Item 1.	BUSINESS
The Dewey Electronics Corporation (the "Company") was incorporated in the State of New York in 1955. It is a systems oriented military electronics development, design and manufacturing organization based in Oakland, New Jersey. The Company 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 as a prime contractor and subcontractor. Its electronics business includes spare and replacement parts.
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, 2000 are set forth in Note K Operating Segments of the Notes to the 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, 2000, the Company had a work force of 39 employees, of whom 9 were technical or professional personnel. Last year at the same date, the work force included 36 employees, of whom 10 were technical or professional personnel. The increase is the result of continued 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 96% of total revenues in fiscal year 2000, 97% of total revenues in fiscal 1999 and 86% of total revenues in fiscal 1998.
Prior to fiscal year 1997, most of the Company's electronics segment revenues were derived from products manufactured, either as prime contractor or subcontractor, for the U.S. Navy. In August 1996, the Company was awarded a contract with the U.S. Army to provide diesel operated tactical generator sets with five annual purchasing periods including price escalations each year. With the completion of performance of the Company's contracts under the Navy's ADCAP torpedo program, most electronics segment revenues in recent years have arisen from performance of work for the U.S. Army under this contract.
The Company has continued to pursue both long-term and short-term awards from various United States 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 is derived from contracts with various agencies of the United States Government (the "Government") or subcontracts with prime Government contractors, the loss of substantial Government business would have a material adverse effect on the business.
For the most part, working capital requirements for the electronics segment of business are funded by progress payments provided by the Government.
All of the Company's contracts with the Government are subject to the standard provision for termination at the convenience of the Government.
Although raw materials are generally available from a number of suppliers, the Company is at times dependent upon a specific supplier or a limited number of suppliers of material for a particular contract and has occasionally experienced some delays in deliveries. Such delays have not had a material effect on operations; however, the Company cannot provide any assurances that future delays, if any, will not have a material adverse effect.
Reference is made to Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding this segment.
LEISURE AND RECREATION SEGMENT
The leisure and recreation segment of business accounted for 4% of the Company's revenues in fiscal year 2000, 3% of the Company's revenues in fiscal 1999 and 14% of the Company's revenues in fiscal 1998.
Snowmaking equipment is sold to ski areas as original equipment or as replacements for existing equipment. Most snowmaking equipment is paid for in full at delivery to the customer. In other cases, such equipment is sold under a sales contract that provides for a substantial down payment and retention of a security interest in the equipment until full payment is received. Typically, full payment is made within one year. The Company has not experienced any losses due to resale of the equipment following default by customers. The Company services the equipment at the purchaser's expense after a warranty period that 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 performed by the Company's employees in the domestic market and by distributors and representatives in foreign markets. In fiscal 2000, all revenues were from domestic sales.
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. As discussed in Item 7, in the fourth quarter of fiscal year 2000, the Company reduced the value of its inventory of snowmaking machines and parts in the amount of $353,092, resulting in a year 2000 charge to income.
Item 2.
Item 2.	PROPERTIES
The Company's 49,200 square foot facility at 27 Muller Road, Oakland, New Jersey, located on 90 acres of land owned by the Company, was constructed in 1981. This facility houses executive offices and manufacturing operations and is used primarily for the electronics segment of business. Approximately 90% of this facility is being utilized for production (one shift), staging and storage.
Under the terms of a mortgage note to Sovereign Bank described in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations both the land and building are subject to the lien of a mortgage securing indebtedness in the amount of $1,665,686. 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.
Item 3.	LEGAL PROCEEDINGS
There are no material pending legal proceedings.
Item 4.
Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of fiscal year 2000.
PART II
Item 5.
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 2000			Fiscal Year 1999
	Quarter	 	 High	 Low		 High		 Low
	1st 		$2.375 $1.1875	 $ 0.6563 	$ 0.4063 	2nd		 2.625 2.375	 0.4063	 0.3125 	3rd	 	 3.125 2.1875	 0.6250	 0.2813 	4th		 2.625 1.3125	 2.0000	 0.6250
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 2000 and 1999. The Company has no plans to pay dividends in the foreseeable future.
The number of holders of record of the Company's common stock as of August 31, 2000 was 805.
Item 6.
Item 6. Selected Financial Data
			(In thousands of dollars, except per share amounts)
						 Year ended June 30, 2000 1999 1998 1997 1996 Revenues $10,409(1) $8,632(3) $2,325 $3,828 $4,595 Income/(loss) before income taxes $1,543(2) $ 935(3) $ (748) $ (155) $ 409 Net income/(loss) $926(1)(2) $ 561(3) $ (447) $ 7(4) $ 244 Net income/(loss) per share basic and diluted $.69 $.42 $ (.33) $ .01 $ .18 Cash dividends per common share -- -- -- -- -- Total assets $5,155 $5,776 $4,713 $4,645 $5,372 Long-term obligations $1,829 $2,427 $2,481 $1,843 $2,366 Working capital $3,131 $2,413 $1,444 $1,508 $1,879 Stockholders' equity $2,275 $1,349 $ 788 $1,235 $1,227
(1) Revenues in fiscal year 2000 includes $702 as a result of notification of the final closeout of a contract with the U.S.Navy.
(2) Income in fiscal year 2000 includes a charge for an inventory provision in the amount of $353.
(3) The increases in this selected financial data relate to the Company's contract with the U.S. Army to supply diesel operated tacital generator sets over five annual purchasing periods.
(4)	In fiscal 1997, net income was increased by an extraordinary gain of $100 net of income taxes.
Item 7.
Item 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 		AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected Financial Data" and the Company's Financial Statements, including the related notes thereto, appearing elsewhere in this Annual Report. Certain statements in this Form 10-K 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 Form 10-K 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. 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 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, 2000, 1999, and 1998 are set forth in Note K Operating Segments of the Notes to the Financial Statements.
Results of Operations
The Company's fiscal year ends on June 30. Accordingly, all references to years in this Management's Discussion refer to the fiscal year ended June 30 of the indicated year. Also, when referred to herein, operating profit means net sales less operating expenses, without deductions for general corporate expenses, interest and income taxes.
Revenues
Revenues for fiscal year 2000 increased by 21% over last year and were 347% higher than revenues for 1998. Revenues increased in both the leisure and recreation segment and in the electronics segment.
During the fourth quarter of fiscal year 2000, the Company received notice from the U.S. Government Contract Administration Office that a contract with the U.S. Navy was closed. The Company had provided a current liability of $701,608 contingent upon possible changes to the contract. These changes never occurred. As a result of this contract close out, the Company recognized this as revenue during the fourth quarter of 2000.
Electronic Products
Revenues from the electronics segment accounted for 96% of total revenues in 2000 and 97% of total revenues in 1999.
In 1996, the Company was awarded a contract with the U.S. Army to supply diesel operated tactical generator sets with five annual purchasing periods including price escalations for each year. The Government may place orders for its tactical generator requirements through this contract until the end of August 2001. Though it is not obligated to do so, the Army has placed an annual production order each year plus some additional orders. The Company has been receiving smaller generator set orders throughout the contract period, in addition to annual production orders, for delivery to the Army, Navy, Air Force and the Marines. The amount of orders for this product has amounted to approximately $21 million since its initial award, which funded $1 million in 1996.
The Department of Defense had issued a fuel policy requiring that all mobile electric power sets (includes tactical generators) will require only diesel fuels and that those using gasoline fuels will be eliminated.
The Company anticipates that the Government will continue to place orders for these diesel operated tactical generator sets. However, no assurances can be given that they will do so. Orders not yet received are not reflected in the fiscal year end backlog figures provided below.
The tactical generator set contract accounted for 78% of the electronic segment revenues in fiscal year 2000 and 94% in 1999.
The remaining 22% of year 2000 electronic product revenues (6% in 1999) was the result of various orders, more limited in scope and duration, that were generally for replacement parts for previously supplied equipment used by the Department of Defense and shipbuilders and for other projects performed as a subcontractor. A large part of such other revenues continues to be attributable to the Company's Pitometer Log Division, which manufactures speed and distance measuring instrumentation for the U.S. Navy.
In 1998, the Company experienced a period of reduced revenues. Due to engineering changes initiated by the Company and subsequently approved by the U.S. Army, delivery of diesel operated tactical generator sets were rescheduled from March 1998 to November 1998. As a result of this delay, production efforts were also delayed causing lower revenue recognition during this period. This contract accounted for 40% of electronic segment revenues in 1998. Various orders for replacement parts accounted for 49% of such 1998 revenues and the remaining 11% was from production efforts towards the completion of the Company's contracts under the U.S. Navy's ADCAP torpedo program.
The aggregate value of the Company's backlog of electronic products not previously recorded as revenues was approximately $4 million on June 30, 2000, 1999 and 1998. Almost all of this backlog is attributable to the U.S. Army contract for diesel operated tactical generator sets. It is estimated that the present backlog will be shipped during the next 12 months and recognized as fiscal year 2001 revenues.
Leisure and Recreation
In the leisure and recreation segment, sales of snowmaking machines and related parts amounted to $375,546 in fiscal year 2000. In fiscal years 1999 and 1998 sales amounted to $276,657 and $328,939 respectively. There were no export sales of snowmaking machines during the last three fiscal years.
The Company is continuing its marketing efforts to increase its market share by utilizing different strategies dependent upon regional locations. Competition in foreign markets remains to be stronger than in the domestic market.
There was no backlog of orders for snowmaking equipment as of June 30, 2000. Last year, there was a backlog of orders in the amount of $201,500. There was no backlog of orders at June 30, 1998.
Gross Profit
Gross Profit was 26% in 2000, 23% in 1999 and 12% in 1998.
In the electronics segment, gross profit was 30% of revenues as a result of continued production efforts towards the contract for diesel operated tactical generator sets. In 1999, gross profit was 24% as full production resumed for this project. In fiscal year 1998, gross profit was 10% due to delayed production resulting from engineering changes as explained above.
During the fourth quarter of fiscal year 2000, the Company's management reviewed inventory for pricing and marketability. Inventory is comprised almost entirely of machines and parts for its snowmaking business. Consideration was given (among other factors) to the number of snowmaking machines at customer sites requiring support services, profitability and inventory carrying costs.
As a result, management determined that a reduction of inventory in the amount of $353,092 was appropriate.
Selling, General and Administrative Expenses
In 2000, selling, general and administrative expenses remained at 10% of revenues ($939,094) as they were in 1999 ($841,107). In 1998, these expenses amounted to $827,776 (36% of revenues).
Interest Expense
Interest expense for the last three fiscal years amounted to $204,283 in 2000, $216,017 in 1999 and $212,738 in 1998.
Under a borrowing arrangement with Sovereign Bank, effective September 18, 1997, the interest rate for the Company's mortgage note is 8.25%. The Company also has a line of credit facility under the Sovereign Bank borrowing arrangement which carries an interest rate of .75% over the prime rate for its outstanding borrowings. The prime rate as of June 30, 2000 was 9.5%. Interest payments made to Sovereign Bank constitute essentially all of the Company's interest expense.
Other Income-Net
The amounts reported as Other Income represent the net effect of interest and miscellaneous items such as the sale of scrap, discounts, bank transaction fees and other like items.
During fiscal year 2000, Other Income of $4,592 was comprised of interest income of $4,866 partially offset by the net effect of miscellaneous items of $274.
Other Income for fiscal year 1999 represented the sum of interest income of $870 and the net income of miscellaneous scrap sales of $4,615.
In fiscal year 1998, Other Income was the sum of interest income of $6,827 and miscellaneous scrap sales of $14,045.
Income Taxes
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating loss carryforwards.
The tax (provision)benefit for the fiscal years 2000, 1999, and 1998 was at an effective rate of 40%.
Inflation
Historically, inflation and price changes have not had a material effect on operations.
Liquidity and Capital Resources
During fiscal year 2000, the net cash provided by operating activities was $1,757,904, as compared to $162,544 in 1999 and cash used in 1998 of $613,007.
Expenditures for plant, property and equipment amounted to $116,229 in 2000, $58,341 in 1999 and $17,490 in 1998.
In fiscal year 2000, $754,055 was used by financing activities which includes a voluntary principal reduction payment towards the Company's mortgage with Sovereign Bank. This additional principal payment was in the amount of $500,000.
Net cash provided by financing activities in 1999 was $50,207 as a result of short-term borrowings against the Company's Line of Credit with Sovereign Bank.
In fiscal 1998, net cash provided by financing activities amounted to $446,888.
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, payable 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 of .75% over the prime rate that will become due and payable on October 31 of each year. The prime rate as of June 30, 2000 was 9.50%. At the Bank's discretion, this line of credit may be renewed. As of June 30, 2000, there were no outstanding borrowings against this line of credit.
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.
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 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.
The Company had no material commitments for capital expenditures as of the end of the 2000 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 a net value of approximately $700,000. 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.
Recent Pronouncements
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133), establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires companies to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. We have adopted SFAS No. 133 in the first quarter of fiscal 2001, in accordance with the deferral provision in SFAS No. 137. The adoption of SFAS No. 133 did not have a material effect on our financial statements.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements. We are required to adopt SAB 101 in the fourth quarter of fiscal 2001. We anticipate that the adoption of SAB 101 will not have a significant impact on our financial statements.
Electronics Segment
Most of the Company's revenues are derived from its electronic product segment. This segment of operations is comprised of business with the U.S. Department of Defense or with other Government contractors. Long- term contracts with the U.S. Department of Defense have provided most of electronic segment revenues. The balance of such revenues is primarily for replacement parts, which are principally driven by requirements of the U.S. Navy and continue to remain at relatively stable levels.
In recent years, 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 Company's contract with the U.S. Army to manufacture diesel operated tactical generator sets consists of a five year program with the Army placing orders each year from 1997 through 2001, based on a predetermined estimated quantity. The Department of Defense has issued a fuel policy requiring that in the future all mobile electric power sets (includes tactical generators) will require only diesel fuels and that those using gasoline fuels will be eliminated. It is expected that the diesel operated 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 Army will place further orders under this program. The Company continues to explore areas of business which will provide continued stability and growth.
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.
Item 8.
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
									Page
Independent Auditors' Report						 15
Financial Statements:
	Balance Sheets, June 30, 2000 and 1999				 16
	Statements of Income (Loss), Years Ended June 30, 2000, 	1999 and 1998							 17
	Statements of Stockholders' Equity, Years Ended June 	30, 2000, 1999, and 1998						 17
	Statements of Cash Flows, Years Ended June 30, 2000, 	1999, and 1998							 18
	Notes to the Financial Statements					 19
All other schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or the Notes thereto.
Independent Auditors' Report
Board of Directors of The Dewey Electronics Corporation Oakland, New Jersey
We have audited the accompanying balance sheets of The Dewey Electronics Corporation as of June 30, 2000 and 1999, and the related statements of income (loss), stockholders' equity and cash flows for each of the three years in the period ended June 30, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Dewey Electronics Corporation at June 30, 2000 and 1999 and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2000 in conformity with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP September 13, 2000 Parsippany, New Jersey
Balance Sheets 											 June 30,
2000 1999 ASSETS: CURRENT ASSETS: Cash and cash equivalents $1,176,479 $ 288,859 Accounts receivable (includes U.S. Government receivables of approximately $925,000 in 2000 and $1,183,000 in 1999) less allowance for doubtful accounts of $20,000 in 2000 and $28,571 in 1999 1,349,965 1,211,841 Inventories 534,181 1,064,996 Contract costs and related estimated profits in excess of billings 1,087,863 1,819,008 Deferred Tax Asset 170,475 -- Prepaid expenses and other current assets 33,849 28,375
TOTAL CURRENT ASSETS 4,352,812 4,413,079
PROPERTY, PLANT AND EQUIPMENT: Land and improvements 521,308 519,186 Building and improvements 1,838,083 1,799,383 Machinery and equipment 2,407,000 2,370,215 Furniture and fixtures 182,201 147,512 4,948,592 4,836,296 Less accumulated depreciation and amortization 4,106,636 3,956,251 841,956 880,045 DEFERRED TAX ASSET -- 348,308 OTHER NON-CURRENT ASSETS 130,512 134,694
TOTAL ASSETS $5,325,280 $5,776,126
LIABILITIES AND STOCKHOLDERS' EQUITY: CURRENT LIABILITIES: Accounts payable $334,701 607,591 Accrued expenses and other liabilities 158,203 248,803 Accrued corporate income taxes 379,807 35,730 Pension costs accrued 155,772 152,722 Billings in excess of contract costs and related estimated profits -- 701,608 Current portion of long-term debt 97,827 54,056 Note payable bank -- 200,000
TOTAL CURRENT LIABILITIES 1,126,310 2,000,510
LONG-TERM DEBT 1,567,859 2,165,685
OTHER LONG-TERM LIABILITIES 61,172 61,172 DEFERRED TAX LIABILITY 95,320 -- DUE TO RELATED PARTY 200,000 200,000
STOCKHOLDERS' EQUITY: Preferred stock, par value $1.00; authorized 250,000 shares, issued and outstanding, none -- -- Common stock, par value $.01; authorized 3,000,000 shares; issued and outstanding 1,693,397 in 2000 and 1999. 16,934 16,934 Paid-in capital 2,835,307 2,835,307 Accumulated deficit (57,525) (983,385) 2,794,716 1,868,856 Less: Treasury stock, 353,866 shares in 2000 and 1999, at cost 520,097 520,097 2,274,619 1,348,759 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,325,280 $ 5,776,126
See notes to the financial statements
Statements of Income (Loss)
									 Years ended June 30, 2000 1999 1998 Revenues $10,408,958 $8,632,261 $2,324,597
Cost of revenues 7,727,083 6,645,599 2,052,787
Gross profit 2,681,875 1,986,662 271,810
Selling, general and administrative expenses 939,094 841,107 827,776
Operating profit/(loss) 1,742,781 1,145,555 (555,966)
Interest expense (204,283) (216,017) (212,738)
Other income - net 4,592 5,485 20,872
Income/(loss) before income taxes 1,543,090 935,023 (747,832)
Income tax (provision)/benefit (617,230) (374,000) 301,028
NET INCOME/(LOSS) $925,860 $561,023 $(446,804)
NET INCOME/(LOSS) PER COMMON SHARE BASIC AND DILUTED $ .69 $ .42 $ (.33)
Statements of Stockholders' Equity
Treasury stock 		 Common Stock					 at cost Paid-in Accumulated Shares Amount capital Deficit Shares Amount 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 Net Income -- -- -- 561,023 -- --
Balance, June 30, 1999 1,693,397 16,934 2,835,307 (983,385) 353,866 520,097 Net Income -- -- -- 925,860 -- --
Balance, June 30, 2000 1,693,397 $16,934 $2,835,307 $ (57,525) 353,866 $520,097
See notes to the financial statements
Statements of Cash Flows 									 	 Years ended June 30, 2000 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $925,860 $561,023 $(446,804) Adjustments to reconcile net income(loss) to net cash provided by/(used in) operating activities: Depreciation 154,318 142,228 138,818 Amortization 4,182 4,182 7,432 Deferred income taxes provision/ (benefit) 234,183 374,000 (301,028) Provision for doubtful accounts (8,571) -- 20,000 Increase in accounts receivable (129,553) (762,307) (92,056) Decrease/(Increase) in inventories 530,815 (14,969) 7,311 Decrease/(Increase) in contract costs and related estimated profits in excess of billings 731,145 (625,488) 77,587 (Increase)/Decrease in prepaid expenses and other current assets (5,474) 32,181 (8,524) (Increase) in other non-current assets -- -- (83,642) (Decrease)/Increase in accounts payable (272,890) 426,066 65,443 (Decrease)/Increase in accrued expenses and other liabilities (90,600) 32,545 (39,623) Increase/(Decrease) in pension costs accrued 3,050 (6,917) 43,606 (Decrease) in other long-term liabilities -- -- (1,527) (Decrease) in billings in excess of contract costs and related estimated profits (701,608) -- -- Increase in accrued corporate income taxes 383,047 -- -- Total adjustments 832,044 (398,479) (166,203)
Net cash provided by/(used in) operations 1,757,904 162,544 (613,007)
CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for plant, property and equipment (116,229) (58,341) (17,490)
Net cash used in investing (116,229) (58,341) (17,490)
CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of long-term debt (554,055) (49,793) (1,953,112) Repayment of short term borrowings (200,000) (100,000) -- Proceeds from short-term borrowings -- 200,000 100,000 Debt refinanced -- -- 2,300,000
Net cash (used in)/provided by financing (754,055) 50,207 446,888
NET INCREASE/(DECREASE) IN CASH 887,620 154,410 (183,609)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 288,859 134,449 318,058
CASH AND CASH EQUIVALENTS AT END OF YEAR $1,176,479 $288,859 $ 134,449
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $206,159 $212,682 $200,587 Interest received $4,866 $846 $6,827 Income taxes paid $2,411 $525 $732
See notes to the financial statements.
Notes to the Financial Statements Years ended June 30, 2000, 1999, and 1998
A. Summary of Significant Accounting Policies
1. Revenue Recognition
Revenues and estimated earnings under defense contracts are recorded using the percentage-of-completion method of accounting, measured as the percentage of costs incurred to estimated total costs for each contract. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability may result in revisions to costs and income and are recognized in the period in which the revisions are determined.
Since substantially all of the Company's electronics business comes from contracts with various agencies of the United States Government or subcontracts with prime Government contractors, the loss of Government business would have a material adverse effect on this segment of business.
In the Leisure and Recreation segment, revenues and earnings are recorded when deliveries are made.
2. Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with a maturity of three months or less at the date of purchase to be cash equivalents.
3. Fair Value of Financial Instruments
The fair values of the Company's long-term debt and line of credit borrowings are estimated based upon interest rates currently available for borrowings with similar terms and maturities and approximate the carrying values.
Due to the short term nature of cash, accounts receivable, accounts payable, accrued expenses and other current liabilities, their carrying value is a reasonable estimate of fair value.
4. Inventories
Cost is determined by the first-in, first-out (FIFO) method.
Inventories are valued at the lower of cost or market. Components of cost include materials, direct labor and factory overhead.
5. Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
6. Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Allowance for depreciation is provided on a straight-line basis over estimated useful lives of three to ten years for machinery and equipment, ten years for furniture and fixtures, and twenty years for building and improvements.
7. Loan Fees
Loan fees are capitalized by the Company and amortized utilizing the straight-line basis over the term of the loan.
8. Long-Lived Assets
Whenever events 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, 2000, the carrying values of such assets are appropriate.
9. Recent Pronouncements
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133), establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires companies to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. We have adopted SFAS No. 133 in the first quarter of fiscal 2001, in accordance with the deferral provision in SFAS No. 137. The adoption of SFAS No. 133 did not have a material effect on our financial statements.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements. We are required to adopt SAB 101 in the fourth quarter of fiscal 2001. We anticipate that the adoption of SAB 101 will not have a significant impact on our financial statements.
B. Inventories
Inventories consist of:
							 June 30,
2000 1999 Finished goods $ 67,000 $392,652 Work in progress 192,828 146,075 Raw materials 274,353 526,269 Net inventory $534,181 $1,064,996
C. Costs and Estimated Earnings on Uncompleted Contracts
							 June 30, 2000 1999 Costs incurred on contracts in progress $16,124,396 $47,961,443 Estimated contract profit 5,552,406 7,686,643 21,676,802 55,648,086 Less: billings to date 20,588,939 54,530,686 $1,087,863 $1,117,400
Included in the accompanying balance sheets under the following captions:
										 June 30,
2000 1999 Contract costs and related estimated profits in excess of applicable billings $1,087,863 $1,819,008 Billings in excess of contract costs and related estimated profits -- (701,608) $1,087,863 $1,117,400
D. Stock Option Plan
On December 2, 1998, the Employee Stock Option Committee adopted a Stock Option Plan of 1998 which granted incentive stock options to various executives and key employees to purchase shares of common stock. Such options were granted at fair market value of the stock on the date of grant and are exercisable over a ten year period beginning December 2, 1999 to December 1, 2009.
The changes in the number of shares under option are as follows:
Number of Shares Exercise Price Balance at June 30, 1998 -- -- Granted during 1999 27,500 $.5781 Exercised -- -- Balance, June 30, 1999 27,500 $.5781 Exercised -- -- Balance, June 30, 2000 27,500 $.5781
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 any material impact on the financial statements for 2000, 1999, and 1998, respectively.
E. Long-Term Debt
Long-term debt at June 30, consists of: 2000 1999 8.25% Mortgage Note payable to Sovereign Bank due in monthly installments of approximately $20,000 with a final maturity in October 2002. $1,665,686 $2,219,741 Less current portion: 97,827 54,056 $1,567,859 $2,165,685
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 Mortgage Note is secured by a first mortgage on the Company's land and its building. Borrowings under the line-of-credit arrangement are secured by a first lien on all of the Company's machinery, equipment and other personal property. This borrowing arrangement with the bank contains no financial ratio or other debt covenants. In June 2000, the Company made a voluntary principal reduction payment of $500,000.
Aggregate annual principal payments applicable to long-term debt for the years subsequent to June 30, 2000, based on the mortgage loan agreement in place at June 30, 2000 are:
2001 $97,827 2002 109,916 2003 1,457,943 $1,665,686
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.
The Bank also agreed to provide a $500,000 line-of-credit facility to be evidenced by promissory notes bearing interest at a rate of .75% plus the prime rate. The prime rate at June 30, 2000 was 9.50%. There were no outstanding borrowings against the line-of-credit facility at June 30, 2000. Any outstanding borrowings under the line of credit will become due and payable on October 31 of each year. This line of credit may be renewed on an annual basis.
F. Taxes on Income
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and b) operating loss and tax credit carryforwards.
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 $635,000 at June 30, 2000 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 will remain profitable. In addition, 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.
As of June 30, 2000 based on pre-tax income of $1,543,090, the relevant income and balance sheet accounts are detailed below:
Income Statement Expense/Benefit) Years Ended June 30, 2000 1999 1998 Deferred Federal $200,728 $285,416 $(230,171) State 33,455 88,584 (70,857) Current Federal 296,853 -- -- State 86,194 -- -- $617,230 $374,000 $(301,028)
Deferred tax assets and liabilities as of June 30, 2000 and June 30, 1999 consisted of the following:
Deferred tax assets: (Current) 2000 1999 Net operating loss carryforward $ -- $ 462,967 Vacation accrual 29,235 28,890 Inventory valuation 141,240 -- $170,475 $ 491,857
Deferred tax liabilities: (Non-Current) Depreciation $95,320 $ 114,659 Deferred contract income -- 67,860 $ 95,320 $ 182,519
G. Pension Plan
The Company has a non-contributory defined benefit retirement plan covering all its employees. The plan is qualified under the Internal Revenue Code. The method of determining the accrued benefit of an employee is the amount equal to .8% of an employee's average monthly salary times the number of years employed by the Company, to a maximum of 35 years. The Company's policy is to contribute the amounts allowable under Internal Revenue Service regulations. The plan assets are invested primarily in a fixed income investment account.
Net pension expense consists of the following:
									 Years ended June 30, 2000 1999 1998 Service cost $14,281 $15,268 $19,281 Interest cost on projected benefit obligations 51,132 46,630 46,438 Expected return on assets (32,262) (28,665) (27,144) Net amortization and deferrals 21,788 21,788 21,788 Net pension expense $54,939 $55,021 $60,363
In both 2000 and 1999, 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:
June 30, 2000 1999
Actuarial present value of benefit obligations: Accumulated benefit obligation $662,084 $599,343 Projected benefit obligation $715,546 $650,630 Plan assets at fair value, consisting of investments held in a fixed income investment account 471,594 384,808 Projected benefit obligation in excess of plan assets 243,952 265,822 Unrecognized net gain/(loss) (38,263) (28,834) Unrecognized net obligation (28,919) (43,379) Prior service cost not yet recognized in net periodic pension cost (21,981) (29,309) Adjustment required to recognize minimum liability 35,701 50,235 Accrued pension cost $190,490 $214,535 Weighted average assumptions as of December 31: Expected long-term rate of return on plan assets: 7.5% 7.5% Discount rate: 7.75% 7.5% Salary increase: 2.5% 2.5%
H. Income (Loss) Per Share
The number of shares used in the computation of earnings per share was 1,339,531 in each of the years ended June 30, 2000, 1999 and 1998. Since the computation of diluted earnings (loss) per share is not materially dilutive or anti-dilutive, the amounts reported for basic and diluted earnings (loss) per share are the same.
I. 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.
J. Other Income
Other income/(expense) consists of the following for the year ended June 30:
2000 1999 1998
Sales of Scrap and miscellaneous (expense)-net $ (274) $4,615 $14,045 Interest 4,866 870 6,827 $4,592 $5,485 $20,872
K. Operating Segments
The Company operates in two industries: electronics; and leisure and recreation. Operations in the electronics industry is primarily related to supplying electronics and electrical products and systems for the United States Government as a prime contractor or subcontractor. Operations in the leisure and recreation industry involve the production and sale of snowmaking machinery and servicing of such machinery at the purchaser's expense beyond the warranty period. Total revenue by industry represents sales to unaffiliated customers, as reported in the Company's Statement of Income(Loss). 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 $140,000 and $18,000 in 2000, $128,000 and $18,000 in 1999 and $126,000 and $20,000 in 1998. Capital expenditures for the electronics industry were approximately $116,000 in 2000, $58,000 in 1999 and $17,000 in 1998. 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.
The following tables present information about reported segment revenues, operating profit or loss, and assets, and reconcile such segment information to the Company's consolidated totals:
					 Year ended June 30, 2000 									 (in thousands) Leisure and Total Electronics Recreation Company
Total revenue $10,034 $375 $10,409
Operating profit/(loss) $2,162 $(419) 1,743
Interest expense and other income-net (200)
Income before income taxes $1,543
Identifiable assets at June 30, 2000 $3,262 $683 $3,945
Corporate assets 1,210
Total assets at June 30, 2000 $5,155
								 Year ended June 30, 1999 									 (in thousands) Leisure and Total Electronics Recreation Company
Total revenue $8,355 $ 277 $8,632
Operating profit/(loss) $1,227 $ (81) $1,146
Interest expense and other income-net (211)
Income before income taxes $ 935
Identifiable assets at June 30, 1999 $3,955 $1,155 $5,110
Corporate assets 666
Total assets at June 30, 1999 $5,776
								 Year ended June 30, 1998 									 (in thousands) Leisure and Total Electronics Recreation Company
Total revenue $1,996 $ 329 $2,325
Operating (loss) $(501) $ (55) (556)
Interest expense and other income-net (192)
Loss 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
L. Unaudited Quarterly Financial Data
Earnings per share 2000 Revenue Gross profit Net income basic and diluted Sept. 30 $2,661,493 $589,686 $199,420 $.15 Dec. 31 2,091,283 448,682 78,528 $.06 Mar. 31 1,842,929 469,377 110,969 $.08 Jun. 30 3,813,253 1,174,130 536,943 $.40
Year $10,408,958 $2,681,875 $925,860 $.69
Earnings per share 1999 Revenue Gross profit Net income basic and diluted Sept. 30 $1,740,718 $301,346 $ 42,748 $.03 Dec. 31 2,083,905 427,757 88,436 $.07 Mar. 31 2,025,158 609,759 215,515 $.16 Jun. 30 2,782,480 647,800 214,324 $.16
Year $8,632,261 $1,986,662 $561,023 $.42
Item 9.
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 		ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10.
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 2000 Annual Meeting of Stockholders.
Item 11.
Item 11.	EXECUTIVE COMPENSATION
Executive compensation information is incorporated herein by reference from the Company's definitive proxy statement for the 2000 Annual Meeting of Stockholders.
Item 12.
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 2000 Annual Meeting of Stockholders.
Item 13.
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 2000 Annual Meeting of Stockholders.
PART IV
Item 14.
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						 15
		Balance Sheets, June 30, 2000 and 1999				 16
		Statements of Income (Loss), Years Ended June 30, 		2000, 1999 and 1998							 17
		Statements of Stockholders' Equity, Years Ended 		June 30, 2000, 1999 and 1998						 17
		Statements of Cash Flows, Years Ended June 30, 		2000, 1999 and 1998							 18
		Notes to Financial Statements						 19
(2)	Exhibits									 32
		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.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, The Dewey Electronics Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized:
THE DEWEY ELECTRONICS CORPORATION
__________/s/________________		______________/s/_________________ BY: Gordon C. Dewey		 			BY: Thom A. Velto, Treasurer President, Chief Executive Officer and Chief Financial Officer
DATE:	 September 13, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
___________/s/________________________		Date: September 13, 2000 Alexander A. Cameron,		Director
__________/s/_________________________		Date: September 13, 2000 Frances D. Dewey,			Director
__________/s/_________________________		Date: September 13, 2000 Gordon C. Dewey,			Director
		/s/				 			Date: September 13, 2000 John H.D. Dewey			Director
__________/s/_________________________		Date: September 13, 2000 John G. McQuaid,			Director
	 /s/ 						Date: September 13, 2000 Pat Nolletti				Director
_________/s/___________			 		Date: September 13, 2000 Nathaniel Roberts			Director
THE DEWEY ELECTRONICS CORPORATION
INDEX TO EXHIBITS
The following exhibits are filed as part of this report. For convenience of reference, exhibits are listed according to the numbers assigned in the Exhibit table to Regulation S-K.
Number											 Page No.
3	(a)-	Certificate on Incorporation as amended. This item was filed as part	of the Registrant's Form 10-K for the year ended June 30, 1988 and is	herein incorporated by reference 		--
3	(b)-	By Laws as amended. This item was filed as part of the Registrant's 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 SovereignBank 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. 			 --
4	(c)-	1998 Stock Option Plan. This item was filed with the Registrant's Definitive	Proxy Statement for the 1999 annual meeting of stockholders on December	1, 1999 and is herein incorporated by reference. --