 $2.034 72,500
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in response to this item is incorporated herein
by reference from the Company's definitive proxy statement
for the 2003 Annual Meeting of Stockholders.
Item 14.PRINCIPAL ACCOUNTING FEES AND SERVICES
Information in response to this item is incorporated herein
by reference from the Company's definitive proxy statement
for the 2003 Annual Meeting of Stockholders.
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) (1)The following financial statements are included in Part
II Item 8:
Page
Independent Auditors' Report 21
Balance Sheets, June 30, 2003 and 2002 22
Statements of Income, Years Ended June 30,
2003, 2002 and 2001 23
Statements of Stockholders' Equity, Years Ended
June 30, 2003, 2002 and 2001 23
Statements of Cash Flows, Years Ended June 30,
2003, 2002 and 2001 24
Notes to Financial Statements 25
(2) Exhibits 41
A list of the exhibits required to be filed as part
of this report is set forth in the Index to Exhibits,
which immediately follows the signature page, and is
incorporated herein by this reference.
(b) Reports on Form 8-K
On May 15, 2003, the Registrant filed a Periodic Report on
Form 8-K, which contained a press release issued by the
Registrant on May 15, 2003, announcing its results for
the period ended March 31, 2003.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, The Dewey Electronics
Corporation has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized:
THE DEWEY ELECTRONICS CORPORATION
/s/ John H.D. Dewey /s/ Thom A.Velto
BY: John H.D. Dewey BY: Thom A. Velto,
President and Chief Executive Officer Treasurer
DATE: September 24, 2003
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and
on the dates indicated:
/s/ Alexander A. Cameron Date: September 24, 2003
Alexander A. Cameron, Director
/s/ Frances Dewey Date: September 24, 2003
Frances D. Dewey, Director
/s/ John H.D. Dewey Date: September 24, 2003
John H.D. Dewey Director
/s/ James M. Link Date: September 24, 2003
James M. Link Director
/s/ Nathaniel Roberts Date: September 24, 2003
Nathaniel Roberts Director
THE DEWEY ELECTRONICS CORPORATION
INDEX TO EXHIBITS
The following exhibits are filed as part of this report.
For convenience of reference, exhibits are listed
according to the numbers assigned in the Exhibit table
to Regulation S-K.
Number Page No.
3(a)-Certificate on Incorporation as amended. This item was
filed as part of the Registrant's Form 10-K for the year ended
June 30, 1988 and is herein incorporated by reference. --
3(b)-By Laws as amended. This item was filed as part of the
Registrant's Form10-K for the year ended June 30, 1988
and is herein incorporated by reference. --
4(a)-Agreement dated as of September 18, 1997 with Sovereign
Bank providing for the borrowing of $2,300,000 against issuance
of a mortgage note payable to the Bank. This item was filed
as part of the Registrant's Form 10-K for the year ended
June 30, 1997 and is herein incorporated by reference. --
4(a)-Mortgage note modification agreement dated December 27,
2001 with Sovereign Bank providing for reducing outstanding
balance to $975,000, reducing interest rate, and extending
term to January 1, 2005 This item was filed as part of the
Registrants Form 10-K for the year ended June 30, 2002
and is herein incorporated by reference. --
4(b)-Line of credit agreement dated as of September 18, 1997
with Sovereign Bank providing for the borrowing of up to
$500,000. This item was filed as part of the Registrant's
Form 10-K for the year ended June 30, 1997 and is herein
incorporated by reference. --
4(c)-2001 Stock Option Plan. This item was filed with the
Registrant's Definitive Proxy Statement for the 2001 annual
meeting of stockholders on December 5, 2001 and is herein
incorporated by reference.
4(c)-Amendment and Restatement of the 1998 Stock Option Plan.
This item was filed with the Registrant's Definitive Proxy
Statement for the 2001 annual meeting of stockholders on
December 5, 2001 and is herein incorporated by reference.
31.1 Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2 Certification of Treasurer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1 Certification of Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.2 Certification of Treasurer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (filed herewith)
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John H.D. Dewey, certify that:
1.I have reviewed this annual report on Form 10-K of The
Dewey Electronics Corporation;
2.Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made,
in light of the circumstances under which such statements
were made, not misleading with respect to the period
covered by this report;
3.Based on my knowledge, the financial statements, and
other financial information included in this report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
4.The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) for the registrant and have:
a)designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period
in which this report is being prepared;
b)evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
c)disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal
control over financial reporting; and
5.The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
a)all significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect
the registrant's ability to record, process, summarize and
report financial information; and
b)any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal control over financial
reporting.
Date: September 26, 2003
By: /s/ John H.D. Dewey
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Thom A. Velto, certify that:
1.I have reviewed this annual report on Form 10-K of The
Dewey Electronics Corporation;
2.Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements
were made, not misleading with respect to the period
covered by this report;
3.Based on my knowledge, the financial statements, and
other financial information included in this report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in
this report;
4.The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
a)designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that
material information relating to the registrant,
including its consolidated subsidiaries, is made
known to us by others within those entities,
particularly during the period in which this report
is being prepared;
b)evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in
this report our conclusions about the effectiveness
of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
c)disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5.The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
a)all significant deficiencies and material weaknesses
in the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
b)any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over
financial reporting.
Date: September 26, 2003
By: /s/ Thom A. Velto
Treasurer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of The Dewey Electronics
Corporation (the "Corporation") on Form 10-K for the fiscal
year ended June 30, 2003 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"),
I, John H. D. Dewey, Chief Executive Officer of the
Corporation, certify, pursuant to 18 U.S.C. ss 1350,
as adopted pursuant to ss 906 of the Sarbanes-Oxley
Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of
section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and
results of operations of the Corporation.
/s/ John H.D. Dewey
John H. D. Dewey, Chief Executive Officer
September 26, 2003
A signed original of this written statement required by
Section 906 has been provided to The Dewey Electronics
Corporation and will be retained by The Dewey Electronics
Corporation and furnished to the Securities and exchange
commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of The Dewey Electronics
Corporation (the "Corporation") on Form 10-K for the fiscal
year ended June 30, 2003 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"),
I, Thom A. Velto, Treasurer of the Corporation, certify,
pursuant to 18 U.S.C. ss 1350, as adopted pursuant to ss
906 of the Sarbanes-Oxley Act of 2002, that to
my knowledge:
(1) The Report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and results
of operations of the Corporation.
/s/ Thom A. Velto
Thom A. Velto, Treasurer
September 26, 2003
A signed original of this written statement required by
Section 906 has been provided to The Dewey Electronics
Corporation and will be retained by The Dewey Electronics
Corporation and furnished to the Securities and exchange
commission or its staff upon request.
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