UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - QSB
(Mark One)
_X_ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACTOF 1934
For the quarterly period ended March 31, 2008
___ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from__________to____________
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
Check whether the issuer (1) filed reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 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 shell company (as defined
in Rule 12b-2 of the Exchange Act). YES___ NO_X_
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS.
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. YES___ NO___
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
Common equity, as of the latest practicable date: 1,362,031 at May 7, 2008.
_______________________________________
Transitional Small Business Disclosure Format (Check one): YES___ NO_X_
THE DEWEY ELECTRONICS CORPORATION
INDEX
Page No.
Part I Financial Information
Item 1. Condensed Financial Statements
Condensed Balance Sheets -
March 31, 2008(unaudited) and June 30, 2007 3
Condensed Statements of Operations -
Three and Nine-months Ended March 31, 2008
and 2007 (unaudited) 4
Condensed Statements of Cash Flows for
the Nine-months Ended March 31, 2008
and 2007 (unaudited) 5
Notes to Condensed Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11
Item 3. Controls and Procedures 21
Part II Other Information
Item 2. Unregistered Sales of Equity Securities and Use
of Proceeds 22
Item 4. Submission of Matters to a Vote of Security
Holders 22
Item 6. Exhibits 22
2
PART I: FINANCIAL INFORMATION
ITEM 1.CONDENSED FINANCIAL STATEMENTS
THE DEWEY ELECTRONICS CORPORATION
CONDENSED BALANCE SHEETS
MARCH 31, JUNE 30,
2008 2007
ASSETS: (unaudited)
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 325,609 $ 432,337
ACCOUNTS RECEIVABLE NET OF $3,981 RESERVE 929,300 922,627
INVENTORIES 933,063 701,425
CONTRACT COSTS AND RELATED ESTIMATED
PROFITS IN EXCESS OF BILLINGS 1,275,591 581,619
PREPAID EXPENSES AND OTHER CURRENT ASSETS 149,358 147,686
_________ _________
TOTAL CURRENT ASSETS 3,612,921 2,785,694
_________ _________
PLANT, PROPERTY AND EQUIPMENT
LAND AND IMPROVEMENTS 651,015 651,015
BUILDING AND IMPROVEMENTS 1,885,653 1,885,653
MACHINERY AND EQUIPMENT 3,208,069 3,091,584
FURNITURE AND FIXTURES 206,686 205,539
_________ _________
5,951,423 5,833,791
Less accumulated depreciation 4,859,184 4,776,078
_________ _________
1,092,239 1,057,713
_________ _________
DEFERRED COSTS 75,095 75,095
TOTAL ASSETS $4,780,255 $3,918,502
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
ACCOUNTS PAYABLE 653,156 253,908
ACCRUED EXPENSES AND OTHER LIABILITIES 219,505 201,910
ACCRUED COMPENSATION AND BENEFITS PAYABLE 180,360 151,769
ACCRUED PENSION COSTS 73,653 103,653
__________ __________
TOTAL CURRENT LIABILITIES 1,126,674 711,240
__________ __________
LONG-TERM PENSION LIABILITY 306,545 261,545
__________ __________
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
1,693,397 at March 31, 2008 and
June 30, 2007 16,934 16,934
Additional paid-in capital 2,815,245 2,815,245
RETAINED EARNINGS 1,104,667 703,348
ACCUMULATED OTHER COMPREHENSIVE LOSS (102,782) (102,782)
_________ _________
3,834,064 3,432,745
LESS: TREASURY STOCK 331,366 SHARES at cost (487,028) (487,028)
_________ _________
TOTAL STOCKHOLDERS' EQUITY 3,347,036 2,945,717
__________ __________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,780,255 $3,918,502
========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS
3
THE DEWEY ELECTRONICS CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE-MONTHS ENDED, NINE-MONTHS ENDED
March 31, March 31,
2008 2007 2008 2007
REVENUES $2,414,946 $1,170,845 $7,480,420 $4,307,024
COST OF REVENUES 1,906,853 1,671,786 5,828,751 4,505,397
__________ __________ __________ __________
GROSS PROFIT/(LOSS) 508,093 (500,941) 1,651,669 (198,373)
SELLING,GENERAL &
ADMINISTRATIVE 470,036 414,267 1,258,819 1,108,912
__________ _________ __________ __________
OPERATING INCOME/(LOSS) 38,057 (915,208) 392,850 (1,307,285)
INTEREST EXPENSE 0 (36) 0 (5,181)
OTHER INCOME/(EXPENSE)
- NET (677) 1,087 8,469 5,796
__________ __________ __________ __________
INCOME/(LOSS) BEFORE INCOME
TAXES 37,380 (914,157) 401,319 (1,306,670)
PROVISION FOR INCOME TAX -- -- -- --
__________ __________ __________ __________
NET INCOME/(LOSS) $37,380 $(914,157) $401,319 $(1,306,670)
========== =========== ========== ==========
NET INCOME/(LOSS) PER
COMMON SHARE-BASIC $0.03 $(0.67) $0.29 $(0.96)
NET INCOME/(LOSS) PER
COMMON SHARE-DILUTED $0.03 $(0.67) $0.29 $(0.96)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
BASIC 1,362,031 1,362,031 1,362,031 1,362,031
DILUTED 1,363,043 1,362,031 1,362,945 1,362,031
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS
4
THE DEWEY ELECTRONICS CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE-MONTHS ENDED
MARCH 31,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME/(LOSS) $401,319 $(1,306,670)
ADJUSTMENTS TO RECONCILE NET INCOME/
(LOSS) TO NET CASH PROVIDED BY/(USED
IN) OPERATING ACTIVITIES:
DEPRECIATION 83,106 90,232
WRITE OFF OF CAPITALIZED
DEVELOPMENT COSTS 0 703,799
(INCREASE)/DECREASE IN ACCOUNTS
RECEIVABLE (6,673) 78,543
(INCREASE)/DECREASE IN INVENTORIES (231,638) 173,788
(INCREASE) IN CONTRACT COSTS AND
RELATED ESTIMATED PROFITS
IN EXCESS OF BILLINGS (693,972) (121,278)
DECREASE IN PREPAID EXPENSES AND
OTHER CURRENT ASSETS (1,672) 1,727
INCREASE/(DECREASE)IN ACCOUNTS PAYABLE 399,248 (165,656)
INCREASE/(DECREASE) IN ACCRUED EXPENSES
AND OTHER LIABILITIES 46,186 (81,213)
INCREASE IN PENSION LIABILITY 15,000 26,250
TOTAL ADJUSTMENTS (390,415) 706,192
________ ___________
NET CASH PROVIDED BY/(USED IN)
OPERATING ACTIVITIES 10,904 (600,478)
________ ___________
CASH FLOWS FROM INVESTING ACTIVITIES:
EXPENDITURES FOR PLANT, PROPERTY
AND EQUIPMENT (117,632) (17,462)
DEFERRED COSTS -- (1,063)
________ ___________
NET CASH USED IN INVESTING ACTIVITIES (117,632) (18,525)
________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS OF DEBT -- (86,047)
________ __________
NET CASH USED IN FINANCING ACTIVITIES -- (86,047)
________ __________
NET DECREASE IN CASH AND CASH
EQUIVALENTS (106,728) (705,050)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 432,337 1,075,500
________ __________
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $325,609 $ 370,450
======== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
INTEREST PAID $ -- $ 5,181
INTEREST RECEIVED 1,476 5,392
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS
5
THE DEWEY ELECTRONICS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Significant Accounting Policies
=====================================
Basis of Presentation
=====================
The accompanying unaudited condensed financial statements have been prepared
by The Dewey Electronics Corporation (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC")for interim
reporting. Certain information and disclosures normally included in notes to
financial statements have been condensed or omitted pursuant to such rules and
regulations, but resultant disclosures are in accordance with accounting
principles generally accepted in the United States of America as they apply to
interim reporting. The condensed financial statements should be read in
conjunction with the financial statements and the notes thereto in the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 2007 (the "2007
Form 10-KSB").
In the opinion of the Company's management, the accompanying unaudited condensed
financial statements contain all adjustments (consisting of normal recurring
adjustments) necessary to present fairly, in all material respects, the
Company's financial position as of March 31, 2008, and the results of operations
for the three-months and nine-months and cash flows for the nine-months then
ended. The results of operations and cash flows for the periods ended March 31,
2008 are not necessarily indicative of the results of operations or cash flows
to be expected for any subsequent quarter or the full fiscal year ending June
30, 2008.
As of March 31, 2008, there have been no material changes to any of the
significant accounting policies, described in our Annual Report on Form 10-KSB
for the fiscal year ended June 30, 2007, except for the adoption of Financial
Accounting Standards Board ("FASB")Financial Interpretation ("FIN")No. 48
"Accounting for Uncertainty in Income Taxes."
Revenue Recognition
===================
Revenues and estimated earnings under long-term defense contracts (including
some 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 of each contract. For the Company's indefinite delivery,
indefinite quantity contract to provide 2kW generator sets to the military and
for orders from other government subcontractors for 2kW generators, percentage-
of-completion calculations are based on individual "Delivery Orders" which are
periodically received for specified quantities. For research and development
contracts total costs incurred are compared to total expected costs for each
contract. The Company currently has one development sub-contract to perform
qualification tests for an EPA compliant engine for use with its 2kW generator
sets on which it does not recognize revenue based on the percentage-of-
completion method rather revenue is recorded with the successful completion of
each milestone in accordance with the contract terms.
The Company uses the percentage-of-completion method to recognize revenue for
its replacement parts business when the dollar amount of the order to be
delivered in a future period or periods is material, and the duration of the
work will span multiple reporting periods. Revenue and earnings for all other
orders for replacement parts are recorded when deliveries of product are made
and title and risk of loss have been transferred to the customer and collection
is probable.
6
For those contracts where revenue has been recognized using the percentage-of-
completion method of accounting, 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 of product are made and title and risk of loss have been transferred
to the customer and collection is probable.
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. These estimates include, among others, lower of cost or
market estimates for inventories, realization of deferred tax assets, revenue
recognition and certain accrued expenses. Actual results could differ from
those estimates.
Income Taxes
============
In June 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income
Taxes-an interpretation of FASB Statement No. 109 ("FIN 48") which clarifies the
accounting for uncertainty in income taxes recognized in an enterprise's
financial statements in accordance with FASB Statement No. 109, Accounting for
Income Taxes. FIN 48 prescribes a recognition threshold and measurement
criteria for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure, and transition and defines the criteria that must
be met for the benefits of a tax position to be recognized. The cumulative
effect of the change in accounting principle must be recorded as an adjustment
to beginning retained earnings. The Company has completed its evaluation of the
impact of the Company's July 1, 2007 adoption of FIN 48 and determined that such
adoption did not have a material impact on its financial statements.
The tax years 2001 - 2007 remain open to examination by the major taxing
jurisdictions to which we are subject.
2. Recent Accounting Pronouncements
====================================
In February 2007, the Financial Accounting Standards Board ("FASB"), issued
Statement of Financial Accounting Standard ("SFAS") No. 159 "The Fair Value
Option for Financial Assets and Financial Liabilities." SFAS 159 permits
entities to choose, at specified election dates, to measure eligible financial
instruments at fair value and report unrealized gains and losses on items for
which the fair value option has been elected in earnings at each subsequent
reporting date. SFAS 159 is effective for fiscal years beginning after November
15, 2007. The Company does not own any financial instruments and does not
expect this statement to have an effect on the Company's financial statements.
7
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements".
This Statement defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles, and expands disclosures about
fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this Statement does not require
any new fair value measurements. However, for some entities, the application of
this Statement will change current practice. This Statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. In November 2007, the FASB
agreed to defer, for one year, the effective date for all non-financial assets
and liabilities, except those that are recognized or disclosed at fair value in
the financial statements on a recurring basis. The Company is currently
evaluating the impact of this Statement on its financial statements.
3. Inventories
===============
Inventories consist of:
March 31, 2008 June 30, 2007
Finished Goods $116,751 $165,751
Work In Progress 100,452 137,678
Raw Materials 715,860 397,996
________ ________
Total $933,063 $701,425
======== ========
4. Taxes on Income
===================
The Company has provided a valuation allowance against its net deferred tax
assets as it believes that it is more likely than not that it will not realize
these tax attributes. The Company has approximately $970,000 and $180,000 of
federal and state net deferred tax assets, respectively, expiring beginning in
In fiscal 2008 approximately $136,000 and $24,000 of these federal and
state net deferred tax assets, respectively, have been reduced as a
result of the net income for the nine-month period ending March 31,
2008. The valuation allowance against these deferred tax assets has
been reduced by a corresponding amount.
5. Earnings Per Share
======================
Net income/(loss) per share has been presented pursuant to SFAS No. 128,
"Earnings per Share". Basic net income/(loss) per share is computed by dividing
reported net income/(loss) available to common shareholders by weighted average
shares outstanding for the period. Diluted net income/(loss) per share is
computed by dividing reported net income/(loss) 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 or loss per common share computations.
Certain stock options were excluded from the computation of earnings per share
due to their anti-dilutive effect. For the three-months ended March 31, 2008
the number of shares excluded from the calculation was 16,000 due to the
exercise price of the options exceeding the average share price for the quarter.
For the three-months ended March 31, 2007 the number of shares excluded from the
calculation was 35,000 due to the anti-dilutive effect they would have on the
basic net loss.
For the nine-months ended March 31, 2008 the number of shares excluded from the
calculation was 16,000 due to the exercise price of the options exceeding the
average share price for the nine-month period. For the nine-months ended March
31, 2007 the number of shares excluded from the calculation was 35,000 due to
the anti-dilutive effect they would have on the basic net loss.
8
Three-months Ended March 31,
2008 2007
Per Per
Income Shares Share Loss Shares Share
Amount Amount
Basic
Net
Income
/(loss)
per
common
share $37,380 1,362,031 $.03 ($914,157) 1,362,031 ($.67)
Effect
Of
dilutive
Securities -- 1,012 -- -- -- --
_____ ________ ____ _______ _______ ____
Diluted net
income/
(loss)
Per
Common
Share $37,380 1,363,043 $.03 ($914,157) 1,362,031 ($.67)
======= ========= === ========= ========= ====
Nine-months Ended March 31,
2008 2007
Per Per
Income Shares Share Loss Shares Share
Amount Amount
Basic
Net
Income
/(loss)
Per
Common
Share $401,319 1,362,031 $.29 ($1,306,670) 1,362,031 ($.96)
Effect
Of
dilutive
Securities -- 914 -- -- -- --
_______ _______ ____ __________ _________ ____
Diluted
Net
income/
(loss)
Per
Common
Share $401,319 1,362,945 $.29 ($1,306,670) 1,362,031 ($.96)
======== ========= ==== ========== ========= ====
6. Operating Segments
=======================
The Company operates in two segments: Electronics, and Leisure and Recreation.
Operations in the Electronics Segment are 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 segment 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 segment represents sales to unaffiliated customers, as
reported in the Company's Statements of Operations. 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. All of the Company's operations are performed at its
facility in Oakland, New Jersey. The facility and resources are shared by both
segments and the direct use of such resources and space cannot be entirely
specified. Accordingly, the Company allocates usage of its facility and
equipment.
The following tables present information about reported segment revenues,
operating profit or loss, and reconciles such segment information to the
Company's totals:
9
Three-months ended Nine-months ended
March 31, March 31,
2008 2007 2008 2007
Electronics Segment
Revenues $2,392,554 $1,164,869 $7,437,616 $4,275,359
Operating Income/
(Loss) 52,711 (871,033) 495,019 (1,188,067)
Leisure and Recreation
Segment
Revenues 22,392 5,976 42,804 31,665
Operating Loss (14,654) (44,175) (102,169) (119,218)
Total
Revenues 2,414,946 1,170,845 7,480,420 4,307,024
Operating Income/
(Loss) 38,057 (915,208) 392,850 (1,307,285)
Interest Expense 0 (36) 0 (5,181)
Other Income/(Expense) (677) 1,087 8,469 5,796
Income Tax Benefit/
Expense 0 0 0 0
_________ _________ ________ ________
Net Income/(Loss) $37,380 $(914,157) $401,319 $(1,306,670)
========= ========= ======== ==========
10
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
condensed financial statements, including the notes thereto, appearing elsewhere
in this Form 10-QSB, and with the audited financial statements, including the
notes thereto, appearing in the Company's 2007 Form 10-KSB. 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", and "Company Strategy" and in Item 1 (Description of
Business - Operational Risks) of the Company's 2007 Form 10-KSB. 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 comparison of recorded revenues and earnings may not
be indicative of future operating results. The following comparative analysis
should be viewed in this context.
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.
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.
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.
There are no intersegment sales.
11
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 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 segment for the three- and nine-month
periods ended March 31, 2008 and March 31, 2007 are set forth in Note 6 -
Operating Segments of the Notes to the Condensed Financial Statements.
Revenues
========
Revenues of $2,414,946 for the third quarter of fiscal year 2008(the three-month
period ended March 31, 2008) were 106% higher than in the third quarter of
fiscal year 2007 (the three-month period ended March 31, 2007) when revenues
were $1,170,845. Revenues for the third quarter of fiscal year 2008 were higher
in both the Electronics segment and the Leisure and Recreation segment when
compared to the same period in fiscal year 2007.
For the nine-month period ended March 31, 2008, revenues totaled $7,480,420
which is 74% higher than total revenues of $4,307,024 for the nine-month period
ended March 31, 2007. Revenues in the Electronics segment and Leisure and
Recreation segment were both higher when compared to the nine-month period
ending March 31, 2007.
Information about the Company's operations in the two segments is set forth in
Note 6 - Operating Segments of the Notes to the Condensed Financial Statements
and is discussed in further detail below.
Electronics Segment
===================
In the Electronics Segment, revenues and estimated earnings under long-term
defense contracts (including some 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 of each contract. For
the Company's indefinite delivery, indefinite quantity contract to provide 2kW
generator sets to the military and for orders from other government
subcontractors for 2kW generators, percentage-of-completion calculations are
based on individual "Delivery Orders" which are periodically received for
specified quantities. For research and development contracts total costs
incurred are compared to total expected costs for each contract. The Company
currently has one development sub-contract to perform qualification tests for an
EPA compliant engine for use with its 2kW generator sets on which it does not
recognize revenue based on the percentage-of-completion method as revenue is
recorded with the successful completion of each milestone in accordance with the
contract terms.
The Company uses the percentage-of-completion method to recognize revenue for
its replacement parts business when the dollar amount of the order to be
delivered in a future period or periods is material, and the duration of the
work will span multiple reporting periods. Revenue and earnings for all other
orders for replacement parts are recorded when deliveries of product are made
and title and risk of loss have been transferred to the customer and collection
is probable.
For those contracts where revenue has been recognized using the percentage-of-
completion method of accounting, 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.
12
Electronic product revenues accounted for 99% of total revenues for the third
quarter of fiscal year 2008, and the third quarter of fiscal year 2007.
Revenues in the Electronics Segment for the three-month period ended March 31,
2008 were $1,227,685 higher when compared to the same period in 2007. This
increase in revenue is attributable to an increase in production of 2 kW
generator sets under both the Company's prime contract with the United States
Army and for delivery to other subcontractors. Revenues resulting from the
Company's research and development contracts were also higher in this three-
month period compared to the same period last year as work continued on two
customer sponsored research and development subcontracts and initial work began
on a third subcontract as described further below while revenues from
replacement parts and other short term business was lower when compared to the
same period last year.
During the three-month period ended March 31, 2008, production efforts under the
Company's contracts to provide the Armed Forces with 2kW diesel operated
generator sets provided approximately 53% of the Electronic segment revenues
compared to approximately 62% of such revenues in the same period last year.
The Company's research and development contracts provided approximately 17% of
Electronics Segment revenues during the three-month period ended March 31, 2008,
while no revenue was recognized from research and development contracts in the
same period last year. Replacement parts and other short-term business provided
approximately 30% of such revenues in the three-month period ended March 31,
2008, and approximately 38% of such revenues in the same period in 2007.
Revenues in the Electronics segment for the nine-month period ended March 31,
2008 were $3,162,257 higher when compared to the same period in 2007. This
increase in revenue is attributable to initial production efforts under a short-
term contract to provide the United States Marine Corps with a 3.5kW generator
set as described further below and increased production of the Company's 2kW
generator sets. Revenues resulting from the Company's research and development
contracts described below were also higher in this nine-month period compared to
the same period in 2007 as well as revenues from replacement parts and other
short term business when compared to the same period last year.
During the nine-month period ended March 31, 2008, production efforts under the
Company's contract to provide the Armed Forces with 2kW and 3.5kW diesel
operated generator sets provided approximately 70% of the Electronic segment
revenues compared to approximately 66% of such revenues in the same period in
2007. The Company's research and development contracts provided approximately
10% of Electronics segment revenues during the nine-month period ended March 31,
2008, versus approximately 2% of such revenues in the same period in 2007.
Replacement parts and other short-term business provided approximately 20% of
such revenues in the nine-month period ended March 31, 2008, and approximately
32% of such revenues in the same period in 2007.
In March 2007, the Company was awarded three related research and development
sub-contracts, in the aggregate amount of approximately $230,400 to research and
develop electronic controls for diesel fuel cell reformers. Work on these
contracts began in the first fiscal quarter (ended September 30, 2007) and is
expected to extend until the third quarter of fiscal 2009. No assurances can be
given that the Company will receive any future production orders as a result of
these sub-contracts or that the Company will be awarded any additional research
and development contracts or sub-contracts.
In July 2007 the Company received a subcontract to develop an armored 3 kilowatt
28 volt DC auxiliary power unit that can be mounted on the back of the USMC main
battle tank, the Abrams M1A1. The development contract, for $646,400, was
awarded by the USMC Tank Program Office, in Quantico, VA, through a sub-contract
administered by CACI, Eatontown, NJ, and has the possibility of a follow-on
production contract. Work on this contract also began in the first quarter of
fiscal 2008 and is continuing into the quarter ending June 30, 2008. No
assurance can be made that the Company will receive any future production orders
as a result of this contract or that the Government will award the Company any
additional development contracts.
13
In August 2007, the Company received a new contract to provide auxiliary power
systems for the United States Marine Corps (USMC) 'Logistic Vehicle'. This
contract, awarded by the USMC Systems Command, Quantico, VA, consists of a base
year and three option years, exercisable at the Government's option.
The Logistics Vehicle Power System (LVPS) is a diesel-powered 3.5 kilowatt 28
volt DC generator providing power to equipment that protects against improvised
explosive devices. It is based on the Company's existing 2 kilowatt military
tactical generator. A delivery order for the LVPS, valued at approximately $2.3
million was received in August 2007 and completed in December 2007. While the
Company was successful in fulfilling the first delivery order, no assurance can
be made that the Company will receive any future production orders as a result
of this contract.
In December 2007 - the Company announced the award of a $985,976 subcontract
from Fibertek, Inc. of Herndon, VA, as part of the U.S. Government's 2kW
Military Tactical Generator (MTG) Product Improvements - Engine prime contract
DAAB07-01-D-G602. This contract covers the efforts to successfully qualify an
EPA compliant diesel engine for use in the 2kW portable Military Tactical
Generator product line. This engineering and test effort is being conducted at
the Company's Oakland, NJ, facility. Initial test efforts began during the third
fiscal quarter (ended March 31, 2008) and are expected to be completed by
November of 2008. Although no assurances can be made, the Company expects that
first article testing, if successful, should result in the incorporation of the
EPA compliant engine as a standard component of the 120 volt AC and 28 volt DC
2kW generator sets currently manufactured by the Company.
Previously, on September 28, 2004, the Company was awarded a "cost plus fixed
fee" research and development contract by the U.S. Army, in the amount of
approximately $1.5 million, for research and development of a lighter, quieter
2kW diesel generator. Work on this project continued through September 2006
when funding for the project was substantially exhausted and the contract
expired on March 31, 2007. As a result the Company did not realize any revenue
from this contract during the first nine months of fiscal 2008 but did realize
approximately $75,000 during the first nine months of fiscal year 2007.
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 1-A,
Revenue Recognition of the Notes to Financial Statements in the Company's 2007
Form 10-KSB).
The aggregate value of the Company's backlog of electronic products not
previously recorded as revenues was $5.3 million as of March 31, 2008. It is
estimated that most of the present backlog will be billed during the next 12
months and be substantially recognized as fiscal years 2008 and 2009 revenues.
As of March 31, 2007 the aggregate value of the Company's backlog of electronic
products not previously recognized as revenue was approximately $3.1 million.
14
Leisure and Recreation Segment
==============================
In the Leisure and Recreation segment, revenues for the three-month period ended
March 31, 2008 increased by approximately $16,416 when compared to the same
period in 2007. This is attributable to an increase in the sale of repair and
replacement parts for machinery previously sold and no longer under warranty
during the three-month period ended March 31, 2008.
During the nine-month period ended March 31, 2008, revenues increased
approximately $11,139 when compared to the same period in 2007. This increase in
revenues is attributable to greater sales of repair and replacement parts for
previously sold snowmaking machines.
The market for snowmaking machines has changed in recent years. Rather than
ordering machinery many months in advance of delivery, 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 Snowcub snowmaking machines
for inventory purposes.
Gross Profit
============
The Company's gross profit was $508,093 for the third quarter of fiscal year
2008, compared with gross loss of $500,941 for the third quarter of fiscal year
2007. The loss recorded in fiscal 2007 was primarily the result of the write off
of the Company's capitalized development costs during the third quarter of
fiscal 2007.
Gross margin is the measure of gross profit as a percentage of revenues. It is
affected by a variety of factors including, among other items, product mix,
product pricing, and product costs. The Company's gross margin was 21% for the
three-month period ended March 31, 2008 and a negative gross margin of (43%)for
the three-month period ended March 31, 2007. The increase in gross margin is
attributable to an increase in revenues for the three-month period ended March
31, 2008, principally from the sales of 2kW generator sets and increased revenue
from customer funded research and development contracts compared to the same
period in 2007.
For the nine-month period ended March 31, 2008, the Company's gross profit was
$1,651,669 compared to a gross loss of $198,373 for the nine-month period ended
March 31, 2007.
The Company's gross margin was approximately 22% for the nine-month period ended
March 31, 2008 and a negative gross margin of approximately (5%) during the
nine-month period ended March 31, 2007. These improved results for the first
nine months of fiscal year 2008 are due to several factors. The first factor is
the addition of production efforts under the Company's short-term contract to
provide the United States Marines with 3.5kW generator sets. The second factor
is increased production of the Company's 2kW generator sets produced for the
U.S. Army and other sub-contractors and the third factor is an increase in
customer sponsored research and development activities. The increased efforts
in these three areas provides a greater basis for allocating the Company's fixed
production costs thereby improving the margins on all of the Company's product
lines. Additionally the selling price of the 3.5kW generators is reflective of
current material costs unlike the 2kW generator contract, the gross margin on
which has diminished over time due to material costs rising faster than price
increases allowed in the contract.
In the last quarter of fiscal year 2006 the Company instituted price increases
for delivery of generators sold separately from the prime contract. Delivery of
these orders during the first nine months of fiscal 2008 reflect this price
increase and accounted for approximately 19% of total gross profit for the nine-
month period ended March 31, 2008. Delivery of these generators did not
contribute a significant amount to gross profit during the same period in fiscal
2007.
15
Selling, General and Administrative Expenses
============================================
Selling, General and Administrative expense for the three-months ended March 31,
2008 were $470,036 or 19% of revenue. For the three-months ended March 31, 2007,
Selling, General and Administrative expenses totaled $414,267 or 35% of revenue.
Selling, General and Administrative expense for the nine-months ended March 31,
2008 were $1,258,819 or 17% of revenue. For the nine-months ended March 31,
2007, Selling, General and Administrative expenses totaled $1,108,912 or 26% of
revenue. Expenditures for the nine-month period ended March 31, 2008 were
higher when compared with the same period last year primarily due to increased
product development efforts and increased sales and marketing efforts.
Interest Expense
================
The Company had no interest expense for the three-months ended March 31, 2008
compared to $36 for the same period in 2007. This reduction in interest expense
is a result of the Company paying off its mortgage note during fiscal 2007.
The Company had no interest expense for the nine-months ended March 31, 2008
compared to $5,181 for the same period last year. This reduction in interest
expense is a result of the Company paying off its mortgage note during fiscal
2007.
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.
Other expense of $677 for the three-months ended March 31, 2008 was comprised of
bank fees of $1,231 and franchise tax of $1,711 partly offset by interest income
of $902 and miscellaneous income of $1,363.
For the three-months ended March 31, 2007, other income of $1,087 was comprised
of interest income of $1,112 and miscellaneous expense of $25.
Other income of $8,469 for the nine-months ended March 31, 2008 was comprised of
interest income of $1,476, and miscellaneous income of $6,993.
For the nine-months ended March 31, 2007, other income of $5,796 was comprised
of interest income of $5,391 and miscellaneous income of $405.
Net Income/Loss before income taxes
===================================
Net income before income taxes for the three-month period ended March 31, 2008
was $37,380. For the same period in 2007 net loss before income taxes was
$914,157.
Results for the third quarter of fiscal year 2008 increased when compared to the
same period in fiscal year 2007 primarily due to higher gross profit while
Selling, General and Administrative costs were slightly higher as discussed
above.
Net income before income taxes for the nine-month period ended March 31, 2008
was $401,319. For the same period in 2007 net loss before income taxes was
$1,306,670.
16
Results for the nine-month period ended March 31, 2008 increased when compared
to the same period in 2007 primarily due to higher gross profit partly offset by
slightly higher Selling, General and Administrative costs as discussed above.
Taxes on Income
===============
The Company has provided a valuation allowance against its net deferred tax
assets as it believes that it is more likely than not that it will not realize
these tax attributes. The Company has approximately $970,000 and $180,000 of
federal and state net deferred tax assets, respectively, expiring beginning in
2012. In fiscal 2008 approximately $136,000 and $24,000 of these federal and
state net deferred tax assets, respectively, have been reduced as a result of
the net income for the nine-month period ending March 31, 2008. The valuation
allowance against these deferred tax assets has been reduced by a corresponding
amount.
Liquidity and Capital Resources
===============================
Historically, the Company's capital expenditures, debt servicing requirements
and working capital needs have been financed by cash flow from operations,
progress payments on various Government contracts (based on cost incurred) and a
line of credit of $500,000. This line of credit expired on February 28, 2007.
Starting in fiscal year 2008, the Company has changed the way it progress bills
on new contracts. The Company now attempts to negotiate payment based on
achievement of milestones rather than relying on demonstration of incurred
costs. This approach is expected to result in the Company receiving payment at
or before the time it must pay its vendors. The two new contracts described
under "Electronics Segment" above that were received early in fiscal year 2008
have been structured this way and the Company intends to continue this approach
where possible.
As of March 31, 2008 the Company had no material capital expenditure
commitments. Management believes that the Company's current cash combined with
progress and milestone payments as well as billings at the time of delivery of
products will be sufficient to support short-term liquidity requirements,
working capital needs and capital expenditures at their current or expected
levels.
At March 31, 2008, the Company's working capital was $2,486,247 compared to
$2,074,454 at June 30, 2007.
The ratio of current assets to current liabilities was 3.21 to 1 at March 31,
2008 and 3.92 to 1 at June 30, 2007.
The following table is a summary of the Statements of Cash Flows in the
Company's Condensed Financial Statements:
nine months ended March 31,
2008 2007
Net Cash provided by/(used in)
Operating activities 10,904 ($600,478)
Investing activities ($117,632) ($18,525)
Financing activities ($0) ($86,047)
Operating Activities:
Adjustments to reconcile net income/(loss) to net cash used in operations are
presented in the Statements of Cash Flows in the Company's Condensed Financial
Statements.
17
Net cash provided by operating activities for the nine-month period ended March
31, 2008 was comprised primarily of net income before depreciation and increases
in accounts payable and accrued expenses, which were partly offset by increases
in accounts receivable, contract costs and related estimated profits in excess
of billings, inventories and prepaid expense.
Net cash used in operating activities for the nine-month period ended March 31,
2007 was comprised primarily of net loss before depreciation, an increase in
contract costs and related estimated profits in excess of billings and decreases
in accounts payable which were partly offset by decreases in inventories,
accounts receivable, prepaid expenses and other current assets.
Company sponsored research and development costs are expensed as incurred.
These costs consist primarily of material and labor costs. The Company expensed
$150,388 of these costs during the nine-month period ended March 31, 2008. For
the nine-month period ended March 31, 2007, the Company expensed $68,652 of
research and development costs.
Investing Activities:
====================
During the nine-month period ended March 31, 2008, net cash of $117,632 was used
in investing activities all of which was used for capital expenditures.
During the nine-month period ended March 31, 2007, net cash of $18,525 was used
in investing activities. This amount consisted of $17,462 used for capital
expenditures, and $1,063 of deferred costs.
Financing Activities:
====================
During the nine-month period ended March 31, 2008, the Company expended no cash
on financing activities.
During the nine-month period ended March 31, 2007, net cash used in financing
activities amounted to $86,047. This amount was used toward the repayment of
the Company's term loan as described further below. As of March 31, 2008, the
Company had no long-term debt.
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 was secured by a first lien on
all of the Company's accounts receivable, machinery, equipment and other
personal property (the "Collateral") and was subject to customary
representations, covenants and default provisions in favor of the Bank. On
January 22, 2007, the Company made the final installment payment on this term
loan.
The Company also had 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 (8.25% as of
December 31, 2006) plus 0.25 percent. In February 2007, the Bank advised the
Company that the Bank would not renew the line of credit. This line of credit
is currently not vital for the Company; however the Company is endeavoring to
obtain a replacement credit facility from another lending institution.
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 68 undeveloped and unused acres of this 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".
18
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, since the Act was passed in June of 2004, the State has repeatedly
delayed promulgation of final regulations. Originally expected in 2005, they
were only recently finalized in December 2007. The Company is evaluating those
regulations and creating a plan for moving forward in its efforts to monetize
the property. There are still significant uncertainties and accordingly, no
assurances can be given that the Company's efforts will be successful or if
successful, the timing thereof.
Recent Pronouncements
=====================
In February 2007, the Financial Accounting Standards Board ("FASB"), issued
Statement of Financial Accounting Standard ("SFAS") No. 159 "The Fair Value
Option for Financial Assets and Financial Liabilities." SFAS 159 permits
entities to choose, at specified election dates, to measure eligible financial
instruments at fair value and report unrealized gains and losses on items for
which the fair value option has been elected in earnings at each subsequent
reporting date. SFAS 159 is effective for fiscal years beginning after November
15, 2007. The Company does not own any financial instruments and does not
expect this statement to have an effect on the Company's financial statements.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements".
This Statement defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles, and expands disclosures about
fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this Statement does not require
any new fair value measurements. However, for some entities, the application of
this Statement will change current practice. This Statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. In November 2007, the FASB
agreed to defer, for one year, the effective date for all non-financial assets
and liabilities, except those that are recognized or disclosed at fair value in
the financial statements on a recurring basis. The Company is currently
evaluating the impact of this Statement on its financial statements.
Company Strategy
================
The Company has many years of experience in contracting with the Department of
Defense and has been successful in obtaining many contracts to provide a wide
array of products and services. Management believes that this experience is a
significant positive competitive factor. Management is continuing to explore
other areas of business with the Department of Defense, which are capable of
providing stability and growth.
The Company is focusing its efforts on select product categories where
management believes that the Company has the best chances of successfully
growing its business. Although no assurances can be made that such a strategy
will be successful, management believes that long-term growth can best be
achieved by: 1) growing the Company's market share in areas where the Company
already has a strong presence, 2) expanding into related markets with existing
products and capabilities, and 3) further taking advantage of the Company's
strengths by expanding into related product categories.
19
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. 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 and the market for snowmaking
equipment now demands short delivery lead-times. 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. In the second
fiscal quarter of 2008 the Company revised its marketing strategy with regard to
its HEDCO snowmaking machines and has recorded a $30,000 inventory adjustment
against its finished snowmakers. This will allow the Company to price the
machines held in inventory more aggressively in the marketplace. The Company's
investments in 2kW generator and Snowcub-related inventory are an important
component of management's business strategy of growing the Company's market
share.
Despite the inherent risks and uncertainties of investing in inventory,
management believes that these investments in inventory are important because
they allow the Company to be more responsive to the needs of its customers.
The Company faces competition in many areas and from companies of various sizes,
capabilities and resources. 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. As part of its overall business
strategy, management is continuing to re-enforce customer awareness of the
Company's current and past performance as a Department of Defense supplier, its
product quality and reliability, and its historically strong customer
relationships.
The U.S. Army has changed its priorities regarding product improvements to the
2kW Generator Program (see "Electronics Segment" above). These priorities have
shifted away from long range product improvement toward less extensive, more
immediate product improvement. As a result, management has re-evaluated its
approach to the second and third strategic objectives described above. Rather
than continuing to develop new internal technologies, the Company is now
attempting to capitalize on its previous investments in technology in its
efforts to obtain business in related military power markets and to expand into
related military product categories. For additional discussion of the Company's
prior efforts at long range product improvements to the 2kW Generator Program,
see Management's Discussion and Analysis of Financial Condition and Results of
Operations -"Electronics Segment" included in the Company's 2007 Form 10-KSB.
The contract to develop and provide a 3.5kW auxiliary power unit for use on a
United States Marine Corps logistics vehicle and the subcontract to develop a
3kW enclosed generator for mounting on a United States Marine Corps battle tank
are examples of the second strategic objective, expanding into related power
markets, utilizing the Company's core expertise in light weight air cooled
diesel engine power generation. In furtherance of the third strategic
objective, expanding into related military product categories, the Company is
utilizing its experience in military-grade portable power systems under three
related customer funded research and development sub-contracts where the Company
will design and prototype electronic controls for diesel fuel cell systems (See
"Electronics Segment" above).
In the near term, a continued return to profitability is the Company's primary
objective. The two development contracts awarded in 2007, and the customer-
funded research and development contract and sub-contracts, described above
contribute to this goal. At present, the Company is not actively pursuing
opportunities for piece and component manufacturing work and other short-term
business that would utilize existing factory capacities and capabilities as
discussed in its Form 10-QSB for the period ending March 31, 2007, due to the
lack of excess capacity in the Company's factory. However, the Company may
consider pursuing such opportunities in the future. The Company is continuing to
pursue possible sub-contracting relationships with other companies and defense
contractors that leverage the Company's current expertise and technology.
20
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. 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, and valuation of
deferred tax assets and liabilities. For additional discussion of the
application of these and other accounting policies, see Management's Discussion
and Analysis of Financial Condition and Results of Operations - Critical
Accounting Policies and Note 1 of the Notes to the Financial Statements included
in the Company's 2007 Form 10-KSB.
ITEM 3. Controls and Procedures
===================================
The Company carried out, under the supervision and with the participation of the
Company's management, including the Chief Executive Officer and Treasurer, an
evaluation of the effectiveness of the design and operation of its 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. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Securities Exchange Act is accumulated and communicated to management, including
its Chief Executive Officer and Treasurer, as appropriate to allow timely
decisions regarding required disclosure. Based on this evaluation, the Chief
Executive Officer and Treasurer concluded that, as of March 31, 2008, the design
and operation of the Company's disclosure controls and procedures were
effective.
Nonetheless, a control system, no matter how well designed and operated, cannot
provide absolute assurance that the objectives of the control system are met,
and no evaluation of controls can provide absolute assurance that all control
issues have been detected.
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.
21
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-QSB.
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
Date: May 13, 2008 /s/ John H.D. Dewey
John H.D. Dewey
President and Chief Executive Officer
Date: May 13, 2008 /s/ Stephen P. Krill
Stephen P. Krill, Treasurer
22
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-B.
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
23