UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 
 x           ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
 OF 1934
 
 For the fiscal year ended June 30, 2009.
 
 o           TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
 OF 1934
 
 For the transition period from                        to                     .
 
 Commission file number 0-2892
 
 THE DEWEY ELECTRONICS CORPORATION
 (Exact name of registrant as specified in its charter)
  NEW YORK

13-1803974(State or other jurisdiction of
incorporation or organization)

(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, including area code)
 
 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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes     X No
 
 Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   Yes     X No
 
 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.  XYes      No
 
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).  X Yes      No.
 
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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 10-K.  X
  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
  Large accelerated filer
Accelerated filer
 
 Non-accelerated filer
Smaller reporting company  X
 (Do
not check if a smaller reporting company)
 
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act):  Yes    No X.
 
 
 
 State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter:  $1,314,177
at December 31, 2008.
 
 Indicate the number of shares outstanding of each of the registrant’s classes of common equity, as of the latest practicable date:1,362,031 shares of common stock, par value $.01 per share, at September 18, 2009.
 
 Documents Incorporated by Reference
 
 Portions of the Company’s definitive Proxy Statement for the 2009  Annual Meeting of Shareholders are incorporated by reference in Part III.
  2
  THE DEWEY ELECTRONICS CORPORATION
 TABLE OF CONTENTS
  Item

PagePART I1.
Business
42.
Properties
73.
Legal Proceedings
84.
Submission of Matters to a Vote of Security Holders
8PART II5.
Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
96.
Selected Financial Data
97.
Management's Discussion and Analysis of Financial Condition
And Results of Operations
107A.
Quantitative and Qualitative Disclosures about
Market Risk
198.
Financial Statements and Supplementary Data
209.
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
359A(T).
Controls and Procedures
359B.
Other Information
36PART III10.
Directors, Executive Officers and Corporate Governance
3711.
Executive Compensation
3712.
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
3713.
Certain Relationships and Related Transactions,
and Director Independence
3714.
Principal Accounting Fees and Services
37PART IV15.
Exhibits, Financial Statement Schedules
37
 
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 PART I
 Item 1. BUSINESS
 
 The Dewey Electronics Corporation (the "Company") was incorporated in the State of New York in 1955.  Located in Oakland New Jersey, the Company is a systems oriented military electronics development, design and manufacturing organization with a focus on compact diesel power generation solutions.  The Company’s principal
products are electronic and electromechanical systems manufactured for the Armed Forces of the United States, which the Company provides as a prime contractor or as a subcontractor for the Department of Defense.  In addition, the Company manufactures and sells commercial snowmaking equipment and related spare parts to the leisure and recreation industry.  In recent years this commercial business has not provided a significant portion of the Company’s revenues.
 
 Approximately half of the Company’s revenues are derived from the production of a 2kW diesel operated tactical generator set under a long-term prime contract with the Department of Defense. Other government contracts and orders from other defense contractors for small diesel generator sets account for approximately a quarter of revenues
with the balance of revenues coming from research and development contracts and orders for spare parts and other electro-mechanical systems. Included in this other business is speed and measurement instrumentation primarily for the U.S. Navy and other prime contractors such as shipbuilders.  Orders are also received for replacement parts and equipment for previous Company contracts with the Department of Defense as well as other projects performed as a subcontractor.  In past years, the Company
had various long-term contracts to provide the U.S. Navy with various equipment.
 
 The Company has been the sole source producer of the 2kW diesel operated tactical generator set for the Department of Defense since 1997.  Its initial contract was awarded by the U.S. Army in 1996 and final deliveries were made under that award in March 2002.  Deliveries were made to the various branches of the Armed Forces
of the United States.
 
 A new contract was awarded in September 2001 to provide the U.S. Army and other Department of Defense Agencies with this same 2kW diesel operated generator set.  This contract is a ten-year indefinite delivery, indefinite quantity contract which replaces the initial contract awarded in 1996.  The total amount of orders
under the September 2001 contract placed through August 31, 2009 amount to approximately $33 million.  Deliveries of orders currently in-house are scheduled to continue through fiscal year 2010.  As with the initial contract mentioned above, this contract allows for the U.S. Army to place annual production orders and to place additional interim orders.  However, no assurances can be made that further orders will be placed or, if they are placed, the timing and amount of such orders.
 
 In March 2007, the Company was awarded three related research and development sub-contracts, in the aggregate amount of up to approximately $230,400, to research and develop electronic controls for diesel fuel cell reformers.  Work on these sub-contracts began in the first quarter of fiscal year 2008(quarter ended September 30, 2007)
and is expected to extend until the third quarter of fiscal 2010. In April 2009 the Company was notified that an additional option in one of the original sub-contracts above had been funded in an amount up to $197,183. Work on this option phase of the sub-contract is also expected to continue until the third quarter of fiscal 2010. (No assurances can be given that the research and development services provided by the Company over the term of these sub-contracts will equal the full amounts set forth above.)  No
assurances can be given that the Company will receive any future production orders as a result of these sub-contracts or that the Company will be awarded any additional research and development contracts or sub-contracts.
 
 In July 2007, the Company received a sub-contract to develop an armored 3 kilowatt 28 volt DC auxiliary power unit that can be mounted on the back of the United States Marine Corps (USMC) main battle tank, the Abrams M1A1.  The development sub-contract, for $646,400, was awarded by the USMC Tank Program Office, in Quantico, VA, through
a sub-contract administered by CACI, Eatontown, NJ, and had the possibility of a follow-on production contract.  Work on this sub-contract also began in the first quarter of fiscal year 2008(quarter ended September 30, 2007) and continued into the quarter ending September 30, 2008. In December 2008, the Company was notified that
 
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 the USMC had awarded the production contract to another company who was not part of the development phase awarded in 2007.
 
 In August 2007, the Company received a new contract to provide auxiliary power systems for the USMC ‘Logistic Vehicle’.  This contract, awarded by the USMC Systems Command, Quantico, VA, consists of a base year and three option years, exercisable at the Government’s option.  The Logistics Vehicle Power
System (LVPS) is a diesel-powered 3.5 kilowatt 28 volt DC generator providing power to equipment that protects against improvised explosive devices.  It is based on the Company’s existing 2 kilowatt military tactical generator.  A delivery order for the LVPS, valued at approximately $2.4 million was received in August 2007 and completed in December 2007.  In July 2008, the Company received a second delivery order valued at approximately $500,000 for additional units which were
delivered in January 2009. Work began to produce these units during the first quarter of fiscal year 2009 (quarter ended September 30, 2008) and was substantially completed during the second quarter of fiscal year 2009. Subsequently, in January 2009, the Company received a third delivery order valued at approximately $400,000 with deliveries made in July and August 2009.  While the Company was successful in obtaining these initial orders, no assurance can be made that the Company will receive any future
production orders as a result of this contract.
 
 In December 2007, the Company announced the award of a $985,976 sub-contract from Fibertek, Inc. of Herndon, VA, as part of the U.S. Government’s 2kW Military Tactical Generator (MTG) Product Improvements – Engine.  This sub-contract covered the efforts to qualify an EPA compliant diesel engine for use in the 2kW portable
Military Tactical Generator product line.  This engineering and test effort was conducted at the Company’s Oakland, NJ, facility.  Initial test efforts began during the third quarter of fiscal year 2008 (quarter ended March 31, 2008). First article testing revealed that the replacement EPA compliant engine was incapable of providing the necessary power output in the required range of operating conditions.  As a result, the Company does not expect this engine to replace the
existing non-compliant engine used in the 2kW product line.  The Army has a waiver from the EPA to continue using the non-compliant engine.
 
 In May 2008, the Company received an award of $475,000 to develop a prototype ‘idle reduction’ system consisting of an environmental control unit and diesel generator under a sub-contract from MTC Technologies of Eatontown, NJ.  The Company partnered with AMETEK Corporation of El Cajon, California to develop this system
to provide heating and cooling for US Army “long haul” trucks independent of the vehicle’s main engine.  The generator developed by the Company under this sub-contract, powers the environmental control unit while also providing both AC and DC current for the vehicle.  Work under this sub-contract was substantially completed in December 2008 and delivery of the prototype units to the customer was made in January 2009.  No assurance can be made that the Company will
receive any future production orders as a result of this sub-contract or that the Government will award the Company any additional development contracts.
 
 The Company’s primary sources of revenue include products with long manufacturing lead times.  Recognizing this, the Company has committed some of its resources to making a quantity of these products readily available by producing them for inventory and sales.  The Government sector has been ordering limited quantities
of 2kW generator sets for specific uses pursuant to short-term orders independent of the Company’s 2kW contract.
 
 The Company expenses its research and development costs as incurred.  These costs consist primarily of salaries and material costs.  For the fiscal years ended June 30, 2009 and 2008, the Company expensed $113,735 and $212,348, respectively, of research and development costs.  Research and development projects
performed under contracts for customers are billed to the customer and are recorded as contract costs as incurred.
 
 Compliance with Federal, state and local environmental provisions has had no material effect upon capital expenditures, income or the competitive position of the Company.  In addition, there are no material capital expenditures anticipated for environmental compliance.
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  As of September 18, 2009 the Company had a work force of 34 employees, all of whom were fulltime employees of the Company.  Fluctuations in the work force during the year generally result from uneven contract requirements and variations in the mix of products.
 
 Revenues and estimated earnings under long-term defense contracts (including research and development contracts, except as described below in this paragraph) are recorded using the percentage-of-completion method of accounting, measured as the percentage of costs incurred to estimated total costs of each contract.  For the Company’s
indefinite delivery, indefinite quantity contract to provide 2kW generator sets to the military and for orders from other government subcontractors for 2kW generators, percentage-of-completion calculations are based on individual “Delivery Orders” which are periodically received for specified quantities.  For research and development contracts total costs incurred are compared to total expected costs for each contract. During the fiscal year ended June 30, 2009, the Company had one development
sub-contract to perform qualification tests for an EPA compliant engine for use with its 2kW generator sets on which it did not recognize revenue based on the percentage-of-completion method.  In this sub-contract revenue was recorded with the successful completion of each milestone in accordance with the contract terms. The sub-contract was completed in January 2009.
 
 The Company uses the percentage-of-completion method to recognize revenue for its replacement parts business when the dollar amount of the order to be delivered in a future period or periods is material, and the duration of the work will span multiple reporting periods.  Revenue and earnings for all other orders for replacement parts
(including orders for replacement parts for snowmaking equipment) are recorded when deliveries of product are made and title and risk of loss have been transferred to the customer and collection is probable.
 
 For those contracts where revenue has been recognized using the percentage-of-completion method of accounting, provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.  Changes in job performance, job conditions, and estimated profitability may result in revisions to costs
and income and are recognized in the period in which the revisions are determined.
 
 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.  As of the filing of this Annual Report, the Company’s principal suppliers are: Martin Diesel, Baldor Electric Company,
Balmar Commercial Industries and the Crompton Instruments Division of Tyco Electronics Corporation.  The Company has occasionally experienced some temporary delays in the receipt of raw materials in the past. Such delays have not had a material adverse effect on operations.  The Company cannot, however, 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.
 
 OPERATIONAL RISKS
 
 You should carefully consider the information described below, together with all of the other information included in this Annual Report.  The following operational risks and uncertainties are not the only ones we face, however, they are the ones our management believes are material.  If any of the following risks actually
materialize, our business, financial condition or results of operations could be harmed.  This Annual Report contains statements that are forward-looking.  These statements are based on current expectations and assumptions that are subject to risks and uncertainties such as those listed below and elsewhere in this Annual Report, which, among others, should be considered in evaluating our future performance.
 
 The Company’s Dependence on Government Defense Business and the 2kW Program
 
 Virtually all of our revenues are derived from Government defense business, which is comprised of business with the U.S. Department of Defense or with other Government contractors.  Our Government defense business consists of long-term contracts and
 
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  short-term orders such as for replacement parts.  The loss of substantial Government business (including a material reduction of orders under existing contracts) would have a material adverse effect on our business.
 
 Historically, our revenues from our Government defense business have been dependent upon single programs.  Currently, our primary program is with the U.S. Army to provide diesel operated generator sets.  On September 7, 2001, we were awarded a ten year indefinite delivery, indefinite quantity contract to provide the U.S.
Army and other Department of Defense agencies with 2kW diesel operated generator sets.  The amount of orders received under this contract is approximately $33 million through August 31, 2009.  Our generator set contract with the U.S. Army allows the U.S. Army to place additional orders.  We cannot, however, give any assurances that the U.S. Army will do so, or if there are additional orders, the amount and timing of the orders.  In addition, we experienced inflationary
pressures from some suppliers in each of fiscal year 2009 and fiscal year 2008 and cannot give any assurances that the Government will agree to a price increase under the contract that would be equitable to the Company.
 
 We continue to explore additional sources of revenue to reduce our dependence on the 2kW program but cannot give any assurances that these efforts will be successful or, if successful, when they will be achieved.  See Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations –
Company Strategy for additional information regarding Company strategy.
 
 Supplier Concentration Risks
 
 The Company is primarily dependent on four vendors to supply qualified components for its 2kW generator products.  During fiscal year 2009, two of these suppliers accounted for 24.9% and 18.3% of material purchases, respectively.  See Note 1-B of the Notes to Financial Statements.  We purchase these components
pursuant to purchase orders and do not have long-term contracts with any of these vendors.  While there may be some temporary delays, problems regarding source and availability of raw materials have had no material adverse effect on operations.  However, we cannot give any assurances that these four sources of supply will continue to be available to us or, if any or all of these sources are not available to us when we need them to be available, that the Company will be able to implement alternative
sources of supply without undue delay or expense.
 
 Risks Associated with Government Defense Contracting; Competition
 
 The Government defense business is subject to changes in military procurement policies and objectives and to Government budgetary constraints.  Periods of heightened national security and war have often introduced new priorities and demands, external delays, and increased uncertainty into the defense contracting marketplace.  In
addition, the Department of Defense budgeting process has an extended timeframe.  The process of including expenditures in this budget could take a minimum of 12 to 24 months.
 
 Approval of the Department of Defense budget does not guarantee that budgeted expenditures will actually be made and, in particular, that we will receive an award or order for a product.  Among other things, we bid for this business in competition with many defense contractors, including firms that are larger in size and have greater
financial resources than we have.  Moreover, we now believe that there has been competition in part of the market for generator sets, from a larger 3kW generator that operates more quietly than our 2kW model.  However, this 3kW generator does not compete in the ‘man-portable’ segment of the market since it is twice as heavy.
 
 All of our contracts with the Government are subject to the standard provision for termination at the convenience of the Government.
 
 Item 2.PROPERTIES
 
 The Company's 49,200 square foot facility at 27 Muller Road, Oakland, New Jersey, is located on 90 acres of land owned by the Company and was constructed in 1981.  This facility houses the Company’s executive offices and manufacturing operations.
 
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 Approximately 90% of this facility is being utilized for production (one shift), staging and storage.
 
 As described further in Note 10 of the Notes to Financial Statements, the Company has a line of credit with TD Bank, NA.  As of the date of this Annual Report, the Company has borrowed $250,000 against this line of credit.  Any loans drawn under the line of credit are secured by a first lien on all of the Company’s
accounts receivable, machinery, equipment, other personal property and a Commercial Mortgage Security Agreement on the Company’s real property.
 
 Item 3.LEGAL
PROCEEDINGS
  There are no material pending legal or environmental proceedings against or in favor of the Company.
 
 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 2009.
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  PART II
 MARKET FOR REGISTRANTS’S COMMON EQUITY AND RELATED STOCKHOLDER
 MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
 The Company's common stock is traded over-the-counter under the symbol "DEWY.OB".
 
 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 RangeFiscal Year 2009
Fiscal Year 2008High
Low
High
Low1st Quarter
3.25
2.51
3.00
2.052nd Quarter
2.50
1.55
2.90
2.123rd Quarter
2.50
1.40
3.35
2.194th Quarter
1.75
1.60
3.00
2.58
 
 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 fiscal years 2009 and 2008.  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 September 18, 2009 was 386.
  SELECTED FINANCIAL DATA
  Not applicable.
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  Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
 CONDITION AND RESULTS OF OPERATIONS
 
 The following discussion should be read in conjunction with the Company’s Financial Statements, including the related notes thereto, appearing elsewhere in this Annual Report.  Certain statements in this report may be deemed “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934.  All
statements, other than statements of historical fact, that address activities, events or developments that the Company or management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements.  Such statements are based upon certain assumptions and assessments made by management of the Company in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes to be
appropriate.  The forward-looking statements included in this report are also subject to a number of material risks and uncertainties, including but not limited to economic, governmental, competitive and technological factors affecting the Company’s operations, markets, products, services and prices and specifically, the factors discussed below under “Company Strategy” and in Item 1 above (Description of Business – Operational Risks).  Such forward-looking statements
are not guarantees of future performance and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements.
 
 The Company’s operating cycle is long-term and includes various types of products and varying delivery schedules.  Accordingly, results of a particular period or period-to-period comparisons of recorded revenues and earnings may not be indicative of future operating results.  The following comparative analysis should
be viewed in this context.
 
 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.
 
 Revenues
  Revenues and estimated earnings under long-term defense contracts (including research and development contracts, except as described below in this paragraph) are recorded using the percentage-of-completion method of accounting, measured as the percentage of costs incurred to estimated total costs of each contract.  For the Company’s
indefinite delivery, indefinite quantity contract to provide 2kW generator sets to the military and for orders from other government subcontractors for 2kW generators, percentage-of-completion calculations are based on individual “Delivery Orders” which are periodically received for specified quantities.  For research and development contracts total costs incurred are compared to total expected costs for each contract.  During the fiscal year ended June 30, 2009 the Company had
one development sub-contract to perform qualification tests for an EPA compliant engine for use with its 2kW generator sets on which it did not recognize revenue based on the percentage-of-completion method.  In this sub-contract, revenue was recorded with the successful completion of each milestone in accordance with the contract terms. The sub-contract was completed in January 2009.
 
 The Company uses the percentage-of-completion method to recognize revenue for its replacement parts business when the dollar amount of the order to be delivered in a future period or periods is material, and the duration of the work will span multiple reporting periods.  Revenue and earnings for all other orders for replacement parts
(including orders for replacement parts for snowmaking equipment) are recorded when deliveries of product are made and title and risk of loss have been transferred to the customer and collection is probable.
 
 For those contracts where revenue has been recognized using the percentage-of-completion method of accounting, provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability may result in revisions to
 
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  costs and income and are recognized in the period in which the revisions are determined.
 
 Revenues in fiscal year 2009 were $1,490,714 higher when compared to fiscal year 2008.  The higher revenues were due to increased production of generator sets principally due to the increased production of 2kW generator sets for delivery to other defense contractors outside the Company’s prime contract with the U.S. Army and
initial production of a larger 3.5kW generator for another defense contractor.  Customer funded research and development revenues also increased when compared to fiscal 2008 while revenues for replacement parts and short-term orders were lower in fiscal 2009 then they were in fiscal 2008.
 
 In fiscal year 2009, production efforts to provide the Armed Forces with 2kW and 3.5 kW diesel operated generator sets provided approximately 80% of revenues compared to approximately 82% in fiscal year 2008.  The Company’s research and development contracts provided approximately 11% of revenues in 2009,and approximately 11%
of revenues in fiscal year 2008.  Replacement parts and other short-term business including snowmaking equipment provided approximately 9% of revenues in fiscal year 2009 and approximately 7% of revenues in fiscal year 2008.
 
 In March 2007, the Company was awarded three related research and development sub-contracts, in the aggregate amount of up to approximately $230,400, to research and develop electronic controls for diesel fuel cell reformers.  Work on these sub-contracts began in the first quarter of fiscal year 2008(quarter ended September 30, 2007)
and is expected to extend until the third quarter of fiscal 2010. In April 2009 the Company was notified that an additional option in one of the original sub-contracts above had been funded in an amount up to $197,183. Work on this option phase of the sub-contract is also expected to continue until the third quarter of fiscal 2010. (No assurances can be given that the research and development services provided by the Company over the term of these sub-contracts will equal the full amounts set forth above.) No
assurances can be given that the Company will receive any future production orders as a result of these sub-contracts or that the Company will be awarded any additional research and development contracts or sub-contracts.
 
 In July 2007, the Company received a sub-contract to develop an armored 3 kilowatt 28 volt DC auxiliary power unit that can be mounted on the back of the United States Marine Corps (USMC) main battle tank, the Abrams M1A1.  The development sub-contract, for $646,400, was awarded by the USMC Tank Program Office, in Quantico, VA, through
a sub-contract administered by CACI, Eatontown, NJ, and had the possibility of a follow-on production contract.  Work on this sub-contract also began in the first quarter of fiscal year 2008(quarter ended September 30, 2007) and continued into the quarter ending September 30, 2008. In December 2008, the Company was notified that the USMC had awarded the production contract to another company who was not part of the development phase awarded in 2007.
 
 In August 2007, the Company received a new contract to provide auxiliary power systems for the USMC ‘Logistic Vehicle’.  This contract, awarded by the USMC Systems Command, Quantico, VA, consists of a base year and three option years, exercisable at the Government’s option.  The Logistics Vehicle Power
System (LVPS) is a diesel-powered 3.5 kilowatt 28 volt DC generator providing power to equipment that protects against improvised explosive devices.  It is based on the Company’s existing 2 kilowatt military tactical generator.  A delivery order for the LVPS, valued at approximately $2.4 million was received in August 2007 and completed in December 2007.  In July 2008, the Company received a second delivery order valued at approximately $500,000 for additional units which were
delivered in January 2009. Work began to produce these units during the first quarter of fiscal year 2009(quarter ended September 30, 2008) and was substantially completed during the second quarter of fiscal 2009. Subsequently, in January 2009, the Company received a third delivery order valued at approximately $400,000 with deliveries made in July and August 2009.  While the Company was successful in obtaining these initial orders, no assurance can be made that the Company will receive any future production
orders as a result of this contract.
 
 In December 2007, the Company announced the award of a $985,976 sub-contract from Fibertek, Inc. of Herndon, VA, as part of the U.S. Government’s 2kW Military Tactical Generator (MTG) Product Improvements – Engine.  This sub-contract covered the efforts to qualify an EPA compliant diesel engine for use in the 2kW portable
Military
 
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 Tactical Generator product line.  This engineering and test effort was conducted at the Company’s Oakland, NJ, facility.  Initial test efforts began during the third quarter of fiscal year 2008 (quarter ended March 31, 2008). First article testing revealed that the replacement EPA compliant engine was incapable of
providing the necessary power output in the required range of operating conditions.  As a result, the Company does not expect this engine to replace the existing non-compliant engine used in the 2kW product line.  The Army has a waiver from the EPA to continue using the non-compliant engine.
 
 In May 2008, the Company received an award of $475,000 to develop a prototype ‘idle reduction’ system consisting of an environmental control unit and diesel generator under a sub-contract from MTC Technologies of Eatontown, NJ.  The Company partnered with AMETEK Corporation of El Cajon, California to develop this system
to provide heating and cooling for US Army “long haul” trucks independent of the vehicle’s main engine.  The generator developed by the Company under this sub-contract, powers the environmental control unit while also providing both AC and DC current for the vehicle.  Work under this sub-contract was substantially completed in December 2008 and delivery of the prototype units to the customer was made in January 2009.  No assurance can be made that the Company will
receive any future production orders as a result of this sub-contract or that the Government will award the Company any additional development contracts.
 
 The Company experiences variable amounts of material receipts from time to time during the normal course of business.  Material receipts are dependent upon the receipt of orders, project requirements and vendor delivery schedules.  As the Company uses the percentage-of-completion method of accounting to record revenues
on certain long-term contracts, material costs have an impact upon recorded revenues (see Note 1-A, Revenue Recognition of the Notes to Financial Statements).
 
 The aggregate value of the Company’s backlog of sales orders was $5.1 million on June 30, 2009 and $6.8 million on June 30, 2008.  It is estimated that most of the present backlog will be billed during the next 12 months and recognized as fiscal year 2010 revenues.
 
 Gross Profit/(Loss)
 
 The Company earned a gross profit of $2,093,671 for fiscal year 2009 compared to a gross profit of $1,846,254 for fiscal year 2008, as a result of higher revenues in fiscal year 2009.
 
 Gross margin is the measure of gross profit as a percentage of revenues.  It is affected by a variety of factors including, among other items, product mix, product pricing, and product costs.  The Company had a gross margin of 19% for each of fiscal year 2009 and fiscal year 2008.  The Company’s gross margin
is significantly influenced by the high proportion of 2kW generator sets that the Company produces under its long term contract with the U.S. Army relative to its total sales. As a result, changes in relative sales value in the Company’s other lines of business may not significantly change the Company’s gross margin.
 
 During fiscal 2009, gains in gross margin from sales of spare parts and research and development efforts were partially offset by an increase in costs related to metals, transportation and foreign sourced components for the 2kw generator set product line.  The Company’s 10-year indefinite delivery, indefinite quantity prime
contract for generator sets with the U.S. Army, awarded in 2001 allows for a small annual increase in selling price.  Gross profit on this contract has been reduced as a result of costs increasing faster than the selling price.  The Company is in communication with the Government and is continuing to pursue a pricing modification under the contract.  This is a labor intensive process and no assurances can be made that the Government will agree to a modification, or that such a modification
would be equitable to the Company.
 
 At the end of fiscal 2009 the Company evaluated its business lines and made a decision to cease production of its Hedco snowmaking machines.  As a result of this decision, the Company recorded a charge to cost of revenues of approximately $87,100 related to a reduction in the carrying costs of inventory held related to this product.
The Company had recorded a charge of $155,800 in fiscal 2008 related to carrying costs of finished snowmaking machines.  The Company is attempting to sell
 
 12
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 the manufacturing assets and certain intellectual property related to these products while continuing to actively market these products.  No assurance can be made that such efforts will be successful or, if successful, the timing thereof.
 
 Selling, General and Administrative Expenses
 
 Selling, General and Administrative Expenses for fiscal 2009 were $1,931,645 or 17% of revenue compared to $1,750,546 or 18% of revenue in fiscal 2008.  The most significant increases in expense were the result of the write off of prepaid licensing rights of $82,000, an increase in marketing and business development expense of
approximately $46,000, increased expense for training and education of $48,000 and increases in staffing and compensation of $109,000 all of which were partially offset by a decrease in research and development materials expense of approximately $108,000.
  Interest Expense
 
 The Company had no interest expense in fiscal 2009 or fiscal 2008.
 
 Other Income(Expense) – Net
 
 Amounts reported as other income represent the net effect of interest income and miscellaneous items such as the sale of scrap, bank transaction fees and other like items.
 
 Other expense of $19,080 for fiscal year 2009 was comprised of bank charges of $11,438, franchise and use taxes of $9,284, other expense of $110, interest income of $277 and miscellaneous income, primarily from the sale of scrap, of $1,475.
 
 Other income of $26,345 for fiscal year 2008 was comprised of interest income of $2,163 and miscellaneous income, primarily from the sale of scrap, of $24,182.
 
 Net Income before income taxes
 
 Net income before income taxes for fiscal year 2009 was $142,946. For the year ended June 30, 2008 net income before income taxes was $122,053.
 
 Income Taxes
 
 Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their financial statement reported amounts and for tax loss and credit carry-forwards.
 
 A valuation allowance is provided against deferred tax assets when it is determined to be more likely than not that these amounts will not be realized.
 
 The income tax liability for fiscal year 2009 was $0 as a result of the utilization of tax credits and full valuation allowance earned in prior years. In fiscal 2008 the Company’s income tax liability was $0 as a result of a utilization of tax credits and full valuation allowance earned in prior years.
 
 Inflation
 
 Historically, inflation and price changes have not had a material effect on net sales and revenues and on income from continuing operations.  Management does not believe that inflation and price changes in fiscal year 2009 had a material effect on net sales and revenues.  However, beginning in fiscal year 2006 and continuing
through fiscal 2009, the 2kW generator set business experienced increased costs related to metals, transportation and foreign sourced components.  The 10-year prime contract for the generator sets with the Government, awarded in 2001, allows for a small annual increase in selling price.  Profits on generator sets produced under this contract have been reduced as a result of costs increasing faster than the selling price.
 
 The Company is in communication with the Government and is continuing to pursue a pricing modification under the prime contract.  This is a labor intensive process and
 
 13
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 no assurances can be made that the Government will agree to a modification, or that such a modification would be equitable to the Company.
 
 Liquidity and Capital Resources
 
 Historically, the Company’s capital expenditures, debt servicing requirements and working capital needs have been financed by cash flow from operations, progress payments on various Government contracts (based on cost incurred) and a line of credit of $500,000.  The prior line of credit expired on February 28, 2007 and was
replaced in April 2009, as described in Note 10 of the Notes to Financial Statements.  Subsequent to the end of fiscal year 2009 the Company borrowed $250,000 against this line of credit.
 
 Starting in late fiscal year 2007, the Company changed the way it negotiates payment terms on new contracts.  The Company now attempts to negotiate progress payments based on achievement of sub-tasks within a project rather than relying on demonstration of incurred costs.  This approach is expected to result in the Company
receiving payment under those contracts at or before the time it must pay its vendors.  Four recent contracts described under “Revenues” above that were received in fiscal year 2008 were structured this way and the Company intends to continue this approach where possible.
 
 As of June 30, 2009, the Company had no material capital expenditure commitments.  Management believes that the Company’s current cash and its line of credit, combined with progress payments as well as billings at the time of delivery of products will be sufficient to support short-term liquidity requirements, working capital
needs and capital expenditures at their current or expected levels.
 
 At June 30, 2009, the Company’s working capital was $2,411,736 compared to $2,203,421 at June 30, 2008.
 
 The ratio of current assets to current liabilities was 2.83 to 1 at June 30, 2009 and 2.44 to 1 at June 30, 2008.
 
 The following table is a summary of the Statements of Cash Flows in the Company’s Financial Statements:
  Years ended June 30,2009


200
8Net Cash provided by(used in)Operating activities

$
366,821


$
(124,110
)Investing activities


(53,343)



(103,105
)Financing activities


--



-
-
 
 Operating Activities:
 
 Adjustments to reconcile net income to net cash used in operations are presented in the Statements of Cash Flows in the Company’s Financial Statements.
 
 Net cash provided by operating activities in fiscal year 2009 was comprised primarily of net income before depreciation and an increase in inventory reserves and decreases in inventories, accounts receivable, and prepaid expenses, which were partly offset by an increase in contract costs and related estimated profits in excess of applicable
billings and a decrease in accounts payable and accrued expenses.
 
 Net cash used in operating activities in fiscal year 2008 was comprised primarily of net income before depreciation and amortization adjusted by increases in inventories, accounts receivable, contract costs and estimated related profits in excess of applicable billings offset by increases in accounts payable, accrued expenses,
 inventory reserve and allowance for doubtful accounts and a decrease in prepaid expense.
 
 The Company expenses its research and development costs as incurred.  These costs consist primarily of salaries and material costs.  For the fiscal years ended June 30, 2009 and June 30, 2008, the Company expensed $113,735 and $212,348 respectively, of research and development costs.  Research and development
projects performed under
 
 14
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 contract for customers are billed to the customer and are recorded as contract costs as incurred.
 
 Investing Activities:
 
 During fiscal year 2009, net cash of $53,343 was used in investing activities.  This amount was used for capital expenditures, principally for demonstration and test equipment.
 
 During fiscal year 2008, net cash of $103,105 was used in investing activities.  This amount consisted of $113,105 used for capital expenditures, principally for test equipment partly offset by a decrease of $10,000 in deferred costs related to licensing rights.
 
 Financing Activities:
 
 The Company did not use any cash in financing activities during either fiscal 2009 or fiscal 2008.
 
 On April 27, 2009 the Company entered into a $500,000 line of credit with TD Bank, NA. (See Note 10 of the Notes to Financial Statements). As of the date of this Annual Report the Company has an outstanding debt of $250,000 against this line of credit. The Company does not however regard this credit facility as vital to its continued operations.
  The Company owns approximately 90 acres of land and the building, which it occupies in Bergen County, New Jersey, adjacent to an interchange of Interstate Route 287.  The Company is continuing to actively pursue possible methods of monetizing 68 undeveloped and unused acres of this property, by its sale and/or development.  This
endeavor has become more complex with the implications of New Jersey’s “Highlands Water Protection and Planning Act”.
 
 The Act identifies approximately 400,000 acres of New Jersey as The Highlands Preservation Area.  Pursuant to the statute, this area has the most onerous restrictions on future development.  The Company’s property is in this area, and further development would not be permitted without a waiver or other relief from
the State.  The Company continues to believe that there are strong reasons why its property should not be subject to the severe restrictions of the preservation area, and is attempting to affect a solution.
 
 However, since the Act was passed in June of 2004, the State has repeatedly delayed promulgation of final regulations and a master plan.  Originally expected in 2005, final regulations and a master plan were approved by Governor Corzine on September 5, 2008.  At the same time the Governor issued executive order 114 further
defining the framework by which the Highlands Council, other State agencies, and both county and municipal governments are to work together.  The Company believes that a regulatory environment is now developing within which monetization of the land may be possible.  In light of these recent events, the Company is actively assessing its options.  However, no assurances can be given that the Company’s efforts will be successful, that a satisfactory valuation will be achieved,
or that resolution will be timely.
 
 In May 2008, the Company entered into a contract to sell a small parcel of land, approximately 7 acres, for $205,000. The land is physically separated from the main parcel of the Company’s property by an interstate highway and is contained within the Highlands Preservation Area. Among other things, the sale of the land is subject to
approval for development by the Highlands Commission and various state and local government agencies.  Accordingly, the Company can make no assurance that the sale will be successfully consummated or, if consummated, the timing thereof.
 
 Recent Pronouncements
 
 In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”).  SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with U.S. generally
accepted accounting principles, and expands disclosures about fair value measurements.  In February 2008, the FASB issued Staff Position No. 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13
 
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 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13” (“FSP 157-1”) and Staff Position No. 157-2, “Effective Date of FASB Statement No. 157” (“FSP 157-2”).  In October 2008, the FASB adopted FASB Staff
Position No. 157-3 “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (“FSP 157-3”).  FSP 157-1 amends SFAS 157 to remove certain leasing transactions from its scope.  FSP  157-2 delays the effective date of SFAS 157 for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until
the beginning of the Company’s 2010 fiscal year beginning July 1, 2009.  The measurement and disclosure requirements related to financial assets and financial liabilities are effective for the Company beginning in the Company’s 2009 fiscal year beginning July 1, 2008.  FSP 157-3 reaffirms that for financial assets fair value is an estimated exit price, and provides examples of how to estimate fair values when relevant observable data are not available.  It further clarifies
that in disorderly markets, judgment is required when deciding to accept or reject market prices as evidence of fair value.  FSP 157-3 is immediately effective, including for prior periods, for which financial statements have not been issued. The adoption of Statement SFAS 157, FSP 157-1, and FSP 157-3 had no impact on the Company’s financial statements.
 
 In April 2009, the FASB issued Staff Position No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP 157-4”).  FSP  157-4 provides guidelines for making fair value measurements
more consistent with the principles presented in SFAS No. 157.  FSP  157-4 relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales.  It reaffirms what SFAS 157 states is the objective of fair value measurement – to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions.  Specifically,
it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive.  FSP 157-4 is effective for the Company’s annual reporting for the fiscal year ended on June 30, 2009.  The implementation of FSP 157-4 did not impact the Company’s financial position, results of operations or cash flows.
 
 In June 2009, the FASB, issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles– a replacement of FASB Statement No. 162” (“SFAS 168”).  SFAS 168 establishes the FASB Accounting Standards codification as the source of authoritative
accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States.  SFAS 168 is effective for the Company’s interim reporting period ending on September 30, 2009.  SFAS 168 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
 
 In May 2009, the FASB issued Statement No. 165, “Subsequent Events” (“SFAS 165”).  SFAS 165 requires entities to disclose the date through which they have evaluated subsequent events and whether the date corresponds with the release of their financial statements.  SFAS 165 is effective for interim
and annual periods ending after June 15, 2009.  The adoption of SFAS 165 did not materially impact the Company’s financial position, results of operations or cash flows. The Company evaluated subsequent events that occurred after June 30, 2009 up through September 25, 2009.  During this period no material subsequent events came to our attention.
 
 Company Strategy
 
 The Company has many years of experience in contracting with the Department of Defense and has been successful in obtaining many contracts to provide a wide array of products and services.  Management believes that this experience is a significant positive competitive factor.  Management is continuing to explore other areas
of business with the Department of Defense, which are capable of providing stability and growth.
 
 The Company is focusing its efforts within the market for military compact diesel power generation on select product categories which management believes represent the
 
 16
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 best chances of successfully growing the Company’s business.  Although no assurances can be made that such a strategy will be successful, management believes that long-term growth can best be achieved by: 1) growing the Company’s market share in areas where the Company already has a strong presence, 2) expanding into
related markets with existing products and capabilities, and 3) further taking advantage of the Company’s strengths by expanding into related product categories.
 
 The Company faces competition in many areas and from companies of various sizes, capabilities and resources.  Competitive factors include product quality, technology, product availability, price, and customer service.  Management believes that the reputation of the Company in these areas provides a significant positive
competitive factor.  As part of its overall business strategy management is continuing to reinforce customer awareness of the Company’s current and past performance as a Department of Defense supplier, its product quality and reliability, and its historically strong customer relationships.
 
 In response to the U.S. Army’s change in priorities away from long-term product improvements regarding the 2kW Generator Program in 2007, management re-evaluated its approach to the second and third strategic objectives described above.  Rather than continuing to develop new longer term internal technologies, the Company is
now attempting to capitalize on its previous investments in technology to obtain business in related military power markets and to expand into related military product categories.
 
 Two recent contracts with the U.S. Department of Defense to develop generators as auxiliary power units for vehicles are examples of the second strategic objective, expanding into related power markets.  The contract for the Logistics Vehicle Power Supply “LVPS” (described under “Revenues” above) utilizes
the Company’s core expertise in compact and highly reliable diesel engine power generation.  The recent contract to develop a prototype ‘idle reduction’ system consisting of an environmental control unit and diesel generator builds on the Company’s recent accomplishments with vehicle mounted auxiliary power units and management believes it will allow the Company to further expand into related power applications while increasing its technology base.  In furtherance of
the third strategic objective, expanding into related military product categories, the Company is utilizing its experience in military-grade portable power systems under three related customer funded research and development sub-contracts where the Company will design and prototype electronic controls for diesel fuel cell systems (See “Revenues” above).
 
 In the near term, continued growth in profitability and broadening the line of product offerings are the Company’s primary objectives.  The recent development contracts, and the customer-funded research and development sub-contracts, described above contribute to this goal.  The Company is continuing to pursue possible
partnering and sub-contracting relationships with other companies and defense contractors that leverage the Company’s current expertise and technology in generators and auxiliary power units.
 
 Critical Accounting Policies and Estimates
 
 The Company’s financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America.  Preparing financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.  These
estimates and assumptions affect the application of our accounting policies.  Actual results could differ from these estimates.  Our significant accounting policies are described in the Notes to the Financial Statements contained herein.  Critical accounting policies are those that require application of management’s most difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods.  The
Company’s critical accounting policies include revenue recognition on contracts and contract estimates, pensions, impairment of long-lived assets, inventory valuation, and valuation of deferred tax assets and liabilities.
 
 Revenues and estimated earnings under long-term defense contracts (including research and development contracts, except as described below in this paragraph) are recorded using the percentage-of-completion method of accounting.  Revenues are recorded as work is performed based on the percentage that actual incurred costs bear in
 
 17
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 comparison to estimated total costs utilizing the most recent estimates of costs and funding.  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.  During the fiscal year ended June 30, 2009 the Company had one development sub-contract to perform qualification tests for an EPA compliant engine for use with its 2kW generator sets on which it did not recognize revenue based on the percentage-of-completion method; rather, revenue was recorded with the successful completion of each milestone in accordance with the sub-contract terms. The sub-contract was completed in January
2009
 
 The Company has a defined benefit pension plan covering substantially all of its employees.  The Company accounts for its defined benefit pension plan in accordance with FASB Statement No. 158 “Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and
132(R)”(“SFAS 158”). SFAS 158 requires companies to record a net liability or asset to report the funded status of their defined benefit pension and other postretirement benefits on their balance sheet at their fiscal year-end and in the year of adoption, and to show separately in the Notes to the Financial Statements the effect of adopting the provisions of SFAS 158. Accordingly, the required information for the Company’s pension plan is included in the Notes to the Financial Statements.
 
 The Company’s disclosures about its pension plan are made in accordance with SFAS 132R (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits, an amendment of FASB Statements No. 87, 88, and 106, and a revision of FASB Statement No. 132” (“SFAS 132R”) and SFAS 158.  SFAS
No. 132R revises employers’ disclosures about pension plans and other postretirement benefit plans.  It does not change the measurement or recognition of those plans required by SFAS No. 87, “Employers’ Accounting for Pensions”, SFAS No. 88, “Employers Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” and SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions.”  The
rules require disclosures about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other postretirement benefit plans.
 
 The Company has assumed, based upon high quality corporate bond yields, AA rated or higher, that its assumed discount rate will be 6.25% in 2009, the same as its assumed discount rate in 2008.  The Company’s management conducts an analysis which includes a review of plan asset investments and projected future performance of
those investments to determine the plan’s assumed long-term rate of return.  The assumed long-term rate of return of 5.25% on assets is applied to the market-related value of plan assets at the end of the previous year.  This produces the expected return on plan assets that is included in annual pension income or expense for the current year.  The cumulative difference between this expected return and the actual return on plan assets is deferred and amortized into pension income
or expense over future periods.  Since the value of the Company’s pension assets at fiscal year-end 2009 was less than the accumulated pension benefit obligation, the Company recorded $143,422 as a non-cash adjustment to other comprehensive loss in stockholders equity and increased its long-term pension liability by $143,422.  In fiscal year 2008, the Company recorded $52,872 as a non-cash adjustment to other comprehensive loss in stockholders’ equity and decreased its long-term
pension liability by $52,872.  These changes to equity did not affect net income and are recorded net of deferred taxes.  See Note 7 of the Notes to Financial Statements for additional pension disclosures.
 
 The Company reviews the recoverability of all long-term assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable.  If required, the Company compares the estimated undiscounted future net cash flows to the related asset’s
carrying value to determine whether there has been an impairment.  If an asset is considered impaired, the asset is written down to fair value, which is based either
 
 18
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 on discounted cash flows or appraised values in the period the impairment becomes known.
 
 The Company reviews the carrying costs of its inventories and assesses whether the carrying costs of inventory items are likely to be recoverable. At the end of fiscal year 2009 the Company recorded a reduction in the carrying value of its snowmaking machine inventory of approximately $87,100 and a reduction in the carrying value of certain
of its spare parts business of $9,500, both of which were charges to cost of revenue.
 
 The Company applies Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”).  Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases.  The effect on deferred tax assets and liabilities of a change in tax laws is recognized in the results of operations in the period the new laws are enacted.  A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized.
 
 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 Not applicable.
  19
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  Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  Index to Financial Statements
  PageReport of Independent Registered Public Accounting Firm
21Financial Statements:Balance Sheets, June 30, 2009 and 2008
22Statements of Income, Years Ended June 30, 2009, and 2008
23Statements of Stockholders' Equity and Comprehensive Income/Loss, Years Ended June 30, 2009 and 2008
24Statements of Cash Flows, Years Ended June 30, 2009, and 2008
25Notes to the Financial Statements
26
  All other schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or the Notes thereto.
  20
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  Report of Independent Registered Public Accounting Firm
 
 To the Board of Directors and Stockholders of
 The Dewey Electronics Corporation
 Oakland, New Jersey
 
 We have audited the accompanying balance sheets of The Dewey Electronics Corporation (the “Company”) as of June 30, 2009 and 2008, and the related statements of income, stockholders' equity and comprehensive income/loss and cash flows for the years then ended.  These financial statements are the responsibility of the
Company’s management.  Our responsibility is to express an opinion on the financial statements based on our audits.
 
 We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, 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, such financial statements present fairly, in all material respects, the financial position of The Dewey Electronics Corporation at June 30, 2009 and 2008 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
     /s/ Amper, Politziner & Mattia, LLP
 September 25, 2009
 New York, New York
  21
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  The Dewey Electronics CorporationBalance SheetsJune 30,ASSETS:

2009


2008CURRENT ASSETS:Cash and cash equivalents

$
518,600


$
205,122Accounts receivable, net of allowance for doubtful accounts of $23,815 in 2008


984,711



1,467,055Inventories


775,321



854,390Contract costs and related estimated profits in excess of billings


1,398,385



1,090,530Prepaid expenses and other current assets


50,662



117,957TOTAL CURRENT ASSETS


3,727,679



3,735,054PROPERTY, PLANT AND EQUIPMENT:Land and improvements


651,015



651,015Building and improvements


1,885,653



1,885,653Machinery and equipment


3,227,794



3,202,423Furniture and fixtures


235,777



207,8056,000,239



5,946,896Less accumulated depreciation


(5,001,465
)


(4,886,097
)998,774



1,060,799DEFERRED COSTS


65,095



65,095TOTAL OTHER ASSETS


65,095



65,095TOTAL ASSETS

$
4,791,548


$
4,860,948LIABILITIES AND STOCKHOLDERS' EQUITY:CURRENT LIABILITIES:Trade Accounts Payable

$
765,251


$
871,100Accrued expenses and other liabilities


267,340



355,300Accrued compensation and benefits payable


223,913



195,741Accrued pension costs


59,439



109,492TOTAL CURRENT LIABILITIES


1,315,943



1,531,633LONG-TERM PENSION LIABILITY


352,095



208,673STOCKHOLDERS' 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; 1,693,397 shares issued and1,362,031 shares outstanding at June 30, 2009 and 2008


16,934



16,934Additional paid-in capital


2,818,589



2,815,245Retained earnings


968,347



825,401Accumulated other comprehensive loss


(193,332
)


(49,910
)3,610,538



3,607,670Less:  Treasury stock, 331,366 shares at June 30, 2009 and 2008 at cost


(487,028
)


(487,028
)TOTAL STOCKHOLDERS' EQUITY


3,123,510



3,120,642TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
4,791,548


$
4,860,948See notes to the financial statements.
  22
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  The Dewey Electronics Corporation
 Statements of Income
 Years Ended June 30,2009


2008Revenues

$
11,119,099


$
9,628,385Cost of revenues


9,025,428



7,782,131Gross profit


2,093,671



1,846,254Selling, general and administrative expenses


1,931,645



1,750,546Operating income


162,026



95,708Other income(expense) – net


(19,080
)


26,345Income before provision for income tax


142,946



122,053Provision for income tax


--



--NET INCOME

$
142,946


$
122,053NET INCOME PER COMMON SHARE – BASIC

$
0.10


$
.09NET INCOME PER COMMON SHARE – DILUTED

$
0.10


$
.09Weighted Average Shares OutstandingBasic


1,362,031



1,362,031Diluted


1,363,431



1,362,949See notes to the financial statements.
  23
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  The Dewey Electronics Corporation
 
 
 Statements of Stockholders’ Equity and Comprehensive Income/Loss
 Years ended June 30, 2009 and 2008.





AccumulatedAdditional





Other


Treasury stock


TotalCommon


Stock


Paid-in


Retained


Comprehensive


atCost


StockholdersShares


Amount


Capital


Earnings


Loss


Shares


Amount


EquityBalance, June 30, 2007


1,693,397


$
16,934


$
2,815,245


$
703,348


$
(102,782
)


331,366


$
(487,028
)

$
2,945,717Net Income


--



--



--



122,053



--



--



--



122,053Other comprehensive
income net of tax:Minimum pension
liabilityadjustment


--



--



--



--



52,872



--



--



52,872Comprehensive Income






























174,925Balance, June 30, 2008


1,693,397


$
16,934


$
2,815,245


$
825,401


$
(49,910
)


331,366


$
(487,028
)

$
3,120,642Net Income


--



--



--



142,946



--



--



--



142,946Other comprehensive
income net of tax:






























--Minimum pension
liability adjustment


--



--



--



--



(143,422
)


--



--



(143,422
)Comprehensive Loss






























(476
)Stock-based compensation


--



--



3,344



--



--



--



--



3,344Balance, June 30, 2009


1,693,397


$
16,934


$
2,818,589


$
968,347


$
(193,332
)


331,366


$
(487,028
)

$
3,123,510




24
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The Dewey Electronics Corporation
 
 Statements of Cash Flows
 
 Years ended June 30,
 2009


2008CASH FLOWS FROM OPERATING ACTIVITIESNet Income

$
142,946


$
122,053Adjustments to reconcile net income to netcash provided by/(used in) operating activities:Depreciation


115,368



110,019Stock option compensation expense


3,344



--Provision for inventory reserve


96,614



148,800Increase/(Decrease) in allowance for doubtful accounts


--



19,834(Increase)/Decrease in accounts receivable


482,344



(564,262
)(Increase) in inventories


(17,545
)


(301,765
)(Increase) in contract costs and related estimatedprofits in excess of billings


(307,855
)


(508,911
)Decrease in prepaid expenses and other current assets


67,295



29,729Increase/(Decrease) in accounts payable


(105,849
)


617,192Increase/(Decrease) in accrued expenses and other liabilities


(59,788
)


197,362Increase/(Decrease) in accrued pension costs


(50,053
)


5,839Total adjustments


223,875



(246,163
)Net cash provided by/(used in) operating activities


366,821



(124,110
)CASH FLOWS FROM INVESTING ACTIVITIES:Expenditures for property, plant and equipment


(53,343
)


(113,105
)Deferred cost


--



10,000Net cash used in investing activities


(53,343
)


(103,105
)NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS


313,478



(227,215
)CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR


205,122



432,337CASH AND CASH EQUIVALENTS AT END OF YEAR

$
518,600


$
205,122SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONInterest received

$
277


$
2,163See notes to the financial statements.
  25
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The Dewey Electronics Corporation


Notes to the Financial Statements


Years ended June 30, 2009 and 2008








1. Business and Summary of Significant Accounting Policies





The Dewey Electronics Corporation is a systems oriented military electronics development, design and manufacturing organization based in Oakland, New Jersey with a focus on compact diesel power generation solutions.  Its principal products are electronic and electro-mechanical systems manufactured for the Armed Forces of the United
States, which the Company provides as a prime contractor or subcontractor for the Department of Defense.





A.  Revenue Recognition





Revenues and estimated earnings under long-term defense contracts (including research and development contracts, except as described below in this paragraph) are recorded using the percentage-of-completion method of accounting, measured as the percentage of costs incurred to estimated total costs of each contract.  For the Company’s
indefinite delivery, indefinite quantity contract to provide 2kW generator sets to the military and for orders from other government subcontractors for 2kW generators, percentage-of-completion calculations are based on individual “Delivery Orders” which are periodically received for specified quantities.  For research and development contracts, total costs incurred are compared to total expected costs for each contract.  During the fiscal year ended June 30, 2009 the Company had
one development sub-contract to perform qualification tests for an EPA compliant engine for use with its 2kW generator sets on which it did not recognize revenue based on the percentage-of-completion method.  In this sub-contract revenue was recorded with the successful completion of each milestone in accordance with the contract terms. The sub-contract was completed in January 2009.





The Company uses the percentage-of-completion method to recognize revenue for its replacement parts business when the dollar amount of the order to be delivered in a future period or periods is material, and the duration of the work will span multiple reporting periods.  Revenue and earnings for all other orders for replacement parts
(including orders for replacement parts for snowmaking equipment) are recorded when deliveries of product are made and title and risk of loss have been transferred to the customer and collection is probable.





For those contracts where revenue has been recognized using the percentage-of-completion method of accounting, provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.  Changes in job performance, job conditions, and estimated profitability may result in revisions to costs
and income and are recognized in the period in which the revisions are determined.





B.  Concentration Risks





Concentration of Credit Risks





The Company is subject to concentrations of credit risk primarily from cash and accounts receivable.  The Company maintains accounts with financial institutions which exceed the current federally insured maximum of $250,000. The Company minimizes risks associated with cash by periodically reviewing the credit quality of its primary
financial institutions.  The Company’s accounts receivable are principally with agencies of the United States Department of Defense.  These agencies accounted for 58.0% of the Company’s accounts receivable as of June 30, 2009. The Company also had an outstanding accounts receivable with one Department of Defense sub-contractor which accounted for 20.1% of the Company’s accounts receivable as of June 30, 2009.





Product Concentration Risk





The Company derives a significant portion of its revenue from the sale of 2kw portable electrical generators to various branches of the United States military under a long term contract and to other Department of Defense contractors.  The




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contract to supply generators to the Department of Defense is for an indefinite delivery, indefinite quantity and is subject to the Government’s standard provision for termination at the convenience of the Government.


Supplier Concentration Risks





The Company is primarily dependent on four vendors to supply qualified components for its generator products.  During fiscal year 2009 two of these suppliers accounted for 24.9% and 18.3% of material purchases, respectively.  These same suppliers accounted for 27.7% and 16.0% of material purchases in fiscal year 2008.  No
other supplier accounted for more than 10% of material purchases in fiscal years 2009 or 2008.





Customer Concentration Risks





The Company derives most of its revenues through contracts with various agencies of the Department of Defense including a long-term contract to supply portable electric generators, research and development contracts, and various short-term contracts and awards to supply spare parts and perform repairs on products previously manufactured and
sold by the Company.  The Company also provides portable electric generators as a sub-contractor to other prime contractors to the Department of Defense.  In fiscal year 2009 the various agencies of the Department of Defense accounted for approximately 62.5% of Company revenue and one prime contractor accounted for 12.0% of revenues.  In fiscal year 2008 the Department of Defense accounted for 71.8% of revenues and one prime contractor accounted for 16.2% of Revenues.  No
other customer accounted for more than 10% of the Company’s revenues in fiscal years 2009 or 2008.





C.  Cash and Cash Equivalents





The Company considers all highly liquid debt instruments with an original maturity of three months or less at the date of purchase to be cash equivalents.





D.  Accounts Receivable





The Company regularly reviews its trade receivables for probability of collection.  An assessment of the probability of collection of delinquent accounts is made and an allowance is recorded when collection becomes uncertain. There was no allowance for doubtful accounts as of June 30, 2009.





E.  Inventories





Cost is determined by the first-in, first-out (FIFO) method.  Inventories are valued at the lower of cost or market.  Components of inventory cost include materials, direct labor and overhead that have not been charged to specific contracts.





F.  Use of Estimates





The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period.  These estimates include, among others, lower of cost or market estimates for inventories, realization of deferred tax assets, revenue recognition and certain accrued expenses.  Actual results could differ from those estimates.





G.  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.





H. Development Costs





The Company expenses its research and development costs as incurred.  These costs consist primarily of salaries and material costs.  For the fiscal years ended June 30, 2009 and  2008, the Company expensed $113,735 and $212,348, respectively, of





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research and development costs.  Research and development projects performed under contracts for customers are billed to the customer and are recorded as contract costs as incurred.





Previously, the Company licensed certain technology rights under an agreement with a vendor for which it pre-paid licensing fees.  As of June 30, 2009, the Company no longer licensed these technology rights. As of June 30, 2008, $100,000 of these fees were included in prepaid expenses and other current assets.





I.  Impairment of Long-Lived Assets





The Company reviews the recoverability of all long-term assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable.  If required, the Company compares the estimated undiscounted future net cash flows to the related asset’s
carrying value to determine whether there has been an impairment.  If an asset is considered impaired, the asset is written down to fair value, which is based either on discounted cash flows or appraised values in the period the impairment becomes known. There were no impairments of long-term assets in the year ended June 30, 2009 or in the year ended June 30, 2008.





J.  Income Taxes





The Company applies Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”).  Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases.  The effect on deferred tax assets and liabilities of a change in tax laws is recognized in the results of operations in the period the new laws are enacted.  A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized.





On July 1, 2007 the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes–an interpretation of FASB Statement 109” (“FIN 48”). There was no material effect on the Company’s financial statements associated with the adoption of FIN 48.





K.  Deferred Costs





The Company is continuing to actively pursue possible methods of monetizing the undeveloped and unused portion of its property, by its sale and/or development.  To that end the Company has deferred $65,095 of costs incurred related to these efforts.





L.  Liquidity





During the year ended June 30, 2009, the Company’s net income was approximately $143,000 and cash inflows from operations were approximately $367,000.  Beginning in late fiscal 2007 the Company changed the way it negotiates payment terms on new contracts.  The Company now attempts to negotiate progress payments based
on achievement of sub-tasks within a project rather than relying on demonstration of incurred costs.  This approach is expected to result in the Company receiving payment under these contracts at or before the time it must pay its vendors.  The four recent contracts received in fiscal 2008 were structured this way and the Company intends to continue this approach where possible.  The Company believes that the Company’s current cash and its line of credit, combined with progress
payments as well as billings at the time of delivery of products will be sufficient to support short-term liquidity requirements, working capital needs and capital expenditures at their current or expected levels.





M.Reclassification of Prior Year Balances





Certain prior year balances have been reclassified to conform to the current period financial statement presentation.  This reclassification has no impact on the Company’s financial position, results of operations or cash flows.




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2.  Recent Accounting Pronouncements





In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”).  SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with U.S. generally
accepted accounting principles, and expands disclosures about fair value measurements.  In February 2008, the FASB issued Staff Position No. 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13” (“FSP 157-1”) and Staff Position No. 157-2, “Effective Date of FASB Statement No. 157” (“FSP 157-2”).  In
October 2008, the FASB adopted FASB Staff Position No. 157-3 “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (“FSP 157-3”).  FSP 157-1 amends SFAS 157 to remove certain leasing transactions from its scope.  FSP  157-2 delays the effective date of SFAS 157 for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually), until the beginning of the Company’s 2010 fiscal year beginning July 1, 2009.  The measurement and disclosure requirements related to financial assets and financial liabilities are effective for the Company beginning in the Company’s 2009 fiscal year beginning July 1, 2008.  FSP 157-3 reaffirms that for financial assets fair value is an estimated exit price, and provides examples of how to estimate fair values when relevant observable data are
not available.  It further clarifies that in disorderly markets, judgment is required when deciding to accept or reject market prices as evidence of fair value.  FSP 157-3 is immediately effective, including for prior periods, for which financial statements have not been issued. The adoption of Statement SFAS 157, FSP 157-1, and FSP 157-3 had no impact on the Company’s financial statements.





In April 2009, the FASB issued Staff Position No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP 157-4”).  FSP  157-4 provides guidelines for making fair value measurements
more consistent with the principles presented in SFAS No. 157.  FSP  157-4 relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales.  It reaffirms what SFAS 157 states is the objective of fair value measurement – to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions.  Specifically,
it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive.  FSP 157-4 is effective for the Company’s annual reporting for the fiscal year ended on June 30, 2009.  The implementation of FSP 157-4 did not impact the Company’s financial position, results of operations or cash flows.





In June 2009, the FASB, issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles– a replacement of FASB Statement No. 162” (“SFAS 168”).  SFAS 168 establishes the FASB Accounting Standards codification as the source of authoritative
accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States.  SFAS 168 is effective for the Company’s interim reporting period ending on September 30, 2009.  SFAS 168 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.





In May 2009, the FASB issued Statement No. 165, “Subsequent Events” (“SFAS 165”).  SFAS 165 requires entities to disclose the date through which they have evaluated subsequent events and whether the date corresponds with the release of their financial statements.  SFAS 165 is effective for interim
and annual periods ending after June 15, 2009.  The adoption of SFAS 165 did not materially impact the Company’s financial position, results of operations or cash flows.  The Company evaluated subsequent events that occurred after June 30, 2009 up through September 25, 2009.  During this period no material subsequent events came to our attention.




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3.  Inventories





Inventories consist of:




June 30,2009


2008Finished goods

$
38,410


$
56,279Work in progress


144,493



217,674Raw materials


592,418



580,437$
775,321


$
854,390





4.  Contract Costs and Estimated Profits in Excess of Billings








June 30,2009


2008Costs incurred on contracts in progress

$
1,467,305


$
3,740,562Estimated contract profit


254,683



700,5981,721,988



4,441,160Less:  billings to date


323,603



3,350,630Contract costs and related estimatedprofits in excess of billings

$
1,398,385


$
1,090,530





5.  Stock Option Plan





On December 2, 1998, the Employee Stock Option Committee adopted a Stock Option Plan of 1998, pursuant to which incentive stock options have been granted to various executives and key employees to purchase shares of common stock.  Options were granted at fair market value of the stock on the date of grant and (and with respect those
options exercisable as of June 30, 2009) are exercisable over a ten-year period beginning December 2, 1999 to September 12, 2010.  At the Annual Meeting of Stockholders on December 5, 2001, this stock option plan was amended and restated to, among other things, increase the number of shares which may be issued under the plan by 25,000 shares, from 60,000 to 85,000.





The following disclosures are based on stock options granted to employees of the Company in the second fiscal quarter, ended December 31, 2008. For the fiscal year ended June 30, 2009, the Company recorded stock option compensation expense of $3,344. The Company had no stock option expense in fiscal 2008.





The Company used its historical stock price volatility to compute the expected volatility for purposes of valuing stock options issued.  The period used for the historical stock price corresponded to the expected term of the options and was between six and seven years. The expected dividend yield is based on the Company’s practice
of not paying dividends.  The risk-free rate of return is based on the yield of U.S. Treasury Strips with terms equal to the expected life of the options as of the grant date.  The expected life in years is based on historical actual stock option exercise experience.  The following weighted average assumptions were used in the valuation of stock options granted in the second quarter of fiscal 2009.




December 31,2008Expected dividend yield
--Expected volatility
63.8%Risk-free interest rate
1.87%Expected life in years
6.7





Based on the assumptions in the table above, the grant date fair value of stock options granted in the second quarter of fiscal 2009 was $5,287.


The changes in the number of shares under option are as follows:


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Number of Shares

Weighted Average Exercise PriceBalance at June 30, 2007
20,000

$     3.47Granted during 2008
--

--Forefeited
--

--Balance at June 30, 2008
20,000

$     3.47Granted during 2009
5,200

1.63Forfeited
--

--Balance at June 30, 2009
25,200

$     3.09Exercisable at June 30, 2009
20,000

$     3.47





Also, at the Annual Meeting of Stockholders on December 5, 2001, the Company adopted a Stock Option Plan for Non-Employee Directors.  The number of shares issuable upon exercise of options, which may be granted under this plan, shall not exceed 50,000 shares of common stock.  No options have been granted under this plan.





Listed below is a summary of the stock options outstanding and exercisable at June 30, 2009.




Outstanding and Exercisable


Weighted Average
Weighted AverageExercise Price
Options

Exercise Price
Remaining Life-Years1.63
4,000

1.63
1.23.93
16,000

3.93
4.520,000





The fair value of each option was estimated on the grant date using the Black-Scholes option-pricing model.





As of June 30, 2009, the intrinsic value of stock options outstanding and exercisable was $320.





6.  Taxes on Income





Deferred tax assets and liabilities as of June 30, 2009 and  2008 consisted of the following:





Deferred Tax assets:

2009


2008CurrentVacation accrual

$
56,202


$
53,038Inventory reserve


131,403



89,511Allowance for doubtful accounts


--



8,600Prepaids


(8,246
)


(2,489
)179,359



148,660Less Valuation Allowance


(179,359
)


(148,660
)Total current deferred tax asset


--



--Non-currentPension


178,441



137,957Depreciation


(20,205
)


(15,787
)Net Operating Loss


679,439



756,163837,675



878,333Less Valuation Allowance


(837,675
)


(878,333
)Total non-current deferred tax assets


--



--Total deferred tax assets

$
--


$
--




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The Company has provided a valuation allowance against its net deferred taxes as it believes that it is more likely than not that it will not realize the tax attributes. In fiscal 2009, the Company removed the valuation allowance against $9,959 of it’s deferred tax assets and used this amount to offset the Company’s tax liability
for fiscal 2009.








In fiscal 2008 the Company increased its deferred tax assets and the valuation allowance against its net deferred tax assets by $170,464, the result of differences between the Company’s estimate of net operating losses in prior years and the amount actually recognized for income tax purposes. In fiscal 2008 the Company removed the valuation
allowance against $101,688 of its deferred tax assets and used this amount to offset the Company’s tax liability for fiscal 2008. The result of these two changes to the Company’s deferred tax assets is an increase of $68,776 against which the Company has provided a valuation allowance in the same amount.





As of June 30, 2009, the Company has approximately $1,540,000 and $1,660,000 of federal and state, respectively, net operating loss carry-forwards expiring beginning in 2012 through 2022.





The reconciliation of the Federal statutory rate with the Company’s effective tax rate is summarized as follows:





Years ended June 30,2009


2008Federal statutory rate


34.00
%


34.00
%Tax Return to Provision  true up






(46.85
)Decrease in valuation allowance


(39.41
)


17.44Other


5.41



(4.59
)Effective Rate


0.00
%


0.00
%








7.  Pension Plan




The Company has a non-contributory defined benefit retirement plan covering all its employees which is qualified under the Internal Revenue Code.  The method of determining the accrued benefit of an employee is the amount equal to 0.8% 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 investment policy of the Company for its pension plan is to maximize value within the context of providing benefit security for plan participants.  The plan assets are invested in a fixed income investment account.





The Company expects to continue to contribute within the range of legally acceptable contributions as identified by the Plan’s enrolled actuary.





The following tables provide information about changes in the benefit obligation and plan assets and the funded status of the Company’s pension plan.





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2009


2008Change in benefit obligation:Benefit obligation at beginning of year

$
1,311,467


$
1,275,194Service cost


34,961



34,758Interest cost


87,860



79,450Actuarial loss/(gain)


121,469



(63,639
)Benefits paid plus administrative expenses


(13,966
)


(14,296
)Benefit obligation at end of year

$
1,541,791


$
1,311,467Change in plan assets:Fair value of plan assets at beginning of year

$
993,302


$
909,996Actual return on plan assets


47,156



44,046Employer contributions


103,765



53,556Benefits paid plus administrative expenses


(13,966
)


(14,296
)Fair value of plan assets at end of year

$
1,130,257


$
993,302Funded status


(411,534
)


(318,165
)Unrecognized Net Gain or Loss


352,095



208,673Accrued Pension Expense

$
(59,439
)

$
(109,492
)Measurement Date

July 1, 2009


July 1, 2008Weighted Average AssumptionsDiscount Rate


6.25%



6.75%Expected Long-term Rate of Return on Assets


5.25%



7.50%Rate of increase in future compensation levels


3.00%



3.00%





Set forth below is a summary of the amounts reflected in the Company’s statement of financial position at the end of the last two fiscal years:





June 30, 2009


June 30, 2008Accrued pension liability

$
(411,534
)

$
(318,165
)Accumulated other comprehensive income, pre-tax


352,095



208,673Net amount recognized

$
(59,439
)

$
(109,492
)




The accumulated benefit obligation for the plan was $1,541,791 and $1,311,467 at June 30, 2009, and 2008, respectively.





Components of periodic pension costs as of June 30, 2009 and 2008 are as follows:





2009


2008Service cost-benefits earned during the period

$
34,961


$
34,758Interest cost on projected benefit obligation


87,860



79,450Expected return on plan assets


(77,093
)


(67,688
)Amortization of actuarial loss


7,984



12,875Net periodic pension cost

$
53,712


$
59,395





Weighted Average Assumptions for Net Periodic Pension Expense2009
2008Discount Rate
6.25%
6.25%Expected Long-term Rate of Return on Assets
7.50%
7.50%Rate of Increase in Future Compensation Levels
3.00%
3.00%








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Retirement Plan for Employees of Dewey Electronics Corporation’s weighted average asset allocations at June 30, 2009, and 2008, by asset category are as follows:





2009
2008Asset CategoryFixed Funds with Guaranteed Interest Rates
100%
100%Total
100%
100%


The expected future payments for the years ended June 30, are as follows:





2010
$         37,0002011
$         51,0002012
$         66,0002013
$         74,0002014
$         75,000Five years thereafter
$       496,000





8.  Earnings Per Share





Net income per share has been presented pursuant to SFAS No. 128, “Earnings per Share”.  Basic net income per share is computed by dividing reported net income available to common shareholders by weighted average shares outstanding for the period.  Diluted net income per share is computed by dividing reported
net income available to common shareholders by weighted average shares outstanding for the period, adjusted for the dilutive effect of common stock equivalents, which consist of stock options, using the treasury stock method.





The tables below set forth the reconciliation of the numerators and denominators of the basic and diluted net income per common share computations.  Certain stock options were excluded from the computation of earnings per share due to their anti-dilutive effect. The weighted average number of such shares is 16,000 for the years ended
June 30, 2009 and 2008.




Year Ended June 30, 2009Income


Shares


Per Share AmountBasic net income/per common share

$
142,946



1,362,031


$
0.10Effect of dilutive securities


--



1,400



--Diluted net income per common share

$
142,946



1,363,431


$
0.10Year Ended June 30, 2008Income


Shares


Per Share AmountBasic net income/per common share

$
122,053



1,362,031


$
0.09Effect of dilutive securities


--



918



--Diluted net income per common share

$
122,053



1,362,949


$
0.09







9.  Other Income/Expense





Other income/(expense) consists of the following for the years ended June 30:





2009


2008Sales of scrap and miscellaneous income/(expense) – net

$
(19,356
)

$
24,182Interest income


277


$
2,163$
(19,080
)

$
26,345




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10.Credit Facility





On April 27, 2009, the Company entered into a $500,000 Revolving Term Note and related Loan and Security Agreement (collectively, the “Line of Credit”) with TD Bank, NA (the “Bank”) for a term expiring May 5, 2010.  As of June 30, 2009 there were no outstanding borrowings against the Line of Credit.  The
Line of Credit provides among other things for an annual interest rate on borrowings equal to the Bank’s prime rate plus one (1.00) percent with a minimum interest rate of 4.25% and is subject to customary representations, covenants, and default provisions in favor of the bank.  Any loans drawn under the Line of Credit are secured by a first lien on all of the Company’s accounts receivable, machinery, equipment, other personal property and a Commercial Mortgage Security Agreement on the
Company’s real property.




Item 9.CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS
 ON ACCOUNTING AND FINANCIAL DISCLOSURE
  None.




Item 9A(T).   CONTROLS AND PROCEDURES




Evaluation of Disclosure Controls and Procedures





The Company carried out, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Treasurer, an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934) as of the end of the fiscal year covered by this Annual Report.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act is accumulated and communicated to management, including its Chief Executive Officer and Treasurer, as appropriate to allow timely decisions regarding required disclosure.  Based
on this evaluation, the Chief Executive Officer and Treasurer concluded that, as of June 30, 2009, the design and operation of the Company's disclosure controls and procedures were effective.





Nonetheless, a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues have been detected.





Management’s Report on Internal Control over Financial Reporting





The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting(as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.





Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2009 based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation,
management concluded that the Company’s internal control over financial reporting was effective as of June 30, 2009 based on those criteria issued by COSO.





Because of its inherent limitation, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.





This Annual Report does not include an attestation report by the Company’s independent registered public accounting firm regarding internal control over








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financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.





Changes in Internal Control Over Financial Reporting





There were no changes in the Company’s internal control over financial reporting during the fiscal quarter ended June 30, 2009 that materially affected, or are reasonably likely to affect, the Company’s internal control over financial reporting.




Item 9B. OTHER INFORMATION





None




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PART III




Item 10.      DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


Information in response to this Item is incorporated herein by reference from the Company’s definitive proxy statement for the 2009 Annual Meeting of Stockholders.






The Company’s Code of Ethics is available at our website at www.deweyelectronics.com





Item 11.EXECUTIVE
COMPENSATION





Information in response to this Item is incorporated herein by reference from the Company's definitive proxy statement for the 2009 Annual Meeting of Stockholders.





Item 12.SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS





Item 403 of Regulation S-B





Information in response to this Item is incorporated herein by reference from the Company's definitive proxy statement for the 2009 Annual Meeting of Stockholders.





Item 201(d) of Regulation S-K





(a)
(b)Number of securities
Weighted-average
Number of securitiesto be issued upon
exercise price of
remaining available forexercise of outstanding
outstanding
future issuance underOptions, warrants
options, warrants
equity compensationPlan Category
And rights
and rights
Plans (excludingsecurities reflectedin column (a))Equity compensation plans approvedby security holders
25,200
$3.0884
87,300Equity compensation plans not approvedby security holders
--
--
--Total
25,200
$3.0884
87,300


Item 13.CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS


AND DIRECTOR INDEPENDENCE





Information in response to this Item is incorporated herein by reference from the Company’s definitive proxy statement for the 2009 Annual Meeting of Stockholders.





Item 14.PRINCIPAL
ACCOUNTANT FEES AND SERVICES


Information in response to this Item is incorporated herein by reference from the Company’s definitive proxy statement for the 2009 Annual Meeting of Stockholders.





PART IV


Item 15.EXHIBITS,
FINANCIAL STATEMENT SCHEDULES





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.




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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/ John H.D. Dewey

/s/ Stephen P. KrillBY: John H.D. Dewey

BY:  Stephen P. Krill Jr., TreasurerPresident and Chief Executive Officer





DATE:     September 25, 2009




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/ John H.D. Dewey
Date:  September 25, 2009John H.D. Dewey
Director/s/ James M. Link
Date:  September 25, 2009James M. Link
Director/s/ Nathaniel Roberts
Date:  September 25, 2009Nathaniel Roberts
Director/s/ John B. Rhodes
Date:  September 25, 2009John B. Rhodes
Director/s/ Ron Tassello
Date:  September 25, 2009Ron Tassello
Director





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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 of 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.
--10
(a)-
2001 Stock Option Plan.  This item was filed with the Registrant’s Definitive Proxy Statement for the 2001 annual meeting of stockholders on December 5, 2001 and is herein incorporated by reference.
--10
(b)-
Amendment and Restatement of the 1998 Stock Option Plan.  This item was filed with the Registrant’s Definitive Proxy Statement for the 2001 annual meeting of stockholders on December 5, 2001 and is herein incorporated by reference.
--10
(c)-
Form of Grant Letter for the 1998 Stock Option Plan.  This item was filed with the Registrant’s Form 10-Q for the quarter ended December 31, 2008 and is herein incorporated by reference.10
(d)
Revolving Term Note made by the Dewey Electronics Corporation in favor of TD Bank, NA dated April 20, 2009.  This item was filed with the Registrant’s Form 10-Q for the quarter ended March 31, 2009 and is herein incorporated by reference..10
(e)
Loan and Secuirty Agreement between The Dewey Electronics Corporation and TD Bank, NA Dated April 20, 2009.  This item was filed with the Registrant’s Form 10-Q for the quarter ended March 31, 2009 and is herein incorporated by reference.10
(f)
Commercial Mortgage and Security Agreement and Assignment of Leases and Rents between the Dewey Electronics Corporation and TD Bank, NA dated April 20, 2009.  This item was filed with the Registrant’s Form 10-Q for the quarter ended March 31, 2009 and is herein incorporated by reference.31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
--31.2

Certification of Treasurer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
--32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
--32.2

Certification of Teasurer pursuant to 18 U.S.C. Secton 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
--