SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1998
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-2892
THE DEWEY ELECTRONICS CORPORATION
(Exact name of registrant as specified in charter)
NEW YORK 13-1803974
(State of Incorporation) (I.R.S. Employer Identification No.)
27 Muller Road, Oakland, New Jersey 07436
(Address of principal executive offices) Zip Code
201-337-4700
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $.01 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X
No ___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form l0-K.
The aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant, computed by reference to the price at
which the common stock was sold as of the close of business on August 28,
1998: $508,621.
The number of shares outstanding of the registrant's common stock, $.01 par
value was 1,339,531 at August 28, 1998.
THE DEWEY ELECTRONICS CORPORATION
TABLE OF CONTENTS
PART I
Item Page
1. Business 1
2. Properties 3
3. Legal Proceedings 3
4. Submission of Matters to a Vote of Security Holders 3
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters 4
6. Selected Financial Data 5
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
8. Financial Statements and Supplementary Data 12
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 27
PART III
10. Directors and Executive Officers of the Registrant 27
11. Executive Compensation 27
12. Security Ownership of Certain Beneficial Owners and
Management 27
13. Certain Relationships and Related Transactions 27
PART IV
14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 28
PART I
Item 1. BUSINESS
The Dewey Electronics Corporation (herein referred to as the "Company") was
incorporated in the State of New York in 1955. It is a systems oriented
military electronics development, design and manufacturing organization based
in Oakland, New Jersey. The Company has two industry segments: electronics,
and leisure and recreation.
In the electronics segment, the Company produces sophisticated electronics
and electromechanical systems for the U.S. military.
In the leisure and recreation segment, the Company, through its HEDCO
division, designs, manufactures and markets advanced, sophisticated
snowmaking equipment.
The sales and operating profit of each industry segment and the identifiable
assets attributed to each segment for the last three fiscal years ended
June 30, 1998 are set forth in Note M ("Information About the Company's
Operations in Different Industries") of the Notes to Financial
Statements.
During the last three fiscal years, there have been no material expenditures
for Company-sponsored or customer-sponsored research and development
activities.
Compliance with Federal, State and local environmental provisions has had
no material effect upon capital expenditures, earnings or the competitive
position of the Company. In addition, there are no material capital
expenditures anticipated for environmental control facilities.
As of August 31, 1998, the Company had a work force of 26 employees, of
whom 9 were technical or professional personnel. Last year at the same
date, the work force included 22 employees, of whom 8 were technical or
professional personnel. The increase is the result of
the resumption of production efforts in the electronics segment of
business. Fluctuations in the work force may also result from the seasonal
nature of the leisure and recreation segment of business.
ELECTRONICS SEGMENT
This segment of business accounted for 86% of total revenues in fiscal year
1998, 74% of total revenues in fiscal 1997 and 85% of total revenues in
fiscal 1996.
In recent years, most of the Company's electronics segment products have
been manufactured, either as prime contractor or subcontractor, for the U.S.
Navy. With the completion of performance of the Company's contracts under
the Navy's ADCAP torpedo program, most electronics segment revenues now
arise from performance of work for the U.S. Army under a tactical
generator set contract awarded in August 1996.
1
The Company has continued to pursue both long-term and short-term awards
from various Government agencies and related business sectors in its areas
of electronic and mechanical expertise. The Company, however, is bidding for
such contracts in competition with other companies, including other small
firms as well as Fortune 500 companies, in a time of diminished and less
predictable military spending.
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.
For the most part, working capital requirements for the electronics segment
of business are funded by progress payments provided by the Government.
All of the Company's contracts with the Government are subject to the
standard provision for termination at the convenience of the Government.
Although raw materials are generally available from a number of suppliers,
the Company is at times dependent upon a specific supplier or a limited
number of suppliers of material for a particular contract and has
occasionally experienced some delays in deliveries. Such delays
have not had a material effect on operations, however the Company cannot
provide any assurances that future delays, if any, will not have a material
adverse effect.
Reference is made to Item 7 ("Management's Discussion and Analysis of
Financial Condition and Results of Operations") for additional information
regarding this segment.
LEISURE AND RECREATION SEGMENT
The leisure and recreation segment of business accounted for 14% of the
Company's revenues in fiscal 1998, 26% of the Company's revenues in fiscal
1997 and 15% of the Company's revenues in fiscal 1996.
Snowmaking equipment is sold to ski areas as original equipment or as
replacement for existing equipment. Such equipment is sold under a sales
contract that provides for a substantial down payment and retention of a
security interest in the equipment until full payment is received. Most
snowmaking equipment is paid for in full at delivery to the customer.
Typically, in other cases, full payment is made within one year. The Company
has not experienced any losses due to resale of the equipment following
default by customers. The Company services the equipment at the purchaser's
expense after a warranty period that expires at the end of the snowmaking
season in which the sale occurs.
The Company has sold snowmaking equipment to over three hundred different
locations in the United States and abroad. Marketing is done by the
Company's employees in the domestic market and by distributors and
representatives in foreign markets. In fiscal 1998, all revenues
were from domestic sales.
2
Orders for snowmaking equipment have normally been received during the first
and fourth quarters of the fiscal year, though this pattern has been
changing. For the most part shipments are made and revenues recorded
during the second quarter. Production usually takes place in
the first and second quarters and it is during this period that inventory
is generated and working capital demands are the greatest.
While there may be some temporary delays, problems regarding source and
availability of raw materials have had no material adverse effect on
operations of this segment.
Reference is made to Item 7 ("Management's Discussion and Analysis of
Financial Condition and Results of Operations") for additional information
regarding this segment.
Item 2. PROPERTIES
The Company's 49,200 square foot facility at 27 Muller Road, Oakland, New
Jersey, located on 90 acres of land owned by the Company, was constructed
in 1981. This facility houses executive offices and manufacturing
operations and is used primarily for the electronics segment of business.
Approximately 90% of this facility is being utilized for production (one
shift), staging and storage.
Under the terms of a mortgage note to Sovereign Bank described in Item 7
("Management's Discussion and Analysis of Financial Condition and Results
of Operations") both the land and building are subject to the lien of a
mortgage securing indebtedness in the original principal
amount of $2,300,000. The Company also has a line of credit with the
Bank, under which the Company may borrow up to an additional $500,000
that would be secured by a lien on substantially all of the Company's'
machinery, equipment and other personal property.
Item 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
3
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded over-the-counter under the symbol
"DEWY".
The table below sets forth the high and low market prices of the Company's
common stock for each quarter during the last two fiscal years.
Quarterly Common Stock Price Range
Fiscal Year 1998 Fiscal Year 1997
Quarter High Low High Low
lst $.875 $.8125 $.875 $.75
2nd 1.00 .8125 .9375 .75
3rd .875 .6875 .75 .625
4th .71875 .625 .9375 .625
Price information is based on over-the-counter market quotations, which
reflect inter-dealer prices, without retail mark-up, mark-down or commissions,
and may not necessarily represent actual transactions.
There were no dividends declared or paid during the fiscal years 1998 and
1997. The Corporation has no plans to pay dividends in the foreseeable
future.
The number of holders of record of the Company's common stock as of August
28, 1998 was 847.
4
Item 6. Selected Financial Data
(In thousands of dollars except per share amounts)
Year ended June 30,
1998 1997 1996 1995 1994
Revenues $ 2,325 $3,828 $4,595 $6,692 $8,473
(Loss)/Earnings
before income taxes,
cumulative effect
of accounting change
and extraordinary gain $ (748) $(154) $ 409 $ 179 $198(2)
Net (loss)/earnings $ (447) $ 7(1) $ 244 $ 107 $821(3)
Net (loss)/earnings per
share-basic and diluted $(.33) $ .01 $ .18 $ .08 $ .61
Cash dividends per
common share -- -- -- -- --
Total assets $ 4,713 $ 4,645 $5,372 $5,555 $6,417
Long-term obligations $ 2,420 $ 1,780 $2,289 $2,614 $3,365
Working capital $ 1,443 $ 1,508 $1,879 $1,770 $2,310
Stockholders' equity $ 788 $ 1,235 $1,227 $ 983 $ 876
(1) In fiscal 1997, net earnings were increased by an extraordinary gain of
$100 net of income taxes.
(2) Fiscal year 1994 includes temporary expropriation expense of $100.
(3) In fiscal 1994, income was increased by $703 as a result of adopting
Statement of Financial Accounting Standards (SFAS) No. 109.
5
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Financial Data" and the Company's Financial Statements, including the related
notes thereto, appearing elsewhere in this Annual Report. The discussion
contains certain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that should be read in
conjunction with the cautionary statements appearing under "Current Business
Environment" and elsewhere in this discussion.
The sales and operating profit of each industry segment and the identifiable
assets attributed to each segment for the last three fiscal years ended
June 30, 1998 are set forth in Note M ("Information About the Company's
Operations in Different Industries") of the Notes to Financial Statements.
Revenues
Revenues for fiscal year 1998 were 39% lower than those for fiscal year 1997
and 49% lower then revenues for 1996. This decline in revenues represents
a lower level of activity in both the electronics segment and the leisure
and recreation segment of business.
Deliveries under the U.S. Army's 2kW tactical generator set program provided
40% of electronics segment revenues in fiscal year 1998. Production efforts
under this program began later than originally anticipated. The Company's
contract with the U.S. Army contemplated five annual production orders,
the first of which was received in May 1997 and supplemented in
June 1997 with deliveries scheduled to begin in March 1998. As a result of
engineering changes initiated by the Company and approved by the U.S. Army,
deliveries under the first production order were rescheduled and are
anticipated to begin in November 1998. Though the second production order,
expected in June 1998, had not been placed, the Company anticipates that
the U.S. Army will continue to place orders for the 2kW tactical generator
sets. However, no assurances can be given that the U.S. Army will do so.
Orders not yet received are not reflected in the June 30, 1998 backlog
figure given below.
The Company's contracts under the U.S. Navy's MK48 ADCAP torpedo program
accounted for 11% of fiscal year 1998 electronic segment revenues but have
been substantially completed. Final deliveries are now being made
following the receipt of a contract modification from the Navy.
The other 49% of electronic product revenues was from various orders, more
limited in scope and duration, that were generally for replacement parts
for previously supplied Department of Defense equipment and other projects
performed as a subcontractor. A large part of such other revenues continued
to be attributable to the Company's Pitometer Log Division, which
manufactures speed and distance measuring instrumentation for the Navy.
6
In fiscal year 1997, the tactical generator set program provided 49% of
electronic product revenues and production efforts under the Navy's ADCAP
Torpedo program provided 19%. In fiscal year 1996, the ADCAP program
accounted for 74% of such revenues. Remaining electronics segment revenues
in each of such years were derived from various orders, limited in scope
and duration, for the Department of Defense and related replacement
equipment.
The aggregate value of the Company's backlog of electronic products not
previously recorded as revenues was $4 million on June 30, 1998, almost all of
it is attributable to the first production order for tactical generator sets,
$4 million on June 30, 1997 and $1 million on June 30, 1996. It is
estimated that the present backlog will be shipped during the next 12 months
and recognized as fiscal year 1999 revenues.
In the leisure and recreation segment, revenues for fiscal years 1998, 1997
and 1996 amounted to approximately $329,000, $987,000 and $670,000
respectively. There were no export sales of snowmaking machinery in fiscal
year 1998. In both fiscal years 1997 and 1996 export sales of snowmaking
machines were approximately $92,000. Competition in foreign
markets remains much stronger than in the domestic market. The Company is
continuing its efforts to increase its market share by utilizing different
marketing strategies by region.
There was no backlog of orders for snowmaking equipment as of June 30, 1998.
During the first quarter of fiscal year 1999, orders have been received
which amount to approximately $150,000 and more orders are anticipated as
the season approaches. There was no backlog of orders for snowmaking
equipment as of June 30, 1997 and approximately $156,000 of orders
backlogged on June 30, 1996.
Gross Profit
Gross Profit was 12% in fiscal year 1998, 26% in fiscal year 1997 and 37%
in fiscal year 1996.
In the electronics segment, gross profit was lowered to 10% as a result of
delayed production under the tactical generator program with the U.S.
Army. Fiscal year 1997 was favorably affected by approximately $343,000
following contract review of operations in prior years, which resulted in
29% gross profit. In fiscal year 1996, gross profit had increased to 43%
due to favorable results of the completion of the ADCAP torpedo program.
Selling, General and Administrative Expenses
In fiscal year 1998 selling, general and administrative expenses amounted
to $827,776 (35% of revenues). In 1997 they amounted to $938,366 (24% of
revenues) and $1,070,659 (23% of revenues) in fiscal year 1996.
7
Interest Expense
Interest expense for the last three fiscal years was: $212,738 in 1998,
$218,682 in 1997 and $262,905 in 1996.
Under borrowing arrangements with Sovereign Bank effective September 18,
1997 the interest rate is 8.25%, replacing Company borrowings which were
at 9%. Interest payments made to Sovereign Bank constitute essentially all
of the Company's interest expense.
Other Income-Net
For fiscal year 1998, other income is the result of interest income of
$6,827 and income from miscellaneous and scrap sales of $14,045.
Other income for fiscal year 1997 was the net effect of interest income of
$11,159 which was offset by scrap sales and miscellaneous expenses of $3,414.
Fiscal year 1996 other income resulted from interest income of $8,679 and
income from miscellaneous sales of $20,376, net of a prorated portion
($8,072) of a bank financing fee.
Income Taxes
Federal income tax asset net operating loss carryforwards arise mainly from
prior years' losses and temporary differences between financial and taxable
income.
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and (b)
operating loss carryforwards.
The tax benefit/(provisions) for the fiscal years ended June 30, 1998, 1997,
and 1996 were at an effective rate of 40%.
Extraordinary Gain
During the fourth quarter of the fiscal year ended June 30, 1997, the
Company and its then principal lender Fleet Bank agreed in principle that
the Company would prepay its indebtedness to Fleet upon negotiating
financing arrangements with a new long-term lender (see below). It
was determined that financing fees in the amount of $166,832 previously
recorded as Other Expense would not be due and such amount, less applicable
income taxes of $67,150, was treated as an extraordinary gain of $99,682.
Changing Prices
Price changes and inflation did not have a material effect on operations
over the last three years.
8
Liquidity and Capital Resources
The Company's working capital was $1,443,538 at June 30, 1998 and
$1,508,075 at June 30, 1997.
Contract costs and related estimated profits in excess of applicable
billings was reduced by $77,587 by billings which are reflected in the
increase in accounts receivable of $92,056.
The ratio of current assets to current liabilities was 2.00 to 1 at June
30, 1998 and 1.96 to 1 at June 30, 1997.
In fiscal year 1998, operating activities used $613,007 in net cash flow,
expenditures for property, plant and equipment used $17,490 and financing
activities provided $446,888. As a result, cash and cash equivalents
decreased by $183,609.
In fiscal year 1997, operating activities provided net cash flow of
$752,620. Expenditures for plant and equipment used $15,903 and long
term debt was reduced by $507,061. These activities resulted in a net
increase in cash and cash equivalents of $229,656.
In fiscal year 1996, operating activities used net cash of $42,406,
expenditures for plant and equipment used $124,897 and $322,609 was used in
payment of long term debt. These activities resulted in a net reduction in
cash and cash equivalents of $489,912.
The Company continues to meet its short term liquidity needs arising out
of electronic product operations through a combination of progress payments
on government contracts (based on costs incurred) and billings at the time
of delivery of products.
On a long-term basis, the Company's liquidity will depend upon its ability
to maintain adequate borrowing arrangements with lenders. On September 18,
1997, the Company entered into borrowing arrangements with Sovereign Bank
(the "Bank") under which:
- - The Company borrowed $2,300,000 at an interest rate of 8.25% per annum,
repayable in monthly installments of approximately $20,000 with a final
maturity in year 2002, evidenced by delivery of a mortgage note payable to
the Bank (the "Mortgage Note").
- - The Bank agreed to provide up to an additional $500,000 under a line-of-
credit agreement, to be evidenced by promissory notes bearing interest at
a rate 3/4 of 1% over prime that will become due and payable on October 31,
1998. At the Bank's discretion, this line of credit may be renewed.
The Mortgage Note is secured by a first mortgage on all of the Company's
land and its building. Borrowings under the line-of-credit arrangement
are secured by a first lien on all of the Company's machinery, equipment
and other personal property.
9
Approximately $1,900,000 of the proceeds from the issuance of the Mortgage
Note was applied to the prepayment in full of the outstanding balances due
from the Company to Fleet Bank under its secured term loan agreement with
the Company and to New Jersey Economic Development Authority under a
mortgage note. The interest rate on the prepaid indebtedness was 9% per
annum. The prepaid indebtedness was secured by liens on virtually all
of the Company's real and personal property. Under the former term loan
agreement, the Company was subject to numerous affirmative and negative
covenants containing working capital, net worth and other financial tests.
The new borrowing arrangements with the Bank contain no such financial
test covenants.
The Company had no material commitments for capital expenditures as of the
end of the 1998 fiscal year.
The Company owns approximately 90 acres of land and the building it
occupies in Bergen County, New Jersey, which are carried on its books at
approximately $800,000 but which are believed to have a fair market value
in excess of this amount. This property is adjacent to a full
interchange of Interstate Route 287. Management continues to investigate
possible uses of this property which would be favorable to the Company's
stockholders' equity.
Current Business Environment
The two areas in which the Company operates are marked by intense
competition -including competition from firms with greater financial
resources and by unpredictability of customer requirements. Defense
contract suppliers are dependent on legislative and administrative
allocations of funds in a time of less predictable defense spending.
Ski area operations continually face weather conditions and other
uncertainties that impact their capital expenditive programs.
Most of the Company's revenues are derived from its electronic product
segment. This segment of operations is comprised of business with the
Department of Defense of the Federal Government or with other government
contractors. Short term business which is primarily for replacement parts
continues to remain at relatively stable levels. Long term contracts
with the Department of Defense have provided most of such revenues.
The Company has been directing its strategy to bid on projects which are
more likely to be funded by the government and more resistant to budget
cuts. The ADCAP torpedo program with the U.S. Navy had, in prior years,
provided all of the Company's revenues from long term
contracts. In fiscal 1997 the Company entered into a contract with the
U.S. Army to manufacture tactical generator sets. The contract with the
U.S. Army consists of a five year program with the Army placing orders
each year, based on a predetermined estimated quantity. It is expected
that the tactical generator program will continue to be considered
necessary to national defense and provide a steady workflow, but no
assurance can be given that the U.S. Army, or any other customer, will
continue this program. The Company continues to explore areas of
business which will provide continued stability and growth.
10
Electronic product revenues are determined by the percentage of completion
method of accounting. The use of estimates to complete projects is
required under this accounting method. These estimates are reviewed by
management on an ongoing basis and are adjusted when necessary in the
opinion of management. No significant adjustments are anticipated to
be made to current estimates, but changes in contract requirements and the
efforts needed to meet such changes are normal events in the defense
electronics industry.
Leisure and Recreation Products
The Company has experienced the impact of competitive pressures and a
reallocation of funds by the ski areas. The Company has increased its
marketing efforts to gain more exposure within the industry. Cost
reduction efforts had a positive impact on the last fiscal year's results
and the Company is seeking to maximize the benefits of more economic
operating costs along with a more intense marketing campaign.
Properties
The Company has for some time been exploring alternative methods of
increasing its shareholders' equity by realizing the value of its 90 acres
of land and building situated thereon, such as the sale of some or all of
the property, a sale/lease-back arrangement or long-term financing.
The northern New Jersey real estate market has not been favorable for such a
transaction in recent year's and no assurance can be given that any
transaction will occur.
Year 2000
The Company, as a prime contractor for the U.S. Government is required to
maintain precise records for job costing as well as provide timely and
accurate information. It is subject to periodic audits by government
agencies of its systems and controls. The Company has never had any
difficulty in meeting government requirements. However, the intrinsic
problems inherent in the year 2000 issue could be severely detrimental to
the Company as with any other company, particularly in this type of business.
In November 1996, the Company hired an outside service to upgrade hardware
and make modification to its software. In conjunction with this effort,
the Company's main programs have become Year 2000 compliant. The Company
is continuing to work with its supplier base to access the Year 2000 status
of vendors who provide critical materials and services. Sufficient
information has not yet been received from vendors to confirm their
preparedness for Year 2000. The Company has not yet been able to determine
whether any critical vendor will be able to meet Year 2000 requirements.
11
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Page
Independent Auditors' Report 13
Financial Statements:
Balance Sheets, June 30, 1998 and 1997 14
Statements of Earnings, Years Ended June 30, 1998,
1997 and 1996 15
Statements of Stockholders' Equity, Years Ended June
30, 1998, 1997 and 1996 15
Statements of Cash Flows, Years Ended June 30, 1998
1997 and 1996 16
Notes to Financial Statements 17
12
Independent Auditors' Report
Board of Directors of
The Dewey Electronics Corporation
Oakland, New Jersey
We have audited the accompanying balance sheets of The Dewey Electronics
Corporation as of June 30, 1998 and 1997, and the related statements of
earnings, stockholders' equity and cash flows for each of the three years
in the period ended June 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Dewey Electronics
Corporation at June 30, 1998 and 1997 and the results of its operations and
its cash flows for each of the three years in the period ended June
30, 1998 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
September 4, 1998
Parsippany, New Jersey
13
Balance Sheets
June 30,
1998 1997
ASSETS:
CURRENT ASSETS:
Cash $ 134,449 $ 318,058
Accounts receivable (includes U.S.
Government receivables of approximately
$304,500 in 1998 and $159,000 in 1997)
less allowance for doubtful accounts
of $28,571 at 1998 and $8,571 at 1997 449,534 377,478
Inventories 1,050,027 1,057,338
Contract costs and related estimated
profits in excess of billings 1,193,520 1,271,107
Prepaid expenses and other current assets 60,556 52,032
TOTAL CURRENT ASSETS 2,888,086 3,076,013
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 513,161 513,161
Building and improvements 1,799,383 1,799,383
Machinery and equipment 2,330,301 2,314,608
Furniture and fixtures 147,512 147,512
4,790,357 4,774,664
Less accumulated depreciation
and amortization 3,826,425 3,689,404
963,932 1,085,260
DEFERRED TAX ASSET 722,308 421,280
OTHER NON-CURRENT ASSETS 138,876 62,666
TOTAL ASSETS $4,713,202 $4,645,219
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 181,525 $ 116,082
Accrued expenses and other liabilities 251,988 291,611
Pension costs accrued 159,639 116,033
Billings in excess of contract costs and
related estimated profits 701,608 701,608
Current portion of long-term debt 149,788 342,604
TOTAL CURRENT LIABILITIES 1,444,548 1,567,938
LONG-TERM DEBT 2,219,746 1,580,042
OTHER LONG-TERM LIABILITIES 61,172 62,699
DUE TO RELATED PARTY 200,000 200,000
COMMITMENTS AND CONTINGENCIES (Note E)
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1.00;
authorized 250,000 shares, issued
and outstanding, none -- --
Common stock, par value $.01; authorized
3,000,000 shares; issued and
outstanding 1,693,397 in 1998 and 1997 16,934 16,934
Paid-in capital 2,835,307 2,835,307
Accumulated deficit (1,544,408) (1,097,604)
1,307,833 1,754,637
Less: Treasury stock, 353,866 shares
in 1998 and 1997, at cost 520,097 520,097
787,736 1,234,540
TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $4,713,202 $4,645,219
See notes to financial statements
14
Statements of Earnings
Years ended June 30,
1998 1997 1996
Revenues $2,324,597 $3,828,417 $4,594,993
Cost of revenues 2,052,787 2,833,849 2,875,201
Gross profit 271,810 994,568 1,719,792
Selling, general and
administrative expenses 827,776 938,366 1,070,659
Operating (loss)/profit (555,966) 56,202 649,133
Interest expense (212,738) (218,682) (262,905)
Other income - Net 20,872 7,745 22,408
(Loss)/Earnings before income
taxes and extraordinary gain (747,832) (154,735) 408,636
Income tax benefit/(provision) 301,028 62,281 (164,490)
(Loss)/Earnings before
extraordinary gain (446,804) (92,454) 244,146
Extraordinary gain (Net of income
taxes of $67,150) -- 99,682 --
NET (LOSS)/EARNINGS $(446,804) $ 7,228 $244,146
NET (LOSS) EARNINGS PER COMMON
SHARE BASIC AND DILUTED
(Loss)/Earnings before
extraordinary item $(.33) $ (0.06) $ 0.18
Extraordinary gain -- 0.07 --
NET (LOSS) EARNINGS PER COMMON
SHARE BASIC AND DILUTED $(.33) $ 0.01 $ 0.18
Statements of Stockholders' Equity
Treasury stock
Common Stock at cost
Paid-in Accumulated
Shares Amount capital (Deficit) Shares Amount
Balance, June
30, 1995 1,693,397 $16,934 $2,835,307 $(1,348,978) 353,866 $520,097
Net Earnings -- -- -- 244,146 -- --
Balance, June
30, 1996 1,693,397 16,934 2,835,307 (1,104,832) 353,866 520,097
Net Earnings -- -- -- 7,228 -- --
Balance, June
30, 1997 1,693,397 16,934 2,835,307 (1,097,604) 353,866 520,097
Net Loss -- -- -- (446,804) -- --
Balance, June
30, 1998 1,693,397 $16,934 $2,835,307 $(1,544,408) 353,866 $520,097
See notes to financial statements
15
Statements of Cash Flows
Years ended June 30,
1998 1997 1996
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net (Loss)/Earnings $(446,804) $7,228 $244,146
Adjustments to reconcile net
earnings to net cash
provided by operating
activities:
Depreciation 138,818 133,302 125,479
Amortization 7,432 2,210 4,043
Deferred financing costs -- 8,072 8,072
(Increase)/Decrease in
accounts receivable (92,056) 643,197 (523,046)
Increase in allowance for
doubtful accounts 20,000 -- --
Decrease/(Increase) in
Inventories 7,311 358,825 (65,760)
Decrease/(Increase) in contract
costs and related estimated
profits in excess of applicable
billings 77,587 (159,140) 76,222
Decrease in billings in excess
of contract costs and related
estimated profits -- -- (343,606)
(Increase)/Decrease in prepaid
expenses and other current
assets (8,524) (32,127) 35,686
(Increase)/Decrease in other
noncurrent assets (83,642) 25,000 --
(Increase)/Decrease in
deferred tax asset (301,028) 4,869 165,043
Increase/(Decrease) in
accounts payable 65,443 (254,725) 101,699
(Decrease)/Increase in accrued
expenses and other
liabilities (39,623) 8,707 99,616
Increase/(Decrease) in pension
costs accrued 43,606 25,536 10,139
(Decrease)/Increase other long
term liabilities (1,527) (18,334) 19,861
Total adjustments (166,203) 745,392 (286,552)
Net cash (used in)/provided
by operating activities (613,007) 752,620 (42,406)
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property,
plant and equipment (17,490) (15,903) (124,897)
Net cash used in investing
activities (17,490) (15,903) (124,897)
CASH PROVIDED BY/(USED IN)
FINANCING ACTIVITIES:
Payment of long-term debt (1,953,112) (507,061) (322,609)
Proceeds from long term
borrowings 2,300,000 -- --
Proceeds from short term
borrowings 100,000 -- --
Net cash provided by/(used
in) financing activities 446,888 (507,061) (322,609)
NET (DECREASE)/INCREASE IN
CASH (183,609) 229,656 (489,912)
CASH - BEGINNING OF YEAR 318,058 88,402 578,314
CASH - END OF YEAR $134,449 $318,058 $88,402
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash (paid)/received during
the year for:
Interest (paid) $(200,587) $(233,458) $(246,594)
Interest received $6,827 $11,159 $ 8,679
See notes to financial statements
16
Notes to Financial Statements
Years ended June 30, 1998, 1997, and 1996
A. Summary of Significant Accounting Policies
1. Government Contract Accounting (Electronics)
Revenues and estimated earnings under defense contracts are recorded
using the percentage-of-completion method of accounting, measured as the
percentage of costs incurred to estimated total costs for each contract.
Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are determined. Changes in job performance,
job conditions, and estimated profitability may result in revisions to
costs and income and are recognized in the period in which the revisions are
determined. An amount equal to contract costs and estimated profit
(limited to estimated net realizable value) attributable to claims is
included in revenue when realization is probable and the amount can be
reasonably estimated. Claims settled in excess of recorded amounts
are recognized as collected. During fiscal year 1996, the Company
recorded $343,000 of income related to the settlement of a government
contract.
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.
2. Leisure and recreation
Revenues and earnings are recorded when deliveries are made.
3. 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.
4. Fair value of financial instruments
Due to the short term nature of accounts receivable and accounts payable,
their carrying value is a reasonable estimate of fair value.
5. Inventories
Inventories are valued at the lower of cost (first-in, first-out method)
or market. Components of cost include materials, direct labor and factory
overhead.
17
6. Use of Estimates
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues and expenses.
Such estimates primarily relate to unsettled transactions and events as of
the date of the financial statements. Accordingly, upon settlement,
actual results may differ from estimated amounts.
7. Property, plant and equipment
Property, plant and equipment are stated at cost. Allowance for
depreciation and amortization 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.
Whenever events indicate that the carrying values of Long-Lived assets
may not be recoverable, the Company evaluates the carrying values of such
assets using future undiscounted cash flows. Management believes that, as
of June 30, 1998, the carrying values of such assets are appropriate.
B. Inventories
Inventories consist of:
June 30,
1998 1997
Finished goods $458,104 $219,890
Work in progress 159,757 344,032
Raw materials 432.166 493,416
$1,050,027 $1,057,338
C. Costs and Estimated Earnings on Uncompleted Contracts
June 30,
1998 1997
Costs incurred on
contracts in progress $58,108,478 $57,118,035
Estimated contract
profit 10,667,703 10,752,272
68,776,181 67,870,307
Less: billings to date 68,284,269 67,300,808
$491,912 $569,499
18
Included in the accompanying balance sheets under the following captions:
June 30,
1998 1997
Contract costs and related
estimated profits in excess of
applicable billings $1,193,520 $1,271,107
Billings in excess of contract
costs and related estimated
profits (701,608) (701,608)
$491,912 $569,499
D. Stock Option Plan
The Company's stock option plan, which expired in June 1998, authorized the
granting of options to various executives and key employees to purchase
shares of common stock. Such options were granted at fair market value of
the stock on the date of grant and were exercisable over a five-year period.
The changes in the number of shares under option are as follows:
Number
of Exercise
Shares Price
Balance, June 30, 1996 and 1997 15,000 $.9375
Expired 15,000 $.9375
Exercisable at June 30, 1998 --
The Company applies Accounting Principles Board (APB) Opinion 25 and related
interpretations in accounting for the Plan. Accordingly, no compensation
cost had been recognized for the Plan. Had compensation cost for the Plan
been determined consistent with Statement of Financial Accounting Standards
No. 123 "Accounting for Stock-Based Compensation" (SFAS 123), it would not
have materially impacted the financial statements for 1998, 1997 and 1996,
respectively.
E. Commitments and Contingencies
The Company leases certain machinery, and equipment which have been
classified as operating leases. Future minimum commitments as of June 30,
1998 are as follows:
1999 $6,903
2000 1,800
2001 --
$8,703
Total net rent expense was $1,950, $12,837, and $97,572, for each of the
years ended June 30, 1998, 1997 and 1996, respectively.
19
F. Long-Term Debt
June 30,
1998 1997
Long-term debt at June 30, consists of:
8.25% Mortgage Note payable to
Sovereign Bank due in monthly
installments of approximately
$20,000 with a final maturity
in year 2002. $2,269,534
Line of credit agreement at
interest rate of .75% over
prime due and payable on
October 31, 1998. Total
available credit $500,000 $100,000
9% mortgage note payable to
New Jersey Economic Development
Authority, due through 2000,
due in monthly installments of
$12,461 including interest,
collateralized by the Company's
office building and
plant. $363,046
9% Term loan payable to Fleet Bank
due in monthly installments of
$18,400 plus interest. -- 1,559,600
2,369,534 1,922.646
Less current portion 149,788 342,604
$2,219,746 $1,580,042
On September 18, 1997, the Company entered into an agreement with Sovereign
Bank, under which Sovereign Bank loaned the Company $2,300,000 against
delivery of a mortgage note payable at the rate of 8.25%. The proceeds of
the loan were used to replace all outstanding indebtedness to Fleet Bank and
the New Jersey Economic Development Authority and for working capital.
The Bank also agreed to provide up to an additional $500,000 under a line-
of-credit agreement, to be evidenced by promissory notes bearing interest
at a rate 3/4 of 1% over prime that will become due and payable on October
31, 1998. At the Bank's discretion, this line of credit may be renewed.
The Mortgage Note is secured by a first mortgage on all of the Company's
land and its building. Borrowings under the line-of-credit arrangement are
secured by a first lien on all of the Company's machinery, equipment and
other personal property. This borrowing arrangement with the bank
contains no financial test covenants.
Aggregate annual principal payments applicable to long-term debt for the
years subsequent to June 30, 1998, based on the mortgage loan agreement in
place at June 30, 1998 are:
1999 $ 149,788
2000 54,055
2001 56,100
2002 2,109,591
$2,369,534
Management has evaluated its indebtedness and has determined based on
interest rates and related terms that the fair value of such debt
approximates it carrying value.
20
G. Taxes on Income
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes,
and b) operating loss and tax credit carryforwards.
Federal income tax net operating loss carryforwards mainly arise from
temporary differences between financial and taxable income. The Company's
net operating loss ("NOL") carryforwards for tax purposes were $1,385,000
at June 30, 1998 and are scheduled to expire in the year 2008.
The Company believes that it is more likely than not that the NOL
carryforwards will be utilized prior to their expiration. This belief is
based upon the expectation that the Company's real property, or a portion
thereof, will generate income prior to the expiration of the loss
carryforwards in an amount at least sufficient to realize the deferred
tax benefit.
The provision for income taxes is summarized as follows:
Years Ended June 30,
1998 1997 1996
Deferred
Federal $(230,171) $3,723 $125,772
State (70,857) 1,146 38,718
$(301,028) $4,869 $164,490
The provision (benefit) for income taxes allocated between continuing
operations and extraordinary items as summarized below:
Years Ended June 30,
1998 1997 1996
Continuing operations $(301,028) $(62,281) $164,490
Extraordinary items -- 67,150 --
Total $(301,028)$ 4,869 $164,490
The following is a reconciliation of income taxes at the federal statutory
rate and the Company's effective income tax rate:
Years ended June 30,
1998 1997 1996
Statutory Federal Income tax
Rate 34% 34% 34%
State taxes, net of federal
income tax benefit 6 6 6
Effective income tax rate 40% 40% 40%
21
Deferred tax assets and liabilities as of June 30, 1998 and June 30, 1997
consisted of the following:
1998 1997
Deferred tax assets:
Net operating loss carryforward $855,522 $557,172
Vacation accrual 26,802 28,274
$882,324 $585,446
Deferred tax liabilities:
Depreciation $133,214 $135,892
Deferred contract income 67,860 67,860
$201,074 $203,752
H. Pension Plan
The Company has a non-contributory defined benefit retirement plan covering
all its employees. The plan is qualified under the Internal Revenue Code.
The method of determining the accrued benefit of an employee is the amount
equal to .8% of an employee's average monthly salary times the number of
years employed by the Company, to a maximum of 35 years. The Company's
policy is to contribute the amounts allowable under Internal
Revenue Service regulations. The plan assets are invested primarily in a
fixed income investment account.
Net pension expense consists of the following:
Years ended June 30,
1998 1997 1996
Service cost $19,281 $24,089 $29,721
Interest cost on projected
benefit obligations 46,438 48,588 47,195
Actual return on assets (22,722) (28,783) (28,913)
Net amortization and
deferrals 17,366 17,676 20,489
Net pension expense $60,363 $61,570 $68,492
In both 1998 and 1997, the Company recorded its minimum pension liability
as an other long term liability and a corresponding intangible asset
included in other non-current assets. The funded status of the plan and
the amount recognized on the balance sheet are as follows:
22
June 30,
1998 1997
Actuarial present value of benefit
obligations:
Accumulated benefit obligation
(including vested benefits of
$595,359 and $501,014 as of
June 30, 1998 and 1997,
respectively) $625,731 $504,906
Projected benefit obligation $681,502 $576,129
Plan assets at fair value,
consisting of investments
held in a fixed income
investment account 408,893 350,665
Projected benefit obligation in
excess of plan assets 272,609 225,464
Unrecognized net gain/(loss) (18,937) 28,527
Unrecognized net obligation (57,839) (72,299)
Prior service cost not yet
recognized in net periodic
pension cost (36,637) (43,965)
Adjustment required to recognize
minimum liability 57,642 16,514
Accrued pension cost $216,838 154,241
1998 1997
Expected long-term rate of return
on plan assets 8.0% 8.0%
Discount rate 7.5% 7.5%
Salary increase 2.5% 3.0%
I. (Loss) Earnings Per Share
Effective June 30, 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share," which replaces
primary and fully diluted earnings per share calculated under Accounting
Principles Board Opinion No. 15, "Earnings per Share," with basic and
diluted earnings per share. Basic (loss) earnings per share is
computed by dividing net (loss) income by the weighted-average number of
common shares outstanding. Diluted (loss) earnings per share is computed
by dividing net (loss) income by the weighted-average number of common and
common equivalent shares outstanding adjusted for the dilutive effect of
stock options (unless such common stock equivalents would be anti-dilutive),
and the computation of diluted (loss) earnings per share assumes the
exercise of stock options using the treasury stock method.
All per share amounts presented herein have been calculated in accordance
with the provisions of SFAS No. 128. The number of shares used in the
computation of earnings per share was 1,339,531 in each of the years ended
June 30, 1998, 1997 and 1996. Since the computation of diluted (loss)
earnings per share is anti-dilutive, the amounts reported for
basic and diluted (loss) earnings per share are the same.
23
J. Related Party Transaction
Due to Related Party represents notes payable to an officer (stockholder)
of the Company. The notes are due upon demand and are subordinate to the
mortgage note held by Sovereign Bank. The officer (stockholder) has agreed
not to seek repayment of the notes until the mortgage loan has been repaid.
Accordingly, the notes have been classified as long-term obligations.
K. Other Income/(Expense) - Net
Other income/(expense) consists of the following for the year ended June 30:
1998 1997 1996
Interest ncome $6,827 $11,159 $8,679
Sales of Scrap and
miscellaneous (net) $14,045 $(3,414) $20,376
Other -- -- (6,647)
$20,872 $7,745 $22,408
L. New Accounting Pronouncements
During 1997, the Financial Accounting Standards Board (FASB) issued new
accounting pronouncements, Statement of Financial Accounting Standards
(SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related
Information." This pronouncement is effective for the Company's fiscal
year ending June 30, 1999. The Company is assessing the impact on the
financial statements by adopting this pronouncement.
24
M. Information About the Company's Operations in Different Industries
(in thousands)
Year ended June 30, 1998
Leisure
and Total
Electronics Recreation Company
Total revenue $1,996 $329 $2,325
Operating profit/(loss) $ (501) $(55) $(556)
Interest expense and
other income net (192)
Earnings before income
taxes $(748)
Identifiable assets at
June 30, 1998 $2,520 $1,286 $3,806
Corporate assets 907
Total assets at June 30,
1998 $4,713
Year ended June 30, 1997
Leisure
and Total
Electronics Recreation Company
Total revenue $2,841 $987 $3,828
Operating profit(loss) $ 58 $ (2) $ 56
Interest expense and
other income net (211)
Loss before income taxes
and extraordinary gain $(155)
Identifiable assets at
June 30, 1997 $2,375 $1,487 $3,862
Corporate assets 783
Total assets at
June 30, 1997 $4,645
25
Year ended June 30, 1996
Leisure
Electronics and Total
Recreation Company
Total revenue $3,925 $670 $4,595
Operating profit/(loss) $ 883 $(234) $ 649
Interest expense and
other income net (240)
Earnings before income
taxes $409
Identifiable assets at
June 30, 1996 $2,949 $1,901 $4,850
Corporate assets 522
Total assets at June 30,
1996 $5,372
The Company operates in two industries: electronics; and leisure and
recreation. Operations in the electronics industry involve primarily
supplying electronics and electrical products and systems for the United
States Government as a prime contractor or subcontractor. Operations in
the leisure and recreation industry involve the production and
sale of snowmaking machinery and servicing of such machinery at the
purchaser's expense beyond the warranty period. Total revenue by industry
represents sales to unaffiliated customers, as reported in the Company
statement of earnings. There are no inter-segment sales.
Some operating expenses, including general corporate expenses, have been
allocated by specific identification or based on direct labor for items
which are not specifically identifiable. In computing operating profit,
none of the following items have been added or deducted: interest expense,
income taxes, and non-operating income. Depreciation and amortization
for the electronics industry and the leisure and recreation industry,
respectively, was approximately $126,000 and $20,000 in 1998, $106,000 and
$29,000 in 1997, $99,000 and $30,000 in 1996. Capital expenditures for
the electronics industry were approximately $17,000 in 1998, $16,000 in
1997, and $125,000 in 1996. There were no capital expenditures for the
leisure and recreation industry.
Identifiable assets by industry are those assets that are used in the
Company's operations in each industry. Corporate assets are principally
cash, prepaid expenses, and other current assets.
26
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Directors and Executive Officers of the Registrant
is incorporated herein by reference from the Company's definitive proxy
statement for the 1998 Annual Meeting of Stockholders.
Item 11. EXECUTIVE COMPENSATION
Executive compensation information is incorporated herein by reference from
the Company's definitive proxy statement for the 1998 Annual Meeting of
Stockholders.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is incorporated herein by reference from the Company's
definitive proxy statement for the 1998 Annual Meeting of Stockholders.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in response to this item is incorporated herein by reference
from the Company's definitive proxy statement for the 1998 Annual Meeting
of Stockholders.
27
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) (1) The following financial statements are included in Part II Item 8:
Page
Independent Auditors' Report 13
Balance Sheets, June 30, 1998 and 1997 14
Statements of Earnings, Years Ended June 30,
1998, 1997 and 1996 15
Statements of Stockholders' Equity, Years Ended
June 30, 1998, 1997 and 1996 15
Statements of Cash Flows, Years Ended June 30,
1998, 1997 and 1996 16
Notes to Financial Statements 17
(2) Exhibits 30
A list of the exhibits required to be filed as part
of this report is set forth in the Index to Exhibits,
which immediately follows the signature page, and is
incorporated herein by this reference.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Registrant
during the last quarter of the period covered by this
report.
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, The Dewey Electronics Corporation has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized:
THE DEWEY ELECTRONICS CORPORATION
_____________________________ ___________________________________
BY: Gordon C. Dewey BY: Thom A. Velto, Treasurer
President, Chief Executive
Officer and Chief Financial
Officer
DATE: September 24, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
___________________________________ Date: September 24, 1998
Alexander A. Cameron, Director
___________________________________ Date: September 24, 1998
Frances D. Dewey, Director
___________________________________ Date: September 24, 1998
Gordon C. Dewey, Director
___________________________________ Date: September 24, 1998
Peter Eustis, Director
___________________________________ Date: September 24, 1998
John G. McQuaid, Director
29
THE DEWEY ELECTRONICS CORPORATION
INDEX TO EXHIBITS
The following exhibits are filed as part of this report. For convenience
of reference, exhibits are listed according to the numbers assigned in the
Exhibit table to Regulation S-K.
Number Page No.
3 (a)- Certificate on Incorporation as amended. This item
was filed as part of the Registrant's Form 10-K for the year
ended June 30, 1988 and is herein incorporated by reference. --
3 (b)- By Laws as amended. This item was filed as part of
the Registrant's Form 10-K for the year ended June 30, 1988
and is herein incorporated by reference. --
4 (a)- Agreement dated as of September 18, 1997 with Sovereign
Bank providing for the borrowing of $2,300,000 against
issuance of a mortgage note payable to the Bank.
This item was filed as part of the Registrant's Form 10-K
for the year ended June 30, 1997 and is herein incorporated
by reference. --
4 (b)- Line of credit agreement dated as of September 18,
1997 with Sovereign Bank providing for the borrowing of up
to $500,000. This item was filed as part of the Registrant's
Form 10-K for the year ended June 30, 1997 and is
herein incorporated by reference. --
4 (c)- 1983 Stock Option Plan. This item was filed with the
Registrant's Definitive Proxy Statement for the 1983 annual
meeting of stockholders on December 6, 1983 and is herein
incorporated by reference. --
30
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