SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended September 30, 1998
Commission File No 0-2892
THE DEWEY ELECTRONICS CORPORATION
A New York Corporation I.R.S. Employer Identification
No. 13-1803974
27 Muller Road
Oakland, New Jersey 07436
(201) 337-4700
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
.
The number of shares outstanding of the registrant's common
stock, $.01 par value was 1,339,531 at September 30, 1998.
THE DEWEY ELECTRONICS CORPORATION
INDEX
Part I Financial Information Page No.
Condensed balance sheets -
September 30, 1998 and June 30, 1998 1
Condensed statements of income -
Three months ended September 30, 1998
and September 30, 1997 2
Statements of cash flows for the three months
ended September 30, 1998 and 1997 3
Notes to condensed financial statements 4
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 8
THE DEWEY ELECTRONICS CORPORATION
CONDENSED BALANCE SHEET
SEPTEMBER 30 JUNE 30
1998 1998
(UNAUDITED) (AUDITED)*
ASSETS:
CURRENT ASSETS:
CASH $ 84,594 $ 134,449
ACCOUNTS RECEIVABLE 822,115 449,534
INVENTORIES 1,099,780 1,050,027
CONTRACT COSTS & RELATED
EST PROFITS IN EXCESS
OF APPLICABLE BILLINGS 1,063,292 1,193,520
PREPAID EXPENSES & OTHER
CURRENT ASSETS 71,538 60,556
TOTAL CURRENT ASSETS $3,141,319 $2,888,086
PLANT PROPERTY & EQUIPMENT 934,046 963,932
OTHER ASSETS:
DEFERRED TAX ASSETS 693,808 722,308
OTHER NON CURRENT ASSETS 137,019 138,876
TOTAL OTHER ASSETS 830,827 861,184
TOTAL ASSETS $4,906,192 $4,713,202
LIABILITIES & STOCKHOLDERS EQUITY:
CURRENT LIABILITIES
TRADE ACCOUNTS PAYABLE $ 348,511 $ 181,525
ACCRUED LIABILITIES 456,950 411,627
BILLINGS IN EXCESS OF CONTRACT
COSTS & RELATED ESTIMATED
PROFITS 701,608 701,608
CURRENT PORTION OF LONG TERM
DEBT 100,795 149,788
TOTAL CURRENT LIABILITIES $1,607,864 $1,444,548
LONG TERM PORTION OF LONG
TERM DEBT 2,206,672 2,219,746
OTHER LONG TERM LIABILITY 61,172 61,172
DUE TO RELATED PARTY 200,000 200,000
STOCKHOLDERS' EQUITY:
COMMON STOCK 16,934 16,934
PAID IN CAPITAL 2,835,360 2,835,360
RETAINED EARNINGS (1,501,660) (1,544,408)
1,350,634 1,307,886
LESS TREASURY STOCK AT COST (520,150) (520,150)
TOTAL STOCKHOLDERS' EQUITY 830,484 787,736
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $4,906,192 $4,713,202
*- CONDENSED FROM AUDITED FINANCIAL STATEMENTS
1
THE DEWEY ELECTRONICS CORPORATION
STATEMENT OF EARNINGS
THREE MONTHS ENDED SEPTEMBER 30,
1998 1997
REVENUES $1,740,718 $702,453
COST OF REVENUES 1,439,372 471,894
GROSS PROFIT / (LOSS) 301,346 230,559
SELLING & ADMIN EXPENSES 181,008 193,448
OPERATING PROFIT / (LOSS) 120,338 37,111
INTEREST EXPENSE 54,341 49,937
OTHER (INCOME)/EXPENSE (5,250) (823)
INCOME / (LOSS) BEFORE TAXES 71,248 (12,003)
DEFERRED TAX BENEFIT/(EXPENSE) (28,500) 4,801
NET INCOME / (LOSS) $42,748 $(7,202)
INCOME PER SHARE BEFORE TAXES
PRIMARY $0.05 $(0.01)
FULLY DILUTED $0.05 $(0.01)
NET INCOME PER SHARE
PRIMARY $0.03 $(0.01)
FULLY DILUTED $0.03 $(0.01)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
PRIMARY 1,339,531 1,339,531
FULLY DILUTED 1,339,531 1,339,531
2
THE DEWEY ELECTRONICS CORPORATION
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30,
1998 1997
CASH FLOWS FROM OPERATIONS:
NET (LOSS)/INCOME $42,748 $(7,202)
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
DEPRECIATION 36,564 33,323
(INCREASE)/DECREASE IN ACCOUNTS
RECEIVABLES (372,581) 113,971
(INCREASE)/DECREASE IN INVENTORIES (49,753) 1,254
DECREASE/(INCREASE) IN CONTRACT
COSTS AND RELATED ESTIMATED
PROFITS IN EXCESS OF APPLICABLE
BILLINGS 130,228 (437,700)
(INCREASE) IN PREPAID EXPENSES AND
OTHER CURRENT ASSETS (10,982) (63,637)
INCREASE/(DECREASE) IN ACCOUNTS
PAYABLE 166,986 61,015
INCREASE/(DECREASE) IN ACCRUED
EXPENSES 45,323 (32,393)
DECREASE/(INCREASE) IN OTHER
ASSETS 30,357 (73,108)
TOTAL ADJUSTMENTS $(23,858) $(397,275)
NET CASH PROVIDED BY/(USED IN)
OPERATIONS $18,890 $(404,477)
CASH FLOWS FROM INVESTING ACTIVITIES:
EXPENDITURES FOR PLANT, PROPERTY AND
EQUIPMENT (6,678) 0
NET CASH (USED IN) INVESTING $(6,678) $0
CASH FLOWS FROM FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS OF LONG TERM
DEBT (62,067) (1,922,646)
DEBT REFINANCED 0 2,300,000
NET CASH PROVIDED BY/(USED IN)
FINANCING $(62,067) $377,354
NET INCREASE/(DECREASE) IN CASH $(49,855) $(27,123)
CASH AT BEGINNING OF PERIOD 134,449 318,058
CASH AT END OF PERIOD $84,594 $290,935
3
THE DEWEY ELECTRONICS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The financial information included herein is unaudited;
however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair
statement of results for the interim periods.
The results of operations for the three month period ended
September 30, 1998 are not necessarily indicative of the
results to be expected for the full year.
NOTE 2: 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. For the periods ended September 30,
1998 and June 30, 1998 the Company had no cash equivalents.
NOTE 3: 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.
NOTE 4: INVENTORIES
Inventories are valued at lower of cost (first-in, first-out
method) or market. Components of cost include materials,
direct labor and plant overhead.
As there is no segregation of inventories as to raw
materials, work in progress and finished goods for interim
reporting periods (this information is available at year end
when physical inventories are taken and recorded), estimates
have been made for the interim period.
September 30, 1998 June 30, 1998
(UNAUDITED) (AUDITED)
Finished Goods $486,627 $458,104
Work In Process $178,773 $159,757
Raw Materials $434,380 $432,166
________ ________
Total $1,099,780 $1,050,027
======== ========
4
THE DEWEY ELECTRONICS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5: 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.
NOTE 6: PLANT, PROPERTY 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 September 30,
1998, the carrying values of such assets are appropriate.
NOTE 7: 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 earnings per share is computed by
dividing net income by the weighted-average number of common
shares outstanding. Diluted earnings per share is computed
by dividing net 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 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 periods ended September
30, 1998 and September 30, 1997. Since the computation of
diluted earnings per share is anti-dilutive, the amounts
reported for basic and diluted earnings per share are the
same.
5
THE DEWEY ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis contains certain
forward-looking statements that should be read in conjunction
with the Company's Report on Form 10-K for its fiscal year
ended June 30, 1998, including the cautionary statements that
appear following the caption "Current business Environment"
and elsewhere in the 10-K. Reference is made generally to
the information contained in the Form 10-K.
Three months ended September 30, 1998 vs. 1997
- -------------------------------------------------------------
Revenues for the first quarter this year were $1,740,718
increasing by $1,038,265 compared to last year's revenues of
$702,453. This increase is the result of an increase in
revenues in both the electronic and leisure and recreation
segments.
Electronic product revenues increased by $1,024,333 (from
$679,825 to $1,704,158) as a result of production efforts
made on the Company's contract with the U.S. Army for
tactical generator sets. This contract accounted for 89% of
the electronic segment revenues. Production efforts under
this program began later than originally anticipated.
Delivery of these tactical generator sets had been scheduled
to begin in March 1998. As a result of engineering changes
initiated by the Company and approved by the U.S. Army,
deliveries were rescheduled to begin in November 1998. The
Company anticipates that the U.S. Army will continue to place
orders for the tactical generator sets; however, no
assurances can be given that the U.S. Army will continue to
do so. Orders not yet received are not reflected in the
September 30, 1998 backlog figure given below.
The remaining 11% of electronic product revenues resulted
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
continue to be attributable to the Company's Pitometer Log
Division, which manufactures speed and distance measuring
instrumentation for the U.S. Navy.
Last year, the tactical generator set project accounted for
49% of electronic segment revenues and the remaining 51% were
derived from short term projects.
As of September 30, 1998, the aggregate value of the
Company's backlog of electronic products not previously
recorded as revenues was approximately $5 million. It is
estimated that most of this backlog will be recognized as
revenues during the 1999 fiscal year.
As of September 30, 1997, the aggregate value of the
Company's backlog of electronic products not previously
recorded as revenues was also approximately $5 million.
6
In the leisure and recreation segment, revenues increased by
$13,932 compared to last year's revenues (from $22,628 to
$36,560). All of the revenues in both first quarters were
the result of the sales of replacement parts. Traditionally,
the major portion of revenues in this segment are recorded
during the second quarter when snowmaking machine sales are
recorded. The Company anticipates an improvement in machine
sales compared to last year. The Company has not received
any orders for snowmaking machines for export this year and
none last year.
Operations resulted in an operating profit of $.09 per share
compared to a profit of $.03 per share last year. Net
earnings were $.03 per share compared to a net loss last year
of $.01 per share during the same period.
Liquidity and Capital Resources at September 30, 1997
- -------------------------------------------------------------
The Company's working capital as of September 30, 1998 was
$1,533,455 compared to $1,443,538 at June 30, 1998.
This increase of $89,917 is attributable to an increase in
accounts receivable of $372,581 (due to increased billings) a
reduction in contract costs and related estimated profits in
excess of applicable billings of $130,228 (also due to
increased billings) and an increase in accounts payable of
$166,986 due to increased production activity.
For the three month period ending September 30, 1998, $18,890
was provided by operations compared to last year usage by
operations of $404,477.
This year, the Company expended $6,678 for plant property and
equipment during the first quarter. There were no
expenditures made for investing activities last year.
The Company has no material commitments for capital
expenditures as of September 30, 1998.
It is during the first quarter that the greatest demand is
made on working capital due to the strong inventory
requirements and investment required to produce snowmaking
machines for sale in subsequent fiscal quarters.
The Company continues to meet its short term liquidity needs
through a combination of progress payments on government
contracts (based on costs incurred) and billings at the time
of delivery of products.
On a long term basis, the Company's liquidity will be
dependent on the ability to maintain borrowing arrangements
with its lender Sovereign Bank or other lenders.
7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------------------
No reports on Form 8-K have been filed during the quarter
ended September 30, 1998.
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
November 13, 1997 Thom A. Velto, Treasurer
Principal Accounting Officer
November 13, 1997 Edward L. Proskey
Vice President, Operations
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 84,594
<SECURITIES> 0
<RECEIVABLES> 850,686
<ALLOWANCES> 28,571
<INVENTORY> 1,099,780
<CURRENT-ASSETS> 3,141,319
<PP&E> 4,797,035
<DEPRECIATION> 3,862,989
<TOTAL-ASSETS> 4,906,192
<CURRENT-LIABILITIES> 1,607,864
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,906,192
<SALES> 1,740,718
<TOTAL-REVENUES> 1,740,718
<CGS> 1,439,372
<TOTAL-COSTS> 175,757
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,341
<INCOME-PRETAX> 71,248
<INCOME-TAX> (28,500)
<INCOME-CONTINUING> 42,748
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,748
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
