UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10 - Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended March 31, 2006 Commission File No 0-2892 THE DEWEY ELECTRONICS CORPORATION A New York Corporation I.R.S. Employer Identification No. 13-1803974 27 Muller Road Oakland, New Jersey 07436 (201) 337-4700 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 whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer X Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X. The number of shares outstanding of the registrant's common stock, $.01 par value was 1,362,031 at May 5, 2006. THE DEWEY ELECTRONICS CORPORATION INDEX Page No. Part I Financial Information Item 1. Consolidated Financial Statements 3 Consolidated Balance Sheets - March 31, 2006 and June 30, 2005 4 Consolidated Statements of Operations - Three and Nine Months Ended March 31, 2006 and March 31, 2005 5 Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2006 and March 31, 2005 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Item 4. Controls and Procedures 24 Part II Other Information Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 25 Item 4. Submission of Matters to a Vote of Security Holders 25 Item 6. Exhibits 25 PART I: FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS The following unaudited, consolidated balance sheets, statements of operations, and statements of cash flows are of The Dewey Electronics Corporation. These consolidated financial statements reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods reflected herein. The results reflected in the unaudited statements of operations for the period ended March 31, 2006 are not necessarily indicative of the results to be expected for the entire year. The following unaudited consolidated financial statements should be read in conjunction with the notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 2 of Part I of this report, as well as the audited consolidated financial statements and related notes thereto contained in the Form 10-K filed for the fiscal year ended June 30, 2005. THE DEWEY ELECTRONICS CORPORATION BALANCE SHEETS UNAUDITED MARCH 31, JUNE 30, 2006 2005 ASSETS: CURRENT ASSETS: CASH AND CASH EQUIVALENTS $936,607 $1,390,326 ACCOUNTS RECEIVABLE 779,413 756,215 INVENTORIES 1,419,396 1,398,105 CONTRACT COSTS AND RELATED ESTIMATED PROFITS IN EXCESS OF BILLINGS 1,238,291 772,507 DEFERRED TAX ASSET -- 9,471 PREPAID EXPENSES AND OTHER CURRENT ASSETS 228,294 233,977 TOTAL CURRENT ASSETS 4,602,001 4,560,601 PLANT, PROPERTY AND EQUIPMENT - NET 630,096 614,535 CAPITALIZED DEVELOPMENT COSTS 703,799 703,799 DEFERRED TAXES -- 41,603 DEFERRED COSTS 10,000 10,000 LAND AND RELATED COSTS HELD FOR SALE 567,494 541,725 TOTAL OTHER ASSETS 1,281,293 1,297,127 TOTAL ASSETS $6,513,390 $6,472,263 LIABILITIES AND STOCKHOLDERS' EQUITY: CURRENT LIABILITIES: TRADE ACCOUNTS PAYABLE $809,777 $398,513 ACCRUED EXPENSES AND OTHER LIABILITIES 141,614 30,498 ACCRUED COMPENSATION AND BENEFITS PAYABLE 168,976 144,801 ACCRUED PENSION COSTS 4,861 4,861 NOTE PAYABLE 124,698 154,606 DUE TO RELATED PARTY 200,000 200,000 TOTAL CURRENT LIABILITIES 1,449,926 933,279 LONG-TERM PENSION LIABILITY 456,788 441,788 LONG-TERM PORTION OF NOTE PAYABLE -- 86,046 STOCKHOLDERS' EQUITY: COMMON STOCK, par value $.01; authorized 3,000,000 shares; issued and outstanding 1,693,397 shares 16,934 16,934 PAID-IN CAPITAL 2,815,245 2,815,245 ACCUMULATED EARNINGS 2,544,550 2,949,024 ACCUMULATED OTHER COMPREHENSIVE LOSS (283,025) (283,025) 5,093,704 5,498,178 LESS: TREASURY STOCK 333,866 SHARES AT COST (487,028) (487,028) TOTAL STOCKHOLDERS' EQUITY 4,606,676 5,011,150 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,513,390 $6,472,263 SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THE DEWEY ELECTRONICS CORPORATION STATEMENTS OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31, MARCH 31, 2006 2005 2006 2005 REVENUES $2,170,870 $1,267,727 $5,261,509 $4,406,184 COST OF REVENUES 1,929,752 987,673 4,584,528 3,437,911 GROSS PROFIT 241,118 280,054 676,981 968,273 SELLING & ADMIN. EXPENSES 371,220 275,559 1,033,917 908,351 OPERATING (LOSS)/INCOME (130,102) 4,495 (356,936) 59,922 INTEREST EXPENSE 6,563 8,348 21,620 26,870 OTHER (INCOME) - NET (3,809) (2,991) (10,544) (8,846) (LOSS)/INCOME BEFORE INCOME TAXES (132,856) (862) (368,012) 41,898 INCOME TAX BENEFIT/(EXPENSE) 14,612 345 (36,462) (16,759) NET (LOSS)/INCOME ($118,244) ($517) ($404,474) $25,139 NET (LOSS)/INCOME PER SHARE: BASIC ($0.09) ($0.00) ($0.30) $0.02 DILUTED ($0.09) ($0.00) ($0.30) $0.02 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC 1,362,031 1,359,531 1,362,031 1,359,531 DILUTED 1,362,031 1,402,420 1,362,031 1,403,827 SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THE DEWEY ELECTRONICS CORPORATION STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED MARCH 31, 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES NET (LOSS)/INCOME $(404,474) $25,139 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: DEPRECIATION 85,500 80,550 AMORTIZATION OF LOAN FEES -- 133,215 DECREASE IN DEFERRED TAXES 51,074 13,086 (INCREASE) IN ACCOUNTS RECEIVABLE (23,198) (120,189) (INCREASE) IN INVENTORIES (21,291) (8,832) (INCREASE)/DECREASE IN CONTRACT COSTS AND RELATED ESTIMATED PROFITS IN EXCESS OF APPLICABLE BILLINGS (465,784) 153,756 DECREASE/(INCREASE) IN PREPAID EXPENSES AND OTHER CURRENT ASSETS 5,684 (17,241) INCREASE IN ACCOUNTS PAYABLE 411,264 34,119 INCREASE/(DECREASE) IN ACCRUED LIABILITIES 135,291 (61,763) INCREASE IN ACCRUED CORPORATE INCOME TAXES -- 948 INCREASE IN ACCRUED PENSION COSTS 15,000 15,000 TOTAL ADJUSTMENTS 193,540 222,649 NET CASH (USED IN)/PROVIDED BY OPERATIONS (210,934) 247,788 CASH FLOWS FROM INVESTING ACTIVITIES: EXPENDITURES FOR PLANT, PROPERTY AND EQUIPMENT (101,061) (66,425) EXPENDITURES FOR CAPITALIZED DEVELOPMENT COSTS -- (51,138) COSTS CAPITALIZED WITH LAND HELD FOR SALE (25,769) (85,322) NET CASH (USED IN) INVESTING ACTIVITIES (126,830) (202,885) CASH FLOWS FROM FINANCING ACTIVITIES: PRINCIPAL PAYMENT OF DEBT (115,955) (35,547) TREASURY STOCK SOLD -- 1,445 NET CASH (USED IN) FINANCING ACTIVITIES (115,955) (34,102) NET (DECREASE)/INCREASE IN CASH (453,719) 10,801 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,390,326 1,604,475 CASH AND CASH EQUIVALENTS AT END OF PERIOD $936,607 $1,615,276 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION INTEREST PAID 21,620 27,204 INTEREST RECEIVED 10,544 7,880 CORPORATE INCOME TAXES PAID 7,825 2,825 SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THE DEWEY ELECTRONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2006 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES During the prior fiscal year ended June 30, 2005 the Company applied Accounting Principles Board (APB) Opinion 25 and related interpretations in accounting for its Stock Option Plans. Under APB No. 25, the compensation cost for the stock-based employee compensation plan is recognized using the intrinsic value method. The following table illustrates the effect on net income and net income per share if the Company had applied the fair value method to recognize stock-based employee compensation for the three and nine month periods end March 31, 2005. In December 2004, the FASB issued SFAS No.123 (Revised 2004), "Share-Based Payment" ("SFAS No. 123R"). This new pronouncement requires compensation cost relating to share-based payment transactions be recognized in financial statements. That cost is measured based on the fair value of the equity or liability instruments issued. SFAS No. 123R covers a wide range of share- based compensation arrangements including stock options, restricted stock plans, performance-based awards, stock appreciation rights, and employee stock purchase plans. SFAS No. 123R replaces SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees." The Company has adopted the provisions of SFAS No. 123R in fiscal year 2006 using a modified version of prospective application. The Company did not grant, modify, repurchase, or cancel any share based payment awards after the date of adoption of SFAS No. 123R. All awards granted prior to July 1, 2005 had fully vested prior to July 1, 2005. Therefore, there was no effect of adopting SFAS 123R in the Company's financial statements. Three Months Nine Months Ended March 31, Ended March 31, 2005 2005 Net (loss)/gain, as reported ($517) $25,139 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax Effects 14,161 24,031 Pro forma net (loss)/gain ($14,678) $1,108 Earnings per share: Basic - as reported ($.00) $.02 Basic - pro forma ($.01) $.00 Diluted - as reported ($.00) $.02 Diluted - pro forma ($.01) $.00 THE DEWEY ELECTRONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2006 NOTE 2: REVENUE RECOGNITION Revenues and estimated earnings under defense contracts (including research and development 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. Since substantially all of the Company's electronics business comes from contracts with various agencies of the United States Government or subcontracts with prime Government contractors, the loss of Government business would have a material adverse effect on this segment of business. 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. NOTE 3: 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. NOTE 4: 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. NOTE 5: INVENTORIES Inventories are valued at lower of cost (first-in, first-out method) or market. Components of cost include materials, direct labor and plant overhead. As there is no segregation of inventories as to raw materials, work in progress and finished goods for interim reporting periods (this information is available at year end when physical inventories are taken and recorded), estimates have been made for the interim period. These estimates are made following a physical review of existing materials at various stages including specific identification of major cost elements. This process of estimating inventory at various stages of production is consistent with prior periods. THE DEWEY ELECTRONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE AND NINE MONTHS ENDED MARCH 31,2006 March 31, 2006 June 30, 2005 Finished Goods $249,838 $367,660 Work In Progress 327,235 298,771 Raw Materials 842,323 731,674 Total $1,419,396 $1,398,105 NOTE 6: 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. NOTE 7: PLANT, PROPERTY AND EQUIPMENT Plant, property 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. NOTE 8: CAPITALIZED DEVELOPMENT COSTS Capitalized costs are for costs for efforts to improve and enhance the 2kW generator set product line and involve, primarily, the adaptation of existing technology, as well as, engineering and design to meet specific customer requests. The scope of these efforts includes the development of a product, which is in accordance with current customer requests and future requirements. Company efforts are to address areas of sound reduction, reduced weight, improved fuel consumption and environmental considerations. The Company reviews these capitalized costs on a regular basis to assess future recoverability through the existing contracts to which such costs relate and expense such costs, if any, to the extent that they are not deemed recoverable. NOTE 9: INCOME TAXES The income tax expense for the three and nine-month periods ended March 31, 2005 was at an effective rate of 40%. No income tax benefit has been recorded against the net loss before taxes for the nine-months ended March 31, 2006. THE DEWEY ELECTRONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2006 NOTE 10: IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews the recoverability of all long-term assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable. If required, the Company compares the estimated undiscounted future net cash flows to the related asset's carrying value to determine whether there has been an impairment. If an asset is considered impaired, the asset is written down to fair value, which is based either on discounted cash flows or appraised values in the period the impairment becomes known. Management believes that, as of March 31, 2006, the carrying value of such assets are not impaired. NOTE 11: INCOME PER SHARE Basic net income per share is computed by dividing reported net income available to common shareholders by the weighted average shares outstanding for the period. Diluted net income per share is computed by dividing reported net income available to common shareholders by the 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 table below sets forth the reconciliation of the numerators and denominators of the basic and diluted net income per common share computations. Three Months Ended March 31, 2006 2005 Per Per Loss Shares Share Loss Shares Share Amount Amount Basic net (loss)/income per common share ($118,244) 1,362,031 ($.09) ($517) 1,362,031 ($.00) Effect of dilutive Securities -- -- -- -- 40,389 -- Diluted net (loss) income per common Share ($118,244) 1,362,031 ($.09) ($517) 1,402,420 ($.00) THE DEWEY ELECTRONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2006 Nine Months Ended March 31, 2006 2005 Per Per Loss Shares Share Income Shares Share Amount Amount Basic net (loss)/ income per common share ($404,474) 1,362,031 ($.30) $25,139 1,362,031 $.02 Effect of dilutive Securities -- -- -- -- 41,796 -- Diluted Net (loss) income per common Share ($404,474) 1,362,031 ($.30) $25,139 1,403,827 $.02 Stock options to purchase 40,000 shares of common stock were outstanding at March 31, 2006, but were not included in the dilutive loss per share computation because the effect would be antidilutive. NOTE 12: SEGMENT INFORMATION Information about the Company's operations in its two segments for the three- month and nine-month periods ended March 31, 2006 and 2005 are as follows: Three months ended Nine months ended March 31, March 31, 2006 2005 2006 2005 Electronics Segment Revenues $2,157,634 $1,257,704 $5,091,912 $4,206,272 Operating (Loss) /Income (96,461) 29,587 (278,064) 160,539 Leisure and Recreation Segment Revenues 13,236 10,023 169,597 199,912 Operating (Loss) (33,641) (25,092) (78,872) (100,617) Total Revenues 2,170,870 1,267,727 5,261,509 4,406,184 Operating (Loss) /Income (130,102) 4,495 (356,936) 59,922 Interest Expense (6,563) (8,348) (21,619) (26,870) Other Income 3,809 2,991 10,544 8,846 Income Tax Benefit/ (Expense) 14,612 345 (36,462) (16,759) Net Income (118,244) (517) (404,474) 25,139 THE DEWEY ELECTRONICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2006 NOTE 13: PENSION PLAN Three months ended Nine months ended March 31 March 31 2006 2005 2006 2005 Service cost $9,897 $7,067 $29,692 $21,200 Interest cost 16,898 15,708 50,696 47,125 Expected return on plan assets (15,152) (13,551) (45,458) (40.651) Amortization of prior service cost -- -- -- -- Amortization of net (gain) loss 9,128 4,786 27,382 14,358 Net periodic benefit Cost $20,771 $14,010 $62,312 $42,032 Employer Contributions The Company previously disclosed in its financial statements for the year ended June 30, 2005, that it expects to continue to contribute within the range of legally acceptable contributions as identified by the Plan's enrolled actuary. As of March 31, 2006, $30,000 of contributions have been made. The Company presently expects to continue to contribute within the range of legally acceptable contributions as identified by the Plan's enrolled actuary. NOTE 14: Recent Accounting Pronouncements In November 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4." SFAS No. 151 amends the guidance in Accounting Research Bulletins ("ARB") No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB No. 43, Chapter 4, previously stated that "... under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges... ." SFAS No. 151 requires that those items be recognized as current period charges regardless of whether they meet the criterion of "so abnormal." In addition, SFAS No. 151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of SFAS No. 151 will apply to inventory costs beginning in fiscal year 2007. The adoption of SFAS No. 151 is not expected to have a material effect on the consolidated financial statements of the Company. In April 2005, the FASB issued FASB Interpretation (FIN) 47, "Accounting for Conditional Asset Retirement Obligations." This interpretation clarifies that the entity is required to record a liability in financial statements for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. The "conditional asset retirement obligation" terminology used in SFAS No. 143, "Accounting for Asset Retirement Obligations," refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The Company has adopted (FIN) 47 in fiscal year 2006. The adoption of (FIN) 47 did not have a material impact on the Company's financial statements. In June 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections - a replacement of APB No. 20 and FASB Statement No. 3." This SFAS No. 154 supersedes APB No. 20, "Accounting Changes," and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements." This statement applies to all voluntary changes in accounting principle and changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS No. 154 requires retrospective application to prior periods' financial statements of changes in accounting principle, unless this would be impracticable. When it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, this statement requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable. This statement also requires that if an entity changes its method of depreciation, amortization, or depletion for long-lived, nonfinancial assets, the change must be accounted for as a change in accounting estimate. This statement will be effective in fiscal year 2007. Management does not expect this statement to have a material effect on the financial statements. THE DEWEY ELECTRONICS CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the unaudited consolidated financial statements, including the notes thereto, appearing elsewhere in this Form 10-Q, and with the audited consolidated financial statements, including the notes thereto, appearing in the Company's Form 10-K for the fiscal year ended June 30, 2005. 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 "Financing Activities", "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. Operating Segments The Company is organized into two operating segments on the basis of the types of products offered. Each segment is comprised of separate and distinct businesses: the Electronics segment - primarily business with the Department of Defense, and the Leisure and Recreation segment - primarily business with ski areas and resorts. 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 provides most of the Company's revenues and is comprised mostly of the 2kW generator product line, two research and development contracts (work under one was completed in September 2005) and other various spare parts sales orders, more limited in scope and duration. The 2kW generator product line is provided to the various branches of the Armed Forces of the United States. Production is under a long-term contract as well as short-term orders for limited quantities. The Company also provides speed and measurement instrumentation primarily for the U.S. Navy and other prime contractors such as shipbuilders. Orders are also received for replacement parts and equipment for previous Company contracts with the Department of Defense as well as other projects performed as a subcontractor. In past years, the Company had various long-term contracts to provide the U.S. Navy with various equipment. The Company has been the sole source producer of the 2kW diesel operated tactical generator set for the Department of Defense since 1997. Its initial contract was awarded by the U.S. Army in 1996 and final deliveries were made under that award in March 2002. Deliveries were made to the various branches of the Armed Forces of the United States. A new contract was awarded in September 2001 to provide the U.S. Army and other Department of Defense Agencies with this same 2kW diesel operated generator set. This contract is a ten-year indefinite delivery, indefinite quantity contract which replaces the initial contract awarded in 1996. The total amount of orders under the September 2001 contract placed through March 31, 2006 amount to approximately $18 million. As with the initial contract mentioned above, 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 Company's primary sources of revenue include products with long manufacturing lead times. These products, in particular, are its 2kW generator sets, and its HEDCO snowmaking machines. Recognizing this, the Company has committed some of its resources to making a quantity of these products readily available by producing them for inventory and sales. The government sector has been ordering limited quantities of 2kW generator sets for specific uses pursuant to short-term orders independent of the Company's 2kW contract. Some operating expenses, including general corporate expenses, have been allocated to each segment by specific identification or based on labor for items which are not specifically identifiable. Results of Operations 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 comparison of recorded revenues and earnings may not be indicative of future operating results. The following comparative analysis should be viewed in this context. Consolidated Summary For the three-month period ended March 31, 2006, consolidated revenues were $2,170,870 and operations resulted in a loss of $130,102. During the same period last year, consolidated revenues were $1,267,727 and operating income was $4,495. For the nine-month period ended March 31, 2006, consolidated revenues were $5,261,509 and operations resulted in a loss of $356,936. During the same nine-month period last year, consolidated revenues were $4,406,184 and operating income was $59,922. Revenues for the three-month period ended March 31, 2006 were higher compared to the same three-month period last year, attributable to both segments, while revenues for the nine-month period were higher in the Electronics segment, and lower in the Leisure and Recreation segment, compared to the same nine-month period last year. Results of operations by business segment are discussed further below. Also, information about the Company's operations in its two segments for the three-month and nine-month periods this year and last year can be found in Note 12 of the Notes to Consolidated Financial Statements. Income Taxes The income tax expense for the three and nine-month periods ended March 31, 2005 was at an effective rate of 40%. No income tax benefit has been recorded against the net loss before taxes for the nine-months ended March 31, 2006. Electronics Segment 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 costs 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 2 and Note 6 of the Notes to Consolidated Financial Statements. For the three-month period ended March 31, 2006, revenues in the Electronics segment were $899,930 higher than the same three-month period last year. During the three-month period this year, production towards the 2kW generator set contract provided 64% of Electronics segment revenues, the Company's research and development contracts provided 8% of Electronics segment revenues and various orders which are generally for replacement parts provided 28% of Electronics segment revenues. During the same three-month period last year, production towards the 2kW generator set contract provided 23% of Electronics segment revenues, the Company's research and development contracts provided 37% of Electronics segment revenues and various orders generally for replacement parts provided 40% of Electronics segment revenues. The increase in revenues during the three-month period ended March 31, 2006 compared to March 31, 2005 is attributable to an increase in generator set production towards contract requirements as well as an increase in orders for replacement parts. The effect of these increases was partially offset by a decrease in customer funded research and development. Revenue from customer sponsored research and development decreased in amount and percent as a result of the completion in September 2005 of billable work under the Company's first research and development contract. The Company continued internal development on some items through February 2006 and in the three- month period ending March 2006 incurred $4,573 of costs which were expensed in the current period. This change in product mix during the three-month period ended March 31, 2006 compared to March 31, 2005 provided an increase in margin from generator set production work which was outweighed by a decrease in margin from research and development contracts as well as a reduction in higher margin work towards various orders which are generally for replacement parts. For the nine-month period ended March 31, 2006, revenues in the Electronics segment were $885,640 higher than the same nine-month period last year. During the nine-month period this year, production towards the 2kW generator set contract provided 53% of Electronics segment revenues, the Company's research and development contracts provided 19% of Electronics segment revenues and various orders which are generally for replacement parts provided 28% of Electronics segment revenues. During the same nine-month period last year, production towards the 2kW generator set contract provided 34% of Electronics segment revenues, the Company's research and development contracts provided 27% of Electronics segment revenues and various orders generally for replacement parts provided 39% of Electronics segment revenues. The increase in revenues during the nine-month period ended March 31, 2006 compared to the nine-month period ended March 31, 2005 is attributable to an increase in production of 2kW generator sets and orders for replacement parts which was partly offset by a decrease in customer sponsored research and development. The operating loss in the nine-month period ended March 31, 2006 compared to operating income in the nine-month period ended March 31, 2005 is attributable to a change in product mix. The increase in margin from generator set production work was outweighed by a significant reduction in contract research and development work and the reduction in higher margin work towards various orders which are generally for replacement parts. As of March 31, 2006, the aggregate value of the Company's backlog of electronics product not previously recorded as revenues was approximately $4.0 million. It is estimated that approximately $2.2 million of this backlog will be recognized as revenues during this fiscal year ending June 30, 2006. As of March 31, 2005, the aggregate value of the Company's backlog of electronics product not previously recorded as revenues was approximately $3.6 million. Leisure and Recreation Segment In the HEDCO Division, revenues were $3,213 higher for the three-month period ended March 31, 2006 when compared to the same period last year. This reflects fluctuations in the market for replacement parts for previously sold snowmaking machinery. Revenues for the nine-month period ended March 31, 2006 were $30,315 lower than the same nine-month period last year as a result of fewer sales of spare parts. The sale of snowmaking machines are recorded when machinery has been delivered which historically has been during the second fiscal quarter. The operating loss recognized in the three month period ending March 31,2006 is greater than in the same period last year due to increased operating and general and administrative costs. The loss during the nine-month period ending March 31, 2006 was lower when compared to last year due to a change in product mix of spare parts sold and the cessation of additional costs present last year relating to the introduction of new enhancements to the general product line. As a result of a review of this segment completed by management during 2003, enhancements to the machines were designed. These enhancements were and are currently designed to simplify the operation of the HEDCO snowmaker and are made available to provide remote control operations and monitoring as optional features. The cost of developing these enhancements has been expensed as incurred. In addition, the market for snowmaking machines has changed in recent years. Rather than ordering machinery months ahead of delivery times, customers are expecting product to be readily available for immediate use. The last year in which the Company had a backlog of orders for snowmaking machines was in 2001. In order to remain competitive, the Company has produced some models for inventory purposes. 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 March 31, 2006, the Company's working capital was $3,152,075 compared to $3,627,322 at June 30, 2005. The ratio of current assets to current liabilities was 3.17 to 1 at March 31, 2006 and 4.89 to 1 at June 30, 2005. The following table is a summary of the Statements of Cash Flows in the Company's Financial Statements: Nine Months ended March 31, 2006 2005 Net Cash (used) in/ provided by Operating activities ($210,934) 247,788 Investing activities ($126,830) ($202,885) Financing activities ($115,955) ($34,102) Operating Activities Adjustments to reconcile net earnings to net cash used in operating activities are presented in the Statements of Cash Flows in the Company's Financial Statements. During the nine month period ended March 31, 2006, net cash used in operating activities was comprised primarily of net loss before depreciation and amortization and increases in accounts receivable, inventory and contract costs and related profits in excess of billings. These were partly offset by a decrease in deferred taxes and increases in accounts payable and accrued liabilities. Net cash provided by operating activities in the nine month period ended March 31, 2005 was comprised primarily of depreciation and amortization of loan fees, a decrease in contract costs and related profits in excess of billings, and an increase in accounts payable. These were partly offset by an increase in accounts receivable and a decrease in accrued liabilities. The Company expenses its research and development costs as incurred. These costs consist primarily of material and labor costs. For the nine-month period ended March 31, 2006, the Company expensed $45,886 of these costs. For the same nine-month period last year, the Company expensed $50,943 of research and development costs. Investing Activities During the nine-month period ended March 31, 2006, net cash used in investing activities amounted to $126,830. Of this amount, $101,061 was used for plant, property and equipment, and $25,769 was used by the Company for "land and land costs held for sale". During the nine-month period ended March 31, 2005, investing activities used $202,885. Of this amount, $66,425 was used for plant, property and equipment, and $85,322 was used for costs associated with "land and land costs held for sale". The Company had also used $51,138 to continue to invest in its capitalized development costs. Financing Activities Financing activities during the nine-month period ended March 31, 2006 used $115,955 compared to $34,102 during the same period last year. These amounts primarily represent principal reduction payments made toward the Company's term loan agreement described below. On February 24, 2005, the Company and Sovereign Bank (the "Bank") entered into a Term Loan Agreement (the "Loan Agreement") that replaced, and restructured the remaining balance due on, the Company's Mortgage Note agreement with the Bank, which matured in January 2005. Pursuant to the Loan Agreement, the Company borrowed $292,187 from the Bank for a term ending February 23, 2007, at a fixed annual interest rate of 5.56 percent. This loan, of which $124,698 was outstanding as of March 31, 2006, is secured by a first lien on all of the Company's accounts receivable, machinery, equipment and other personal property (the "Collateral") and is subject to customary representations, covenants and default provisions in favor of the Bank. The Company also has a line of credit agreement with the Bank in the amount of $500,000 at an annual interest rate equal to the Bank's prime rate plus ..25 percent. As of March 31, 2006, there were no outstanding borrowings against this line of credit facility. In the event that the Company borrows funds under this line of credit facility, the loan would be co-collateralized by the Collateral under the Loan Agreement. On November 9, 2005, this line of credit agreement was renewed on the same terms and conditions to December 1, 2006. During 1988, Gordon C. Dewey, the Company's co-founder, lent the Company a total of $200,000. The Company's note payable is unsecured and bears interest at the rate of 9 percent per annum. This note was subordinate to the Company's Mortgage Note with the Bank, but is not subordinate to the new Loan Agreement with the Bank described above. It is repayable upon demand by Frances D. Dewey, Mr. Dewey's widow. 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. Previously, on December 29, 2004, the Company had agreed to sell approximately 68 undeveloped and unused acres of this land to K. Hovnanian North Jersey Acquisitions, L.L.C. ("K. Hovnanian"), a wholly-owned subsidiary of Hovnanian Enterprises, Inc., a residential real estate developer and homebuilder. The Company's stockholders approved the sale of this land at the Annual Stockholders meeting, which was held on March 8, 2005. Completion of the proposed land sale depended on, among other things, a number of conditions being satisfied, including extensive regulatory and rezoning approvals from New Jersey State and local entities. On June 2, 2005, the Company agreed to extend, from June 7, 2005 until September 7, 2005, the period (the "Investigation Period") during which K. Hovnanian was permitted to conduct its investigation relating to the proposed purchase. The Agreement of Sale provided that, during the Investigation Period, if K. Hovnanian was not satisfied with the results of its investigation, it could terminate the Agreement of Sale without explanation. On July 25, 2005, the Company announced that it had received from K. Hovnanian a notice terminating the Agreement of Sale. As a result of such termination, the $200,000 deposit previously paid into escrow by K. Hovnanian was returned to K. Hovnanian. As a result of this termination of the Agreement of Sale, the Company had expensed $63,946 of related costs, which had been capitalized as "Land and related costs held for sale". This amount was expensed during the fourth quarter ended June 30, 2005. The Company is continuing to actively pursue possible methods of monetizing the undeveloped and unused portion of its property, by its sale and/or development. This endeavor has become more complex with the implications of New Jersey's "Highlands Water Protection and Planning Act". Although the Act was passed in June of 2004, the specifics are still emerging. The Act identifies approximately 400,000 acres of New Jersey as The Highlands Preservation Area. Pursuant to the statute, this area has the most onerous restrictions on future development. The Company's property is in this area, and further development would not be permitted without a waiver or other relief from the State. The Company believes that there are strong reasons why its property should not be in the preservation area, and is attempting to affect a solution. However, the Act is new, the associated regulations have not yet been promulgated, and the new Governor and administration first took office in January 2006. Accordingly, no assurances can be given that these efforts will be successful or, if successful, the timing thereof. Government Defense Business Most of the Company's revenues are derived from government defense business, which is comprised of business with the U.S. Department of Defense or with other government contractors. The Company's government defense business consists of long-term contracts and short-term orders such as for replacement parts. Historically, the Company's revenues from its government defense business have been dependent upon single programs. Currently, the Company's primary program is with the U.S. Army to provide diesel operated generator sets. 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 replaced the initial contract, which was awarded in 1996. The Company has been the sole source producer of this generator set for the Armed Forces since 1997. These generators continue to be provided for both active and reserve components of various departments of the U.S. Armed Forces. As with the initial contract, the current contract to supply 2kW diesel operated generator sets allows for the U.S. Army to place annual production orders and also place additional interim orders. The amount of orders received under this contract is approximately $18 million through March 31, 2006. Deliveries of these orders are scheduled to continue through August 2006. The composition of the Company's government defense business has been evolving in recent years. Prior to the three-month period ended December 31, 2005, production efforts towards the 2kW generator set contract had been decreasing as a result of reduced orders under the contract. However, in the three-month period ending March 31, 2006 as in the previous three-month period, production efforts towards the contract increased due to customer orders. During the nine-months ended March 31, 2006, production towards the 2kW generator set contract provided 53% of Electronics segment revenue compared to approximately 34% during the same period in fiscal year 2005 and approximately 66% during the same period in fiscal year 2004. Replacement parts and other short-term business provided approximately 28% of Electronics segment revenue during the nine-months ended March 31 2006, approximately 39% during the same period in fiscal year 2005, and approximately 31% during the same period in fiscal year 2004. In addition the Company was awarded a research and development contract on September 9, 2003 and another research and development contract on September 28, 2004. Efforts toward these research and development contracts provided approximately 19% of Electronics segment revenues during the nine-months ended March 31, 2006, approximately 27% during the same period in fiscal year 2005 and approximately 3% during the same period in fiscal year 2004 when the initial research and development contract was awarded. The long term reduction in generator set orders results from many factors. It appears that the main customer, the U.S. Army, has satisfied the majority of its outstanding requirements. It has been placing orders as new requirements emerge, and this is a slower process. Moreover, the Company now believes that there is competition in part of the market, from a larger 3kW generator that operates more quietly than the Company's 2kW model. However, it does not compete in the 'man-portable' segment of the market since the competing product is twice as heavy. The customer is interested in a product which is smaller, lighter and quieter and the Company is working towards developing the 2kW generators to address its customer's request. See below under "Company Strategy." The Company's production contract for 2kW generators prohibits changes to the unit's design and performance characteristics. This allows the military procurement and logistics infrastructure to standardize on a single set of requirements, and avoid incremental change. Traditionally this has been advantageous to both customer and supplier. However, with evolving requirements and competition, this can be less advantageous. As the contract allows, additional orders may be made by the U.S. 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". 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 was in the amount of approximately $1.8 million. The contract was for the research and development of improvements to the current 2kW diesel operated generator set specifically at the request of the Army for lighter, quieter models. Work on this contract was performed at the Company's location in Oakland, New Jersey and was completed in September 2005. On September 28, 2004, the Company was awarded a second "cost plus fixed fee" research and development contract by the U.S. Army, in the amount of $1.5 million, for work to be performed towards similar objectives. Work on this project is expected to continue through September 2006. There are no assurances of future production orders as a result of these contracts. However, both contracts require the Company to present improvements to the government. The Company has continued to invest in its efforts to improve its products and existing technologies. This effort is focused on the enhancement of the existing generator set product line and involves, primarily, the adaptation of existing technology, as well as engineering and design to meet specific customer requests. The scope of these efforts includes the development of an improved product, which is in accordance with current customer requests and future requirements. The Company is engaging in efforts to address these requests in the areas of sound reduction, reduced weight, improved fuel consumption and environmental considerations. Other companies have announced intentions of developing similar products. Some of these companies have greater financial and/or technical resources than the Company. However, management believes that despite inherent risks and uncertainties in all of these types of projects, these efforts are important to the Company's business. 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. 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. 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 The Company's primary sources of revenue include products with long manufacturing lead times. These products, in particular, are its 2kW generator sets, and its HEDCO snowmaking machines. Recognizing this, the Company has committed some of its resources to making a quantity of these products readily available by producing them for inventory and sales. The government sector has been ordering small quantities of 2kW generator sets for specific uses pursuant to short term orders independent of the Company's 2kW contract. The market for snowmaking machines has changed in recent years. Rather than order machinery months ahead of time, customers are expecting product to be readily available for immediate use. In order to remain competitive in this market, the Company has produced some models of snowmaking machines for inventory purposes. It is also enhancing the technical capabilities as optional items for these machines. Despite the inherent risks and uncertainties of investing in inventory, management believes that the investments in inventory described above are important to the Company's business and future growth. The Company is focusing its efforts on select product categories where management believes that the Company can grow its business. Although no assurances can be made that such strategy will be successful, management believes that long term growth can be achieved from three perspectives: 1) growing the Company's market share in areas where it already has a strong presence, 2) expanding into related markets, and 3) expanding its strengths into related product categories. As part of this strategy, the Company has been investing in existing technologies to meet its customer's future requirements. Management is also continuing to re-enforce the customer recognition of the Company's product quality and customer relationships. The Company faces competition in many areas and from companies of various sizes. Competitive factors include product quality, technology, product availability, price and customer service. Management believes that the reputation of the Company in these areas provides a significant positive competitive factor. Critical Accounting Policies and Estimates The Company's 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, impairment of long-lived assets, capitalized development costs, and valuation of deferred tax assets and liabilities. Revenues and estimated earnings under defense contracts (including research and development 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. The Company has capitalized certain development costs for efforts to improve and enhance the 2kW generator set product line. These efforts involve, primarily, the adaptation of existing technology, as well as, engineering and design to meet specific customer requests. The scope of these efforts includes the development of a product, which is in accordance with current customer requests and future requirements. Company efforts are to address areas of sound reduction, reduced weight, improved fuel consumption and environmental considerations. The Company reviews these capitalized costs on a regular basis, to assess future recoverability through the existing contracts to which such costs relate, and expenses such costs, if any, to the extent they are not deemed recoverable. The Company had $703,799 of capitalized development costs as of March 31, 2006 and as of June 30, 2005. See "Government Defense Business" above. ITEM 4. 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 quarter covered by this report. Based upon that evaluation, the Chief Executive Officer and Treasurer concluded that, as of March 31, 2006, the design and operation of these disclosure controls and procedures were effective. During the fiscal quarter covered by this 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 II - OTHER INFORMATION Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None Item 4. Submission of Matters to a Vote of Security Holders None Item 6. Exhibits ------------------------------------------------------------------ See the accompanying Index to Exhibits to this quarterly report on Form 10-Q. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of l934, the registrant 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 Date: May 12, 2006 John H.D. Dewey President and Chief Executive Officer /s/ Stephen P. Krill Date: May 12, 2006 Stephen P. Krill Treasurer THE DEWEY ELECTRONICS CORPORATION INDEX TO EXHIBITS The following exhibits are included with this report. For convenience of reference, exhibits are listed according to the numbers assigned in the Exhibit table to Regulation S-K. Number 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Treasurer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 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 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