FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

               (X)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                     For the fiscal year ended July 3, 2004

                          Commission file number 1-5555
                            WELLCO ENTERPRISES, INC.
               (Exact name of Registrant as specified in charter)

    North Carolina                                     56-0769274
--------------------------                    ---------------------------------
(State of incorporation)                    (I.R.S. employer identification no.)

       Waynesville, North Carolina                                   28786
-------------------------------------------                       -------------
(Address of principal executive offices)                          (Zip Code)

Registrant's telephone number, including area code 828-456-3545
                                                   ------------

Securities registered pursuant to Section 12(b) of the Act:

Common Capital Stock - $1 par value                   American Stock Exchange
-----------------------------------                   -----------------------
(Title of class)                          (Name of exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:

                       Common Capital Stock - $1 par value
                                (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes No X .

As of August 31, 2004, 1,249,046 common shares were outstanding, and the
aggregate market value of the common shares (based upon the closing price of
these shares on the American Stock Exchange on August 31, 2004) of Wellco
Enterprises, Inc. held by nonaffiliates was approximately $6,400,000.

Documents incorporated by reference:
         Definitive Proxy Statement, to be dated October 15, 2004, in PART IV.
         Form 8-K , dated March 4, 2004, in Item 4.
         Definitive Proxy Statement, dated October 17, 2003, in PART IV.
         Definitive Proxy Statement, dated October 18, 2002, in PART IV.
         Definitive Proxy Statement, dated October 13, 2000, in PART IV.
         Definitive Proxy Statement, dated October 17, 1997, in PART IV.
         Definitive Proxy Statement, dated October 18, 1996, in PART IV.
         Form 10-K for the Fiscal Year Ended July 1, 2000, in Part IV.
         Form 10-K for the Fiscal Year Ended July 3, 1982, in PART IV.



<PAGE>




                                     PART I
                                     ------
Item 1. Business.
------  --------

Substantially all of the Company's operating activity is from the sale of
military and other rugged footwear, the sale of specialized machinery and
materials for the manufacture of this type of footwear and the rendering of
technical assistance and other services to licensees for the manufacture of this
type of footwear.

Footnote 15 to the Consolidated  Financial Statements contains information about
revenues by similar  sources and by geographic  areas.  The majority of revenues
($39,648,000  in 2004 and  $18,209,000  in 2003)  were  from  sales to the U. S.
government,  primarily the Defense  Supply  Center  Philadelphia  (DSCP),  under
contracts  for the supply of boots used by the U. S. Armed  Forces.  The loss of
this customer would have a material adverse effect on the Company.

For more than the last five years, the Company has manufactured and sold
military combat boots under firm fixed price contracts with DSCP. The primary
boot products supplied DSCP are the general issue combat boot, the hot wet
(jungle) boot and the hot dry (desert) boot, and the Infantry Combat Boot (ICB).
The government awards fixed price boot contracts on the basis of bids from
several qualified U. S. manufacturers. The Company also sells similar
military-style boot products, as well as anti-personnel mine protective footwear
products, to other customers, including customers located in other countries.

The Company provides, primarily under long-term licensing agreements,
technology, assistance and related services for manufacturing military and
commercial footwear to customers in the United States and abroad. Under these
agreements licensees receive technology, services and assistance, and the
Company earns fees based primarily on the licensees' sales volume. In addition
to providing technical assistance, the Company also, from time to time, supplies
certain foreign military footwear manufacturers with some of their machinery and
material needs. The Company builds specialized footwear manufacturing equipment
for use in its own and its customers' manufacturing operations. This equipment
is usually sold, but in some cases it is leased.

Net income for the 2004 fiscal year was $2,448,000 ($1.97 diluted income per
share) compared to net income of $823,000 ($0.68 diluted income per share) for
the 2003 fiscal year. Income before cumulative effect of change in accounting
principle for goodwill for the 2003 fiscal year was $1,051,000 ($0.87 diluted
income per share before cumulative effect).

Compared to the prior year, total revenues in the current year increased by
$20,860,000. In late March, 2003, the Defense Supply Center Philadelphia (DSCP,
the Department of Defense Agency with whom the Company contracts for the
manufacture of combat boots) invoked its surge option under a contract for the
manufacture of Direct Molded Sole (DMS) boots. Invoked in response to the need
for desert boots used by U. S. Armed Forces personnel in Iraq, the surge option
requires Wellco to significantly increase its rate of boot production. In the
current year, the Company shipped 232,000 more pairs of DMS boots than in the
prior year.

Also in March 2003, DSCP awarded the Company a contract to supply the black ICB
boot. This contract is for a one year period, with four one-year options which
are exercisable at the government's discretion. The Company shipped 75,000 pairs
of the new black ICB boot during fiscal year 2004.




                                       -1-

<PAGE>



More information about these, and other events affecting Wellco's 2004 and 2003
operating results, are contained in the Management's Discussion and Analysis of
Results of Operations and Financial Condition section of the Company's 2004
Annual Report to Shareholders which is incorporated in Part II of this Form
10-K.

Bidding on U. S. government boot solicitations is open to any qualified U. S.
manufacturer. In addition to meeting very stringent manufacturing and quality
standards, contractors are required to comply with demanding delivery schedules
and a significant investment in specialized equipment is required for the
manufacture of certain types of boots.

The Company competes on U. S. government contracts with several other companies,
none of which dominates the industry.  Bidding on contracts is very competitive.
U. S. footwear  manufacturers  have been adversely affected by sales of footwear
made  in  low  labor  cost  countries.   This  has  significantly  affected  the
competition  for contracts to supply boots to U. S. Armed  Forces,  which by law
must be made  in the U. S.  Most  boot  contracts  are for  multi-year  periods.
Therefore, a bidder not receiving an award from a significant solicitation could
be adversely  affected for several  years.  In addition,  current boot contracts
contain  additional  one-year  options to  purchase  boots and the  options  are
exercisable at the government's discretion.

Many factors affect the government's demand for boots, therefore the quantity
purchased can vary from year to year. Contractors cannot influence the
government's boot needs. Price, quality, quick delivery and manufacturing
efficiency are the areas emphasized by the Company that strengthen its
competitive position. While the government's demand for boots varies from month
to month, the Company's business cannot be deemed seasonal.

The U. S. government usually evaluates bids received on solicitations for boots
using their "best value" system, under which bidders offering the best value to
the government are awarded the contract, or in the case of multiple contract
awards, a greater portion of total boots contracted. Best value usually involves
an evaluation of performance considerations, such as quality and delivery, with
the prices bid being equally important. As bidders become more equal in the best
value evaluation, price becomes more important.

Government contracts are subject to partial or complete termination under the
following circumstances:

         (1)      Convenience of the Government. The government's contracting
                  officer has the authority to partially or completely terminate
                  a contract for the convenience of the government only when it
                  is in the government's interest to terminate. The contracting
                  officer is responsible for negotiating a settlement with the
                  contractor.

         (2)      Default of the Contractor. The government's contracting
                  officer has the authority to partially or completely terminate
                  a contract because of the contractor's actual or anticipated
                  failure to perform his contractual obligations.

Under certain circumstances occasioned by the egregious conduct of a contractor,
contracts may be terminated and a contractor may be prohibited for a certain
period of time from receiving government contracts. The Company has never had a
contract either partially or completely terminated.

Because domestic commercial footwear manufacturers are adversely affected by
imports from low labor cost countries, the Company targets its marketing of
technology and assistance primarily to military footwear manufacturers. The
Company competes against several other footwear construction methods commonly
used for heavy-duty commercial footwear. These methods include the Goodyear Welt

                                       -2-

<PAGE>



construction,  as well as boots bottomed by injection molding. These methods are
used in work shoes,  safety shoes, and hiking boots  manufactured both in the U.
S. and  abroad  for the  commercial  market.  Quality,  service  and  reasonable
manufacturing costs are the most important features used to market the Company's
technology, assistance and services.

The Company has a strong research and development program. While not all
research and development results in successful new products or significant
revenues, the continuing development of new products and processes has been and
will continue to be a significant factor in growth and development.

Of the total amount spent on research and development, a significant portion is
for personnel costs of mold engineers, rubber technicians, chemists, pattern
engineers and management, all of whom have many responsibilities in addition to
research and development. The Company estimates that the total cost of research
and development, the majority of which is company sponsored, for fiscal years
2004, 2003 and 2002 is $101,000, $110,000 and $180,000.

The Company's backlog of all sales, not including license fees and rentals, as
of August 31, 2004 was approximately $28,000,000 compared to $19,100,000 at
August 31, 2003. The Company estimates that substantially all of the current
year backlog will be shipped in the 2005 fiscal year. The current year's backlog
increased because the Company was awarded a new contract in May 2004 to supply
the U.S. Army with the ICB boot in the tan color.

Most of the raw materials used by the Company can be obtained from at least two
sources and are readily available. Because all materials in combat boots must
meet rigid government specifications and because quality is the first priority,
the Company purchases most of its raw materials from vendors who provide the
best materials at a reasonable cost. The loss of some vendors would cause some
difficulty for the entire industry, but the Company believes a suitable
replacement could be found in a reasonably short period of time. Major raw
materials include leathers, fabrics and rubber, and, by government regulation
all are from manufacturers in the United States.

Compliance with various existing governmental provisions relating to protection
of the environment has not had a material effect on the Company's capital
expenditures, earnings or competitive position.

The Company employed an average of 693 persons during the 2004 fiscal year.


Item 2. Properties.
------  ----------

The Company has manufacturing, warehousing and office facilities in Waynesville,
North Carolina and Aguadilla, Puerto Rico. The building and land in North
Carolina are owned by the Company. The Puerto Rico building and land are leased.

In 1999, the Company consolidated its existing operations in Puerto Rico and the
operations transferred from its Waynesville, North Carolina factory into a
larger leased building.

Management believes all its plants, warehouses and offices are in good condition
and are reasonably suited for the purposes for which they are presently used.

Item 3. Legal Proceedings.
------  -----------------

There are no material  pending legal  proceedings,  other than ordinary  routine
litigation incidental to the Company's business, to which the Company or any of

                                       -3-

<PAGE>



its subsidiaries are a party or of which any of their property is subject.

Management does not know of any director, officer, affiliate of the Company, nor
any stockholder of record or beneficial owner of more than 5% of the Company's
common stock, or any associate thereof who is a party to a legal proceeding that
is adverse to the Company or any of its subsidiaries.

Item 4. Submission of Matters to a Vote of Security Holders.
------  ---------------------------------------------------

There were not any submissions of matters to a vote of security holders during
the fourth quarter of fiscal year 2004.










                                       -4-

<PAGE>




















                                    WELLCO(R)
                                ENTERPRISES, INC.
                                  ANNUAL REPORT
                                      2004






<PAGE>



                            WELLCO ENTERPRISES, INC.
                      CONSOLIDATED SELECTED FINANCIAL DATA
                   (In Thousands Except for Per Share Amounts)

                                                Fiscal Year Ended

                                   July 3,  June 28,  June 29, June 30,  July 1,
                                      2004      2003      2002     2001     2000
--------------------------------------------------------------------------------
Revenues                          $ 45,693  $ 24,833  $ 19,981 $ 19,417 $ 22,225
--------------------------------------------------------------------------------
Net Income                           2,448  (A)  823       683    1,153      711
--------------------------------------------------------------------------------
Basic Earnings per Share              2.04      0.70      0.58     0.99     0.61
--------------------------------------------------------------------------------
Diluted Earnings per Share            1.97      0.68      0.56     0.97     0.61
--------------------------------------------------------------------------------
Cash Dividends Declared per
Share of Common Stock                 0.45      0.40      0.40     0.40     0.25
--------------------------------------------------------------------------------
Total Assets at Year End            22,642    15,310    12,929   12,787   12,950
--------------------------------------------------------------------------------
Long-Term Liabilities at Year End  $ 1,725  $  1,972  $  1,328 $  1,532 $  1,593
--------------------------------------------------------------------------------


(A)      After a $228,000 cumulative effect of a change in accounting principle
         (See Note 21 in Consolidated Financial Statements). The cumulative
         effect reduced both basic earnings and diluted earnings per share by
         $0.19.

See the Management's Discussion and Analysis of Results and Operations and
Financial Condition section.



Independent Auditors
Dixon Hughes PLLC
Asheville, N.C.

Annual Meeting
November 16, 2004
Corporate Offices
Waynesville, N.C.

10-K Availability
The Company's  Form 10-K (annual  report filed with the  Securities and Exchange
Commission)  is  available  without  charge to those who wish to receive a copy.
Write to: Corporate Secretary,  Wellco Enterprises,  Inc., Box 188, Waynesville,
N.C. 28786






                                       -1-

<PAGE>



Dear Fellow Shareholders:

For fiscal year 2004, your company had net income of $2,448,000, equivalent to
basic earnings per share of $2.04 (diluted $1.97), from revenues of $45,693,000.
This compares with net income of $823,000, equivalent to basic earnings per
share of $.70 (diluted $.68) in the 2003 fiscal year, from revenues of
$24,883,000. For both revenues and net income, this is a record for your
company. The Management's Discussion and Analysis section of this Annual Report
gives you more details about this change.

A "surge" in desert boots, caused by the involvement of U. S. Armed Forces
personnel in Iraq increased revenues by $13,800,000. Shipments under a contract
for the Army's new Infantry Combat Boot (ICB) increased revenues $6,000,000.

Our contracts with the Defense Supply Center Philadelphia (DSCP) contain surge
option clauses. When a significant need arises, DSCP invokes this option clause,
which requires us to accelerate production to the maximum extent possible. On
one of our contracts, surge was invoked in March, 2003 and was in effect for all
of the 2004 fiscal year.

For many years we were one of the suppliers of an all-leather combat boot, which
is the basic boot issued to all U. S. Army recruits. This boot represented about
half of our total boot sales to DSCP. About two years ago, the Army replaced
this boot with the ICB boot. We submitted a response to the Army's first
solicitation of the ICB boot, and in March, 2003 were one of the three companies
awarded a contract.

The combination of surge and incorporation of the ICB boot into production, both
of which occurred at the same time, was a massive task. It resulted in a record
year, but was not without its problems.

Margins suffered from excess costs. Mo-Ka Shoe Corporation, our wholly-owned
subsidiary in Aguadilla, Puerto Rico, where we manufacture the majority of our
boots, increased employment from approximately 200 to a high of approximately
800 people. In the past few years, several shoe manufacturing plants in Puerto
Rico have closed. To my surprise, we still found it difficult to hire a
sufficient number of skilled shoe makers, and we incurred significant excess
labor cost. However, we did not have a choice. Production had to be quickly
increased.

The increased level of operations required the utmost dedication and greatly
extended working hours on the part of management and supervisory staff, as well
as on the part of production workers. It was only through the committed efforts
of many people that we were able to manage the increase.

Our need for cash grew significantly. You will see from this Annual Report that
we had to add a lot of equipment and had to make a significant investment in
inventory and accounts receivable. We are fortunate in having Wachovia Bank that
truly understands our operations and needs. Wachovia responded quickly to our
request for additional borrowings which allowed us to continue the expansion in
operations without interruption.

Although manufacturing costs increased at approximately the rate of revenues,
our administrative staff went far beyond what could reasonably be expected, and,
because of their efforts, we were able to limit the increase in administrative
costs.

I understand that, when we complete shipping the last of our orders that are
under surge, which should be in the second quarter of fiscal year 2005, future
orders will not be under surge, which also means that the need for desert boots
will be less. It is very difficult to project what the demand will be. Our
contracts are "indefinite quantity" contracts, meaning that each contract has a
minimum and a maximum number of pairs that DSCP can order, and the spread

                                       -2-

<PAGE>



between  minimum and maximum is very large.  I do feel that revenues in the 2005
fiscal year will be greater than those of the recent past, except for 2004.

I encourage you to read the "Forward Looking" section of Management's Discussion
and Analysis section of this Annual Report. It contains current information
about our contracts and other useful information.

I will emphasize that, in addition to being very demanding, government boot
contracting is very competitive. Footwear manufacturing remains a labor
intensive operation and very few companies can afford to manufacture in the U.
S. and remain competitive against foreign made footwear in the civilian.
Therefore, our government contracting is attractive for many of the remaining U.
S. boot manufacturers.

We are presently taking the necessary steps to lower our manufacturing costs. In
order to prepare for the future, your management is also concentrating on new
processes and technology. If wisely chosen and successfully implemented, this
will be one of the foundations of our future.

This past year I have learned that we have many great employees. It was only
through their skills, long hours and determination that we have had a successful
2004 fiscal year.








David Lutz
-------------------------------------
Chief Executive Officer and President
-------------------------------------

September 29, 2004









                                       -3-

<PAGE>



   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
   ---------------------------------------------------------------------------
                                    CONDITION
                                    ---------

                              RESULTS OF OPERATIONS
                              ---------------------

Critical Accounting Policies:
----------------------------

The Consolidated Financial Statements have been prepared in accordance with
accounting principles generally accepted in the United States of America which
require the Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the Consolidated Financial
Statements, and revenues and expenses during the periods reported. Actual
results could differ from those estimates. The Company believes the following
are the critical accounting policies which could have the most significant
effect on the Company's reported results and require the most difficult,
subjective or complex judgements by management.

         o        Impairment of Long-Lived Assets:
                  The Company reviews its long-lived assets for impairment
                  whenever events or circumstances indicate that the carrying
                  amount of an asset may not be recoverable. If the sum of the
                  expected cash flows, undiscounted and without interest, is
                  less than the carrying amount of the asset, an impairment loss
                  is recognized as the amount by which the carrying amount of
                  the asset exceeds its fair value. The Company makes estimates
                  of its future cash flows related to assets subject to
                  impairment review. One of the most critical estimates is
                  future demand, primarily through U. S. Department of Defense
                  contracts, for the Company's products. Changes to this and
                  other estimates could result in an impairment charge in future
                  periods.

         o        Inventory Valuation:
                  Raw materials and supplies are valued at the lower of
                  first-in, first-out cost or market. Finished goods and work in
                  process are valued at the lower of actual cost, determined on
                  a specific identification basis, or market. The Company
                  estimates which materials may be obsolete and which products
                  in work in process or finished goods may be sold at less than
                  cost, and adjusts their inventory value accordingly. Future
                  periods could include either income or expense items if
                  estimates change and for differences between the estimated and
                  actual amount realized from the sale of inventory.

         o        Income Taxes:
                  The Company records a liability for potential tax assessments
                  based on its estimate of the potential exposure. Due to the
                  subjectivity and complex nature of the underlying issues,
                  actual payments or assessments may differ from estimates.
                  Income tax expense in future periods could be adjusted for the
                  difference between actual payments and the Company's recorded
                  liability based on its assessments and estimates.

                  The Company has recorded a valuation allowance equal to a
                  significant part of its deferred tax assets. The valuation
                  allowance is based on an evaluation of the uncertainty of
                  future taxable income from certain jurisdictions. An
                  adjustment could be required if circumstances and events cause
                  the Company to change these estimates.





                                       -4-

<PAGE>





Comparing the Fiscal Year ended July 3, 2004 to the Fiscal Year ended June 28,
------------------------------------------------------------------------------
2003:
----

OVERVIEW
--------

The most significant event affecting the Company's operations in the current
fiscal year is the increased demand for desert boots used by U. S. Armed Forces
personnel serving in Iraq. To meet the need, boot production has more than
doubled, new employees have been hired and trained, overtime has been incurred
and new equipment has been purchased. While this level of activity has increased
income, significant excess costs have been incurred which resulted in no
significant change in the percent of gross profit to revenues.

The second most significant event occurring in this fiscal year is the
integration into manufacturing of a new boot for the U. S. Army (the Infantry
Combat Boot, "ICB"). While sales of this boot increased revenues, excess costs
were incurred in training employees and establishing manufacturing procedures
and methods.

Comparative results for these two periods is as follows:


                            Fiscal Year      Fiscal Year
                          Ended July 3,    Ended June 28,                 % of
(Amounts in thousands)             2004              2003    Change     Change
--------------------------------------------------------------------------------
Revenues                      $  45,693         $  24,833  $ 20,860       84%
--------------------------------------------------------------------------------
Cost of Sales                    39,438            21,272    18,166       85%
--------------------------------------------------------------------------------
Unrecovered Contract
Preparation Costs                  -                   70       (70)
--------------------------------------------------------------------------------
Gross Profit                      6,255             3,491     2,764       79%
--------------------------------------------------------------------------------
Administrative Expenses           3,009             2,390       619       26%
--------------------------------------------------------------------------------
Grant Income                         80                80        -
--------------------------------------------------------------------------------
Operating Income                  3,326             1,181     2,145      181%
--------------------------------------------------------------------------------
Net Interest Expense                196                21       175
--------------------------------------------------------------------------------
Income Taxes                        682               109       573
--------------------------------------------------------------------------------
Income Before Accounting
Change                            2,448             1,051     1,397
--------------------------------------------------------------------------------
Accounting Change                  -                 (228)     (228)
--------------------------------------------------------------------------------
Net Income                     $  2,448         $     823  $  1,625
--------------------------------------------------------------------------------

The Company's primary customer is the Defense Supply Center Philadelphia (DSCP),
the Department of Defense agency with which the Company contracts for the
manufacture of boots used by U. S. Armed Forces personnel. Since late March
2003, DSCP has exercised its surge option clause under contracts to manufacture
the Direct Molded Sole (DMS) boot. Invoked in response to the need for desert
boots used by U. S. Armed Forces personnel in Iraq, the surge option required

                                       -5-

<PAGE>



Wellco to significantly increase its rate of boot production.

In the 2004 fiscal year, the Company's increased shipments of DMS boots which
were under surge increased revenues approximately $13,800,000. In the 2004
fiscal year, the Company shipments of the new Army ICB boot increased revenues
approximately $6,000,000.

In order to meet the surge requirement, work shifts were added, new employees
were hired, overtime premiums were paid, and premium air freight costs were
incurred for shipping some raw materials and production machinery.

In March 2003, the Company was awarded a contract to supply the U. S. Army's new
ICB boot. About two years ago, the Army decided to replace its all-leather
combat boot, one of the three DMS boots manufactured by Wellco which represents
about half of Wellco's historical sales to DSCP, with the ICB boot. Wellco,
along with two other manufacturers, was awarded a contract to supply this boot.
During the 2004 fiscal year, the Company incurred significant costs (new
employee training costs, materials for production trials, boot testing, plant
infrastructure costs, etc.) to integrate the production of this new boot into
the Company's factories.

Although revenues increased significantly because of surge and the new ICB
contract, the excess costs associated with this activity resulted in Cost of
Sales increasing at approximately the same rate as the increase in revenues.

Revenues from technical assistance fees and equipment rentals from licensees,
which vary with licensee sales, were greater in the fiscal year because of
increased sales of certain licensees, primarily licensees that were also under
surge.

Increased salaries and bonus expense caused the majority of the increase in
administrative expenses. Two persons have been hired to replace two near-term
retirements. Several administrative clerks have been added to do the work caused
by the increased activity level. One in-house sales person has been added
because of increases in commercial sales of military boots. Employee bonuses
substantially vary directly with net income. Travel costs have also increased as
management personnel traveled more frequently to the Company's primary
manufacturing facility in Puerto Rico.

The increase in interest expense was caused by increased use of the Company's
bank line of credit, which was the primary source of cash needed for surge and
the new ICB contract. See the "Liquidity and Capital Resources" section below.

Grant income represents the straight line recognition of a grant issued by the
government of Puerto Rico related to the Company's 1999 consolidation of
manufacturing operations in Puerto Rico. This income was completely recognized
in the fourth quarter of fiscal year 2004.

Prior fiscal year net income was reduced by the write-off of $228,000 of
previously recorded goodwill that was determined to be impaired under Statement
of Financial Accounting Standards No. 142 which became effective in the fiscal
year 2003.

The income tax rate (the percent of Provision for Income Taxes to the Income
Before Income Taxes) for the 2004 fiscal year was 22% compared to 9% for the
prior fiscal year. The income tax rate increase is primarily due to an increase
in the proportion of total Income Before Income Taxes which is subject to full
federal tax. As shown in Footnote 11 to the Consolidated Financial Statements,
income earned by the Company's Puerto Rico subsidiary, which is exempt from

                                       -6-

<PAGE>



Puerto Rico income tax, and which is partially  exempt from U. S. income  taxes,
was a smaller  percent of total Income Before Income Taxes.  The income tax rate
was reduced by 9% from the  realization  of  previously  recorded  deferred  tax
assets whose value had been reduced by a valuation allowance.


Comparing the Fiscal Year ended June 28, 2003 to the Fiscal Year ended June 29,
2002:

Comparative results for these two periods are as follows:


                            Fiscal Year      Fiscal Year
                         Ended June 28,   Ended June 29,                  % of
(Amounts in thousands)             2003             2002     Change     Change
--------------------------------------------------------------------------------
Revenues                      $  24,833         $ 19,981   $  4,852       24%
--------------------------------------------------------------------------------
Cost of Sales                    21,272           16,361      4,911       30%
--------------------------------------------------------------------------------
Unrecovered Contract
Preparation Costs                    70              335       (265)     (79)%
--------------------------------------------------------------------------------
Gross Profit                      3,491            3,285        206        6%
--------------------------------------------------------------------------------
Administrative Expenses           2,390            2,551       (161)      (6)%
--------------------------------------------------------------------------------
Grant Income                         80               80         -
--------------------------------------------------------------------------------
Operating Income                  1,181              814        367       45%
--------------------------------------------------------------------------------
Interest Expense                     30               32         (2)
--------------------------------------------------------------------------------
Interest Income                       9              260        251
--------------------------------------------------------------------------------
Income Taxes                        109              359       (250)
--------------------------------------------------------------------------------
Income Before Accounting
Change                            1,051              683        368
--------------------------------------------------------------------------------
Accounting Change                  (228)              -        (228)
--------------------------------------------------------------------------------
Net Income                    $     823         $    683   $    140
--------------------------------------------------------------------------------

The Company received the first surge order for DMS boots in March 2003 and
responded immediately by increasing its rate of production. This increased
revenues in the 2003 fiscal year by $2,700,000. In addition, shipments under a
small new DSCP contract to manufacture the Extreme Cold Weather boot increased
revenues by $1,500,000. The sale of boot manufacturing equipment to a state
prison increased revenues $353,000.

Cost of sales increased more than revenues for the following reasons:

         Substantially all DMS boots sold to DSCP in the 2003 fiscal year were
         under three extensions of a contract which expired in April 2002. Prior
         to issuing these contract extensions and in the process of DSCP
         negotiating extension prices, DSCP insisted that certain extension
         prices be those offered by Wellco on an outstanding DMS boot
         solicitation. Prices offered by Wellco on the outstanding solicitation,

                                       -7-

<PAGE>



         and on the subsequent new contract resulting from that solicitation,
         are lower than those under the expired contract. These lower prices
         reduced gross profit by $268,000 in the 2003 fiscal year. The gross
         profit margin on boot sales was also adversely affected by an increase
         in leather prices.

         Cost of Sales and Services in the 2003 fiscal year includes surge
         costs, as explained above.

         In addition, employee group health insurance, workers' compensation
         insurance and general property insurance costs increased $259,000
         during the 2003 fiscal year. Wellco's group health insurance is
         self-funded, and the additional cost was primarily for two employees'
         major medical procedures.

In the 2003 fiscal year, the Company's adopted Statement of Financial Accounting
Standards 142 (SFAS 142), "Goodwill and Other Intangible Assets". The Company's
Consolidated Balance Sheets have for many decades included $228,000 of goodwill
related to the acquisition of a subsidiary. This goodwill arose prior to 1970
and, under the guidance of Accounting Principles Board Opinion No. 17, had not
been amortized. SFAS No. 142 provides for a specific method to determine if
goodwill is impaired and the application of this method resulted in the $228,000
of goodwill being deemed as impaired. As required under SFAS 142, the Company
charged this goodwill against the Consolidated Statements of Operations and
Comprehensive Income as the cumulative effect of change in accounting principle.

The 2003 fiscal year also includes $70,000 of unrecovered contract preparation
costs. In October 2001, Wellco submitted a solicitation response to a DSCP
procurement for berets to be used by U. S. Army personnel. Wellco did not have
any prior experience in manufacturing berets or similar knitted products. Since
submitting its response, certain machinery was purchased and certain costs were
incurred in order to learn beret manufacturing operations and procedures, and to
demonstrate to the government that Wellco had the capability to manufacture and
deliver berets within the government's required delivery schedule. In July 2002,
the government announced contract awards and Wellco was not awarded a contract.
In the 2002 fiscal year, beret manufacturing machinery was written down by
$159,000 to an amount equal to the estimated amount for which this machinery
could be sold ($70,000). Based on revised estimates of the resale value, in the
2003 fiscal year beret manufacturing machinery was completely written off, and
$70,000 is shown as Unrecovered Contract Preparation Costs in the Consolidated
Statements of Operations and Comprehensive Income for the fiscal year ended June
28, 2003.

Lower total administrative personnel salary cost and lower legal costs were the
primary reasons general and administrative expenses decreased $161,000 in the
2003 fiscal year.

Interest income in the 2002 fiscal year includes $234,000 which represents the
reversal of previously accrued imputed interest related to a December 29, 1995
repurchase by Wellco of 1,531,272 shares of its common stock (see Note 12 to the
Consolidated Financial Statements). This repurchase provided for certain
additional payments, without interest, to be made if cumulative net income for
the six fiscal years 1997 through 2002 exceeded a defined amount. Since its
stock repurchase, Wellco, using generally accepted accounting principles,
accrued imputed interest on the estimated additional payments. Since cumulative
income ultimately did not exceed the defined amount, previously accrued imputed
interest was reversed and recognized as interest income.

The income tax rate (the percent of Provision for Income Taxes to the Income
Before Income Taxes) for fiscal year 2003 was 9% compared to 34% for the prior
year. The 2003 fiscal year rate is lower, on the higher pretax income, because
during the prior period the Company recorded a valuation allowance of $300,000

                                       -8-

<PAGE>



to reflect the estimated amount of deferred tax assets that may not be realized.


Forward Looking Information:
---------------------------

Below is a summary of the Company's current boot contracts with DSCP.

         On September 30, 2003, DSCP awarded Wellco a new contract for DMS
         combat boots. Wellco's award was for 30% of DSCP total DMS boot
         purchases. The contract is for a base period of one year, with two
         one-year options. Four contracts were awarded and the quantities to be
         purchased from each contractor are 35%, 30%, 20% and 15% of DSCP total
         boot purchases. The total pairs DSCP will buy under these new contracts
         will be lower than in the past because of the Army's replacement of its
         all-leather DMS combat boot with the ICB boot. In addition, the new
         contract, as compared to the old contract, has lower prices which will
         result in a lower profit margin per pair of boots. The Company believes
         DSCP will exercise the first year option but cannot estimate the
         quantity of boots that will be ordered in this option year, which will
         be for October 2004 through September 2005.

         In March 2003, DSCP awarded the Company a contract to supply the black
         ICB boot. This contract is for a one year period, with four one-year
         options which are exercisable at the government's discretion. Just as
         in the current DMS contract, the margins on the black ICB boot are less
         than those historically earned under prior contracts. In July 2004,
         DSCP exercised the first year option under this contract, which will be
         for July 2004 through June 2005. The Company cannot estimate the
         quantity of boots that will be ordered in this option year.

         On March 10, 2004, DSCP awarded a new contract to Wellco to supply
         110,010 pairs of the ICB boot in the desert tan color. The contract has
         a delivery period of August 2004 through April 2005. Just as in the
         above two contracts, the margins on this contract are less than those
         historically earned under prior contracts.

In the first half of fiscal year 2005, Wellco will complete shipping all boots
which are under the surge orders. Wellco believes that future orders will not
include the surge requirement. When compared to fiscal year 2004, fiscal year
2005 revenues should be less. The Company cannot reasonably estimate how much
the decrease will be.

In September 2004, Hurricane Jeanne interrupted power at the Puerto Rico factory
for approximately one week. No damage was done to the factory building or its
contents. However, the interruption will result in reduced boot sales in the
quarter ended October 2, 2004.

DSCP has temporarily suspended shipments under the above-mentioned DMS contract
until it completes administrative adjustments to that contract. This will not
affect the total pairs Wellco will ship under this contract, but will affect the
timing of those shipments.

The Company believes that DSCP will soon exercise the first option term under
the DMS contract mentioned above. The maximum pairs that DSCP can order under
this option is less than that of the base contract year. Wellco also believes
that DSCP will not invoke its surge option clause under orders issued during
this first option year. The first option term will be for the period October
2004 thorough September 2005. Since March 2003, DSCP has exercised its surge
option, requiring Wellco to accelerate its production of desert boots.

                                       -9-

<PAGE>




The majority of the Company's boot manufacturing operations occur at the factory
of a wholly-owned subsidiary located in Puerto Rico. The Company is
participating in a Puerto Rican government program under which it is reimbursed
for part of the compensation paid to certain employees. On September 23, 2004,
that subsidiary received a reimbursement of $780,000 for compensation paid
employees in the 2004 fiscal year. The Company's policy is to record these
reimbursements in the fiscal period in which they are received, and this amount
will be recorded as a reduction in cost of sales in the fiscal quarter which
will end October 2, 2004.

On December 31, 2004, agreements under which the Company earns fees for
providing certain equipment and related services to other boot manufacturers
expire. The company intends to negotiate an extension of these agreements. The
effect on future operating results would be adverse if the negotiations do not
result in an extension of the agreements.

The  business  of  providing  boots to DSCP is very  competitive,  as U. S. boot
manufacturers  attempt to replace volume lost to low-cost  foreign-made boots by
manufacturing for the U. S. Defense Department.

If Wellco's future operating results and liquidity would be adversely affected
by the decreased prices in the new DMS contract, use of the bank line of credit
would likely increase, and the bank line of credit may be cancelled or may not
be renewed (see further discussion in the Liquidity and Capital Resources
section).

A 1% increase in the assumed discount rate used to compute the Company's pension
benefit obligation would decrease the obligation at June 30, 2004 by $514,000.
Conversely, a 1% decrease in the assumed discount rate would increase the
benefit obligation at June 30, 2004 by $601,000.

A 1% increase in the assumed discount rate used to compute the Company's retiree
health benefit obligation would decrease the benefit obligation at July 3, 2004
by $28,000. Conversely, a 1% decrease in the assumed discount rate would
increase the benefit obligation at July 3, 2004 by $33,000.


                         LIQUIDITY AND CAPITAL RESOURCES

Wellco uses cash from operations and a bank line of credit to supply most of its
liquidity needs. The following table summarizes at the end of each fiscal year
shown the Company's cash and funds available from the bank line of credit:

                                         ( in thousands)
                                 2004          2003           2002
--------------------------------------------------------------------
Cash and Cash Equivalents     $    58       $   133         $   270
--------------------------------------------------------------------
Unused Bank Line of Credit      3,220           910           3,000
--------------------------------------------------------------------
Total                         $ 3,278       $ 1,043         $ 3,270
--------------------------------------------------------------------



                                      -10-

<PAGE>



The following table summarizes the other major sources and (uses) of cash and
cash equivalents for the last three years:
                                                        (in thousands)
                                                     2004      2003       2002
--------------------------------------------------------------------------------
Income Before Depreciation and Other Non-cash
Adjustments                                       $ 3,741   $ 2,080    $ 1,616
--------------------------------------------------------------------------------
Net Change in Accounts Receivable, Inventory,
Accounts Payable and Accrued Compensation          (5,597)   (1,087)      (629)
--------------------------------------------------------------------------------
Net Change in Income Taxes, Pension Obligation,
and Other                                             472       (87)       (99)
--------------------------------------------------------------------------------
Net Cash Provided By (Used In) Operations          (1,384)      906        888
--------------------------------------------------------------------------------
Cash From Bank  Line of Credit                      6,930       995        370
--------------------------------------------------------------------------------
Cash Used to Repay Bank Line of Credit             (3,740)     (405)      (370)
--------------------------------------------------------------------------------
Cash Used to Purchase Plant and Equipment          (2,066)   (1,183)      (962)
--------------------------------------------------------------------------------
Cash Provided by Exercise of Stock Options            730        24        163
--------------------------------------------------------------------------------
Cash Dividends Paid                                  (545)     (474)      (472)
--------------------------------------------------------------------------------
Decrease in Cash and Cash Equivalents             $   (75)  $  (137)   $  (383)
--------------------------------------------------------------------------------

In 2004, cash used by operations was $1,384,000. Net income of $2,448,000 and
depreciation of $1,100,000 was far short of providing the cash needs for an
increase of $2,620,000 in accounts receivable and $4,062,000 in inventory. The
increase in accounts receivable and inventory was primarily caused by surge and
the new ICB contract.

In order to provide cash, the Company negotiated an increase effective December
29, 2003 in its bank line of credit from $4,500,000 to $5,000,000.
Inconsistencies in certain government tests of the ICB boot resulted in a delay
in collecting accounts receivable from these boots sales. In response to this,
the Company negotiated a further increase, effective February 20, 2004, in its
bank line of credit to $10,000,000. The testing situation was subsequently
resolved in the Company's favor and accounts receivable were collected. Under
this change, the line was reduced to $9,000,000 on May 1, 2004; to $8,000,000 on
June 1, 2004; to $7,000,000 on July 1, 2004; to $6,000,000 on August 1, 2004;
and, to $5,000,000 on September 1, 2004. The bank line of credit will remain at
$5,000,000 until December 31, 2004, when it expires and is subject to renewal.

In 2003, cash provided by operations was $906,000. Net income of $823,000 and
depreciation and amortization of $995,000 and a $1,832,000 increase in accounts
payable were the main sources. The main use of cash for operations was a
$2,076,000 increase in accounts receivable and a $761,000 increase in inventory.
Cash from operations and $137,000 of cash from the beginning of the fiscal year,
along with $590,000 of borrowings from the line of credit, provided the cash for
purchases of equipment and the payment of cash dividends.

In 2002, cash provided by operations was $888,000. This primarily resulted from
net income plus depreciation and amortization, which totaled $1,539,000. A
$556,000 reduction in accounts receivable, primarily from completion of a

                                      -11-

<PAGE>



contract,  and an  increase  in accounts  payable  and  accrued  liabilities  of
$208,000, also provided operating cash.

The following table shows aggregated information about contractual obligations
as of July 3, 2004:

                                         Payments Due by Period

                     Total     Less Than 1    1-3 Years    4-5 Years    After 5
                                     Year                                 Years
--------------------------------------------------------------------------------
Long -Term
Debt              $300,000          -            -           -         $300,000
--------------------------------------------------------------------------------
Building Lease     840,000       $156,000     $330,000     $354,000       -
--------------------------------------------------------------------------------
Total           $1,140,000       $156,000     $330,000     $354,000    $300,000
--------------------------------------------------------------------------------

The Company's has a commitment to purchase certain equipment of $500,000 during
the first half of fiscal year 2005. Other than this, Wellco does not know of any
other demands, commitments, uncertainties, or trends that will result in or that
are reasonably likely to result in its liquidity increasing or decreasing in any
material way.

The bank line of credit of $5,000,000 will expire on December 31, 2004 and will
then be subject to renewal at the discretion of the bank. Historically, the bank
has always renewed the line of credit. Under conditions of substantial reduction
in operations, with little basis for projecting a reversal of such reduction, it
is possible that the bank would cancel or not renew the line of credit. Events
that would cause a substantial reduction in operations include, but are not
limited to, cancellation of existing government contracts or receiving
government contracts that do not provide enough revenues to provide adequate
liquidity.

At July 3, 2004, $3,780,000 of additional borrowing was available under the bank
line of credit and the Company was in compliance with the loan covenants on that
date. Because of the investment in accounts receivable and inventory for
manufacture of the new contract for the desert tan ICB boot, the Company expects
to use the bank line of credit, if necessary, to meet this need. If new orders
for the DMS boot do not contain the surge requirement, cash will be provided by
the decrease in accounts receivable and inventory created while under surge.

Since the Company's first source of liquidity is cash from operations, a
decrease in sales of the Company's products would reduce this source of
liquidity and result in increased use of the bank line of credit. Based on
information available to date, the Company believes that operations will
continue to be a significant source of cash in fiscal year 2005.

The Promissory Note, Loan Agreement and Security Agreement documenting the bank
line of credit provide that:

         o        All amounts borrowed shall become due and immediately payable
                  upon demand of the bank.
         o        The bank's obligation to make advances under the note shall
                  terminate: if the bank makes a demand for payment; if a
                  default under any loan document occurs; or, in any event, on
                  December 31, 2004, unless the Note is extended by the bank
                  under terms satisfactory to the bank.

                                      -12-

<PAGE>



         o        All amounts borrowed shall become immediately payable if
                  Wellco commences or has commenced against it a bankruptcy or
                  insolvency proceeding, or in the event of default.

Events of default include:

         o        Having a current ratio less than that prescribed by the bank.
         o        Having tangible net worth less than that prescribed by the
                  bank.
         o        Any failure to meet requirements under the Note, Loan
                  Agreement or Security Agreement.

           CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

Statements throughout this report that are not historical facts are
forward-looking statements. These statements are based on current expectations
and beliefs, and involve numerous risks and uncertainties. Many factors could
affect the Company's actual results, causing results to differ materially from
those expressed in any such forward-looking information.

These factors include, but are not limited to, the receipt of contracts from the
U. S. government and the performance thereunder; the ability to control costs
under fixed price contracts; the cancellation of contracts; and other risks
detailed from time to time in the Company's Securities and Exchange Commission
filings, including Form 10-K for the year ended July 3, 2004. Those statements
include, but may not be limited to, all statements regarding intent, beliefs,
expectations, projections, forecasts, and plans of the Company and its
management. Actual results may differ materially from management expectations.
The Company assumes no obligation to update any forward-looking statements.








                                      -13-

<PAGE>



                            WELLCO ENTERPRISES, INC.
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                           FOR THE FISCAL YEARS ENDED
                  JULY 3, 2004, JUNE 28, 2003 AND JUNE 29, 2002
                     (in thousands except per share amounts)

                                                  JULY 3,  JUNE 28,     JUNE 29,
                                                     2004      2003         2002
                                                  ------------------------------
REVENUES (Notes  5, 15 and 16) ..............   $ 45,693   $ 24,833    $ 19,981
                                                --------   --------    --------

COSTS AND EXPENSES
  Cost of sales and services ................     39,438     21,272      16,361
  Unrecovered contract preparation costs
    (Note 18) ...............................       --           70         335
  General and administrative expenses .......      3,009      2,390       2,551
                                                --------   --------    --------
      Total .................................     42,447     23,732      19,247
                                                --------   --------    --------

GRANT INCOME (Note 17) ......................         80         80          80
                                                --------   --------    --------

OPERATING INCOME ............................      3,326      1,181         814

INTEREST EXPENSE ............................        200         30          32

DIVIDEND AND INTEREST INCOME (Note 12) ......          4          9         260
                                                --------   --------    --------

INCOME BEFORE INCOME TAXES ..................      3,130      1,160       1,042

PROVISION FOR INCOME TAXES (Note 11) ........        682        109         359
                                                --------   --------    --------

INCOME BEFORE CUMULATIVE EFFECT
  OF CHANGE IN ACCOUNTING PRINCIPLE .........      2,448      1,051         683

CUMULATIVE EFFECT OF CHANGE IN
  ACCOUNTING PRINCIPLE (Notes 2 and 21) .....       --          228        --
                                                --------   --------    --------

NET INCOME ..................................      2,448        823         683

OTHER COMPREHENSIVE INCOME (LOSS) (Note 9):
  Decrease (increase) in additional minimum
  pension liability .........................        324       (924)       (159)
                                                --------   --------    --------

COMPREHENSIVE INCOME (LOSS) .................   $  2,772   $   (101)   $    524
                                                ========   ========    ========

EARNINGS PER SHARE (Note 14):
      Basic, before cumulative effect .......   $   2.04   $   0.89    $   0.58
      Cumulative effect .....................       --        (0.19)       --
                                                --------   --------    --------
      Basic, after cumulative effect ........   $   2.04   $   0.70    $   0.58
                                                ========   ========    ========

      Diluted, before cumulative effect .....   $   1.97   $   0.87    $   0.56
      Cumulative effect .....................       --        (0.19)       --
                                                --------   --------    --------
      Diluted, after cumulative effect ......   $   1.97   $   0.68    $   0.56
                                                ========   ========    ========

See Notes to Consolidated Financial Statements.
                                      -14-
<PAGE>



                            WELLCO ENTERPRISES, INC.
                           CONSOLIDATED BALANCE SHEETS
                         JULY 3, 2004 AND JUNE 28, 2003
                                 (in thousands)

                                     ASSETS


                                                            JULY 3,     JUNE 28,
                                                               2004         2003
                                                            --------------------
CURRENT ASSETS:
      Cash and cash equivalents ....................       $    58       $   133
      Receivables, net (Notes 3 and 7) .............         6,070         3,450
      Inventories (Notes 4 and 7) ..................        11,063         7,001
      Deferred taxes  (Note 11) ....................            80           185
      Prepaid expenses .............................           244           290
                                                           -------      --------
      Total ........................................        17,515        11,059
                                                           -------      --------

MACHINERY LEASED TO LICENSEES, net
      (Notes 2 and 5) ..............................            17            23

PROPERTY, PLANT AND EQUIPMENT, net
      (Notes 6 and 7) ..............................         5,091         4,119

INTANGIBLE ASSETS:
      Intangible pension asset (Note 9) ............            19            29

DEFERRED TAXES (Note 11) ...........................          --              80
                                                           -------       -------

TOTAL ..............................................       $22,642       $15,310
                                                           =======       =======







                            (continued on next page)

                                      -15-
<PAGE>

                            WELLCO ENTERPRISES, INC.
                           CONSOLIDATED BALANCE SHEETS
                         JULY 3, 2004 AND JUNE 28, 2003
                        (in thousands except share data)

                      LIABILITIES AND STOCKHOLDERS' EQUITY


                                                            JULY 3,     JUNE 28,
                                                               2004         2003
                                                            --------------------

CURRENT LIABILITIES:
      Short-term borrowing from bank (Note 7) ..........   $  3,780    $    590
      Accounts payable .................................      3,659       3,138
      Accrued compensation .............................      1,374         810
      Accrued liabilities (Notes 8, 9, 10, and 17) .....        604         582
      Accrued income taxes (Note 11) ...................      1,048         722
                                                           --------    --------
          Total ........................................     10,465       5,842
                                                           --------    --------

LONG-TERM LIABILITIES:
      Pension obligation (Note 9) ......................      1,337       1,672
      Notes payable (Note 12) ..........................        222         213
      Deferred taxes  (Note 11) ........................         88        --
      Deferred revenues (Note 12) ......................         78          87

COMMITMENTS (Note 20)

STOCKHOLDERS' EQUITY (Notes 9, 12 and 13):
      Common stock, $1.00 par value; shares
          authorized - 2,000,000; shares issued and
          outstanding - 1,245,046 ......................      1,245       1,186
      Additional paid-in capital .......................      1,027         357
      Retained earnings ................................      9,499       7,596
      Accumulated other comprehensive loss .............     (1,319)     (1,643)
                                                           --------    --------
          Total ........................................     10,452       7,496
                                                           --------    --------

TOTAL ..................................................   $ 22,642    $ 15,310
                                                           ========    ========

See Notes to Consolidated Financial Statements.








                                      -16-
<PAGE>



                            WELLCO ENTERPRISES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           FOR THE FISCAL YEARS ENDED
                  JULY 3, 2004, JUNE 28, 2003 AND JUNE 29, 2002
                                 (in thousands)

                                             JULY 3,    JUNE 28,    JUNE 29,
                                                2004        2003        2002
                                             -------------------------------

CASH FLOWS FROM OPERATING
ACTIVITIES:
      Net income .........................   $ 2,448    $   823    $   683
                                             -------    -------    -------
      Adjustments to reconcile net income
      to net cash provided by (used in)
      operating activities:
          Cumulative effect of change in
          accounting principle ...........      --          228       --
          Depreciation and amortization ..     1,100        995        856
          Deferred income taxes ..........       273         44        232
          Non-cash reduction in accrued
          interest .......................      --         --         (234)
          Non-cash asset impairment ......      --           70        159
          Non-cash grant income recognized       (80)       (80)       (80)
          Non-cash interest expense ......         9          8          7
          Non-cash reduction in deferred
          revenues .......................        (9)        (8)        (7)
          (Increase) decrease in-
              Receivables ................    (2,620)    (2,076)       556
              Inventories ................    (4,062)      (761)    (1,230)
              Other current assets .......        25         57        (78)
          Increase (decrease) in-
              Accounts payable ...........       521      1,832        129
              Accrued compensation .......       564        (82)       (84)
              Other accrued liabilities ..       102         95         79
              Accrued income taxes .......       326        (47)        37
              Pension obligation .........        19       (192)      (137)
                                             -------    -------    -------
      Total adjustments ..................    (3,832)        83        205
                                             -------    -------    -------
NET CASH PROVIDED BY (USED IN)
      OPERATING ACTIVITIES ...............    (1,384)       906        888
                                             -------    -------    -------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases of equipment .............    (2,066)    (1,183)      (962)
                                             -------    -------    -------

NET CASH USED IN INVESTING ACTIVITIES ....    (2,066)    (1,183)      (962)
                                             -------    -------    -------











                            (continued on next page)

                                      -17-
<PAGE>

                            WELLCO ENTERPRISES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           FOR THE FISCAL YEARS ENDED
                  JULY 3, 2004, JUNE 28, 2003 AND JUNE 29, 2002
                                 (in thousands)

                                             JULY 3,    JUNE 28,    JUNE 29,
                                                2004        2003        2002
                                             -------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Net advances of line of credit
      borrowings .......................       3,190        590          --
      Cash dividends paid ..............        (545)      (474)       (472)
      Stock option exercise ............         730         24         163
                                               -----      -----       -----
NET CASH PROVIDED BY (USED IN)
      FINANCING ACTIVITIES .............       3,375        140        (309)
                                               -----      -----       -----

NET DECREASE IN CASH AND
      CASH EQUIVALENTS .................         (75)      (137)       (383)

CASH AND CASH EQUIVALENTS AT
      BEGINNING OF YEAR ................         133        270         653
                                               -----      -----       -----

CASH AND CASH EQUIVALENTS AT
      END OF YEAR ......................     $    58      $ 133       $ 270
                                               =====      =====       =====



SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid (received) for-
          Interest .....................     $   191      $  22       $  32
          Income taxes paid (refunded) .         (22)       113          65
NONCASH INVESTING AND FINANCING
ACTIVITY:
Adjustment of stock repurchase note ....        --         --          (347)
      Increase in leasehold improvements     $   (38)     $--         $ 112
                                               =====      =====       =====



See Notes to Consolidated Financial Statements.







                                      -18-
<PAGE>


                            WELLCO ENTERPRISES, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                           FOR THE FISCAL YEARS ENDED
                  JULY 3, 2004, JUNE 28, 2003 AND JUNE 29, 2002
                        (in thousands except share data)


                                               JULY 3,   JUNE 28,   JUNE 29,
                                                  2004       2003       2002
                                               ------------------------------
COMMON STOCK :
      Balance at beginning of year ........   $  1,186    $ 1,183    $ 1,164
      Stock option exercise (Note 13) .....         59          3         19
                                               -------    -------    -------
      Balance at  end of year .............      1,245      1,186      1,183
                                               -------    -------    -------

ADDITIONAL PAID-IN CAPITAL:
      Balance at beginning of year ........        357        336        192
      Stock option exercise (Note 13) .....        566         21        144
      Tax benefit from stock option plans
      (Note 11) ...........................        104       --         --
                                               -------    -------    -------
      Balance at  end of year .............      1,027        357        336
                                               -------    -------    -------

RETAINED EARNINGS:
      Balance at beginning of year ........      7,596      7,247      6,689
      Adjustment of note payable from stock
      repurchase (Note 12) ................       --         --          347
      Net income ..........................      2,448        823        683
      Cash dividends (per share: 2004-$.45,
          2003-$.40, 2002-$.40) ...........       (545)      (474)      (472)
                                               -------    -------    -------
      Balance at end of year ..............      9,499      7,596      7,247
                                               -------    -------    -------

ACCUMULATED OTHER COMPREHENSIVE LOSS
      Additional minimum pension liability,
      net of tax (Note 9):
      Balance at beginning of year ........     (1,643)      (719)      (560)
      Change for the year .................        324       (924)      (159)
                                               -------    -------    -------
      Balance at end of year ..............     (1,319)    (1,643)      (719)
                                               -------    -------    -------

TOTAL STOCKHOLDERS' EQUITY ................   $ 10,452    $ 7,496    $ 8,047
                                               =======    =======    =======

See Notes to Consolidated Financial Statements.





                                      -19-
<PAGE>





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
For the Fiscal Years Ended July 3, 2004, June 28, 2003, and June 29, 2002
-------------------------------------------------------------------------

1. BUSINESS AND ORGANIZATION:

         Substantially all of the Company's operating activity is from the sale
         of military and other rugged footwear, the sale of specialized
         machinery and materials for the manufacture of this type of footwear
         and the rendering of technical assistance and other services to
         licensees for the manufacture of this type of footwear. The majority of
         revenues ($39,648,000 in 2004, $18,209,000 in 2003, and $14,875,000 in
         2002) were from sales to the U. S. government, primarily the Defense
         Supply Center Philadelphia (DSCP), under contracts for the supply of
         boots used by the U. S. Armed Forces. The loss of this customer would
         have a material adverse effect on the Company.

         Bidding on U. S. government boot solicitations is open to any qualified
         U. S. manufacturer. Bidding on contracts is very competitive. U. S.
         footwear manufacturers have been adversely affected by sales of
         footwear made in low labor cost countries. This has significantly
         affected the competition for contracts to supply boots  to U. S. Armed
         Forces, which  by law must be made in the U. S.

         Most boot contracts are for multi-year periods. Therefore, a bidder not
         receiving an award from a significant solicitation could be adversely
         affected for several years. In addition, current boot contracts contain
         options for additional pairs that are exercisable at the government's
         discretion. The Company cannot predict with certainty its success in
         receiving a contract from any of the above solicitations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

         Principles of Consolidation
                  The accompanying financial statements include the consolidated
                  accounts of the Company and its wholly-owned subsidiaries.
                  Appropriate eliminations have been made of all material
                  intercompany transactions and balances.

         Cash and Cash Equivalents
                  Cash in excess of daily requirements is invested in short-term
                  interest earning instruments. The Company considers
                  investments with original maturities of three months or less
                  to be cash equivalents.

         Receivables
                  Accounts receivable from the sale of products or services are
                  recorded at net realizable value and the Company grants credit
                  to customers on an unsecured basis. The Company provides an
                  allowance for doubtful collections that is based upon a review
                  of outstanding receivables, historical collections
                  information, and existing economic conditions. Normal trade
                  receivables are due 30 days after the issuance of the invoice.
                  Receivables past due more than 120 days are considered
                  delinquent. Delinquent receivables are written off based on
                  individual credit evaluations and specific circumstances of
                  the customer.

         Inventories
                  Raw materials and supplies are valued at the lower of
                  first-in, first-out cost or market. Finished goods and work in
                  process are valued at the lower of actual cost, determined on
                  a specific identification basis, or market.


                                      -20-

<PAGE>




         Income Taxes
                  The provision for income taxes is based on taxes currently
                  payable adjusted for the net change in the deferred tax asset
                  or liability during the current year. A deferred tax asset or
                  liability arises from temporary differences between the
                  carrying value of assets and liabilities for financial
                  reporting and income tax purposes. 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.

         Fair Value of Financial Instruments
                  The carrying values of cash, receivables and accounts payable
                  at July 3, 2004 and June 28, 2003 approximate fair value. The
                  carrying value of the notes payable (see Note 12 to the
                  Consolidated Financial Statements) is equal to the present
                  value of estimated future cash flows using a discount rate
                  commensurate with the uncertainties involved and thus
                  approximates fair value.

         Depreciation and Amortization
                  The Company uses the straight-line method to compute
                  depreciation and amortization on machinery leased to licensees
                  and property, plant and equipment used by the Company.

         Machinery Leased to Licensees
                  Certain shoe-making machinery is leased to licensees under
                  cancelable operating leases. Such activity is accounted for by
                  the operating method whereby leased assets are capitalized and
                  depreciated over their estimated useful lives (5 to 10 years)
                  and rentals, based primarily on the volume of shoes produced
                  or shipped by the lessees, are recorded during the period
                  earned.

         Research and Development Costs
                  All research and development costs are expensed as incurred
                  unless subject to reimbursement. The amount charged against
                  income was approximately $101,000 in 2004, $110,000 in 2003
                  and $180,000 in 2002.

         Intangible Asset
                  The excess of the fair value (as determined by the Board of
                  Directors) of Wellco Enterprises, Inc. common stock issued
                  over the net assets of Ro-Search, Incorporated, a wholly owned
                  subsidiary of Wellco, at acquisition was not being amortized.
                  This asset arose prior to 1970 and, in the opinion of
                  management, there was not any diminution in its value under
                  the guidance of APB Opinion No. 17. Effective for the
                  Company's 2003 fiscal year, Statement of Financial Accounting
                  Standards No. 142 (SFAS 142), Goodwill and Other Intangible
                  Assets, supersedes APB Opinion No. 17.

                  Statement of Financial Accounting Standards No. 142 (SFAS 142,
                  "Goodwill and Other Intangible Assets) was effective with the
                  Company's 2003 fiscal year. Under SFAS 142, this goodwill was
                  deemed impaired and was written off as a cumulative effect of
                  change in accounting principle at June 28, 2003, as explained
                  in Footnote 21.

         Revenue Recognition
                  On June 1, 2001, the government unilaterally modified the
                  Company's current boot contract to require a bill and hold
                  procedure. Under bill and hold, the government issues a
                  specific boot production order which, when completed and ready
                  for shipment, is inspected and accepted by the Quality

                                      -21-

<PAGE>



                  Assurance Representative (QAR), thereby transferring ownership
                  to the government. Under this contract modification, after
                  inspection and acceptance by the QAR, the boots become
                  "government-owned property". Also, after QAR inspection and
                  acceptance, Wellco invoices and receives payment from the
                  government, and warehouses and distributes the related boots
                  against government-issued requisition orders, which Wellco
                  receives five days per week. Government-owned boots stored in
                  Wellco's warehouse are complete, including packaging and
                  labeling. The bill and hold procedure requires physical
                  segregation and specific identification of government-owned
                  boots and, because they are owned by the government, Wellco
                  cannot use them to fill any other customers' orders. Wellco
                  has certain custodial responsibilities for these boots,
                  including loss or damage, which Wellco insures. The related
                  insurance policies specifically provide that loss payment on
                  finished stock and sold personal property completed and
                  awaiting delivery is based on Wellco's selling price. The
                  modification also provides that at the end of any one-year
                  term when an option is not exercised, the government is to
                  take final delivery of any and all of its remaining inventory
                  within six months. In accordance with guidance issued under
                  Securities and Exchange Commission Staff Accounting Bulletin
                  No. 101, Revenue Recognition in Financial Statements, revenues
                  from bill and hold transactions are recognized at the time of
                  acceptance by the QAR.

                  Certain shoe-making machinery is leased to licensees under
                  twenty-year cancelable operating leases. Lease payments are
                  variable based on the quantity of boots manufactured and sold
                  by the lessee to its customers and the contractual rental fee
                  per pair of boots. There are no base rental amounts or
                  contingent rentals contained in the agreements. Rental income
                  is recognized by the Company when the lessee manufactures and
                  sells boots to the customer and is based upon the quantity of
                  boots manufactured or shipped by the lessee times the fixed
                  rate per pair of boots contained in the lease agreements.

                  The Company earns service fees for providing customers with
                  technical assistance in the manufacture of boots. The related
                  agreements under which these services are provided are for a
                  fixed term and expire in calendar years 2004-2007. The Company
                  records service fee revenues at a fixed rate per pair of boots
                  times the quantity of boots manufactured and sold by the
                  customer when such boots are manufactured and sold by the
                  Company's customer.

                  Revenues from the sale of machinery and materials are recorded
                  at the time of shipment from our factory (FOB factory) or at
                  the time of receipt by the customer (FOB destination). Other
                  than a one-year warranty, the Company does not have any
                  continuing responsibility related to machines sold. Warranty
                  costs are diminimus.

         Shipping and Handling Costs
                  Shipping and handling costs are charged to Cost of Sales and
                  Services in the period incurred. Any amounts paid by customers
                  for shipping and handling are included in Revenues.

         Impairment of Long-Lived Assets
                  The Company reviews its long-lived assets, including
                  intangible assets, for impairment whenever events or
                  circumstances indicate that the carrying amount of an asset
                  may not be recoverable. If the sum of the expected cash flows,
                  undiscounted and without interest, is less than the carrying
                  amount of the asset, an impairment loss is recognized as the
                  amount by which the carrying amount of the asset exceeds its
                  fair value. The Consolidated Statements of Operations and

                                      -22-

<PAGE>



                  Comprehensive Income for the fiscal years 2003 and 2002
                  include a write-down of $70,000 and $159,000 related to
                  equipment purchased during contract preparation for the
                  manufacture of berets (see Note 18 to the Consolidated
                  Financial Statements).

         Self-Funded Group Health Insurance
                  The cost of employee group health insurance is recorded in the
                  period in which the health care costs are incurred including
                  an estimate of the incurred but not reported claims. Third
                  party administrator fees are recorded in the month to which
                  they apply. The cost of stop loss insurance is recorded in the
                  month to which it applies. The liability for incurred but not
                  reported insurance claims is accrued and included in the
                  Accounts Payable caption in the Consolidated Balance Sheets.

         Fiscal Year
                  The Company's fiscal year ends on the Saturday closest to June
                  30. Consequently, the 2004 fiscal year contains 53 weeks of
                  operating results while the 2003 and 2002 fiscal years contain
                  52 weeks each .

         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. These estimates and assumptions affect the
                  reported amounts of assets and liabilities, as well as the
                  disclosure of contingent assets and liabilities, at the date
                  of the financial statements. They also affect the reported
                  amounts of revenues and expenses during the reporting period.
                  Actual results could differ from those estimates.

         Reclassifications
                  Certain reclassifications have been made in prior years'
                  financial statements to conform to classifications used in the
                  current year.

         Stock-Based Compensation Plans
                  The Company accounts for its stock-based compensation plans
                  using the compensation recognition provisions of Accounting
                  Principles Board Opinion 25 (APB 25), "Accounting for Stock
                  Issued to Employees". The Company also provides the
                  disclosures required by Statement of Financial Accounting
                  Standards No. 148 (SFAS 148), "Accounting for Stock- Based
                  Compensation- Transition and Disclosure." Compensation expense
                  under the APB 25 method is recognized when there is a
                  difference between the exercise price for stock options and
                  the stock's market price on the measurement date, which for
                  the Company, is normally the date of award.

         New Accounting Pronouncements

                  In December 2003, the FASB issued SFAS No. 132(R), a revision
                  to SFAS No. 132, "Employers' Disclosure about Pensions and
                  Other Postretirement Benefits". SFAS No. 132(R) does not
                  change the measurement or recognition related to pension and
                  other postretirement 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" and retains the disclosure requirements contained in
                  SFAS No. 132. SFAS No. 132(R) requires additional disclosures
                  about the assets, obligations, cash flows and net periodic
                  benefit cost of defined benefit pension plans and other
                  defined benefit postretirement plans. SFAS No. 132(R) is
                  effective for financial statements with fiscal years ending
                  after December 15, 2003. The Company included the required
                  annual disclosures in its consolidated financial statements as
                  of and for the year ended July 3, 2004 and has included the
                  required disclosures in Note 9 to its consolidated financial

                                      -23-

<PAGE>



                  statements. The adoption of SFAS No. 132(R) did not impact the
                  Company's consolidated balance sheet or results of operations.

3. RECEIVABLES:

         The majority of receivables at July 3, 2004 and June 28, 2003 are from
         the U. S. Government. The Company's policy is to require either a
         confirmed irrevocable bank letter of credit or advance payment on
         significant orders from foreign customers. Allowances for doubtful
         accounts in 2004, 2003 and 2002 are not significant.

4. INVENTORIES:
         The components of inventories are:
                                                       (in thousands)
                                                     2004         2003
----------------------------------------------------------------------
Finished Goods                             $        2,228 $      1,247
----------------------------------------------------------------------
Work in Process                                     2,771        1,753
----------------------------------------------------------------------
Raw Materials and Supplies                          6,064        4,001
----------------------------------------------------------------------
Total                                      $       11,063 $      7,001
----------------------------------------------------------------------

5. MACHINERY LEASED TO LICENSEES:

         Accumulated depreciation netted against the cost of leased assets in
         the Consolidated Balance Sheets at July 3, 2004 and June 28, 2003 is
         $1,543,000 and $1,537,000, respectively. Rental revenues for the fiscal
         years 2004, 2003, and 2002 were $279,000, $178,000 and $148,000,
         respectively, and vary with lessees' production or shipments.

6. PROPERTY, PLANT AND EQUIPMENT:

         The components of property, plant and equipment are summarized as
         follows:
                                 (in thousands)
                               2004          2003         Estimated Useful Life
--------------------------------------------------------------------------------
Land                         $  107        $  107                     N/A
--------------------------------------------------------------------------------
Buildings                     1,439         1,439                   40-45 Years
--------------------------------------------------------------------------------
Machinery & Equipment         9,553         7,559                    2-20 Years
--------------------------------------------------------------------------------
Furniture & Fixtures            985           951                    2-10 years
--------------------------------------------------------------------------------
Leasehold Improvements          809           771                             *
--------------------------------------------------------------------------------


                                      -24-

<PAGE>



                               2004          2003         Estimated Useful Life
--------------------------------------------------------------------------------
Total Cost                $  12,893     $  10,827
--------------------------------------------------------------------------------
Total Accumulated
Depreciation and
Amortization               $  7,802     $   6,708
--------------------------------------------------------------------------------
  *Leasehold improvements are amortized using the straight-line method over the
   shorter of the estimated useful lives of the improvements or the period of
   the respective leases.

7. LINES OF CREDIT:

         Due to the Company's increased accounts receivable from shipping DMS
         boots under surge, and to increased inventories, caused by both surge
         and the initial production of the ICB boot, the Company increased its
         line of credit during the 2004 fiscal year to $10,000,000. The current
         line of credit agreement contains terms that require the available
         borrowings to be revised to $7,000,000 as of July 1, 2004 and
         subsequently to $5,000,000 by September 1, 2004. The line, which
         expires December 31, 2004, can be renewed annually at the bank's
         discretion. This line of credit is secured by a blanket lien on all
         machinery and equipment and all accounts receivables and inventory. At
         July 3, 2004, borrowings on this line of credit were $ 3,780,000 with $
         3,220,000 available in additional borrowings.

         Interest is at the London Interbank Offered Rate (LIBOR) plus 2.25
         points or 3.61% at July 3, 2004. The bank credit agreement contains,
         among other provisions, defined levels of net worth and current ratio
         requirements. The Company was in compliance with the loan covenants at
         July 3, 2004. The covenants are subject to review at the end of each
         fiscal quarter.

         Historically, the bank has always renewed the line of credit. Under
         conditions of substantial reduction in operations, with little basis
         for projecting a reversal of such reduction, it is possible that the
         bank would cancel the line of credit or not renew it when it expires.
         Events that would cause a substantial reduction in operations include:
         cancellation of existing government contracts that are being solicited;
         not receiving future government contracts; and, receiving government
         contracts that do not provide enough revenues to provide adequate
         liquidity.

8. ACCRUED LIABILITIES:

         The components of accrued liabilities are:
                                               (in thousands)
                                            2004           2003
---------------------------------------------------------------
Retiree Health Benefits (Note 10)        $   295        $   231
---------------------------------------------------------------
Interest Expense (Note 12)                     2              2
---------------------------------------------------------------
Accrued Lease Payments (Note 20)              93            135
---------------------------------------------------------------
Deferred Grant Revenues (Note 17)              -             80
---------------------------------------------------------------
Other                                        214            134
---------------------------------------------------------------
Total                                    $   604        $   582
---------------------------------------------------------------

                                      -25-
<PAGE>


9. PENSION PLANS:

         The Company has two non-contributory, defined benefit pension plans.
         The components of pension expense, included in Cost of Sales and
         Services in the Consolidated Statements of Operations and Comprehensive
         Income are as follows:

                                               (in thousands)
                                          2004        2003       2002
---------------------------------------------------------------------
Benefits Earned for Service in the
Current Year                            $  129      $  132     $  119
---------------------------------------------------------------------
Interest on the Projected Benefit
Obligation                                 355         365        372
---------------------------------------------------------------------
Expected Return on Plan Assets            (297)       (286)      (303)
---------------------------------------------------------------------
Amortization of: Unrecognized Net
Pension Obligation at July 1, 1987;
Cost of Benefit Changes Since That
Date; and Gains and Losses                 116          80        119
---------------------------------------------------------------------
Against Actuarial  Assumptions
Pension Expense                         $  303      $  291     $  307
---------------------------------------------------------------------

         Below are various analyses and other information relating to the
         Company's pension liability, assets and expense as of July 2004 and
         June 2003, (all amounts are in thousands except for those indicated as
         percent):

Change in Benefit Obligation:                            2004          2003
---------------------------------------------------------------------------
Benefit Obligation at Beginning of Year              $  6,158      $  5,658
---------------------------------------------------------------------------
Current Year Service Cost                                 129           132
---------------------------------------------------------------------------
Interest Cost on Projected Liability                      355           365
---------------------------------------------------------------------------
Benefit Payments                                         (533)         (580)
---------------------------------------------------------------------------
Actuarial (Gain)Loss                                     (292)          583
---------------------------------------------------------------------------
Benefit Obligation at End of Year                    $  5,817      $  6,158
---------------------------------------------------------------------------


Change in Plan Assets:                                   2004          2003
---------------------------------------------------------------------------
Fair Value of Plan Assets at Beginning of Year       $  4,374      $  4,247
---------------------------------------------------------------------------
Company Contributions                                     283           482
---------------------------------------------------------------------------


                                      -26-

<PAGE>



Change in Plan Assets:                                   2004          2003
---------------------------------------------------------------------------
Actual Return on Plan Assets                              580           225
---------------------------------------------------------------------------
Benefit Payments                                         (533)         (580)
---------------------------------------------------------------------------
Fair Value of Plan Assets at End of Year             $  4,704      $  4,374
---------------------------------------------------------------------------


Reconciliation of Funded Status:                         2004          2003
---------------------------------------------------------------------------
Funded Status                                        $ (1,113)     $ (1,785)
---------------------------------------------------------------------------
Unrecognized Actuarial Loss                             1,319         2,001
---------------------------------------------------------------------------
Unrecognized Prior Service Cost                            19            29
---------------------------------------------------------------------------
Net Amount Recognized                                $    225      $    245
---------------------------------------------------------------------------


Amounts Recognized in the Consolidated Balance
Sheets:                                                  2004          2003
---------------------------------------------------------------------------
Intangible Pension Asset                             $     19      $     29
---------------------------------------------------------------------------
Accumulated Other Comprehensive Loss                    1,319         1,643
---------------------------------------------------------------------------

Accrued Pension Liability:
---------------------------------------------------------------------------
   Prepaid Benefit Cost                                   478           463
---------------------------------------------------------------------------
   Accrued Benefit Cost                                  (254)         (218)
---------------------------------------------------------------------------
   Additional Minimum Pension Liability                (1,337)       (1,672)
---------------------------------------------------------------------------
Net Amount Recognized in Financial Statements        $    225      $    245
---------------------------------------------------------------------------


Accumulated Benefit Obligation in Excess of Plan
Assets:                                                  2004          2003
---------------------------------------------------------------------------
Projected Benefit Obligation                         $  5,817      $  6,158
---------------------------------------------------------------------------
Accumulated Benefit Obligation                          5,460         5,802
---------------------------------------------------------------------------
Fair Value of Plan Assets                            $  4,704      $  4,374
---------------------------------------------------------------------------



                                      -27-

<PAGE>




                                                         2004          2003
---------------------------------------------------------------------------
Increase (Decrease) in Minimum Liability Included in
Other Comprehensive Income                            $  (691)     $    563
---------------------------------------------------------------------------



Weighted-average assumptions used to determine
benefit obligations:                                     2004          2003
---------------------------------------------------------------------------
Assumed Discount Rate                                   6.25%         6.00%
---------------------------------------------------------------------------
Expected Long-Term Rate of Return on Plan Assets        6.75%         6.75%
---------------------------------------------------------------------------
Rate of Compensation Increase, For the Pay Related
 Benefit Plan                                            5.5%          5.5%
---------------------------------------------------------------------------



Weighted-average assumptions used to determine net
periodic benefit cost:                                   2004          2003
---------------------------------------------------------------------------
Assumed Discount Rate                                   6.00%         6.75%
---------------------------------------------------------------------------
Expected Long-Term Rate of Return on Plan Assets        6.75%         6.75%
---------------------------------------------------------------------------
Rate of Compensation Increase, For the Pay Related
Benefit Plan                                            5.50%         5.50%
---------------------------------------------------------------------------

        PLAN ASSETS:

Pension plan's weighted-average asset allocations by
asset category:                                          2004          2003
---------------------------------------------------------------------------
Equity Securities                                         46%           40%
---------------------------------------------------------------------------
Debt Securities                                            5%           10%
---------------------------------------------------------------------------
Real Estate                                                0%            0%
---------------------------------------------------------------------------
Other                                                     49%           50%
---------------------------------------------------------------------------
Total                                                    100%          100%
---------------------------------------------------------------------------

        CASH FLOWS:

        Contributions

        Contributions to the pension plan for fiscal year 2005 are expected to
        be $362,000.


                                      -28-

<PAGE>




                                                           (in thousands)
Estimated Future Benefit Payments                                  Amount
-------------------------------------------------------------------------
2005                                                            $     481
-------------------------------------------------------------------------
2006                                                                  471
-------------------------------------------------------------------------
2007                                                                  462
-------------------------------------------------------------------------
2008                                                                  457
-------------------------------------------------------------------------
2009                                                                  455
-------------------------------------------------------------------------
2010-2014                                                       $   2,288
-------------------------------------------------------------------------

         At July 2004, one of the pension plans has a benefit obligation
         ($2,520,000) that is greater than its plan assets ($2,109,000)
         resulting in the additional liability of $890,000 and at June 2003, the
         plan had a benefit obligation ($2,714,000) that was greater than its
         plan assets ($1,963,000) resulting in the additional liability of
         $1,215,000. At July 2004, the other pension plan has a benefit
         obligation ($3,297,000) that is greater than its plan assets
         ($2,595,000) resulting in the additional liability of $448,000 and at
         June 2003, this plan had a benefit obligation ($3,087,000) that is
         greater than its plan assets ($2,412,000) resulting in the additional
         liability of $457,000.

         A 1% increase in the assumed discount rate would decrease the benefit
         obligation at July 2004 by $514,000. Conversely, a 1% decrease in the
         assumed discount rate would increase the benefit obligation at July
         2004 by $601,000.

         The Consolidated Statements of Operations and Comprehensive Income
         shows the amount included in Other Comprehensive Income (Loss) that
         resulted from recording the additional minimum pension liability which
         represents the portion of the pension liability that has not yet been
         charged against operations. A valuation allowance is recorded for the
         deferred tax asset ($448,000) that arises from the cumulative Other
         Comprehensive Income (Loss).

         In addition, the Company provides retirement benefits to certain
         employees through deferred compensation contracts and the unfunded
         liability associated with these contracts was $92,000 at July 3, 2004
         and $76,000 at June 28, 2003.

10. RETIREE HEALTH BENEFITS:

         The Company accounts for the costs and liability of health care
         benefits for retired employees using Statement of Financial Accounting
         Standards No. 106 (FAS 106), "Employers Accounting for Postretirement
         Benefits Other Than Pensions". The liability at the date of adoption of
         FAS 106 (July 4, 1993) is being recognized over employee future service
         lives.

         Employees of the North Carolina plant who meet certain criteria and
         retire early (age 62-64) or become disabled, receive for themselves,
         but not for their dependents, the same health insurance benefits
         received by active employees. All benefits terminate when the employee
         becomes eligible to receive Medicare (usually age 65 or 30 months after
         disability date). This benefit is provided at no cost to the employee
         and the Company does not fund the cost of this benefit prior to costs
         actually being incurred.

                                      -29-

<PAGE>



         The cost of retiree health benefits included in the accompanying
         Statements of Operations and Comprehensive Income was:

                                                     (in thousands)

                                               2004          2003          2002
-------------------------------------------------------------------------------
Benefits Earned for Current Service          $   36        $   28        $   20
-------------------------------------------------------------------------------
Interest Cost on Accumulated Liability           24            22            27
-------------------------------------------------------------------------------
Amortization of the July 4, 1993 Liability        4             4             4
-------------------------------------------------------------------------------
Total Cost                                   $   64        $   54        $   51
-------------------------------------------------------------------------------


         An analysis of the total liability for the last two fiscal years,
         including a reconciliation of the liability in the Consolidated Balance
         Sheets (see Note 8) at July 3, 2004 and June 28, 2003 is as follows:

                                                             (in thousands)

                                                              2004         2003
-------------------------------------------------------------------------------
Total Obligation at Beginning of Year                       $  414       $  330
-------------------------------------------------------------------------------
Liability for Current Service                                   36           28
-------------------------------------------------------------------------------
Interest on Liability                                           24           22
-------------------------------------------------------------------------------
Benefit Payments                                                -            -
-------------------------------------------------------------------------------
Actuarial (Gain) Loss                                          (82)          34
-------------------------------------------------------------------------------
Total Obligation at End of Year                                392          414
-------------------------------------------------------------------------------
Less Unamortized Liability at July 4, 1993                     (42)         (46)
-------------------------------------------------------------------------------
Unrecognized Loss                                              (55)        (137)
-------------------------------------------------------------------------------
Liability Recognized in the Consolidated Balance Sheets     $  295       $  231
-------------------------------------------------------------------------------

         The assumed health care cost trend rate used to project expected future
         cost was 15% in 2004 and 2003, gradually decreasing to 6% by 2009 and
         remaining at 6% thereafter. The assumed discount rate used to determine
         the accumulated liability was 6.25% for 2004 and 6.00% for 2003.

         A 1% increase in the assumed health care cost trend rate would increase
         the benefit obligation at July 3, 2004 by $11,000. Conversely, a 1%
         decrease in the assumed health care cost trend rate would decrease the
         benefit obligation at July 3, 2004 by $11,000.

         A 1% increase in the assumed discount rate would decrease the benefit
         obligation at July 3, 2004 by $28,000. Conversely, a 1% decrease in the
         assumed discount rate would increase the benefit obligation at July 3,
         2004 by $33,000.


                                      -30-

<PAGE>




11. INCOME TAXES:

         The Company accounts for the provision and liability for income taxes
         using Statement of Financial Accounting Standards No. 109, "Accounting
         for Income Taxes." The provision for income taxes consists of the
         following:
                                                          (in thousands)

                                                   2004       2003         2002
-------------------------------------------------------------------------------
Federal Provision:
-------------------------------------------------------------------------------
    Currently Payable                            $  389     $   50       $   92
-------------------------------------------------------------------------------
    Deferred                                        273         44          232
-------------------------------------------------------------------------------
    Total Federal                                   662         94          324
-------------------------------------------------------------------------------
State Provision Currently Payable                    20         15           35
-------------------------------------------------------------------------------
Total Provision                                  $  682     $  109       $  359
-------------------------------------------------------------------------------

         A reconciliation of the effective income tax rate for the 2004, 2003
         and 2002 fiscal years is as follows:

                                                   2004        2003        2002
-------------------------------------------------------------------------------
Statutory Federal Income Tax Rate                   34%         34%         34%
-------------------------------------------------------------------------------
Current Period Income of Puerto Rico
Subsidiary Substantially Exempt From Puerto
Rican and Federal Income Taxes                     (5)%       (28)%       (25)%
-------------------------------------------------------------------------------
Deferred Tax Valuation Allowance (Reversal of
Previously Recorded Valuation Allowance)           (9)%         -           29%
-------------------------------------------------------------------------------
State Taxes, Net of Federal Tax Benefit              1%          1%          3%
-------------------------------------------------------------------------------
Other                                                1%          2%        (7)%
-------------------------------------------------------------------------------
Effective Income Tax Rate                           22%          9%         34%
-------------------------------------------------------------------------------

         Income earned in Puerto Rico by the Company's Puerto Rican wholly-owned
         subsidiary was 90% exempt from Puerto Rican income tax through 2000.
         Effective July 1, 2000, the Company received a new multi-year tax
         exemption grant that provided for a flat income tax rate of 2% and
         eliminated the withholding tax (5%) on dividends paid. Income earned in
         Puerto Rico by this subsidiary has not been subject to United States
         federal income tax. The Small Business Job Protection Act (Act)
         terminated the federal tax credit on this income subject to a phase out
         for existing companies, for tax years beginning after December 31,
         1996. Under the phase out, the Company received a full credit through
         fiscal year 2002. For fiscal years 2003 through 2006, the credit will
         be limited, and will be completely eliminated starting with the 2007
         fiscal year.

                                      -31-

<PAGE>



         The accumulated undistributed earnings ($2,848,000) through July 1,
         2000 of this subsidiary are subject to the 5% Puerto Rican withholding
         tax when remitted to the parent Company as dividends. Accrued tax
         liabilities have been provided for the withholding tax reasonably
         expected to be paid in the future.

         Significant components of the Company's deferred tax assets and
         liabilities as of the end of fiscal 2004 and 2003 are as follows:

                                                                (in thousands)

Deferred Tax Assets:                                          2004         2003
-------------------------------------------------------------------------------
Tax Effect of Pension Liability Charged Against Equity      $  448       $  558
-------------------------------------------------------------------------------
Employee Compensation Charged Against Financial
Statement Income, Not Yet Deducted From Taxable
Income                                                         383          237
-------------------------------------------------------------------------------
Additional Costs Inventoried for Tax Purposes                   91           81
-------------------------------------------------------------------------------
Federal NOL Carryforward                                         -          625
-------------------------------------------------------------------------------
State NOL Carryforward                                         165          334
-------------------------------------------------------------------------------
Alternative Minimum Tax Credit                                   -           70
-------------------------------------------------------------------------------
Equipment Impairment Loss Not Yet Deductible                     -           78
-------------------------------------------------------------------------------
Other                                                          229          186
-------------------------------------------------------------------------------
Deferred Tax Assets Before Valuation Allowance               1,316        2,169
-------------------------------------------------------------------------------
Valuation Allowance                                         (1,236)      (1,767)
-------------------------------------------------------------------------------
Total Deferred Tax Assets                                       80          402
-------------------------------------------------------------------------------
Deferred Tax Liabilities:
Depreciation and Prepaid Pension Costs Deducted From
Taxable Income Not Yet Charged Against Financial
Statement Income                                                88          137
-------------------------------------------------------------------------------
Net Deferred Tax Assets (Liabilities)                       $   (8)      $  265
-------------------------------------------------------------------------------

         Deferred tax assets have been reduced by a valuation allowance because
         it is more likely than not that certain of these assets will not be
         used to reduce future tax payments.

         The Company has state operating loss carryforwards of $2,392,000, which
         begin to expire in 2013, available to reduce future state taxable
         income.

12. NOTES PAYABLE:

         On December 29, 1995 Wellco repurchased from Coronet Insurance Company
         and some of its affiliates (Coronet and Affiliates) 1,531,272 shares of
         Wellco common stock, which represented 57.69% of total shares

                                      -32-

<PAGE>



         outstanding at that time. This repurchase provided for certain
         additional payments, without interest, to be made if cumulative net
         income for the six fiscal years 1997 through 2002 exceeded a defined
         amount.

         Generally accepted accounting principles required that an obligation be
         reflected in the Consolidated Balance Sheets for the estimated
         additional payments that would be made. Actual cumulative net income
         through fiscal year 2002 was less than the defined amount that
         cumulative net income had to exceed. Consequently, the $347,000 Note
         Payable, recorded at June 30, 2001 for the estimated additional
         contingent liability, was reversed and Stockholders' Equity was
         increased by this amount during the second quarter of fiscal year 2002
         (as required by generally accepted accounting principles for stock
         repurchases).

         Since its stock repurchase, Wellco, had accrued imputed interest
         expense on the estimated additional contingent payment. At December 29,
         2001, the previously accrued $234,000 interest liability was reversed
         in connection with the elimination of the Note Payable and accordingly,
         the 2002 fiscal year Consolidated Statement of Operations and
         Comprehensive Income includes interest income for this amount.
         As part of an agreement with a customer for which the Company provides
         certain technology and equipment, in April, 2001 that customer loaned
         the Company $300,000. The loan agreement provides for quarterly
         interest payments at an annual rate of 3% with the $300,000 principal
         due in April 2011. Because this interest rate is less than the market
         rate, the Company recorded the note payable discounted at a market rate
         of 8% ($196,000), and is recording interest expense at this rate. The
         difference between interest at the 8% and 3% rates ($104,000) was
         recorded as deferred service income, which is being recognized over the
         10-year life of the loan agreement. The Company attributed the
         difference between the stated 3% rate and the market rate of 8% as part
         of its compensation for technology and equipment provided to the
         customer. The Consolidated Statements of Operations and Comprehensive
         Income for the fiscal years 2004, 2003 and 2002 include service fee
         income of $9,000, $8,000 and $7,000, respectively, and interest expense
         of $17,000, $17,000 and $16,000, respectively. The Consolidated Balance
         Sheets at July 3, 2004 and at June 28, 2003 includes $222,000 and
         $213,000, respectively, for this note, and $78,000 and $87,000,
         respectively, as deferred service income.

13. STOCK OPTIONS:

         On July 12, 2000, the Company and its Chairman of the Board executed an
         Agreement under which the Chairman was granted options to purchase up
         to 50,000 shares of the Company's common stock at an exercise price of
         $9.125 per share with such options vesting in 2005 or earlier if
         certain performance targets are met. As of July 3, 2004, 20,000 shares
         under the Agreement have vested. Expiration of such options shall be
         the earlier of the fifth anniversary of the date on which such options
         vest or one year after the Chairman's separation from employment under
         the Agreement (see Note 19 to the Consolidated Financial Statements).
         The 1999 Stock Option Plan for Key Employees (1999 Employee Plan) and
         the 1999 Stock Option Plan for Non-Employee Directors (1999 Director
         Plan) provide for granting options to purchase 90,000 shares and 21,000
         shares, respectively. At July 3, 2004 options have been granted for
         65,000 shares under the 1999 Employee Plan and 11,000 shares under the
         1999 Director Plan. The plans permit the issuance of either incentive
         stock options or non-qualified stock options. The1997 Stock Option Plan
         for Key Employees (1997 Employee Plan) and the 1997 Stock Option Plan
         for Non-Employee Directors (1997 Director Plan) provide for granting
         options to purchase

                                      -32-

<PAGE>



         99,000 shares and 16,000 shares, respectively. At July 3, 2004 options
         have been granted for 84,000 shares under the 1999 Employee Plan and
         10,000 shares under the 1999 Director Plan.

         The 1996 Stock Option Plan for Key Employees provides for granting
         options to purchase 60,000 shares. At July 3, 2004 options have been
         granted for 52,500 shares.

         Under all of the above Plans, option price is the market price on the
         date granted, and options have a life of 10 years from the date
         granted. At July 3, 2004, all granted options under the 1999, 1997 and
         1996 Plans are exercisable.

         Transactions involving these Plans for the last three fiscal years are
         summarized below:


                                                                  Weighted-
                                          No. of                    Average
Option Shares:                            Shares             Exercise Price
----------------------------------------------------------------------------
Outstanding at June 30, 2001             233,000                      $9.67
----------------------------------------------------------------------------
Exercised                                (19,500)                      8.41
----------------------------------------------------------------------------
Outstanding at June 29, 2002             213,500                       9.79
----------------------------------------------------------------------------
Exercised                                 (3,000)                      8.00
----------------------------------------------------------------------------
Forfeited                                (12,000)                      9.67
----------------------------------------------------------------------------
Outstanding at June 28, 2003             198,500                       9.78
----------------------------------------------------------------------------
Exercised                                (59,300)                     10.55
----------------------------------------------------------------------------
Outstanding at July 3, 2004              139,200                      $9.46
----------------------------------------------------------------------------

         The following table summarizes information about fixed stock options
         outstanding at July 3, 2004:


                                                         Weighted-Average
                                                                Remaining
           Range of Exercise     Weighted Average        Contractual Life
Number                Prices       Exercise Price                in Years
-------------------------------------------------------------------------
15,000                 $5.00                $5.00                     1.0
-------------------------------------------------------------------------
45,200         $12.00-$17.50               $12.24                     3.0
-------------------------------------------------------------------------
29,000                 $8.00                $8.00                     5.0
-------------------------------------------------------------------------
50,000*                $9.13                $9.13                     6.0
-------------------------------------------------------------------------

         * As of July 3, 2004, 30,000 shares are not exercisable.  All other
         shares shown are fully exercisable.

                                      -34-

<PAGE>



         The following table summarizes information concerning options issued,
         options available for future issuance and approval of plans by security
         holders at July 3, 2004:

                        (A)                (B)              (C)
--------------------------------------------------------------------------------
                                                            Number of
                                                            Securities
                                                            Remaining Available
                        Number of                           for Future Issuance
                        Securities to be   Weighted-        Under Equity
                        Issued Upon        Average          Compensation Plans
                        Exercise of        Exercise Price   (Excluding
                        Outstanding        of Outstanding   Securities Reflected
Plan Category           Options            Options          in Column (A))
--------------------------------------------------------------------------------
Equity Compensation
Plans Approved by
Security Holders        139,200            $9.46            63,500
--------------------------------------------------------------------------------
Equity Compensation
Plans Not Approved by
Security Holders           -                 -                -
--------------------------------------------------------------------------------
Total                   139,200            $9.46            63,500
--------------------------------------------------------------------------------

         We have applied the intrinsic value based method of accounting
         prescribed by APB Opinion No. 25 and related interpretations in
         accounting for stock-based compensation plans. Accordingly, no
         compensation cost is reflected in net income for stock option awards as
         all options granted had an exercise price equal to or in excess of the
         market value of the underlying common stock on the date of grant.


         We have adopted the disclosure provisions of SFAS No. 148, "Accounting
         for Stock-Based Compensation-Transition and Disclosure, an amendment of
         FASB Statement No.123" and the following table illustrates the pro
         forma effect on net income and income per share in 2003, 2002 and 2001
         had the fair value recognition provisions of SFAS No.123 "Accounting
         for Stock-Based Compensation" been applied to stock-based employee
         compensation.


                                             2004     2003     2002
-------------------------------------------------------------------
Net Income, As Reported                   $ 2,448   $  823   $  683
-------------------------------------------------------------------
Net Income, Pro Forma                     $ 2,430   $  800   $  660
-------------------------------------------------------------------
Basic Earnings Per Share, As Reported     $  2.04   $ 0.70   $ 0.58
-------------------------------------------------------------------
Basic Earnings Per Share, Pro Forma       $  2.02   $ 0.68   $ 0.56
-------------------------------------------------------------------
Diluted Earnings Per Share, As Reported   $  1.97   $ 0.68   $ 0.56
-------------------------------------------------------------------
Diluted Earnings Per Share, Pro Forma     $  1.95   $ 0.66   $ 0.54
-------------------------------------------------------------------


                                      -35-

<PAGE>



14. EARNINGS PER SHARE:

         The Company computes its basic and diluted earnings per share amounts
         in accordance with Statement of Financial Accounting Standards No. 128
         (SFAS 128), "Earnings per Share." Basic earnings per share is computed
         by dividing net earnings by the weighted average number of common
         shares outstanding during the period. Diluted earnings per share is
         computed by dividing net earnings by the weighted average number of
         common shares outstanding during the period plus the dilutive potential
         common shares that would have been outstanding upon the assumed
         exercise of dilutive stock options.

         The following is the reconciliation of the numerators and denominators
         of the basic and diluted earnings per share computations:

                                           For the Fiscal Year Ended 7/3/04
                                         Net Income      Shares       Per-Share
                                        (Numerator)  (Denominator)       Amount

Basic EPS Available to Shareholders     $ 2,448,000    1,200,937      $   2.04
--------------------------------------------------------------------------------
Effect of Dilutive Stock-based
Compensation Arrangements                                 43,017
--------------------------------------------------------------------------------
Diluted EPS Available to Shareholders   $ 2,448,000    1,243,954      $   1.97
--------------------------------------------------------------------------------

                                           For the Fiscal Year Ended 6/28/03
                                         Net Income      Shares       Per-Share
                                        (Numerator)  (Denominator)       Amount

Income Before Accounting Change         $ 1,051,000    1,184,242      $    0.89
--------------------------------------------------------------------------------
Cumulative Effect of Accounting Change     (228,000)
--------------------------------------------------------------------------------
Net Income Available to Shareholders        823,000    1,184,242      $    0.70
--------------------------------------------------------------------------------
Effect of Dilutive Stock-based
Compensation Arrangements                                 26,687
--------------------------------------------------------------------------------
Diluted EPS Available to Shareholders   $   823,000    1,210,929      $    0.68
--------------------------------------------------------------------------------

                                           For the Fiscal Year Ended 6/29/02
                                         Net Income      Shares       Per-Share
                                        (Numerator)  (Denominator)       Amount

Basic EPS Available to Shareholders     $   683,000    1,173,534      $    0.58
--------------------------------------------------------------------------------
Effect of Dilutive Stock-based
Compensation Arrangements                                 42,453
--------------------------------------------------------------------------------
Diluted EPS Available to Shareholders   $   683,000    1,215,987      $    0.56
--------------------------------------------------------------------------------


                                      -36-

<PAGE>




15. SEGMENT AND REVENUE INFORMATION:

         The Company operates in one reportable segment. SFAS 131 requires
         disclosure of financial and descriptive information about reportable
         operating segments, revenues by products or services, and revenues and
         assets by geographic areas. Substantially all of the Company's
         operating activity is from the sale of military and other rugged
         footwear, the sale of specialized machinery and materials for the
         manufacture of this type of footwear and the rendering of technical
         assistance and other services to licensees for the manufacture of this
         type of footwear. The Company identifies segments based on the
         Company's organization under one management group. The Company's
         operations are managed as one unit and resources are allocated without
         regard to separate functions.

         Information about the Company's revenues is as follows:

                                                             (in thousands)
                                                      2004       2003       2002
--------------------------------------------------------------------------------
Sales of Footwear and Related Items ...........    $44,327    $24,012    $19,349
--------------------------------------------------------------------------------
Revenues from Licensees .......................      1,366        821        632
--------------------------------------------------------------------------------
Total Revenues by Major Product Group .........    $45,693    $24,833    $19,981
--------------------------------------------------------------------------------

Revenues from U. S. Customers .................    $45,344    $24,631    $18,826
--------------------------------------------------------------------------------
Revenues from International Customers .........        349        202      1,155
--------------------------------------------------------------------------------
Total Revenues by Geographic Region ...........    $45,693    $24,833    $19,981
--------------------------------------------------------------------------------

Location of Major International Customers:
Latin America .................................    $   153    $   127    $   664
--------------------------------------------------------------------------------
Canada ........................................         14         12        332
--------------------------------------------------------------------------------
Asia/Pacific ..................................        171         47        154
--------------------------------------------------------------------------------
Mexico ........................................          2          2          2
--------------------------------------------------------------------------------
United Kingdom/Europe/South Africa ............    $     9    $    14         $-
--------------------------------------------------------------------------------

Major Customer- U. S. Government ..............    $39,648    $18,209    $14,875
--------------------------------------------------------------------------------

         The Company does not have long-lived assets or operations in foreign
         countries. The categorization of revenues as being from international
         customers was based upon the final destination of products sold or
         services rendered.

                                      -37-

<PAGE>




16. GOVERNMENT BOOT CONTRACT REVENUES:

         From time to time, the Company records estimates of revenues or costs
         associated with certain contract actions before the amount of such
         actions are settled with the DSCP. Any differences between these
         estimates and the actual amounts agreed to are included in the period
         of settlement.

         In late March 2003, DSCP ordered the Company to surge its rate of boot
         production by exercising a contract's surge option clause. As used in
         this clause, surge means that the contractor is to accelerate its
         production to the maximum extent possible. Wellco interprets the surge
         option contract clause to require its submitting and subsequently
         negotiating with DSCP reimbursement of surge costs, a significant
         portion of which is excess labor cost related to new employees. DSCP
         has a different understanding of this clause under which the Company
         would not be reimbursed these costs. The Company's legal counsel has
         discussed with DSCP's legal counsel this difference in contract clause
         interpretation, without any resolution, and counsel has not expressed
         their opinion as to the probability of a successful outcome should the
         Company decide to litigate this issue.

         As disclosed in Footnote 23, subsequent to the end of fiscal year 2004
         the Company received from the Government of Puerto Rico $780,000
         representing part of the compensation paid to new employees. During
         fiscal year 2004, the Company received $365,000 of such reimbursement.
         These amounts represent a substantial part of the Company's total
         excess labor cost during surge, and therefore would significantly
         reduce the amount of any reimbursement claim that might be filed with
         DSCP. The possible outcome and related legal cost of pursuing remaining
         surge costs has not been, but will be, determined, and a decision will
         be made as to filing a claim. The Company has not recognized a
         receivable for any surge costs incurred.

17. GRANT MONEY RECEIVED AND CONTRACT CLAIM:

         The Company received $400,000 ($100,000 in November, 2000 and a final
         payment of $300,000 on July 2, 2001) from the government of Puerto Rico
         under a Special Incentives Contract related to its 1999 consolidation
         of boot manufacturing operations in Puerto Rico, which was completed in
         fiscal year 2001. The grant required the Company to maintain operations
         in Puerto Rico for five years (fiscal years 2000 through 2004). Grant
         income was not recognized until the $100,000 was received in November,
         2000, and the 2001 Consolidated Statement of Operations and
         Comprehensive Income included, as a catch-up adjustment, $160,000 of
         grant income. After the Contract was executed on May 23, 2001, and
         subsequent to receiving the final $300,000 payment, grant income
         recognized on a straight line basis over this five year period at the
         rate of $20,000 per fiscal quarter. The Consolidated Statements of
         Operations and Comprehensive Income for the fiscal years 2004, 2003 and
         2002 include an income item from this grant of $80,000. As of July 3,
         2004, all of the deferred grant income has been recognized.

18. UNRECOVERED CONTRACT PREPARATION COSTS:

         In October, 2001, Wellco submitted a solicitation response to a DSCP
         procurement for berets to be used by U. S. Army personnel. Wellco did
         not have any prior experience in manufacturing berets or similar
         knitted products. Since submitting its response, certain costs were
         incurred in order to learn beret manufacturing operations and
         procedures, and to demonstrate to the government that Wellco had the

                                      -38-

<PAGE>



         capability to manufacture and deliver berets within the government's
         required delivery schedule.

         In July, 2002, Wellco received notification that the contract awardee
         was another company. At June 29, 2002, beret manufacturing machinery
         was written down by $159,000 to an amount equal to the estimated amount
         for which this machinery could be sold. This write-down, along with
         other direct costs incurred (employee training  and materials,
         consultant fees, travel), a total of $335,000, was shown as Unrecovered
         Contract Preparation Costs in the Consolidated Statements of Operations
         and Comprehensive Income for the fiscal year ended June 29, 2002. Based
         on revised estimates of the resale value, the beret manufacturing
         machinery was further written down by $70,000 and shown as Unrecovered
         Contract Preparation Costs in the Consolidated Statements of Operations
         and Comprehensive Income for the fiscal year ended June 28, 2003.

19. RELATED PARTY TRANSACTIONS:

         The Company has an Agreement with its former Chairman of the Board of
         Directors under which certain payments are to be made to the former
         Chairman for a five-year period commencing January 2000. These payments
         are computed as certain fixed percentages of revenues earned by the
         Company and related to certain products, as defined, that the former
         Chairman has been instrumental in conceiving or developing. The amount
         paid under this agreement since its inception and through June 29, 2002
         was $2,000. The payments under this agreement to the former Chairman
         for the fiscal years ending July 3, 2004 and June 28, 2003 were $1,681
         and $2,435, respectively.

         Effective July 1, 2002, the Chairman resigned as an employee of the
         Company and in the future is to be paid $100 per hour for consulting
         services as mutually agreed between himself and the Company. There have
         been no payments to the former Chairman for consulting services during
         the past two fiscal years.

20. COMMITMENTS:

         The Company has a non-cancelable operating lease with a Puerto Rican
         governmental agency for its manufacturing facility. The term of the
         lease is for ten years, beginning July 1, 1999 with monthly payments
         that commenced on January 1, 2000. Total lease payments for the period
         July 4, 2004 through June 30, 2009 are $840,000. Lease payments for
         each of the Company's five fiscal years ending after July 3, 2004 are:
         $156,000, $162,000, $168,000, $174,000 and $180,000. Lease expense for
         the Company's current Puerto Rican facility in the 2004, 2003 and 2002
         fiscal years was $142,500 each year.

21. GOODWILL:

         Statement of Financial Accounting Standards No. 142 (SFAS 142,
         "Goodwill and Other Intangible Assets") was effective with the
         Company's 2003 fiscal year. As shown in the Consolidated Balance
         Sheets, the excess of cost over net assets of subsidiary at acquisition
         (goodwill) was reviewed for impairment in conjunction with the adoption
         of SFAS 142. SFAS No. 142 provides for a specific method to determine
         if goodwill is impaired and the application of this method resulted in
         the $228,000 of goodwill being deemed as impaired. As required under
         SFAS 142, the Company charged this goodwill against the Consolidated
         Statements of Operations and Comprehensive Income as the cumulative

                                      -39-

<PAGE>



         effect of change in accounting principle. In applying the SFAS 142
         method, conservative assumptions and estimates were used, which may not
         be indicative of future results.

         The changes in the carrying amount of goodwill was as follows:

                                                  (in thousands)
                                                       2003
------------------------------------------------------------
Excess of cost over net assets of subsidiary
at acquisition, at beginning of year                $   228
------------------------------------------------------------
Cumulative effect of change in accounting
principle                                              (228)
------------------------------------------------------------
Excess of cost over net assets of subsidiary        $     0
at acquisition, at end of year
------------------------------------------------------------

22. SUBSEQUENT EVENT:-

         The majority of the Company's boot manufacturing operations occur at
         the factory of a wholly-owned subsidiary located in Puerto Rico. The
         Company is participating in a Puerto Rico government program under
         which it is reimbursed for part of the compensation paid to certain
         employees. On September 23, 2004, that subsidiary received a
         reimbursement of $780,000 for compensation paid employees in the 2004
         fiscal year. The Company's policy is to record these reimbursements in
         the fiscal period in which they are received, and this amount will be
         recorded as a reduction in cost of sales in the fiscal quarter which
         will end October 2, 2004.







                                     -40-

<PAGE>






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To The Board of Directors and Stockholders
of Wellco Enterprises, Inc.
Waynesville, North Carolina

We have audited the accompanying consolidated balance sheets of Wellco
Enterprises, Inc. and subsidiaries (the "Company") as of July 3, 2004 and June
28, 2003, and the related consolidated statements of operations and
comprehensive income, stockholders' equity, and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing 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
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
July 3, 2004 and June 28, 2003 and the results of their operations and their
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.


DIXON HUGHES PLLC

Asheville, North Carolina
September 22, 2004







                                      -41-

<PAGE>



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Stockholders
Wellco Enterprises, Inc.
Waynesville, North Carolina

We have  audited the  accompaning  consolidated  statements  of  operations  and
comprehensive income, stockholders' equity and cash flows of Wellco Enterprises,
Inc. and  subsidiaries  (the "Company") for the fiscal year ended June 29, 2002.
The financial statements are the responsibility of the Company's management. Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We  conducted  our audit 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.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the results of operations and cash flows of the Company for
the fiscal year ended June 29, 2002, in conformity  with  accounting  principles
generally accepted in the United States of America.


DELOITTE & TOUCHE LLP
Charlotte, North Carolina

October 14, 2002







                                      -42-

<PAGE>



                            WELLCO ENTERPRISES, INC.
                PRICE RANGE, DIVIDENDS AND MARKET OF COMMON STOCK

                                                   Fiscal Year 2004 Quarters

                                       First    Second    Third    Fourth
--------------------------------------------------------------------------------
Market Price Per Share-
High                                  $11.10    $11.75   $22.69    $23.80
--------------------------------------------------------------------------------
Low                                    $8.55     $9.80   $11.40    $12.00
--------------------------------------------------------------------------------
Per Share Cash Dividend Declared       $0.10     $0.10    $0.10     $0.15
--------------------------------------------------------------------------------


                                                   Fiscal Year 2003 Quarters

                                       First    Second    Third    Fourth
Market Price Per Share-
High                                  $13.70    $13.50   $12.45    $12.48
--------------------------------------------------------------------------------
Low                                   $11.40    $10.20   $10.95     $9.55
--------------------------------------------------------------------------------
Per Share Cash Dividend Declared       $0.10     $0.10    $0.10     $0.10
--------------------------------------------------------------------------------


The Company's Common Stock is traded on the American Stock Exchange.

The number of holders of record of Wellco's Common Stock as of September 16,
2004 was 191.



Registrar and Transfer Agent
Mellon Shareholders Services
New York, N. Y.






                                      -43-

<PAGE>

                            WELLCO ENTERPRISES, INC.
                        SELECTED QUARTERLY FINANCIAL DATA
                                   (Unaudited)
                   (In Thousands Except for Per Share Amounts)


                                                   Fiscal Year 2004 Quarters

                                       First    Second      Third      Fourth
--------------------------------------------------------------------------------
Revenues                            $  8,617  $ 11,389   $ 11,513  (A) 14,174
--------------------------------------------------------------------------------
Cost of Sales and Services             7,490    10,122      9,914      11,912
--------------------------------------------------------------------------------
Net Income                               416       551        623         858
--------------------------------------------------------------------------------
Basic Earnings Per Share                0.35      0.46       0.52        0.70
--------------------------------------------------------------------------------
Fully Diluted Earnings Per Share    $   0.35  $   0.46   $   0.50   $    0.66
--------------------------------------------------------------------------------

                                                   Fiscal Year 2003 Quarters

                                       First    Second      Third      Fourth
--------------------------------------------------------------------------------
Revenues                            $  5,258  $  5,248   $  5,572  (C) $8,755
--------------------------------------------------------------------------------
Cost of Sales and Services             4,230     4,579      5,042       7,421
--------------------------------------------------------------------------------
Net Income Before Cumulative
Effect of Change in Accounting
Principle                                394        64        (26)        619
--------------------------------------------------------------------------------
Net Income (Loss)                    (B) 166        64        (26)        619
--------------------------------------------------------------------------------
Basic Earnings (Loss) Per Share
Before Cumulative Effect of Change
in Accounting Principle                 0.33      0.05      (0.02)       0.52
--------------------------------------------------------------------------------
Basic Earnings (Loss) Per Share         0.14      0.05      (0.02)       0.52
--------------------------------------------------------------------------------
Fully Diluted Earnings (Loss)Per
Share Before Cumulative Effect of
Change in Accounting Principle          0.32      0.05      (0.02)       0.51
--------------------------------------------------------------------------------
Fully Diluted Earnings (Loss)
Per Share                           $   0.13  $   0.05   $  (0.02)   $   0.51
--------------------------------------------------------------------------------

(A)   Includes sales of 55,000 pairs of black ICB boots under new contract.

(B)   Includes a $228,000 cumulative effect adjustment for goodwill impairment
      with the adoption of SFAS 142 (See Note 21 to the Consolidated Financial
      Statements).

(C)   In late March, 2003, DSCP invoked its surge option under the Direct Molded
      Sole (DMS) contract. During the fourth quarter, Wellco shipped 50,000 more
      pairs of DMS boots than the fourth quarter for the prior
     year.




                                      -44-

<PAGE>

Officers and Directors

DAVID LUTZ
Chief Executive Officer, President,  Chief Operating Officer and Chairman, Board
of Directors

HORACE AUBERRY
Chairman Emeritus, Board of Directors

ROLF KAUFMAN
Vice Chairman of the Board

FRED K. WEBB, Jr.
Vice President of Marketing

Officers

SVEN E. OBERG
V. P. - Engineering and Process Development

CHRIS CASTLEBERRY
V. P. - Technical Director

RICHARD A. WOOD, Jr.
Secretary, Attorney, Member of the law firm of McGuire, Wood & Bissette, P. A.

TAMMY FRANCIS
Treasurer, Assistant Secretary and Controller

Directors

WILLIAM M. COUSINS, Jr.
President of William M. Cousins, Jr., Inc.
(Management Consultants)


JAMES T. EMERSON
Retired Engineer


                                      -45-

<PAGE>



CLAUDE S.  ABERNETHY, Jr.
Senior Vice President of IJL Wachovia

KATHERINE J. EMERSON
Information Systems Controller and CPA
Master Gage and Tool Company

JOHN D. LOVELACE
Vice President of Credit and Collections
United Leasing Corporation











                                      -46-

<PAGE>



                                     PART II
                                     -------
Items 5, 6, 7, and 8.
--------------------

The information called for by the following items is in the Company's 2004
Annual Report to Shareholders which is incorporated starting on the following
page in this Form 10-K:

                                                                  Annual Report
                                                                       Page No.
--------------------------------------------------------------------------------
Item 5.   Market for the Registrant's Common Equity and Related
          Stockholder Matters                                               43
--------------------------------------------------------------------------------
Item 6.   Consolidated Selected Financial Data                               1
--------------------------------------------------------------------------------
Item 7.   Management's Discussion and Analysis of Results of
          Operations and Financial Condition                              4-13
--------------------------------------------------------------------------------
Item 8.   Consolidated Financial Statements and Supplementary
          Data                                                       14-40, 44
--------------------------------------------------------------------------------

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
-------  ----------------------------------------------------------

We are exposed to interest rate changes primarily as a result of our line of
credit which we use to maintain liquidity and to fund capital expenditures and
expansion. Our market risk exposure with respect to this debt is to changes in
LIBOR. Our line of credit provides for interest on outstanding borrowings at
rates tied to LIBOR. A 1% increase in interest rates on our current borrowings
would have had a $ 48,000 impact on income before income taxes. We do not enter
into derivative or interest rate transactions for speculative purposes.

In the normal course of business and consistent with established policies and
procedures we use the necessary financial instruments to manage the fluctuations
in interest rates. The Company does not have any foreign currency risk.

Item 9. Changes in and Disagreements with Accountants on Accounting and
-----------------------------------------------------------------------
Financial Disclosure.
--------------------

On March 5, 2004, the Registrant filed a Form 8-K reporting under Item 4,
Changes in Registrant's Certifying Accountants, that at a meeting held on March
4, 2004,the audit committee of the Board of Directors of the Company approved
the engagement of Dixon Hughes PLLC, the successor in the merger of its current
independent auditors, Crisp Hughes Evans LLP, and the firm of Dixon Odom PLLC as
its independent auditors effective with the successful merger of the two firms.
On March 1, 2004, the audit committee of the Board of Directors was notified
that the merger of the two firms was completed and that the firm of Crisp Hughes
Evans LLP would resign as independent auditors.

Disclosure was filed in Item 4 of Form 8-K dated March 5, 2004, and is
incorporated herein by reference.


Item 9A.  Controls & Procedures
-------   ---------------------

(a) Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in the reports that
are filed or submitted under the Exchange Act is recorded, processed, summarized

                                       -5-

<PAGE>



and reported,  within the time periods  specified in the Securities and Exchange
Commissions's  rules and forms.  Disclosure  controls  and  procedures  include,
without limitation,  controls and procedures designed to ensure that information
required to be disclosed in the reports that are filed under the Exchange Act is
accumulated  and  communicated  to  management,  including  the chief  executive
officer and chief financial  officer,  as appropriate to allow timely  decisions
regarding   required   disclosure.   Under  the  supervision  of  and  with  the
participation  of management,  including the chief  executive  officer and chief
financial officer, the Company has evaluated the effectiveness of the design and
operation of its  disclosure  controls and  procedures  as of July 3, 2004,  and
based on its evaluation, our chief executive officer and chief financial officer
have concluded that these controls and procedures are effective.

(b) Changes in Internal Controls

There have been no significant changes in internal controls or in other factors
that could significantly affect these controls subsequent to the date of the
evaluation described above, including any corrective actions with regard to
significant deficiencies and material weaknesses.








                                       -6-

<PAGE>



                                    PART III
                                    --------

Responsive information called for by the following Items 10, 11, 12. 13 and 14,
except for certain information about executive officers provided and the
Registrant's Code of Ethics presented below, will be filed not later than 120
days after the close of the fiscal year with the Securities and Exchange
Commission in a Proxy Statement dated October 15, 2004, and is incorporated
herein by reference. After each item and shown in parenthesis is the proxy
heading for the section containing the responsive information.

Item 10. Directors and Executive Officers of the Registrant.
         (Board of Directors)
-------  --------------------------------------------------

         The Proxy Statement is not expected to contain information disclosing
delinquent Form 4 filers.

     Identification of Executive Officers and Certain Significant Employees:
     ----------------------------------------------------------------------


Name                              Age      Office
David Lutz, CPA                   59      Chairman, Board of Directors,
                                          Chief Executive Officer, President,
Horace Auberry                    73      Chairman Emeritus, Board of
                                          Directors
Rolf Kaufman                      74      Vice Chairman, Board of Directors
Sven Oberg                        65      Vice President-Engineering and
                                          Process Development
Chris Castleberry                 31      Vice President-Technical Director
Fred K. Webb, Jr.                 44      Vice President of Marketing
Richard A. Wood, Jr.              67      Secretary
Tammy Francis, CPA                45      Controller, Treasurer and
                                          Assistant Secretary

Effective January 1, 2002, Mr. Lutz was elected Chairman of the Board of
Directors and Chief Executive Officer and has been serving as President and
Director for more than five years.

Also, effective January 1, 2002, Mr. Auberry retired from Chief Executive Office
and is serving as Chairman Emeritus. Prior to serving as Chairman Emeritus, Mr.
Auberry served as Chairman of the Board of Directors for more than five years.

Prior to being elected Vice President, Engineering and Process Development in
2001, Mr. Oberg served as Vice President, Technical Director for more than five
years.

Mr. Castleberry has been an employee with the Company since April 2000 and was
elected Vice-President, Technical Director in May 2001. From 1996 until 2000, he
was a plant engineer for Converse Corporation, Inc.

Mr. Webb has been a director since 1996 and an employee with the Company since
August 1998. In February 1999, Mr. Webb was elected Vice President of Marketing.
Mr. Webb was employed as an

                                       -7-

<PAGE>



Accounting Team Leader with United Guaranty Corporation from 1989 until 1998.

Ms. Francis has been Controller since October, 1996 and was elected Treasurer in
May, 2003 and Assistant Secretary in November, 1998.

Executive officers are elected by the Board of Directors to serve a term of one
year. There are no arrangements or understandings pursuant to which any of the
officers are elected, and all are elected to serve for one year terms.

The Registrant has a Code of Conduct and Ethics that applies to, among others,
its principal executive officer, principal financial officer and principal
accounting officer or controller. The Code of Conduct and Ethics is filed as
Exhibit 14 to this Form 10-K.

Item 11. Executive Compensation.  (Executive Compensation)
-------  ----------------------

Item 12. Security Ownership of Certain Beneficial Owners and Management.
         (Security Ownership)
-------  --------------------------------------------------------------

Item 13. Certain Relationships and Related Transactions.
         (Board of Directors/Security Ownership)
-------  ----------------------------------------------

Since the beginning of the 2004 fiscal year, no executive officer of the
Registrant or member of his immediate family or record or beneficial owner of
more than 5% of the Company's stock has had any transaction or series of similar
transactions with the Registrant or any of its subsidiaries exceeding $60,000,
and there are no currently proposed transactions exceeding $60,000.

Since the beginning of the 2004 fiscal year, no -
         (1)      executive officer of the Registrant or member of his immediate
                  family,
         (2)      corporation or organization of which any such person is an
                  executive officer, partner, owner or 10% or more beneficial
                  owner, or
         (3)      trust or other estate in which any such person has a
                  substantial interest or as to which such person serves as
                  trustee or in a similar capacity, was indebted to the
                  Registrant or its subsidiaries in an amount exceeding $60,000.

Item 14.  Principal Accountant Fees and Services.
          (Independent Auditors Fees and Services)
--------  --------------------------------------

                                                           PART IV

Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.
-------   ---------------------------------------------------------------

(a) The following documents are filed as a part of this report:

1. All Financial Statements
---------------------------

                                                                         Page
                                                                         Number
--------------------------------------------------------------------------------
The following consolidated financial statements of Wellco
Enterprises, Inc. are in the Registrant's 2004 Annual Report
to Shareholders which is integrated into Part II of this Form
10-K immediately after page 4
--------------------------------------------------------------------------------
Consolidated Balance Sheets -at July 3, 2004 and June 28, 2003            15-16*
--------------------------------------------------------------------------------


                                       -8-

<PAGE>



                                                                         Page
                                                                         Number
--------------------------------------------------------------------------------
Consolidated Statements of Operations and Comprehensive
Income - for the years
ended July 3, 2004, June 28, 2003 and  June 29, 2002                         14*
--------------------------------------------------------------------------------
Consolidated Statements of Cash Flows - for the years
ended July 3, 2004, June 28, 2003 and June 29, 2002                       17-18*
--------------------------------------------------------------------------------
Consolidated Statements of Stockholders' Equity - for
the years ended July 3, 2004, June 28, 2003 and June 29, 2002                19*
--------------------------------------------------------------------------------
Independent Auditors' Reports                                             41-42*
--------------------------------------------------------------------------------
Notes to Consolidated Financial Statements                                20-40*
--------------------------------------------------------------------------------

* Page number in the 2004 Annual Report to Shareholders included in Part II of
this Form 10-K.


2. Financial Statement Schedules

                                                                         Page
                                                                         Number
--------------------------------------------------------------------------------
Schedule II      Valuation and Qualifying Accounts                           26
--------------------------------------------------------------------------------

All other schedules are omitted because they are not applicable or not required.


3. Exhibits
-----------

Exhibit                                                                  Page
 Number          Description                                             Number
--------------------------------------------------------------------------------
   3             Articles of Incorporation and By-Laws                       15
--------------------------------------------------------------------------------
  10             Material Contracts:
                 A. Bonus Arrangement*                                       (b)
--------------------------------------------------------------------------------
                 B. 1996 Stock Option Plan for Key Employees
                 of Wellco Enterprises, Inc.*                                (c)
--------------------------------------------------------------------------------
                 C. 1997 Stock Option Plan for Key Employees
                 of Wellco Enterprises, Inc.*                                (d)
--------------------------------------------------------------------------------
                 D. 1997 Stock Option Plan for Non-Employee
                 Directors of Wellco Enterprises, Inc.*                      (e)
--------------------------------------------------------------------------------
                 E. 1999 Stock Option Plan for Key Employees
                 of Wellco Enterprises, Inc.*                                (f)
--------------------------------------------------------------------------------
                 F. 1999 Stock Option Plan for Non-Employee
                 Directors of Wellco Enterprises, Inc.*                      (g)
--------------------------------------------------------------------------------


                                       -9-

<PAGE>



Exhibit                                                                  Page
 Number                                                                  Number
--------------------------------------------------------------------------------
                 G.  Employment Agreement with Chairman of
                 Wellco's Board of Directors*                                (h)
--------------------------------------------------------------------------------
                 H.  Amended Employment Agreement with Chairman
                 of Wellco's Board of Directors*                             (i)
--------------------------------------------------------------------------------
  14             Code of Conduct and Ethics                                  16
--------------------------------------------------------------------------------
  21             Subsidiaries of Registrant                                  17
--------------------------------------------------------------------------------
  23             Consent of Experts                                     18 - 19
--------------------------------------------------------------------------------
  31             Certifications of the Chief Executive Officer
                 and Chief Financial Officer under Section 302
                 of the Sarbanes-Oxley Act of 2002, filed herewith.     20 - 23
--------------------------------------------------------------------------------
  32             Certifications of the Chief Executive Officer
                 and Chief Financial Officer under Section 906
                 of the Sarbanes-Oxley Act of 2002, filed herewith.     24 - 25
--------------------------------------------------------------------------------


* Management Compensation Arrangement/Plan.

Copies of the below  listed  exhibits  may be  obtained  on  written  request to
Corporate  Secretary,  Wellco  Enterprises,  Inc., Box 188,  Waynesville,  N. C.
28786, accompanied by payment of the following amounts for each copy:
         Exhibit 3         $40.00
         Exhibit 10 A.       2.00
         Exhibit 10 B.       3.00
         Exhibit 10 C.       3.00
         Exhibit 10 D.       3.00
         Exhibit 10 E.       3.00
         Exhibit 10 F.       3.00
         Exhibit 10 G.       3.00
         Exhibit 10 H.       3.00
         Exhibit 14        This exhibit will be furnished without charge upon
                           receipt of a written request to the Corporate
                           Secretary at the address shown above.


         (a)      Exhibit was filed in Part IV of Form 10-K for the fiscal year
                  ended July 1, 1995, and is incorporated herein by reference.
         (b)      Exhibit was filed in PART IV of Form 10-K for the fiscal year
                  ended July 3, 1982, and is incorporated herein by reference.
         (c)      Exhibit was filed as Exhibit A to the Proxy Statement dated
                  October 18, 1996, and is incorporated herein by reference.
         (d)      Exhibit was filed as Exhibit A to the Proxy Statement dated
                  October 17, 1997, and is incorporated herein by reference.
         (e)      Exhibit was filed as Exhibit B to the Proxy Statement dated
                  October 17, 1997, and is incorporated herein by reference.
         (f)      Exhibit was filed as Exhibit A to the Proxy Statement dated
                  October 13, 2000, and is incorporated herein by reference.

                                      -10-

<PAGE>




         (g)      Exhibit was filed as Exhibit B to the Proxy Statement dated
                  October 13, 2000, and is incorporated herein by reference.
         (h)      Exhibit was filed in Part IV of Form 10-K for the fiscal year
                  ended July 1, 2000, and is incorporated herein by reference.
         (i)      Exhibit was filed in Part IV of Form 10-K for the fiscal year
                  ended June 29, 2002, and is incorporated herein by reference.

Item 14 (b) - Reports on Form 8-K
---------------------------------


On May 18, 2004, the Company filed a current report of Form 8-K under Item 12
announcing the Company's results of operations for the three months (third
quarter) and nine months ended April 3,2004.








                                      -11-

<PAGE>





                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Wellco Enterprises, Inc. has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

WELLCO ENTERPRISES, INC.



/s/ David Lutz
------------------------------------------------------
By: David Lutz, Chief Executive Officer, President and
Chairman of the Board of Directors
(Chief Executive Officer)
------------------------------------------------------


/s/ Tammy Francis
-------------------------------------------
By: Tammy Francis, Controller and Treasurer
 (Chief Financial Officer)
-------------------------------------------


Date: October 1, 2004

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/ Horace Auberry                         /s/ Rolf Kaufman
--------------------------------------------------------------------------------
Horace Auberry, Director                   Rolf Kaufman, Director
--------------------------------------------------------------------------------


/s/ David Lutz                            /s/ William M. Cousins, Jr.
--------------------------------------------------------------------------------
David Lutz, Director                      William M. Cousins, Jr. Director
--------------------------------------------------------------------------------


/s/ Fred K. Webb, Jr.
----------------------------
Fred K. Webb, Jr.,  Director
----------------------------



Date: October 1, 2004






                                      -12-

<PAGE>









REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To The Board of Directors and Stockholders
 of Wellco Enterprises, Inc.
Waynesville, North Carolina

We have audited the accompanying consolidated balance sheets of Wellco
Enterprises, Inc. and subsidiaries (the "Company") as of July 3, 2004 and June
28, 2003 and the related consolidated statements of operations and comprehensive
income, stockholders' equity, and cash flows for the years then ended. Our
audits also included the financial statement schedule listed in the Index at
Item 15(a)(2).These consolidated financial statements and the financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and the schedule based on our audits.

We conducted our audits in accordance with auditing 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
consolidated financial statements and schedule are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
July 3, 2004 and June 28, 2003 and the results of their operations and their
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole presents fairly, in all
material respects the information set forth therein.





DIXON HUGHES PLLC

Asheville, North Carolina
September 22, 2004







                                      -13-

<PAGE>







REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Stockholders
Wellco Enterprises, Inc.
Waynesville, North Carolina

We have audited the  consolidated  statements  of operations  and  comprehensive
income,  stockholders'  equity,  and cash flows of Wellco  Enterprises,  Inc.and
subsidiaries for the fiscal year ended June 29, 2002, and have issued our report
thereon  dated  October  14,  2002;  such  financial  statements  and report are
included in the 2004 Annual  Report to  Shareholders  included  herein.  Our
audit also  included the  financial  statement  schedule of Wellco  Enterprises,
Inc.,  listed  in  Item  15(a)(2).  This  financial  statement  schedule  is the
responsibility of the Company's management.  Our responsibility is to express an
opinion based on our audit. In our opinion,  such financial  statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole,  presents fairly, in all material respects the information set forth
therein.



DELOITTE & TOUCHE LLP
Charlotte, North Carolina

October 14, 2002













                                      -14-

<PAGE>






                                                                    EXHIBIT 3
                                                                    ---------

                            WELLCO ENTERPRISES, INC.
                      ARTICLES OF INCORPORATION AND BY-LAWS

The following 36 pages, not separately numbered in this Form 10-K, are the
complete Articles of Incorporation and By-Laws of the registrant including those
approved on November 18, 2003.














                                      -15-

<PAGE>






                          CERTIFICATE OF INCORPORATION
                                       OF
                             WELLCO SHOE CORPORATION

         THIS IS TO CERTIFY, that we, the undersigned, do hereby associate
ourselves into a corporation under and by virtue of the laws of the State of
North Carolina, as contained in Chapter 22 of the Consolidated Statutes,
entitled "Corporations" and the several amendments thereto, and do severally
agree to take the number of shares of capital stock in the said corporation set
opposite our respective names, and to that and do hereby set forth:

         1. The name of this corporation is WELLCO SHOE CORPORATION.

         2. The location of the principal office of the corporation in this
State is at 58 North Main Street in the City of Waynesville, County of Haywood;
but it may have one or more branch offices and places of business out of the
State of North Carolina, as well as in said State.

         3. The objects for which this corporation is formed are as follows:

         To manufacture, buy, sell, import, export and otherwise deal in shoes,
slippers, rubbers and boots for men, women and children, hats, gloves, mittens,
raincoats, and other goods made of rubber or leather for hand or footwear,
including any and all accessories in connection therewith; to acquire, maintain
and operate tanneries, textile plants, and otherwise manufacture and deal in all
types of textiles; to acquire, maintain and operate plants for the manufacture
of raw rubber into rubber goods of every kind and description; to acquire and
hold such store or stores as may be necessary to the proper conduct of the
business and to do and perform every other act that may be legally performed by
a corporation engaged in such business.

         And in order properly to prosecute the objects and purposes above set
forth the corporation shall have full power and authority to purchase, lease and
otherwise acquire, hold, mortgage, convey and otherwise dispose of all kinds of
property, both real and personal, both within North Carolina and in all other
states, territories and dependencies of the United States; to purchase the
business, good will and all other property of any individual, firm or
corporation as a going concern and to assume all its debts, contracts and
obligations, provided said business is authorized by the powers contained
herein; to construct, equip and maintain buildings, works, factories and plants;
to install, maintain and operate all kinds of machinery and appliances; to
operate same by steam, water, electricity or other motive power, and generally
to perform all acts which may be deemed necessary or expedient for the proper
and successful prosecution of the objects and purposes for which the corporation
is created.

         To acquire, hold, use, sell, assign, lease, grant licenses in respect
of, mortgage or otherwise dispose of letters patent of the United States or any
foreign country, patent rights, licenses and privileges, inventions,
improvements and processes, copyrights, trade-marks and trade names, relating to
or useful in connection with any business of the corporation.

         To purchase, hold, sell, assign, transfer, mortgage, pledge or
otherwise dispose of shares of the capital stock of, or any bonds, securities or
evidences of indebtedness created by any other corporation or corporations
organized under the laws of this state or any other state, country, nation or
government, and while the owner thereof to exercise all the rights, powers and
privileges of ownership, including the right to vote thereon.



<PAGE>



         To borrow or raise moneys for any of the purposes of the corporation
and from time to time without limit as to amount to draw, make, accept, endorse,
execute and issue promissory notes, drafts, bills of exchange, warrants, bonds,
debentures and other negotiable or non-negotiable instruments and evidence of
indebtedness and to secure the payment of any thereof and of the interest
thereon by mortgage upon or pledge, conveyance or assignment in trust of the
whole or any part of the property of the corporation, whether at the time owned
or thereafter acquired and to sell, pledge or otherwise dispose of such bonds or
other obligations of the corporation for its corporate purposes.

         To purchase, hold, sell and transfer the shares of its own capital
stock, provided it shall not use its funds or property for the purchase of its
own shares of capital stock when such use would cause any impairment of its
capital; and provided further that shares of its own capital stock belonging to
it shall not be voted upon directly or indirectly.

         4. The total  authorized  capital stock of this corporation is One
Thousand (1,000)  Shares of  preferred  stock of the par value of One  Hundred
($100.00) Dollars  per  share   amounting  in  the  aggregate  to  One  Hundred
Thousand ($100,000.00)  Dollars,  and One Hundred  (100) Shares of common  stock
without nominal or par value.

         5. The respective designations,  preferences,  privileges and voting
powers or restrictions or qualifications of each class of stock, are to be as
follows:

         (a) The holders of the preferred stock shall be entitled to cumulative
         dividends thereon at the rate of Five ($5.00) Dollars per share per
         annum and no more, payable out of any and all surplus or net profits of
         the corporation, quarterly, half-yearly or yearly, as and when declared
         by the Board of Directors, before any dividends shall be declared set
         apart for or paid upon the common shares of the corporation. Said
         dividends on the preferred stock shall be cumulative from the date of
         issue so that if the corporation shall fail in any year to pay such
         dividends on all of the issued and outstanding preferred stock, such
         deficiency in the dividends shall be fully paid, but without interest,
         before any dividends shall be paid or set apart on the common stock.
         Subject to the foregoing provisions, said preferred stock shall not be
         entitled to participate in any other or additional surplus or net
         profits of the corporation.

         (b) In the event of the dissolution of liquidation of the corporation,
         or a sale of all its assets, whether voluntary or involuntary, or in
         event of its insolvency or upon any distribution of its capital, there
         shall be paid to the holders of the preferred stock the par value
         thereof, to wit, One Hundred ($100.00) Dollars per share and the amount
         of all unpaid accrued dividends thereon, before any sum shall be paid
         or any assets distributed among the holders of the common shares; and
         after the payment to the holders of the preferred stock of its par
         value and the unpaid accrued dividends thereon, the remaining assets
         and funds of the corporation shall be divided among and paid to the
         holders of all the common stock in proportion to their respective
         holdings of such shares.

         (c) The Board of Directors, in their discretion, may declare and pay
         dividends on the common shares concurrently with dividends on the
         preferred stock, for any dividend period of any fiscal year when such
         dividends are applicable to the common shares; provided, that all
         accumulated dividends on the preferred stock for all previous fiscal
         year and all dividends on the preferred stock for the previous dividend
         periods for the fiscal year shall have been paid in full. The holders
         of the common stock shall be entitled to share in any dividends
         declared upon the common stock of the corporation.

         (d) The common stock shall be the sole voting stock to be issued by the
         corporation, and except as made mandatory by law, the preferred stock


<PAGE>



         shall have no voting rights whatsoever.

         (e) No holder of either the preferred or common stock shall be entitled
         as of right to purchase or subscribe for any part of any unissued stock
         of either class, or any additional preferred or common stock to be
         issued by reason of any increase of the authorized capital stock of the
         corporation of either common or preferred stock, or bonds, certificates
         of indebtedness, debentures or other securities convertible into stock
         of the corporation, but any such unissued stock or such additional
         authorized issue of new stock or of other securities convertible into
         stock may be issued and disposed of pursuant to resolution of the Board
         of Directors to such persons, firms, corporations or associations and
         upon such terms as may be deemed advisable by the Board of Directors in
         the exercise of their discretion.

         (f) Said common stock without nominal or par value may be issued by the
         corporation from time to time for such cash, property, services or
         expenses as may be determined from time to time by the Board of
         Directors thereof.

         6. The names and post office addresses of the subscribers for stock and
the number of shares  subscribed  for by each,  the aggregate of which being the
amount of capital stock with which the corporation will commence  business,  are
as follows:

NAME                    POST OFFICE ADDRESS                 NO. OF SHARES COMMON
----                    -------------------                 --------------------

BERTHA SIMINOW          285 Madison Avenue, N.Y.C.                  One (1)

ELIZABETH PEYSER        285 Madison Avenue, N.Y.C.                  One (1)

J. H. WOODY             Waynesville, N.C.                           One (1)

         7. The period of existence of this corporation is sixty (60) years from
the filing of this certificate in the office of the Secretary of State.

         8. In furtherance, and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized;

         To make, alter, amend and rescind the by-laws of this corporation
without the assent or vote of the stockholders;

         To fix the amount to be reserved as working capital over and above its
capital stock paid in;

         To authorize and cause to be executed mortgages and liens upon the real
and personal property of this corporation;

         If the by-laws so provide, to designate two or more of its number to
constitute an executive committee, which committee shall for the time being, as
provided in said resolution or in the by-laws of this corporation, have and
exercise any and all of the powers of the Board of Directors in the management
of the business and affairs of this corporation, and have power to authorize the
seal of this corporation to be affixed to all papers which may require it.

         To sell, transfer and convey all of the corporate property when
approved by the affirmative vote of the holders of two-thirds of the issued and
outstanding stock entitled to vote at a stockholders' meeting, notice of which
contains notice of the proposed sale.


<PAGE>



         To sell, transfer and convey any part of the corporate, real or
personal property.

         This corporation may in its by-laws confer powers upon its directors in
addition to the foregoing, and in addition to the powers and authorities
expressly conferred upon them by statute.

         9. Directors shall have power, if the by-laws so provide, to hold their
meetings, and to keep the books of the corporation (except the stock and
transfer books), outside of the State of North Carolina at such places as may be
from time to time designated by the Board of Directors.

         10. This corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.

         IN TESTIMONY WHEREOF, we have hereunto set our hands and affixed our
seals, this the 12th day of March, 1941.


                                                     BERTHA SIMINOW   (SEAL)
                                                     --------------

                                                     ELIABETH PEYSER (SEAL)
                                                     ---------------

                                                     J H WOODY         (SEAL)
                                                     ---------





<PAGE>






         AGREEMENT OF MERGER made this 29th day of June, 1946, between WELLCO
SHOE CORPORATION, a corporation organized under the laws of the State of North
Carolina (the constituent corporation which will survive), and WELLCO SALES
COMPANY, INC., a corporation organized under the laws of the State of New York
(the other constituent corporation).

                               W I T N E S S T H:

         WHEREAS, Wellco Shoe Corporation (hereinafter called "Wellco Shoe",
"the corporation", or "the surviving corporation"), is a corporation duly
organized and existing under the laws of the State of North Carolina, having
been incorporated under the laws of the State of North Carolina as contained in
Chapter 22 of the Consolidated Statutes entitled "Corporations", and the several
amendments thereto, on the 19th day of March, 1941, and

         WHEREAS, Wellco Sales Company, Inc. (hereinafter called "Wellco
Sales"), is a corporation duly organized and existing under the laws of the
state of New York, having been incorporated pursuant to Article Two of the Stock
Corporation Law of the State of New York, on the 2nd day of March, 1944, and

         WHEREAS, Wellco Shoe has an authorized capital stock of one thousand
(1,000) shares of Preferred Stock of the par value of One Hundred ($100.00)
Dollars per share, and one hundred (100) shares of Common Stock, without nominal
or par value, all of which are presently outstanding, and

         WHEREAS, Wellco Sales has an authorized capital stock of six hundred
(600) shares, of which one hundred (100) shares having a par value of One
Hundred ($100.00) Dollars each are Preferred Stock, and five hundred (500)
shares are Common Stock without par value, of which three hundred (300) shares
of Common Stock without par value are presently outstanding (fifty (50) shares
of Preferred Stock previously outstanding having been redeemed by said Wellco
Sales), and

         WHEREAS, Wellco Shoe and Wellco Sales desire to merge under and
pursuant to the provisions of Chapter 55 of the General Statutes of North
Carolina of 1943 entitled "Corporations" and other related provisions of the
laws of the State of North Carolina, and Section 91 of the Stock Corporation Law
of the State of New York;

         NOW, THEREFORE, in consideration of the premises and the mutual
agreement, covenants and provisions herein contained, it is hereby agreed by and
between said parties hereto, and in accordance with Chapter 55 of the General
Statutes of North Carolina of 1943 entitled "Corporations" and other related
provisions of the laws of North Carolina, and Section 91 of the Stock
Corporation Law of the State of New York, that Wellco Sales shall be and it
hereby is merged into the constituent corporation, Wellco Shoe, and Wellco Shoe,
as the surviving corporation, shall continue to exist under and by virtue of the
laws of the State of North Carolina. Wellco Sales shall, pursuant to this
agreement, and a resolution of its stockholders, be completely liquidated, and
all of its properties and assets shall be transferred and distributed to Wellco
Shoe in complete cancellation of all of the stock of Wellco Sales; and the
stockholders of Wellco Sales shall, in exchange for their stock of Wellco Sales,
receive shares of stock of Wellco Shoe as hereinafter provided.

         The terms and conditions of said merger and the mode of carrying it
into effect, shall be as set forth in the following Articles "First" to
"Thirteenth", inclusive.

         Article First: The name of the corporation shall continue to be WELLCO
SHOE CORPORATION.

         Article Second: The location of the principal office of the corporation
in the State of North Carolina is in the city of


<PAGE>



Waynesville,  County of Haywood;  but it may have one or more branch offices and
places of business out of the State of North Carolina, as well as in said State.

         Article Third: The objects for which the surviving corporation is
formed are as follows:

         To manufacture, buy, sell, import, export and otherwise deal in shoes,
slippers, rubbers and boots for men, women and children, hats, gloves, mittens,
raincoats, and other goods made of rubber or leather for hand or footwear,
including any and all accessories in connection therewith; to acquire, maintain
and operate tanneries, textile plants, and otherwise manufacture and deal in all
types of textiles; to acquire, maintain and operate plants for the manufacture
of raw rubber into rubber goods of every kind and description; to acquire and
hold such store or stores as may be necessary to the proper conduct of the
business and to do and perform every other act that may be legally performed by
a corporation engaged in such business.

         And in order properly to prosecute the objects and purposes above set
forth the corporation shall have full power and authority to purchase, lease and
otherwise acquire, hold, mortgage, convey and otherwise dispose of all kinds of
property, both real and personal, both within North Carolina and in all other
states, territories and dependencies of the United States; to purchase the
business, good will and all other property of any individual, firm or
corporation as a going concern and to assume all its debts, contracts and
obligations, provided said business is authorized by the powers contained
herein; to construct, equip and maintain buildings, works, factories and plants;
to install, maintain and operate all kinds of machinery and appliances; to
operate same by steam, water, electricity or other motive power, and generally
to perform all acts which may be deemed necessary or expedient for the proper
and successful prosecution of the objects and purposes for which the corporation
is created.

         To acquire, hold, use, sell, assign, lease, grant licenses in respect
of, mortgage or otherwise dispose of letters patent of the United States or any
foreign country, patent rights, licenses and privileges, inventions,
improvements and processes, copyrights, trade marks and trade names, relating to
or useful in connection with any business of the corporation.

         To purchase, hold, sell, assign, transfer, mortgage, pledge or
otherwise dispose of shares of the capital stock of, or any bonds, securities or
evidences of indebtedness created by any other corporation or corporations
organized under the laws of this state or any other state, country, nation or
government, and while the owner thereof to exercise all the rights, powers and
privileges of ownership, including the right to vote thereon.

         To borrow or raise moneys for any of the purposes of the corporation
and from time to time without limit as to amount, to draw, make, accept,
endorse, execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures and other negotiable or non-negotiable instruments
and evidences of indebtedness and to secure the payment of any thereof and of
the interest thereon by mortgage upon or pledge, conveyance or assignment in
trust of the whole or any part of the property of the corporation, whether at
the time owned or thereafter acquired and to sell, pledge or otherwise dispose
of such bonds or other obligations of the corporation for its corporate
purposes.

         To purchase, hold, sell and transfer the shares of its own capital
stock, provided it shall not use its funds or property for the purchase of its
own shares of capital stock when such use would cause any impairment of its
capital; and provided further that shares of its own capital stock belonging to
it shall not be voted upon directly or indirectly.

         Article Fourth: The total authorized capital stock of the corporation
shall be one thousand (1,000) shares of Preferred Stock of the par value of One
Hundred ($100.00) Dollars per share, amounting in the aggregate to One Hundred
Thousand ($100,000.00) Dollars, and two hundred (200) shares of Class A


<PAGE>



Common Stock without nominal or par value, and three hundred (300) shares of
Class B Common Stock without nominal or par value.

         Article Fifth: The respective designations, preferences, privileges and
voting powers or restrictions or qualifications of each class of stock, are to
be as follows:

         (a) The holders of the Preferred Stock shall be entitled to cumulative
         dividends thereon at the rate of Five ($5.00) Dollars per share per
         annum and no more, payable out of any and all surplus or net profits of
         the corporation, quarterly, half-yearly, or yearly, as and when
         declared by the Board of Directors, before any dividends shall be
         declared set apart for or paid upon the Common Shares of the
         corporation. Said dividends on the Preferred Stock shall be cumulative
         from the date of issue so that if the corporation shall fail in any
         year to pay such dividends on all of the issued and outstanding
         Preferred Stock, such deficiency in the dividends shall be fully paid,
         but without interest, before any dividends shall be paid or set apart
         on the common stock. Subject to the foregoing provisions, said
         Preferred Stock shall not be entitled to participate in any other or
         additional surplus or net profits of the corporation.

         (b) In the event of the dissolution or liquidation of the corporation,
         or a sale of all its assets, whether voluntary or involuntary, or in
         event of its insolvency or upon any distribution of its capital, there
         shall be paid to the holders of the Preferred Stock the par value
         thereof, to wit, One Hundred ($100.00) Dollars per share and the amount
         of all unpaid accrued dividends thereon, before any sum shall be paid
         or any assets distributed among the holders of the Common shares; and
         after the payment to the holders of the Preferred Stock of its par
         value and the unpaid accrued dividends thereon, the remaining assets
         and funds of the corporation shall be divided among and paid to the
         holders of all the Common shares in proportion to their respective
         holdings of such shares, irrespective of the class to which such shares
         belong.

         (c) The Board of Directors, in their discretion, may declare and pay
         dividends on the Common shares concurrently with dividends on the
         Preferred Stock, for any dividend period of any fiscal year when such
         dividends are applicable to the Common shares; provided, that all
         accumulated dividends on the Preferred Stock for all previous fiscal
         years and all dividends on the Preferred Stock for the previous
         dividend periods for the fiscal year shall have been paid in full. The
         holders of the Common Stock shall be entitled to share in any dividends
         declared upon the Common Stock of the corporation.

         (d) The Class A Common Stock shall be the sole voting stock to be
         issued by the corporation, and except as made mandatory by law, the
         Preferred Stock and the Class B Common Stock shall have no voting
         rights whatsoever.

         (e) No holder of either the Preferred or Common stock shall be entitled
         as of right to purchase or subscribe for any part of any unissued stock
         of either class, or any additional Preferred or Common Stock to be
         issued by reason of any increase of the authorized capital stock of the
         corporation of either Common or Preferred Stock, or bonds, certificates
         of indebtedness, debentures or other securities convertible into stock
         of the corporation, but any such unissued stock or such additional
         authorized issue of new stock or of other securities convertible into
         stock may be issued and disposed of pursuant to resolution of the Board
         of Directors to such persons, firms, corporations or associations and
         upon such terms as may be deemed advisable by the Board of Directors in
         the exercise of their discretion.

         (f) Said Common Stock without nominal or par value may be issued by the
         corporation from time to time for such cash, property, services or


<PAGE>



         expenses as may be determined from time to time by the Board of
         Directors hereof.

         (g) Except with respect to the voting rights as hereinbefore provided
         in subdivision "(d)" hereof, there shall be no distinction between the
         Class A and Class B Common Stock of the corporation, and the rights of
         the respective holders of said classes of stock shall at all times be
         the same.

         Article Sixth: The period of existence of this corporation is sixty
(60) years from the filing of this certificate in the office of the Secretary of
State.

         Article Seventh: In furtherance, and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized:

         To make, alter, amend and rescind the by-laws of this corporation
without the assent or vote of the stockholders;

         To fix the amount to be reserved as working capital over and above its
capital stock paid in;

         To authorize and cause to be executed mortgages and liens upon the real
and personal property of this corporation;

         If the by-laws so provide, to designate two or more of its number to
constitute an executive committee, which committee shall for the time being, as
provided in said resolution or in the by-laws of this corporation, have and
exercise any and all of the powers of the Board of Directors in the management
of the business and affairs of this corporation, and have power to authorize the
seal of this corporation to be affixed to all papers which may require it.

         To sell, transfer and convey all of the corporate property when
approved by the affirmative vote of the holders of two-thirds of the issued and
outstanding stock entitled to vote at a stockholder meeting, notice of which
contains notice of the proposed sale.

         To sell, transfer and convey any part of the corporate, real or
personal property.

         This corporation may in its by-laws confer powers upon its directors in
addition to the foregoing, and in addition to the powers and authorities
expressly conferred upon them by statute.

         Article Eighth: Directors shall have power, if the by-laws so provide,
to hold their meetings, and to keep the books of this corporation (except the
stock and transfer books), outside of the State of North Carolina at such places
as may be from time to time designated by the Board of Directors.

         Article Ninth: The initial Board of Directors of the corporation who
shall hold their offices until their successors be chosen, according to the
by-laws of the corporation, shall consist of five members who shall be the
following persons, whose places of residence are set opposite their respective
names:

           LEO WEILL                          - Waynesville, N. C.
           OTTO FEISTMANN                     - Jackson Bldg., Asheville, N. C.
           HEINZ ROLLMAN                      - Waynesville, N. C.
           J. H. WOODY                        - Waynesville, N. C.
           GEORGE M. JAFFIN                   - 285 Madison Ave., New York City

         Article Tenth: This corporation reserves the right to amend, alter,
change or repeal any provision contained in this agreement of merger, in the


<PAGE>



manner now or hereafter  prescribed by statute,  and all rights  conferred  upon
stockholders herein are granted subject to this reservation.

         Article Eleventh: The manner of converting shares of the constituent
corporations into shares of the surviving corporation, shall be as follows:

         (a) Each of the outstanding shares of the Preferred Stock of Wellco
Shoe shall continue to remain outstanding shares of Preferred Stock without
change.

         (b) Each of the outstanding shares of the Common Stock of Wellco Shoe
held by any person, shall forthwith upon the filing and recording of this
agreement as required by law, be converted into two (2) shares of the Class A
Common Stock of the surviving corporation, and each holder of a certificate or
certificates of such Common Stock of Wellco Shoe, upon surrender of his
certificate or certificates therefor to the surviving corporation for
cancellation, shall be entitled to receive certificates for the number of shares
of Class A Common Stock of the surviving corporation to which he may be
entitled.

         (c) Each of the outstanding shares of the Common Stock of Wellco Sales
held by any person shall, forthwith upon the filing and recording of this
agreement as required by law, be converted into one (1) share of the Class B
Common Stock of the surviving corporation, and each holder of a certificate or
certificates of such Common Stock of Wellco Sales, upon surrender of his
certificate or certificates therefor to the surviving corporation for
cancellation, shall be entitled to receive certificates for the number of shares
of Class B Common Stock of the surviving corporation to which he may be
entitled.

         (d) The fifty (50) shares of Preferred Stock of Wellco Sales heretofore
redeemed by Wellco Sales, shall be canceled and no new stock shall be issued by
the surviving corporation therefor.

         (e) Until surrender for new stock certificates of the surviving
corporation in accordance with the provisions of this Article Eleventh, the
outstanding certificates of stock of Wellco Shoe and Wellco Sales to be
converted into such stock of the surviving corporation as provided in this
agreement of merger, may be treated by the surviving corporation for all
corporate purposes as evidencing respectively the ownership of the number of
shares of stock of the surviving corporation to which the respective holders
thereof shall be entitled upon surrender thereof in exchange for stock of the
surviving corporation.

         Article Twelfth: It shall be a condition precedent to the effectuation
of the merger provided for herein that the holders of all of the outstanding
Common Stock of Wellco Sales and all of the Preferred Stock and Common Stock of
Wellco Shoe, shall either vote in favor of or otherwise irrevocably assent to
this agreement of merger. Upon the failure of the foregoing conditions, this
agreement of merger shall be deemed to be terminated.

         Article Thirteenth: When this agreement shall have been signed,
acknowledged, filed and recorded as required by Chapter 55 of the General
Statutes of North Carolina of 1943 "Corporations" and other related provisions
of the laws of the State of North Carolina, and Section 91 of the Stock
Corporation Law of the State of New York, Wellco Sales shall be merged into
Wellco Shoe and it thereupon shall be liquidated and cease to exist, and Wellco
Shoe, as the surviving corporation, shall continue in existence and shall
possess all the rights, privileges, powers and franchises and all and singular
the rights, privileges, powers and franchises of each of the constituent
corporations, and all property, real, personal and mixed, and all debts due to
each of them on whatever account, as well for stock subscriptions as of other
things in action or belonging in each of them, shall be vested in Wellco Shoe as
the surviving corporation, and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as effectually
the property of the surviving corporation as they were of the constituent
corporations, and title to any real estate, whether by deed or otherwise, under
the laws of the States of North Carolina and New York vested in Wellco Shoe or
Wellco Sales, shall not revert or be in any way impaired by reason of this


<PAGE>



merger; provided that all rights of creditors and all liens upon the property of
either of the constituent corporations shall be preserved unimpaired, and all
debts, liabilities and duties of the constituent corporations shall thenceforth
attach to the surviving corporation and may be enforced against it to the same
extent as if such debts, liabilities and duties had been incurred or contracted
by it.

         IN WITNESS WHEREOF, this agreement of merger has been executed by each
of the constituent corporations, and the corporate seal of each of the
constituent corporations has hereunto been affixed and attested as of the day
and year first above written.


                                                        WELLCO SHOE CORPORATION
ATTEST:


                                                        BY: LEO WEILL
                                                        -------------
RUDOLF HOLLAUS                                              President
--------------
Secretary

                                                       (Corporate seal)



                                                      WELLCO SALES COMPANY, INC.
ATTEST:


                                                      BY: OTTO FEISTMANN
                                                      ------------------
HARRY SCHNEIDER                                           President
---------------
Secretary


                                                       (Corporate seal)






















<PAGE>






                      ARTICLES OF AMENDMENT TO THE CHARTER
                                       OF
                             WELLCO SHOE CORPORATION


         The undersigned corporation, for the purpose of amending its Articles
of Incorporation and pursuant to the provisions of Chapter 55 of the General
Statutes of North Carolina, known as the Business Corporation Act, and
particularly pursuant to Section 55-103 thereof, hereby executes the following
Articles of Amendment.

         1. The name of the corporation at the date of execution of these
Articles of Amendment is Wellco Shoe Corporation, but one of the changes
effected by these Articles of Amendment is to change the name of the corporation
to Wellco Ro-Search Industries, Inc.

         2. The amendment adopted by action of the Board of Directors and the
Shareholders is that the Charter of Wellco Shoe Corporation be amended by
striking out all of the Articles thereof numbered First, Second, Fourth and
Fifth, as set forth in the Charter of Wellco Shoe Corporation as the same has
been heretofore amended and filed in the Office of the Secretary of State of the
State of North Carolina, and be inserting in lieu thereof the Articles numbered
First, Second, Fourth and Fifth set forth in Exhibit "A" attached hereto.

         3. The date of the adoption of this amendment by the Shareholders was
October 31, 1961.

         4. The number of shares of the corporation outstanding at the time of
the adoption of said amendment was 1,544 shares of 5% Cumulative Preferred
Stock, 12,507 shares of Class A Common Stock, and 23,277 shares of Class B
Common Stock, all of which shares were entitled to vote thereon. The 1,544
shares of 5% Cumulative Preferred Stock were entitled to vote thereon as a
class. The 35,734 shares of Common Stock, consisting of 12,507 shares of Class A
Common Stock and 23,277 shares of Class B Common Stock, were entitled to vote
thereon as a class.

         5. The number of shares voted for such amendment was 1,412 shares of 5%
Cumulative Preferred Stock and 35,669 shares of Common Stock (both Class A and
Class B Common Stock voting together as a class and being in this paragraph
referred to as "Common Stock"), and the number of shares voted against such
amendment was 8 shares of 5% Cumulative Preferred Stock. Voting within each
class entitled to vote as a class was as follows:

         Class                                          Number of Shares Voted
         -----                                          ----------------------
                                                        For              Against
                                                        ---              -------

5% Cumulative Preferred Stock                           1,412             8
Common Stock                                           35,669            None

         6. Any exchange, reclassification or cancellation of issued shares will
be effected in the following manner: Each share of 5% Cumulative Preferred Stock
heretofore issued and presently outstanding shall be reclassified and exchanged
on a share-for-share basis into one share of 5% Cumulative Convertible Preferred
Stock authorized by the amendment effected hereby, and the Class B Common Stock
shall be exchanged and reclassified and the Class A Common Stock shall be
convertible in the manner set forth in the amendment.



<PAGE>



         7. Such amendment does not effect a change in the amount of stated
capital of the corporation.

         8. The amendment hereby effected does not give rise to dissenter's
rights under G. S. 55-101(b) for the reason that the amendment does not change
the corporation into a non-profit corporation or cooperative organization, nor
does the amendment effect any changes as described in paragraphs (1), (2), (3),
(4) and (5) of Subsection (a) of G. S. 55-101 in the 5% Cumulative Preferred
Stock heretofore authorized, issued and outstanding, nor would the amendment to
the prejudice of any holder of such shares create or increase any priority,
dividend preference, cumulative dividend right, redemption price or liquidation
preference of any other then issued shares; nor would the amendment authorize
the corporation to issue shares of any new class having preferences as to
dividends or liquidation prior to such shares.

         IN WITNESS WHEREOF, said corporation has caused these Articles of
Amendment to be executed in its corporate name by its President and Secretary
and its corporate seal to be hereunto affixed, this the 12th day of December,
1961.

                                             WELLCO SHOE CORPORATION
                                             (Name Changed Hereby To
                                             WELLCO RO-SEARCH INDUSTRIES, INC.)

                                             BY: HEINZ ROLLMAN
                                                 -------------
                                                 President
ATTEST:

ERNEST ROLLMAN
--------------
Secretary

STATE OF NORTH CAROLINA

COUNTY OF HAYWOOD

         HEINZ W. ROLLMAN, being the President, and ERNEST E. ROLLMAN, being the
Secretary of the above named corporation, each being duly sworn, deposes and
says that the facts stated in the foregoing "Articles of Amendment" are true and
correct.

                                                 HEINZ ROLLMAN
                                                 -------------

                                                 ERNEST ROLLMAN
                                                 --------------

         Sworn to and subscribed before me this 12th day of December, 1961.

                                                 MARGUERITE W. SHOOK
                                                 -------------------
                                                 Notary Public

My commission expires:

October 5, 1962
---------------








<PAGE>




              AMENDMENTS TO THE CHARTER OF WELLCO SHOE CORPORATION

                       AS ADOPTED BY VOTE OF STOCKHOLDERS

                AT SPECIAL STOCKHOLDERS' MEETING OCTOBER 31, 1961
                -------------------------------------------------


         ARTICLE FIRST: The name of the corporation shall be Wellco Ro-Search
Industries, Inc.

         ARTICLE SECOND: The location of the principal office of the corporation
in the State of North Carolina is at Georgia and Pine Streets in the Town of
Hazelwood, County of Haywood, North Carolina; but it may have one or more branch
offices and places of business out of the State of North Carolina, as well as in
said State.

         ARTICLE FOURTH: The total authorized capital stock of the corporation
shall be three thousand (3,000) shares of five per cent. (5%) Cumulative
Convertible Preferred Stock, of the par value of ONE HUNDRED AND NO/100 DOLLARS
($100.00) per share, amounting in the aggregate to THREE HUNDRED THOUSAND AND
NO/100 DOLLARS ($300,000.00), and fifteen thousand (15,000) shares of Class A
Common Stock without nominal or par value, and five hundred thousand (500,000)
shares of Class B Common Stock of the par value of ONE AND NO/100 DOLLARS
($1.00) per share. Each share of the heretofore authorized and presently issued
and outstanding shares of Class B Common Stock without nominal or par value is
hereby changed and converted into ten (10) shares of the hereby authorized Class
B Common Stock of the par value of ONE AND NO/100 DOLLARS ($1.00) per share.
Each share of Class A Common Stock shall be convertible at the option of the
respective holders thereof into ten (10) shares of Class B Common Stock, and
after the conversion of all of the outstanding shares of Class A Common Stock
into Class B Common Stock, the authorized Class A Common Stock shall thereby be
eliminated, and all authorized Class B Common Stock of the par value of ONE AND
NO/100 DOLLARS ($1.00) per share (including all amounts thereof then
outstanding) shall thereafter be designated as the Common Stock of the
Corporation.

         ARTICLE FIFTH: The designations, preferences, privileges, limitations,
voting powers and relative rights of the shares of each class of stock and the
restrictions or limitations thereof shall be as follows:

         (a) The 5% Cumulative Convertible Preferred Stock shall be entitled, in
preference to the Common Stock, when and as declared by the Board of Directors
from funds legally available therefor, to dividends at the rate of five per cent
(5%) of the par value thereof per annum, payable quarterly on January 1, April
1, July 1, and October 1, of each year, or otherwise as the Board of Directors
may determine (the periods between such dates, commencing on such dates, being
herein referred to as "dividend periods"). Such dividends of the 5% Cumulative
Convertible Preferred Stock shall be cumulative from the date of issuance
thereof. If, at the time of the issuance of any shares of 5% Cumulative
Convertible Preferred Stock, dividends upon the shares of 5% Cumulative
Convertible Preferred Stock at the time outstanding shall not then have been
paid or declared and set apart for payment, at the full rate to which said
shares are entitled, to the beginning of the then current dividend period, no
dividends shall be declared or paid on the shares of the 5% Cumulative
Convertible Preferred Stock issued at such time until all such dividends in
arrears shall have been paid or declared and set apart for payment as aforesaid,
and none of the provisions hereof shall be deemed to prevent the declaration and
payment of such dividends in arrears without a declaration or payment of
dividends on additional shares so issued. No dividends shall be paid or set
apart for payment on the Common Stock at any time unless the total amount of
dividends theretofore paid or declared and set apart for payment on then
outstanding 5% Cumulative Convertible Preferred Stock shall be equal to Five
Dollars ($5.00) per annum for each share of such 5% Cumulative Convertible
Preferred Stock from the date when it became cumulative to the end of the
current dividend period.


<PAGE>



         Whenever full cumulative dividends, as aforesaid, on all shares of 5%
Cumulative Convertible Preferred Stock then outstanding for all past dividend
periods and for the current dividend period shall have been paid or declared and
set apart for payment, dividends may be declared and paid or set apart for
payment on the Common Stock, when and to the extent that the Board of Directors
shall determine, and no holder of any shares of 5% Cumulative Convertible
Preferred Stock as such shall be entitled to share therein.

         (b) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, or any proceedings
resulting in any distribution of all its assets to its stockholders, before any
distribution shall be made to the holders of the Common Stock, each holder of
shares of 5% Cumulative Convertible Preferred Stock shall be entitled to be paid
on each share of such stock held by him the sum of One Hundred Dollars
($100.00), plus an amount equal to accrued dividends. After such payment to the
holders of the 5% Cumulative Convertible Preferred Stock of the full
preferential amounts hereinbefore provided for, the holders of the 5% Cumulative
Convertible Preferred Stock as such shall have no right or claim to the
remaining assets and funds shall (subject to the rights, if any, of others
therein) be divided and distributed among the holders of the Common Stock of the
Corporation according to their respective interests. The Board of Directors, by
vote of a majority of the members thereof, may distribute in kind to the holders
of the Common Stock such remaining assets of the Corporation to which such
holders may be entitled at such valuations as it in its sole discretion shall
determine. The sale of all the property of the Corporation to, or the merger or
consolidation of the Corporation into or with any other corporation shall not be
deemed to be a distribution of assets or a dissolution, liquidation or winding
up or proceeding resulting in a distribution of all its assets to its
stockholders for the purpose of this subdivision.

         (c) At the option of the Board of Directors of the Corporation, the 5%
Cumulative Convertible Preferred Stock may be redeemed in whole or in part, at
any time and from time to time after the issuance thereof, at One Hundred
Dollars ($100.00) per share and accrued dividends to the date of redemption. If
less than all the shares of the 5% Cumulative Convertible Preferred Stock are to
be redeemed, the shares to be redeemed shall be selected by lot or in such other
equitable manner as the Board of Directors shall determine.

         Notice of the intention of the Corporation to redeem shares of the 5%
Cumulative Convertible Preferred Stock or any part thereof, and of the date and
place of redemption, shall be mailed not less than thirty nor more than sixty
days previous to the date of redemption to each holder of record of the shares
to be redeemed at his last known post office address as shown by the records of
the Corporation. Such notice shall also contain notification of the right of
each holder of record of the shares to be redeemed to convert any or all of such
shares into shares of Common Stock as hereinafter set forth, provided such
conversion right is exercised on or before, but not after, the close of business
on the seventh calendar day preceding the redemption date specified in such
notice. The holders of any shares of 5% Cumulative Convertible Preferred Stock
so called for redemption shall, as to any of such shares as to which they shall
not have theretofore exercised the right of conversion into shares of Common
Stock as hereinafter provided, on the redemption date specified in such notice,
provided the redemption price is then made available to them, cease to be
stockholders of the Corporation with respect to such shares, and all rights with
respect to said shares so called for redemption shall, on such redemption date,
cease and terminate, except only the rights of the holders thereof to receive
the redemption price therefor without interest.

         At any time after the close of business on the seventh calendar day
preceding the redemption date specified in such notice, the Corporation may
deposit the aggregate redemption price (or the portion thereof not already paid
in the redemption of shares so to be redeemed) with any bank or trust company in
the City of New York, State of New York, or in the City of Asheville, State of
North Carolina, having a capital and surplus of not less than One Million
Dollars ($1,000,000.00), named in a notice mailed to the holders of the shares
called for redemption and represented by certificates not theretofore
surrendered, payable in the amounts aforesaid to the respective orders of the
record holders of such shares to be redeemed, on endorsement, if required, and


<PAGE>



surrender of their  certificates for said shares,  and from and after the making
of any such deposit, said holders shall have not interest in or claim against or
rights as a stockholder of the Corporation with respect to said shares but shall
be entitled only to receive said moneys from said bank or trust company  without
interest,  on endorsement,  if required,  and surrender of their certificates as
aforesaid.  The  Corporation  shall be entitled to receive from any such bank or
trust company on any moneys deposited as in this subdivision  provided,  and the
holders of any shares so redeemed shall have no claim to any such interest.  Any
moneys so  deposited  and  remaining  unclaimed at the end of six years from the
date fixed for redemption  shall,  if thereafter  requested by resolution of the
Board of  Directors,  be  repaid  to the  Corporation,  and in the event of such
repayment to the  Corporation  such holders of record of the shares so redeemed,
as shall not have made claim against such moneys prior to such  repayment to the
Corporation,  shall be deemed to be unsecured creditors of the Corporation,  but
only for a period of two years from the date of such repayment  (after which all
rights of the holders of said shares, as unsecured creditors or otherwise, shall
cease) for an amount  equivalent to the amount deposited as above states for the
redemption of such shares and so repaid to the Corporation but shall in no event
be entitled to any interest.

         (d) Subject to and upon compliance with the provisions of this
paragraph (d), each share of 5% Cumulative Convertible Preferred Stock may, at
the option of the holder thereof and at any time so long as the conversion right
shall continue in effect as herein provided, be converted into as many fully
paid and non-assessable whole shares of Common Stock of the Corporation as
result from dividing the par value of the 5% Cumulative Convertible Preferred
Stock so being converted by the conversion price, which shall be Eight Dollars
($8.00) per share unless such price has been adjusted as provided in
subdivisions A or B of this paragraph (d), in which case such adjusted price
shall be the conversion price. The conversion right herein provided shall, as to
any share of 5% Cumulative Convertible Preferred Stock, continue in effect
unless (and until such share shall be called for redemption, and in such case,
shall continue in effect until) and including, but not after, the close of
business on the seventh calendar day preceding the redemption date which may be
specified in the notice of redemption issued with respect to such share.

         In order to exercise the conversion privilege, any holder of a share or
shares shall continue in effect as hereinabove provided, surrender the
certificate for such share or shares of the 5% Cumulative Convertible Preferred
Stock so to be converted, duly endorsed for transfer, to the Corporation at its
home office or any place or places where the Corporation shall maintain a
transfer agency, together with written notice that the holder elects to convert
the shares represented by such certificate. As promptly as practicable
thereafter, the Corporation shall issue and deliver to such holder a certificate
or certificates for the number of whole shares of Common Stock issuable upon
such conversion, together with payment of accrued dividends to the date of
conversion. The Corporation shall not be required to issue fractions of shares
of Common Stock upon conversion of the 5% Cumulative Convertible Preferred
Stock, but if any fractional interest in a share of Common Stock shall be
deliverable upon such conversion, the Corporation shall purchase such fractional
interest for an amount in cash equal to the product obtained by multiplying the
conversion price by such fraction. The conversion shall be deemed to have been
effected on the date on which the certificate for 5% Cumulative Convertible
Preferred Stock shall have been surrendered and written notice of the election
to convert shall have been received by the Corporation as aforesaid and the
person or persons in whose name or names any certificate or certificates shall
be deemed to have become, at such time, a holder or holders of record of the
shares represented thereby.

         A. In case the Corporation shall at any time or from time to time
hereafter issue or sell any shares of its Common Stock (except as provided in
clause (6) of this subdivision A) for a consideration per share less than any
conversion price in effect immediately prior to the time of such issue or sale,
then forthwith upon such issue or sale, said conversion price shall (until
another such issue or sale) be reduced to a price determined by dividing:

         (i) an amount equal to the sum of (a) the number of shares of Common
Stock outstanding immediately prior to such issue or sale, multiplied by the


<PAGE>



         then existing conversion price, and (b) the consideration, if any,
received by the Corporation upon such issue or sale, by

         (ii) the total number of shares of Common Stock outstanding immediately
         after such issue or sale;

provided, however, that no adjustment shall be made if the amount of such
adjustment shall be less than 10 cents per share.

         For the purposes of any computation to be made in accordance with the
provisions of this subdivision A, the following provisions shall be applicable:

         (1) In case of the issuance of additional shares of Common Stock for
cash, the consideration received by the Corporation therefor shall be deemed to
be the amount of cash received by the Corporation for such shares, after
deducting any all commissions and other expenses paid or incurred by the
Corporation for any underwriting of, or otherwise in connection with, the
issuance of such shares.

         (2) In case of the issuance (otherwise than upon conversion or exchange
of obligations or shares of stock of the Corporation) of additional shares of
Common Stock for a consideration other than cash or a consideration a part of
which shall be other than cash, the amount of the consideration other than cash
received by the Corporation for such shares shall be deemed to be the value of
such consideration as determined in good faith by the Board of Directors of the
Corporation.

         (3) In the case of the issuance of any rights to subscribe for or to
purchase, or of any options for the purchase of, additional shares of Common
Stock at a price per share for the additional shares of Common Stock issuable
upon the exercise of such rights or options less than the current conversion
price in effect immediately prior to the issuance of such rights or options,
then the issuance of such rights or options shall be deemed to be an issuance
(as of the date of issuance of such rights or options) of the total maximum
number of shares of Common Stock issuable upon the exercise of all such rights
or options. In such case, any amount received or receivable by the Corporation
in consideration of the issuance of such rights or options (plus the minimum
aggregate amount of premium or additional consideration payable to the
Corporation upon the exercise of such rights or options) after deducting
therefrom any commissions or other expenses paid or incurred by the Corporation
for any underwriting of, or otherwise in connection with, the issuance of such
rights or options, shall be deemed to be the consideration actually received (as
of the date of issuance of such rights or options) for the issuance of such
additional shares of Common Stock.

         (4) In case of the issuance of any obligations or of any shares of
stock of the Corporation that shall be convertible into or exchangeable for
shares of Common Stock, then the issuance of such obligations or shares shall be
deemed to be an issuance (as of the date of issuance of such obligations or
shares) of the total maximum number of additional shares of Common Stock
issuable upon the conversion or exchange of all such obligations or shares. In
such case, any amount received or receivable by the Corporation in consideration
of the issuance of such obligations or shares convertible into or exchangeable
for shares of Common Stock (plus the minimum aggregate amount of premium or
additional consideration payable to the Corporation upon the conversion or
exchange of such obligations or shares) after deducting therefrom any
commissions or other expenses paid or incurred by the Corporation for any
underwriting of, or otherwise in connection with, the issuance of such
obligations or shares, shall be deemed to be the consideration actually received
(as of the date of issuance of such additional shares of Common Stock.

         (5) In case of the issuance of additional shares of Common Stock as a
dividend, the aggregate number of shares of Common Stock issued in payment of
such dividend shall be deemed to have been issued and to be outstanding on the
day next succeeding the record date for the determination of stockholders
entitled to such dividend and shall be deemed to have been issued without
consideration.


<PAGE>



         (6) The number of shares of Common Stock at any time outstanding shall
include any shares of Common Stock then owned or held by or for the account of
the Company.

         (7) No adjustment of the conversion price shall be made in connection
with the issuance of shares of 5% Cumulative Convertible Preferred Stock or in
connection with the issuance of shares of Common Stock upon conversion of any
shares of 5% Cumulative Convertible Preferred Stock.

         B. In case the Corporation shall at any time subdivide or combine the
outstanding shares of Common Stock, each conversion price shall be
proportionately decreased in the case of subdivision or increased in the case of
combination, effective at the close of business on the date of such subdivision
or combination.

         In case of any reclassification or change of outstanding shares of
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination), or in case of any consolidation of the Corporation with, or merger
of the Corporation into, another corporation (other than a consolidation with a
subsidiary in which consolidation the Corporation is the continuing corporation
and which does not result in any reclassification or change of outstanding
shares of the Common Stock), or in case of any sale or conveyance to another
corporation of the property of the Corporation as an entirety or substantially
as an entirety, the holders of the 5% Cumulative Convertible Preferred Stock
shall have the right to convert the 5% Cumulative Convertible Preferred Stock
into the kind and amount of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock into which the 5%
Cumulative Convertible Preferred Stock might have been converted immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance.

         If, in any case, the terms and conditions set forth in subparagraphs A
or B of this paragraph (d) of ARTICLE FIFTH are for any reason not specifically
applicable to any state of facts which shall in fact arise, the conversion price
shall be adjusted by the Board of Directors in its discretion so as to carry out
as nearly as practicable the purposes and objectives of the provisions as herein
set forth and any such determination by the Board of Directors shall be binding
for the purposes hereof on all persons claiming rights as holders of shares of
Preferred Stock.

         Whenever a conversion price is adjusted as herein provided, the
Corporation shall mail to the holders of the 5% Cumulative Convertible Preferred
Stock a certificate signed by or bearing the facsimile signature of an officer
of the Corporation showing the new conversion price and the computation thereof.

         (e) The Corporation may purchase to the extent permitted by law, in the
open market, or otherwise, for such consideration as its Board of Directors may
deem adequate, any shares of its 5% Cumulative Convertible Preferred Stock or
any shares of its Common Stock.

         (f) Each holder of record of Common Stock shall be entitled to one vote
for each share of stock standing in his name on the books of the Corporation.
Except as hereinafter stated, or as may be otherwise provided by law, the
holders of the 5% Cumulative Convertible Preferred Stock shall not be entitled
to vote at any meeting of stockholders or election of the Corporation or
otherwise to participate in any action taken by the Corporation or the
stockholders thereof. In any instance where the holders of 5% Cumulative
Convertible Preferred Stock shall be entitled to vote as hereinafter stated,
each holder of record of 5% Cumulative Convertible Preferred Stock shall be
entitled to one vote for each share of stock standing in his name on the books
of the Corporation.

         (g) Upon the vote of a majority of all the Directors of the Corporation
and of the holders of a majority of the total number of shares then issued and
outstanding and entitled to vote, the Corporation may from time to time increase
or decrease the amount of the authorized 5% Cumulative Convertible Preferred
Stock or Common Stock or both; provided, however, that the authorized number of


<PAGE>



shares of 5%  Cumulative  Convertible  Preferred  Stock shall not be  increased,
unless the  stockholders  voting  therefor shall include the holders of not less
than  two-thirds  of the total  number of  shares of 5%  Cumulative  Convertible
Preferred Stock then issued and outstanding.

         Upon the vote of a majority of all the Directors of the Corporation and
of the holders of a majority of the total number of shares then issued and
outstanding and entitled to vote, the Corporation may from time to time create
or authorize one or more other classes of stock, any or all of which classes may
be stock with par value or stock without par value with such voting powers, full
or limited, or without voting powers, and with such designations, preferences
and relative, participating, optional or other special rights and
qualifications, limitations or restrictions as shall be determined by said vote
which may be the same or different from the voting powers, designation,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions of the classes of stock of the
Corporation then authorized, provided, however, that no new class of stock shall
hereafter be created which is entitled to dividends or shares in distribution of
assets on a parity with or in priority to the 5% Cumulative Convertible
Preferred Stock unless either (1) the stockholders voting for the creation of
such new class of stock shall include the holders of not less than two-thirds of
the number of shares of the 5% Cumulative Convertible Preferred Stock then
outstanding, or (2) the holders of not less than two-thirds of the number of
shares of 5% Cumulative Convertible Preferred Stock then outstanding shall
consent thereto in writing.

Neither the amounts which the holders of the 5% Cumulative Convertible Preferred
Stock are entitled to receive as dividends or in distribution of assets in
preference to the holders of the Common Stock, nor the price at which the 5%
Cumulative Convertible Preferred Stock may be redeemed shall be decreased nor
may the conversion privileges of the holder of the 5% Cumulative Convertible
Preferred Stock be adversely modified, unless the holders of at least 90% of the
number of shares of 5% Cumulative Convertible Preferred Stock then outstanding
consent in writing to or vote for such decrease.

         (h) The term "accrued dividends" shall be deemed to mean in respect of
any share of the 5% Cumulative Convertible Preferred Stock, as of any given
date, the amount, if any, by which the product of the rate of the full dividend
per annum multiplied by the number of years and any fractional part of a year
which shall have elapsed from the date after which dividends on such stock
became cumulative to such given date, exceeds the sum of the total dividends
actually paid on such stock and dividends declared and set apart for payment.
Accumulations of dividends shall not bear interest.

         (i) No holder of any stock of the Corporation shall be entitled as of
right to purchase or subscribe for any part of any stock of the Corporation
previously authorized by this certificate or of any additional stock of any
class to be issued by reason of any increase of the authorized stock of the
Corporation or of any bonds, certificates of indebtedness, debentures or other
securities convertible into stock of the Corporation, but any stock previously
authorized or authorized by this certificate, or any such additional authorized
issue of new stock or of securities convertible into stock may be issued and
disposed of by the Board of Directors to such persons, firms, corporations or
associations for such consideration and upon such terms and in such manner as
the Board of Directors may in its discretion determine without offering any
thereof on the same terms or on any terms to the stockholders then of record or
to any class of stockholders.











<PAGE>





                      ARTICLES OF AMENDMENT TO THE CHARTER
                                       OF
                        WELLCO RO-SEARCH INDUSTRIES, INC.

         The undersigned corporation, for the purpose of amending its Articles
of Incorporation and pursuant to the provisions of Chapter 55 of the General
Statutes of North Carolina, known as the Business Corporation Act, and
particularly pursuant to Section 55-103 thereof, hereby executes the following
Articles of Amendment:

         1. The name of the corporation at the date of execution of these
Articles of Amendment is Wellco Ro-Search Industries, Inc., but the change to be
effected by these Articles of Amendment is to change the name of the corporation
to Wellco Enterprises, Inc.

         2. The amendment adopted by action of the Board of Directors and the
Shareholders is that the charter of Wellco Ro-Search Industries, Inc. be amended
by striking out all of Article First as set forth in the charter of Wellco
Ro-Search, Inc. as the same has been heretofore amended and filed in the Office
of the Secretary of State of North Carolina and by inserting in lieu thereof the
following:
         "ARTICLE FIRST: The name of the corporation shall be Wellco Enterprises
, Inc."

         3. The date of the adoption of this amendment by the Shareholders was
November 21, 1967.

         4. The number of shares of the corporation outstanding at the time of
the adoption of this amendment was 395,027 shares of Common Stock, all of which
shares were entitled to vote thereon. There were no shares of Preferred Stock
outstanding.

         5. The number of shares voted for such amendment was 229,452 shares of
said Common Stock and the number of shares voted against such amendment was none
shares of said Common Stock.

         6. The amendment hereby effected does not give rise to dissenter's
rights to payment for the reason that the only effect of such amendment is to
change the name of the corporation.

         IN WITNESS WHEREOF, said corporation has caused these Articles of
Amendment to be executed in its corporate name by its President and Secretary
and its corporate seal to be hereunto affixed, this the 21st day of November,
1967.

                                               WELLCO RO-SEARCH INDUSTRIES, INC.
                                               (Name Changed Hereby To
                                               WELLCO ENTERPRISES, INC.

                                               BY: HEINZ ROLLMAN
                                                   -------------
                                                     President

ATTEST: ERNEST ROLLMAN
        --------------
         Secretary








<PAGE>



                        ARTICLES OF AMENDMENT TO CHARTER
                            WELLCO ENTERPRISES, INC.

         The undersigned corporation, for the purpose of amending its Articles
of Incorporation and pursuant to the provisions of Chapter 55 of the General
Statutes of North Carolina, and particularly pursuant to the provisions of
Section 55-103 thereof, hereby executes the following Articles of Amendment to
its Charter heretofore filed in the Office of the Secretary of State of North
Carolina:

         1. The name of the corporation is WELLCO ENTERPRISES, INC.

         2. The following amendment to the charter of the corporation was
adopted by its stockholders at the annual stockholders meeting held on the 19th
day of November, 1968, in the manner prescribed by law:

         "RESOLVED, that the present 'Article Fourth' of the Charter of Wellco
         Enterprises, Inc., be deleted in its entirety and an new 'Article
         Fourth' be substituted in lieu thereof, said new 'Article Fourth'
         providing as follows:

         ARTICLE FOURTH: The total authorized capital stock of the corporation
         shall be three thousand (3,000) shares of five per cent (5%) Cumulative
         Convertible Preferred Stock, of the par value of ONE HUNDRED AND NO/100
         DOLLARS ($100.00) per share, amounting in the aggregate to THREE
         HUNDRED THOUSAND ($300,000.00) DOLLARS and two million (2,000,000)
         shares of common stock of the par value of ONE AND NO/100 DOLLAR
         ($1.00) per share."

         3. The number of shares of the corporation outstanding at the time of
such adoption was 420,027; and the number of shares entitled to vote thereon was
420,027.

         4. The number of shares represented at the meeting at which said
amendment was approved was 274,066; the number of shares voted for such
amendment was 267,955; the number of shares voted against such amendment was
3,513.

         5. The amendment herein effected does not result in any change in the
stated capital of the corporation.

         6. The amendment herein effected does not give rise to dissenter's
rights to payment for the reason that the only effect of such amendment is to
increase the amount of authorized common stock of the corporation.

         IN WITNESS WHEREOF, these articles are signed by the President and
Secretary of the corporation this 19th day of November, 1968.

                                                 WELLCO ENTERPRISES, INC.

                                                 By: ROLF KAUFMAN
                                                     ------------
                                                       President
ATTEST: ERNEST ROLLMAN
        --------------
           Secretary


STATE OF NORTH CAROLINA

COUNTY OF HAYWOOD


<PAGE>




         I, GRACE B. ROGERS, a Notary Public, hereby certify that on this 19th
day of November, 1968, personally appeared before me ROLF KAUFMAN and ERNEST
ROLLMAN, each of whom being by me first duly sworn, declared that he signed the
foregoing document in the capacity indicated, and that the statements contained
therein are true.


                                                              GRACE B. ROGERS
                                                              ---------------
                                                              Notary Public

My Commission Expires:

March 26, 1970









<PAGE>



                        ARTICLES OF AMENDMENT TO CHARTER
                                       OF
                            WELLCO ENTERPRISES, INC.

         The undersigned corporation, for the purpose of amending its Articles
of Incorporation (as stated in June 29, 1946 Agreement of Merger with Wellco
Sales Company, Inc.) and pursuant to the provisions of Chapter 55 of the General
Statutes of North Carolina, and particularly pursuant to the provisions of
Section 55-103 thereof, hereby executes the following Articles of Amendment to
its Charter heretofore filed in the Office of the Secretary of State of North
Carolina.

         1. The name of the corporation is WELLCO ENTERPRISES, INC.

         2. The following amendments to the charter of the corporation were
adopted by its stockholders at the annual stockholders meeting of said
corporation held on the 16th day of November, 1976, in the manner prescribed by
law:

         "RESOLVED, that the present 'Article Ninth' of the Charter of Wellco
         Enterprises, Inc., be deleted in its entirety and a new 'Article Ninth'
         provided as follows:

         Article Ninth: The property and business of this corporation shall be
         managed by its Board of Directors. The number of Directors which shall
         constitute the whole Board shall be nine, divided and classified into
         three Classes, to be designated, respectively, Class I, Class II and
         Class III, each Class to consist of three Directors. At the 1976 annual
         meeting of stockholders, all of the Directors shall be elected; Class I
         for a term to expire at the 1977 annual meeting of stockholders; Class
         II for a term to expire at the 1978 annual meeting of stockholders;
         Class III for a new term to expire at the 1979 annual meeting of
         stockholders; and in the case of each Class, until their respective
         successors are duly elected and qualified, or until their resignation,
         death, or removal by stockholders for cause. At each annual meeting of
         stockholders commencing in 1977, directors shall be elected to fill any
         vacancies then existing and to succeed those whose terms have expired,
         and the directors so elected shall be identified as being of the same
         class as the directors they succeed and shall be elected to hold office
         for the term of the class to which each is elected, and until their
         respective successors are duly elected and qualified, or until their
         resignation, death, or removal by stockholders for cause. If any
         vacancy shall occur in the Board of Directors by reason of the death,
         resignation, or disqualification as by law provided, the directors then
         in office, although less than a quorum, may by majority vote fill any
         such vacancy, and any director so chosen shall hold office until the
         next annual meeting of the stockholders and until his successor shall
         be duly elected and qualified; provided, however, that if in the event
         of any such vacancy, the directors remaining in office shall be unable,
         by majority vote, to fill such vacancy within thirty (30) days after
         the occurrence thereof, the President or the Secretary may call a
         special meeting of the stockholders at which such vacancy shall be
         filled. Any Director elected by stockholders may be removed from office
         as a Director at any time, but only for cause, by the affirmative vote
         of stockholders of record holding a majority of the outstanding shares
         of stock of the corporation entitled to vote in elections of Directors
         given at a meeting of stockholders duly called for that purpose.

         AND FURTHER RESOLVED, that the present 'Article Tenth' of the Charter
         of Wellco Enterprises, Inc., be deleted in its entirety and a new
         'Article Tenth' be substituted in lieu thereof, said new 'Article
         Tenth' providing as follows:

         Article Tenth: This corporation reserves the right to amend, alter,
         change, or repeal any provision contained in this corporation's
         Articles of Incorporation in effect from time to time, in the manner


<PAGE>



         new or hereafter prescribed by statute, and all rights conferred upon
         stockholders herein are granted subject to this reservation; provided,
         however, that the foregoing Article Ninth may be amended only by the
         affirmative vote of stockholders of record holding two-thirds of the
         outstanding shares of stock of this corporation entitled to vote upon
         such amendment given at a meeting of stockholders duly called for that
         purpose and no amendment to this Article Tenth modifying such
         requirement may be adopted except upon the same affirmative vote."

         3. The number of shares of the corporation outstanding as of the
October 1, 1976 record date for said meeting was 418,903, all of which were
entitled to vote upon said amendments.

         4. The number of shares represented at the meeting at which said
amendments were approved was 338,201; the number of shares voted for said
amendments was 274,782; the number of shares voted against said amendments was
46,210; the number of shares withholding vote with reference to said amendments
was 17,209.

         5. The amendments herein effected do not result in any change in the
stated capital of the corporation.

         6. The amendments herein effected do not give rise to dissenter's
rights to payment for the reason that the only effect of such amendments is to
increase the composition of the Board of Directors and related matters.

         IN WITNESS WHEREOF, these articles are signed by the President and
Secretary of the corporation this 16th day of November, 1976.

                                                WELLCO ENTERPRISES, INC.

(CORPORATE SEAL)
                                                By ROLF KAUFMAN
                                                   ------------
                                                   Rolf Kaufman, President

ATTEST:

ERNEST ROLLMAN
--------------
Ernest Rollman, Secretary

STATE OF NORTH CAROLINA
COUNTY OF HAYWOOD

         I, Donna M. Overman, a Notary Public, hereby certify that on this 16th
day of November, 1976, personally appeared before me ROLF KAUFMAN and ERNEST
ROLLMAN, each of whom being by me first duly sworn, declared that he signed the
foregoing document in the capacity indicated, and that the statements contained
herein are true.

                                               DONNA M. OVERMAN
                                               ----------------
                                               Notary Public








<PAGE>



                              ARTICLES OF AMENDMENT
                                TO THE CHARTER OF
                            WELLCO ENTERPRISES, INC.

         The undersigned corporation, for the purpose of amending its Articles
of Incorporation (as stated in June 29, 1946 Agreement of Merger withl Wellco
Sales Company, Inc.) and pursuant to the provisions of Chapter 55 of the General
Statutes of North Carolina, particularly the provisions of Section 55-103
thereof, hereby executes the following Articles of Amendment to its Charter
heretofore filed in the Office of the Secretary of State of North Carolina:

         1. The name of the Corporation is WELLCO ENTERPRISES, INC.

         2. The following Amendment to the Charter of the Corporation was
adopted by its stockholders at the annual stockholders meeting of said
corporation held on the 17th day of November, 1987, in the manner prescribed by
law:

         "RESOLVED, that the Charter of Wellco Enterprises, Inc. be amended by
         adding a new Article Fourteenth thereof, said new Article Fourteenth
         providing as follows:

         ARTICLE FOURTEENTH: No director of the Corporation shall be personally
         liable arising out of an action whether by or in the right of the
         Corporation or otherwise, for monetary damages for breach of his duties
         as a director; provided, however, that this Article Fourteenth shall
         not be effective with respect to (i) acts or omissions not made in good
         faith that the director at the time of such breach knew or believed
         were in conflict with the best interests of the Corporation, (ii) any
         liability under Section 55-32 of the General Statutes of North
         Carolina, (iii) any transaction from which the director derived an
         improper personal benefit, or (iv) acts or omissions occurring prior to
         the effective date of this charter amendment. As used herein, the term
         'improper personal benefit' does not include a director's compensation
         or other incidental benefits for or on account of his services as a
         director, officer, employee, independent contractor, attorney or
         consultant of the Corporation."

         3. The number of shares of the Corporation's common stock outstanding
as of the September 30, 1987 record date for said meeting was 875,706, all of
which were entitled to vote upon said Amendment.

         4. The number of shares represented at the meeting at which said
Amendment were approved was 768,636; the number of shares voted for said
Amendment was 750,541; the number of shares voted against said Amendment was
14,688; the number of shares withholding vote with reference to said Amendment
was 3,407.

         5. The Amendment herein effected do not result in any change in the
stated capital of the Corporation.

         6. The Amendment herein effected does not give rise to dissenter's
rights to payment for the reason that the only effect of said Amendment is to
limit certain liabilities of members of the Board of Directors and does not
relate to those matters enumerated in N.C.G.S. Sec. 55-101(b).

         IN WITNESS WHEREOF, these Articles are signed by the President and
Secretary of the Corporation, this 17th day of November, 1987.






<PAGE>





                                                    WELLCO ENTERPRISES, INC.

(CORPORATE SEAL)

                                                    By: ROLF KAUFMAN
                                                        ------------
                                                        Rolf Kaufman, President
Attest:

DAVID LUTZ
----------
David Lutz, Secretary

STATE OF NORTH CAROLINA

COUNTY OF HAYWOOD

         I, DONNA M. CHAMBERS, a Notary Public of said State and County, hereby
certify that ROLF KAUFMAN and DAVID LUTZ personally appeared before me this day
and, each of whom being by me first duly sworn, declared that he signed the
foregoing Articles of Amendment to the Charter of Wellco Enterprises, Inc. in
the capacity above indicated and that the statements contained therein are true.

         WITNESS my hand and Notarial Seal, this 17th day of November, 1987.


                                            DONNA M. CHAMBERS
                                            -----------------
                                            Notary Public
My commission expires:

March 9, 1991
-------------








<PAGE>




                              ARTICLES OF AMENDMENT
                                TO THE CHARTER OF
                            WELLCO ENTERPRISES, INC.
                            ------------------------

         The undersigned corporation, for the purpose of amending its Articles
of Incorporation (as stated in June 29, 1946 Agreement of Merger withWellco
Sales Company, Inc.) and pursuant to the provisions of Chapter 55 of the General
Statutes of North Carolina, particularly the provisions of Section 55-103
thereof, hereby executes the following Articles of Amendment to its Charter
heretofore filed in the Office of the Secretary of State of North Carolina:

         1. The name of the Corporation is WELLCO ENTERPRISES, INC.

         2. The following Amendment to the Articles of Incorporation was adopted
by its stockholders on the 15th day of November, 1994, in the manner prescribed
by law:

                  ARTICLE NINTH: The property and business of this corporation
                  shall be managed by its Boards of Directors. The number of
                  Directors which shall constitute the whole Board shall be
                  nine, divided and classified into three classes of three
                  directors each, to be designated, respectively, Class I, Class
                  II, and Class III. The terms of each Class shall continue
                  until their respective successors are duly elected and
                  qaulified, or until their resignation, death or removal by
                  stockholders for cause. The terms of the Class II Directors
                  shall expire at the 1996 annual meeting of the stockholders.
                  The terms of the Class I Directors shall expire at the 1995
                  annual meeting of the stockholders. The terms of the Class III
                  Directors shall expire at the 1997 annual meeting of the
                  stockholders. At each annual meeting of stockholders
                  commencing in 1995 and thereafter, directors shall be elected
                  to fill any vacancies then existing and to succeed those whose
                  terms have expired, and the directors so elected shall be
                  identified as being of the same class as the directors they
                  succeed and shall be elected to hold office for the term of
                  the class to which each is elected. If any vacancy shall occur
                  in the Board of Directors by reason of the death, resignation,
                  or disqualification as by law provided, the Directors then in
                  office, although less thana quorum, may by majority vote fill
                  any such vacancy, and any Director so chosen shall hold office
                  until the next annual meeting of the stockholders and until
                  his successor shall be duly elected and qualified; provided,
                  however, that if in the event of any such vacancy, the
                  Directors remaining in office shall be unable, by majority
                  vote, to fill such vacancy within thirty (30) days after the
                  occurrence thereof, the President or the Secretary may call a
                  special meeting of the stockholders at which such vacancy
                  shall be filled. Any Director elected by stockholders may be
                  removed from office as a Director at any time, but only for
                  cause, by the affirmative vote of stockholders of record
                  holding a majority of the outstanding shares of stock of the
                  corporation entitled to vote in elections of Directors given
                  at a meeting of stockholders duly called for that purpose.

         3. Said Amendment was adopted as required by Chapter 55 of the General
Statutes of North Carolina.

         4. Said Amendment does not provide for any exchange, reclassification
or cancellation of the Corporation's issued common stock.

         5. These Articles shall become effective upon filing of the same with
the North Carolina Secretary of State.



<PAGE>




         This the 16th day of November, 1994.


                                               WELLCO ENTERPRISES, INC.



                                               By: David Lutz
                                                   Secretary-Treasurer





<PAGE>



                              ARTICLES OF AMENDMENT
                                TO THE CHARTER OF
                            WELLCO ENTERPRISES, INC.
                            ------------------------

         The undersigned corporation, for the purpose of amending its Articles
of Incorporation (as stated in June 29, 1946 Agreement of Merger withWellco
Sales Company, Inc.) and pursuant to the provisions of Chapter 55-10-06 of the
General Statutes of North Carolina, particularly the provisions of Section
55-103 thereof, hereby executes the following Articles of Amendment to its
Charter heretofore filed in the Office of the Secretary of State of North
Carolina:

         1. The name of the Corporation is WELLCO ENTERPRISES, INC.

         2. The following Amendment to the Articles of Incorporation was adopted
by its stockholders on the 18th day of November, 2003, in the manner prescribed
by law:

Article Ninth: The property and business of the corporation shall be managed by
its Board of Directors. The Board of Directors of the corporation who shall hold
their offices until their successors be chosen according to the by-laws of the
corporation, shall consist of nine members. Effective with the Annual
Stockholders Meeting of the corporation in the year 2003 and subsequent years,
Directors whose terms have then expired shall be elected annually, with the
result that by the corporation's Annual Stockholders Meeting in 2005 all Classes
of the Board of Directors shall have been eliminated and all Directors of the
corporation shall be elected annually at said 2005 Annual Stockholders Meeting
and all future Annual Stockholders Meetings.

If any vacancy shall occur in the Board of Directors by reason of the death,
resignation, or disqualification as by law provided, the directors then in
office, although less than a quorum, may by majority vote to fill any such
vacancy, and any director so chosen shall hold office until the next annual
meeting of the stockholders and until his successor shall be duly elected and
qualified; provided, however, that if in the event of any such vacancy, the
directors remaining in office shall be unable, by majority vote, to fill such
vacancy within thirty (30) days after the occurrence thereof, the President or
the Secretary may call a special meeting of the stockholders at which such
vacancy shall be filled. Any Director elected by stockholders may be removed
from office as a Director at any time, but only for cause, by the affirmative
vote of stockholders of record holding a majority of the outstanding shares of
stock of the corporation entitled to vote in elections of Directors given at a
meeting of stockholders duly called for that purpose.

Article Tenth: This corporation reserves the right to amend, alter, change, or
repeal any provision contained in this corporation's Articles of Incorporation
in effect from time to time, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation.

3. Said Amendment was adopted as required by Chapter 55 of the General Statutes
of North Carolina.

4. Said Amendment does not provide for any exchange, reclassification or
cancellation of the Corporation's issued common stock.

5. These Articles shall become effective upon filing of the same with the North
Carolina Secretary of State.

         This the 18th day of November, 2003.
                                                 WELLCO ENTERPRISES, INC.

                                                 By: David Lutz
                                                     ----------
                                                     Secretary-Treasurer



<PAGE>




                            WELLCO ENTERPRISES, INC.

                                     BY-LAWS

                         As in effect November 15, 1994


                                     OFFICES

         1. The principal office shall be in the City of Waynesville, County of
Haywood, State of North Carolina.

         2. The Corporation may also have offices in the City of New York, State
of New York, and at such other places as the board of directors may from time to
time appoint or the business of the corporation may require.


                                      SEAL

         3. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal, North
Carolina." Said seal may be used by causing it or facsimile thereof to be
impressed or affixed or reproduced or otherwise.


                             STOCKHOLDERS' MEETINGS

         4. All meetings of the stockholders for the election of directors shall
be held at the office of the corporation in Waynesville, N. C. Special meetings
of stockholders for any other purpose shall be held in the office of the
corporation in Waynesville, N. C., or at such place in North Carolina as shall
be stated in the notice of the meeting.

         5. The annual meeting of the stockholders shall be held on the third
Tuesday of November in each year; provided, however, that if this day is the
Tuesday of the week including the Thanksgiving holiday, the annual meeting shall
be held on the Tuesday of the preceding week or the Tuesday of the following
week, as determined by unanimous resolution of the Board of Directors. If the
day so selected as the annual meeting date is a legal holiday, then the meeting
shall be on the next secular following day. The meeting shall be at 3:00 o'clock
P. M. or thereafter, as adjourned, at which time the shareholders shall elect by
a plurality vote, by ballot, members of the Board of Directors as provided in
these Bylaws, and transact such other business as may properly be brought before
the meeting.

         6. The holders of a majority of the stock issued and outstanding, and
entitled to vote thereat, present in person, or represented by proxy, shall be
requisite and shall constitute a quorum at all meetings of the stockholders for
the transaction of business except as otherwise provided by law, by the
certificate of incorporation or by these by-laws. If, however, such majority
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person, or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the required amount of voting stock shall be
present. At such adjourned meeting at which the requisite amount of voting stock
shall be represented any business may be transacted which might have been
transacted at the meeting as originally notified.

         7. At any meeting of the stockholders every stockholder having the
right to vote shall be entitled to vote in person, or by proxy appointed by an



<PAGE>



instrument in writing subscribed by such stockholder and bearing a date not more
than three years prior to said meeting, unless said
instrument provides for a longer period. Each stockholder shall have one vote
for each share of stock having voting power, registered in his name on the books
of the corporation, and except where the transfer books of the corporation shall
have been closed or a date shall have been fixed as a record date for the
determination of its stockholders entitled to vote, no share of stock shall be
voted on at any election of directors which shall have been transferred on the
books of the corporation within twenty days next preceding such election of
directors.

         7A. The provisions of Article 9A of the North Carolina Business
Corporation Act, known as the North Carolina Control Share Acquisition Act, to
otherwise be effective as to the corporation from and after July 1, 1990, shall,
pursuant to N.C.G.S. Sec. 55-9A-09, not be applicable to the corporation.

         8. Written notice of the annual meeting shall be mailed to each
stockholder entitled to vote thereat at such address as appears on the stock
ledger of the corporation, not less than ten (10) nor more than (50) days before
the date of the meeting.

         9. A complete list of the stockholders entitled to vote a the ensuing
election, arranged in alphabetical order, with the residence of each, and the
number of voting shares held by each, shall be prepared by the secretary and
filed in the office where the election is to be held, at least ten days before
every election, and shall at all times, during the usual hours for business, and
during the whole time of said election, be open to the examination of any
stockholder.

         10. Special meetings of the stockholders, for any purpose, or purposes,
unless otherwise prescribed by statute, may be called by the president, and
shall be called by the president or secretary at the request in writing of a
majority of the board of directors, or at the request in writing of stockholders
owning a majority in amount of the entire capital stock of the corporation
issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.

         11. Business transacted at all special meetings shall be confined to
the objects stated in the call.

         12. Written notice of a special meeting of stockholders, stating the
time and place and object thereof, shall be mailed, postage prepaid, not less
than ten (10) nor more than fifty (50) days before such meeting, to each
stockholder entitled to vote thereat, at such address as appears on the books of
the corporation.


                                    DIRECTORS

         13. The property and business of this corporation shall be managed by
its board of directors, consisting of nine (9) in number. Each director shall be
elected to serve until his successor shall be elected and shall qualify.
Effective with the Annual Stockholders Meeting of this corporation in the year
2003 and subsequent years, Directors whose terms have then expired shall be
elected annually, with the result that by this corporation's Annual Stockholders
Meeting in 2005 all Classes of the Board of Directors shall have been eliminated
and all Directors of the corporation shall be elected annually at said 2005
Annual Stockholders Meeting and all future Annual Stockholders Meetings.

         14. The directors may hold their meetings and have one or more offices,
and keep the books of the corporation, except the original or duplicate stock
ledger, outside of North Carolina at such place or places as they may from time
to time determine.

         15. In addition to the powers and authorities by these by-laws
expressly conferred upon it, the board of directors may exercise all such



<PAGE>



powers of the corporation and do all such lawful acts and things as are not
required to be exercised or done by the stockholders.


                             COMMITTEES OF DIRECTORS

         16. The board of directors, may, by resolutions passed by a majority of
the whole board, designate one or more committees, each committee to consist of
two or more of the directors of the corporation, which, to the extent provided
in said resolution or resolutions, shall have and may exercise the powers of the
board of directors in the management of the business and affairs of the
corporation, and may have the power to authorize the seal of the corporation to
be affixed to all papers which may require it. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the board of directors.

         17. The committees shall keep regular minutes of their proceedings and
report the same to the board when required.


                              MEETINGS OF THE BOARD

         18. Each newly elected board may meet at such place ;and time either
within or without the State of North Carolina as shall be fixed by the vote of
the stockholders at the annual meeting, and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting; provided, a majority of the whole board shall be present; or they may
meet at such place and time as shall be fixed by the consent in writing of all
the directors.

         19. Regular meetings of the board may be held without notice of such
time and place either within or without the State of North Carolina as shall
from time to time be determined by the board.

         20. Special meetings of the board may be called by the president on one
(1) day's notice to each director, either personally or by mail or by telegram;
special meetings shall be called by the president or secretary in like manner
and on like notice on the written request of two directors.

         21. At all meetings of the board three (3) directors shall be necessary
and sufficient to constitute a quorum for the transaction of business, and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation or by
these by-laws.


                                    OFFICERS

         22. The officers of the corporation shall be chosen by the directors
and shall be a president, one or more executive vice presidents, a secretary and
a treasurer.

         The board of directors may also choose additional vice-presidents,
assistant secretaries and assistant treasurers and elect a chairman of the board
of directors and an honorary chairman of board of directors. Any two of more
offices may be held by the same person, but no officer may act in more than one
capacity where action of two or more officers is required.

         23. The board of directors, at its first meeting after each annual
meeting of stockholders, shall choose a president and executive vice-president
from their own number, and a secretary and a treasurer, who need not be members
of the board.



<PAGE>




         24. The board may appoint such other officers and agents as it shall
deem necessary, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by
the board.

         25. The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the whole board of directors.


                       CHAIRMAN OF THE BOARD OF DIRECTORS

         26. The chairman of the board of directors shall, if elected, preside
at all meetings of the stockholders and directors; and shall be an ex-officio
member of standing committees; and shall perform such other duties as may be
delegated to him from time to time by the board of directors. An honorary
chairman of the board of directors will have no duties whatsoever to perform
unless requested by the president.


                                  THE PRESIDENT

         27. The president shall be the chief executive officer of the
corporation; he shall have general and active management of the business of the
corporation, and shall see that all orders and resolutions of the board of
directors are carried into effect, and preside at stockholders and directors
meetings if no chairman of board elected.

         28. He shall execute bonds, mortgages and other contracts requiring a
seal, under the seal of the corporation.

         29. He shall be an ex-officio member of all standing committees, and
shall have the general powers and duties of supervision and management usually
vested in the office of the president of a corporation.


                                 VICE-PRESIDENTS

         30. The vice-presidents in the order of their seniority shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president, and shall perform such other duties as the board of
directors shall prescribe.


                      THE SECRETARY AND ASSISTANT SECRETARY

         31. The secretary shall attend all sessions of the board of directors
and all meetings of the stockholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose; and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the board of
directors or president, under whose supervision he shall be. He shall keep in
safe custody the seal of the corporation, and when authorized by the board,
affix the same to any instrument requiring it, and when so affixed, it shall be
attested by his signature or by the signature of the treasurer or an assistant
secretary.

         32. The assistant secretaries in the order of their seniority shall, in
the absence or disability of the secretary, perform the duties and exercise the
powers of the secretary, and shall perform such other duties as the board of



<PAGE>



directors shall prescribe.


                      THE TREASURER AND ASSISTANT TREASURER

         33. The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
monies, and other valuables effects in the name and to the credit of the
corporation in such depositories as may be designated by the board of directors.

         34. He shall disburse the funds of the corporation as may be ordered by
the board, taking proper vouchers for such disbursements, and shall render to
the president and directors, at the regular meetings of the board, or whenever
they may require it, an account of all his transactions as treasurer and of the
financial condition of the corporation.

         35. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum, and
with surety or sureties as shall be satisfactory to this board, for the faithful
performance of the duties of his office, and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.

         36. The assistant treasurers in the order of their seniority shall, in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer, and shall perform such other duties as the board of
directors shall prescribe.


                           RESIGNATIONS AND VACANCIES

         37. Any director or other elected officer or member of any committee of
the board of directors may resign his office at any time by delivering or
mailing his resignation to the president of the corporation. Resignations shall
take effect at the time of their receipt by the president, unless otherwise
expressly stated by their terms.

         38. If any vacancy shall occur in the board of directors by reason of
death, resignation, disqualification as by law provided, or removal by
stockholders for cause, the directors then in office, although less than a
quorum, may by majority vote to fill any such vacancy, and any director so
chosen shall hold office until the next annual meeting of the stockholders and
until his successor shall be duly elected and qualified; provided, however, that
if in the event of any such vacancy, the directors remaining in office shall be
unable, by majority vote, to fill such vacancy within thirty (30) days after the
occurrence thereof, the president or the secretary may call a special meeting of
the shareholders at which such vacancy shall be filled.

         39. Any director elected by stockholders may be removed from office as
a director at any time, but only for cause, by the affirmative vote of
stockholders of record holding a majority of the outstanding shares of stock of
the corporation entitled to vote in elections of directors given at a meeting of
stockholders duly called for that purpose.

         40. In addition to the mandatory and permissive provisions applicable
to directors, officers and employees of the Corporation under Chapter 55A of the
General Statutes of North Carolina the Corporation hereby pursuant to N.C.G.S.
ss.55A-8-57(a) indemnifies its directors, officers, and employees against
liability and expenses in any proceeding (including without limitation a



<PAGE>



proceeding  brought by or on behalf of the  Corporation  itself)  arising out of
their status as such or their  activities  in any of the  foregoing  capacities;
provided,  however,  that  the  Corporation  shall  not  indemnify  or  agree to
indemnify an officer,  director or employee against liabilities or expenses such
person  may incur on  account of his  activities  which were at the time  taken,
known  or  believed  by the  person  to be  clearly  in  conflict  with the best
interests  of the  Corporation  or if the person  received an improper  personal
benefit, as determined pursuant to N.C.G.S. ss.55A-8-55(b).

The Corporation shall likewise and to the same extent indemnify or agree to
indemnify any officer, director or employee who, at the request of the
Corporation, is or was serving as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust, or other enterprise or as a trustee or administrator under an
employee benefit plan.

An indemnified person may recover from the Corporation reasonable costs,
expenses and attorney fees incurred by said person in connection with the
enforcement of rights to indemnification granted hereunder.

Any officer, director or employee subpoenaed to appear as a witness in any
proceeding affecting the Corporation who is not at the time a named defendant or
respondent in said proceeding may similarly be reimbursed for such witness's
reasonable costs, expenses and attorney fees incurred by such person in
connection with such testimony and may be paid by the Corporation in advance of
such person incurring such expenses upon receipt from such person of an
undertaking to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation pursuant to this
Article 40 or as otherwise provided in Chapter 55A of the General Statutes of
North Carolina.

                       DUTIES OF OFFICERS MAY BE DELEGATED

         41. In case of the absence of any officer of the corporation, or for
any other reason that the board may deem sufficient, the board may delegate, for
the time being, the powers or duties or any of them, of such officer to any
other officer, or to any director.


                              CERTIFICATES OF STOCK

         42. The certificates of stock of the corporation shall be numbered and
shall be entered in the books of the corporation as they are issued. They shall
exhibit the holder's name and number of shares and shall be signed by the
president or a vice-president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary. If the corporation has a transfer agent
or an assistant transfer agent, or a transfer clerk acting on its behalf and a
registrar, the signature of any such officer may be facsimile.


                               TRANSFERS OF STOCK

         43. Transfers of stock shall be made on the books of the corporation
only upon surrender of the certificates therefor endorsed by the person named in
the certificate or by attorney, lawfully constituted in writing.




<PAGE>




                            CLOSING OF TRANSFER BOOKS

         44. The board of directors shall have power to close the stock transfer
books of the corporation for a period not exceeding fifty days preceding the
date of any meeting of stockholders or the date for payment of any dividend or
the date for the allotment or rights or the date when any change or conversion
or exchange of capital stock shall go into effect; provided, however, that in
lieu of closing the stock transfer books as aforesaid, the board of directors
may fix in advance a date, not exceeding fifty days preceding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights or the date when any change or conversion or
exchange of capital stock shall go into effect, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting, or entitled to receive payment of any such dividend, or to any
such allotment of rights, or to exercise the rights in respect of any such
change, conversion, or exchange of capital stock, and in such case such
stockholders, and only such stockholders as shall be stockholders of record on
the date so fixed, shall be entitled to such notice of, and to vote at, such
meeting, or to receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any stock on the books of the corporation after any such record date
fixed as aforesaid.


                             REGISTERED STOCKHOLDERS

         45. The corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof, and, accordingly,
shall on the part of any other person, whether or not it shall have express or
other notice thereof, save as expressly provided by the laws of North Carolina.


                                LOST CERTIFICATE

         46. Any person claiming a certificate of stock to be lost or destroyed
shall make an affidavit or affirmation of that fact and advertise the same in
such manner as the board of directors may require, and the board of directors
may, in its discretion, require the owner of the lost or destroyed certificate,
or his legal representative, to give the corporation a bond, sufficient to
indemnify the corporation against any claim that may be made against it on
account of the alleged loss of any such certificate. A new certificate of the
same tenor and for the same number of shares as the one alleged to be lost or
destroyed may be issued without requiring any bond, when, in the judgment of the
directors, it is proper so to do.

                                     CHECKS

         47. All checks or demands for monies and notes of the corporation shall
be signed by such officer or officers or such other person or persons as the
board of directors may from time to time designate.


                                   FISCAL YEAR

         48. The fiscal year shall begin the first day following the Saturday
closest to June 30 of each year. The fiscal year shall end on the Saturday
closest to June 30 of each year.






<PAGE>



                                    DIVIDENDS

         49. Dividends upon the capital stock of the corporation, subject to the
provisions of the certificate of incorporation, if any, may be declared by the
board of directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital stock.

         50. Before payment of any dividend there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation of for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may abolish any such reserve in the manner in
which it was created.


                           DIRECTOR'S ANNUAL STATEMENT

         51. The board of directors shall present at each annual meeting, and
when called for by vote of the stockholders at any special meeting of the
stockholders, a full and clear statement of the business and conditions of the
corporation.


                                     NOTICES

         52. Whenever under the provisions of these by-laws notice is required
to be given to any director or stockholder it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, by depositing
the same in the post office or letter box, in a postpaid sealed wrapper,
addressed to such stockholder or director at such address as appears on the
books of the corporation, or, in default of other address to such director or
stockholder at the General Post Office in the City of Waynesville, North
Carolina, and such notice shall be deemed to be given at the time when the same
shall be thus mailed.

         53. Any stockholder or director may waive any notice required to be
given under these by-laws.


                                   AMENDMENTS

         54. These By-Laws may be altered, amended or rescinded by the
affirmative vote of a majority of the Board of Directors at a duly held meeting
for such purpose, provided three days written notice of the proposed action
shall have been given to each director.















<PAGE>



                                                               EXHIBIT 14



                            WELLCO ENTERPRISES, INC.
                                 CODE OF ETHICS

The following 24 unnumbered pages in this Form 10-K, is the complete Code of
Conduct and Ethics covering, among others, the Registrant's principal executive
officer, principal financial officer and principal accounting officer or
controller.












                                      -16-

<PAGE>



                            WELLCO ENTERPRISES, INC.
                           CODE OF CONDUCT AND ETHICS
         (for officers, directors and certain salaried, etc., employees)


                                  INTRODUCTION

          Wellco Enterprises, Inc. and its subsidiaries Ro-Search, Inc., in
Waynesville, North Carolina, and MO-KA Shoe Corporation in Aguadilla, Puerto
Rico ("Wellco" or the "Company") policy is to comply fully with all federal,
state and local laws and regulations. The purpose of Wellco's Code of Conduct
and Ethics (the "Code") is to provide all officers, directors and all salaried
employees in Wellco's Waynesville, North Carolina and Aguadilla, Puerto Rico
facilities and certain hourly-paid employees in said Puerto Rican facility as
specifically identified from time to time by Wellco President David Lutz
(hereinafter referred to as "employees") with a basic understanding of the laws
that govern their conduct and how to comply with such laws.

          The purpose of this Code is to promote honest and ethical conduct,
including the following:
          o The ethical handling of actual or apparent code of conduct between
personal and professional relationships;
          o Full, fair, accurate, timely and understandable disclosure in
periodic reports and documents required to be signed by Wellco, and in other
public communications made by Wellco;
          o Compliance with applicable American Stock Exchange and governmental
rules and regulations;
          o Prompt internal reporting of violations of this Code to an
appropriate person or persons; and
          o Accountability for adherence to this Code.

          Like all companies, Wellco and its employees must comply with federal
and state antitrust laws, and one of the Code's purposes is to inform employees
about the kind of anticompetitive practices the antitrust laws prohibit. Because
Wellco is engaged in the business of manufacturing combat boots for the United
States Department of Defense ("DOD") under federal contracts, the Code also
discusses certain anti-fraud laws, such as the federal False Statements and
False



<PAGE>



Claims Acts, which apply to companies and individuals that bid on, and perform,
federal government contracts or contracts that are funded with federal money.

          This Code is designed to provide a summary of some of the principal
federal laws that apply to Wellco and its employees, as opposed to a detailed
description of them. If you have questions about whether particular conduct
would violate these laws or any other federal, state or local law you should
contact Wellco President David Lutz or Wellco's legal counsel, Richard A. Wood,
Jr. of McGuire, Wood & Bissette, P.A., attorneys in Asheville, North Carolina,
at (828) 254-8800.

          As the result of enactment in 2002 of the "Sarbanes-Oxley" legislation
and new "listing" requirements imposed by the American Stock Exchange for
issuers such as Wellco as a condition of having its stock listed and traded on
the AMEX, certain new rules are also applicable with reference to any
questionable accounting or auditing matters and are subject to special
opportunities on a confidential anonymous basis for an employee, officer or
director to report violations or concerns as to such matters as discussed on
page 22.

          When reading this Code, keep in mind that compliance with these laws
is crucial because the consequences of a violation can be literally ruinous,
both for the employee involved and for the Company. In addition to the criminal
penalties, charges that Wellco has violated these laws can result in the Company
being barred from receiving federal contracts for up to three years. Since
Wellco relies on such contracts a violation could put it out of business.

         This Code of Conduct and Ethics has been adopted by the Company's Board
of Directors and first became effective on May 18, 1994 and has been revised on
February 17, 2004, to become effective on June 1, 2004 to reflect the changes in
the Code required by the Sarbanes- Oxley legislation and AMEX requirements
discussed above. This Code of Conduct supersedes the Company 's Standards of
Business Conduct Policy dated May 26, 1988.






<PAGE>




                                TABLE OF CONTENTS

                            WELLCO ENTERPRISES, INC.

                           CODE OF CONDUCT AND ETHICS



I. THE ANTITRUST LAWS

                  A.       Summary Of The Antitrust Laws

                  B.      The Sherman Act's Prohibition
                          Against Anti-Competitive Agreements
                  C.      Trade Association Activities
                  D.      Consequences of Violating The Antitrust Laws

II. THE ANTI-FRAUD LAWS


                  A.       The False Statements And False Claims Statutes

                  B.       The Truth In Negotiations Act
                  C.       The Conspiracy Statute
                  D.       Consequences Of Violating The Anti-Fraud Laws

III. BRIBERY, GRATUITIES AND KICKBACKS


                  A.       The Anti-Kickback Statute
                  B.       Bribery And Gratuities

IV. CONFLICTS OF INTEREST

                  o        Improper Use of Proprietary Information
                  o        Protection and Proper Use of Corporate Assets

V.    THE PROCUREMENT INTEGRITY PROVISIONS

VI.   INSIDER TRADING

VII.  THE FOREIGN CORRUPT PRACTICES ACT

VIII. DRUG-FREE WORKPLACE

IX.   HARASSMENT



<PAGE>



X.   SARBANES-OXLEY AND AMEX REQUIREMENTS

XI.  PROCEDURES FOR IMPLEMENTING AND ENFORCING THE STANDARDS















<PAGE>



I.       THE ANTI-TRUST LAWS
         -------------------

         A.    Summary of the Antitrust Laws
         The four major federal antitrust statutes are:

         o     The Sherman Act -- Prohibits any contract, combination or
               conspiracy in restraint of trade (Section 1) and prohibits
               monopolizing, attempts to monopolize or conspiring to monopolize
               trade (Section 2).

         o     The Clayton Act -- Prohibits certain types of conduct, such as
               tying arrangements and requirements contracts, which may unduly
               foreclose competition.

         o     The Robinson-Patman Act -- Makes it unlawful for a seller to
               discriminate in the prices charged to competing customers for
               like goods and prohibits customers from knowingly receiving the
               benefits of such price discrimination.

         o     The Federal Trade Commission Act -- Grants the Federal Trade
               Commission authority to define and prevent business practices
               considered to be "unfair methods of competition."

          Viewed as a whole, the antitrust laws embody the nation's commitment
to an economy where free market forces determine the products and services
offered for sale, the quantity of products and services offered and the prices
thereof. The goal of the antitrust 1aws is to preserve and promote vigorous,
open and fair competition within a free market economy, and Wellco fully
supports this goal.

          While Wellco requires its employees to comply with all federal and
state antitrust laws, the law that the Company is most concerned about is
Section 1 of the Sherman Act, which prohibits companies and their employees from
fixing prices, rigging bids and dividing markets. These are the kinds of
practices that the federal antitrust enforcement authorities will prosecute
criminally, and so Wellco wants you to understand what is meant by these terms.

B.      The Sherman Act's Prohibition Against Anti-Competitive Agreements
        -----------------------------------------------------------------
          Section 1 of the Sherman Act prohibits any "contract, combination or
conspiracy" in restraint of  trade. The terms "contract, combination or
conspiracy" are fancy words for a more simple word, namely,  "agreement." Any
agreement between two or more competitors which substantially eliminates or
reduces  competition violates ss.1 of the Sherman Act. The agreement
need not be in writing, express or formal. It can be oral, tacit and informal,
so long as there is an agreement or understanding between the participants.

          Wellco emp1oyees whose duties involve preparing bids or proposals,
marketing or participating in trade association activities must be particularly



<PAGE>



sensitive to the antitrust  laws.  The  antitrust  enforcement  authorities  are
especially  suspicious of communications  between competitors about prices, bids
or proposals and costs. They believe that communications  about increased costs,
for  example,  often  lead  to  a  tacit  understanding  to  raise  prices.  Any
communication  with a competitor made for the purpose,  and with the effect,  of
raising,  fixing,  pegging  or  stabilizing  prices  -- even  falling  prices --
violates ss. 1 of the Sherman Act.  Thus,  Wellco  employees  should  ordinarily
avoid communications with competitors about:

          o       prices or bids;

          o       terms of proposals for DOD solicitations;

          o       allocating customers or markets;

          o       limiting the manufacture or supply of combat
                  boots;

          o       boycotting any Wellco supplier or customer; or

          o       costs.

                  EXAMPLE: Suppose that the DOD changes its specification for
                  the NBN boot by requiring that it be manufactured with a more
                  expensive type of leather. Representatives of four
                  manufacturers of military boots, A, B, C and D, discuss the
                  new specification and agree to increase their bids by $2.24 a
                  boot to cover the additional costs involved. This is price
                  fixing, and the federal antitrust enforcement agencies will
                  prosecute this kind of conduct as a criminal violation. If
                  convicted, the representatives of A, B, C and D who
                  participated in the meeting will likely go to jail.

         Wellco employees should also make every effort to avoid communications
or situations which might create an appearance, or raise suspicions, of
violating the antitrust laws.

o        What About Communications With Other Combat Boot Manufacturers About
         Sales of Components?
         --------------------------------------------------------------------
From time to time, Wellco may sell components of combat boots, such as uppers,
eyelets, lace, heels, etc. to other manufacturers. As a result, company
employees will have communications with other combat boot manufacturers about
the prices of these items. Do these communications violate the antitrust laws?

         The answer, of course, is: "No." When a Wellco employee negotiates with
another combat boot manufacturer about price for the sale of a component, the
company is acting as a supplier to -- and not as a competitor of -- the other
combat boot manufacturer. For purposes of the sale of such a component, the
relationship is one of supplier and customer in the market for the component,
and not that of two competitors in the market for combat boots.



<PAGE>



          When Wellco employees engage in communications with other combat boot
manufacturers about the sale or purchase of a component, the conversation or
extent of the conversation should be limited to that necessary to transmit the
sale or purchase.

         EXAMPLE: Y, a Wellco employee calls X, an employee of another combat
         boot manufacturer, and asks for a price on a spot purchase of heels.
         After some negotiation X and Y agree on a price. There is no violation
         of the antitrust laws because the communication between X and Y was
         limited to the seller/buyer relationship in the market for heels.

         EXAMPLE: Y calls up X and asks for a price for a spot purchase of
         heels. X gives Y a price and asks whether Wellco intends to bid on an
         upcoming DOD procurement for 300,000 pairs of the tropical boot. Y
         says: "Yes." X says that because of current backlogs, Wellco and his
         company are likely to be the most aggressive bidders on this
         procurement. X suggests that both bid in a manner to assure that each
         company will get a minimum of 100,000 pairs and Y agrees. This is bid
         rigging in the market for tropical boots and the federal antitrust
         enforcement authorities will prosecute this kind of conduct as a
         criminal violation of the antitrust laws. If convicted, X and Y will
         likely go to jail, and their respective companies will be fined.

         Wellco employees must be sure that communications with other combat
boot manufacturers about prices of components do not become a pretext for
communications about prices arid bids in the market for combat boots.

         o     More About Bid Rigging
               ----------------------
          Many people have a mistaken view of the kind of conduct that
constitutes bid-rigging. To them, bid rigging means an elaborate scheme whereby
the work is divided in a predetermined fashion by and among all or some of the
competitors in the industry. This type of bid-rigging arrangement usually
involves a rotation scheme whereby all or most of the companies submit bids,
with each taking turns being the low bidder. There are a number of other more
subtle arrangements or understandings, however, which the antitrust enforcement
authorities will view as bid rigging.

         EXAMPLE: DOD issues an invitation for bids ("IFB") for the procurement
         of 1.2 million pair of NBN boots. A, B, and C. have backlogs from a
         previous contract. D is out of work. During dinner together after a
         trade association meeting, D says: "Look, if I don't get a piece of
         that procurement, we're out of business. Let's structure our bids so
         that everyone gets at least 200,000 pair. After that, anything goes."
         A, B and C agree and are awarded 300,000; 250,000 and 250,000 pair
         respectively, while D is awarded 400,000 pair.  A, B C & D have engaged




<PAGE>



         in bid rigging. If convicted, they will likely pay a substantial fine
         and go to jail

         EXAMPLE: DOD issues an IFB for the procurement of 150,000 pair of
         desert boots. A and B have substantial backlogs of other boots and are
         unlikely to bid aggressively on such a small quantity. C calls D on the
         telephone and says: "Let's not cut each other's throats over this. What
         if we each throw in a reasonable bid, and the winner subcontracts
         150,000 pair to the loser or something of comparable value somewhere
         down the line." D agrees. This is bid rigging and will be prosecuted as
         a criminal violation of the antitrust laws. If convicted, the
         representatives of C and D who participated in this telephone
         conversation will likely go to jail.

         While the other prohibitions in the nation's antitrust laws are
important, manufacturers of combat boots are less likely -- given the nature of
their business -- to violate these prohibitions. Because, typically, its major
customer is the DOD, for example, Wellco is not likely to violate the
Robinson-Patman Act, which makes it unlawful for a seller to discriminate
between the prices charged to competing buyers.

          C.      Trade Association Activities
                  ----------------------------
         Since Wellco is a member of the Military Boot Manufacturers
Association, a trade association comprised or companies engaged in the business
of manufacturing military boots, Company employees may from time to time
participate in that Association's activities. The federal antitrust enforcement
authorities are suspicious of trade association activities because they provide
an opportunity for competitors to meet and talk about prices, proposals, bidding
and costs. For this reason, Wellco employees should not participate in any trade
association meetings where competitors are present unless an attorney
representing the trade association is also present.

         Moreover, Wellco employees should immediately leave any trade
association meeting if prices, proposals, bidding or costs become the subject of
conversation,. Wellco's mere presence during such meetings or conversations
could later be misconstrued as acquiescence or participation in an antitrust
violation.
         D.      Consequences of Violating the Antitrust Laws
                 --------------------------------------------
         A Violation of the Sherman Act has three kinds of adverse consequences
for Wellco and its employees: (1) criminal penalties, namely, imprisonment,
fines and restitution; (2) civil suits for money damages; and (3) being
suspended or debarred from receiving federal contracts.




<PAGE>



         The criminal penalties are extremely severe. Employees may be
imprisoned for as much as three years, ordered to make restitution and fined up
to $350,000, while the Company may be ordered to make restitution and fined up
to $10,000,000.

          The federal sentencing guidelines (the "Guidelines") adopted by the
United States Sentencing Commission in 1987, which are designed to eliminate
disparity in the federal criminal sentencing process, have largely eliminated a
judge's discretion in imposing sentence. Under the Guidelines for the sentencing
of individuals, first offenders, individuals with no prior criminal record,
often go to jail instead of merely being required to pay restitution and a fine,
and serve a term of probation. The Commission has also issued Guidelines which
apply to the sentencing or corporations. Under the corporate sentencing
guidelines, antitrust offenses are treated differently than other criminal
offenses. Specifically, the fine for antitrust offenses is determined by the
volume of commerce attributable to the defendant, i.e., Wellco's volume of
commerce in goods. The mandatory minimum fine is, in no event, less than
$100,000 for organizations and $20,000 for individuals.

         In addition to these criminal penalties, Wellco may be subjected to
civil suits for money damages. Customers and competitors injured as a result of
an antitrust violation are entitled to recover up to three times their damages
and reasonable attorney's fees from the violator. Moreover, the cost of
defending against an antitrust case can be enormous. Wellco employees are
expected to take every possible precaution to avoid even the appearance of
having violated the antitrust laws.

         II.      ANTI-FRAUD LAWS
                  ---------------
Since Wellco bids on and performs federal contracts, Company employees must
comply with the federal anti- fraud laws relating to government procurements.
The major federal criminal anti-fraud laws that apply to companies performing
contracts pursuant to federally funded programs include:

            o     The False Statements Act -- Prohibits the knowing submission,
                  or causing the knowing submission, of a false statement to a
                  public or private entity administering a federally funded
                  program.

            o     The False Claims Act -- Prohibits the knowing submission, or
                  causing the knowing submission, of a false, fraudulent or
                  fictitious claim (usually for payment) against the United



<PAGE>



                  States or any public or private entity administering a federal
                  program.

            o     The Truth in Negotiations Act -- Prohibits the submission of
                  incomplete, inaccurate or noncurrent cost or pricing data
                  under certain federal contracts; and

            o     The Conspiracy statute -- Prohibits an agreement to commit a
                  federal crime, to cheat the federal government out of money or
                  property, or to interfere with a federal government program by
                  deceitful or dishonest means.

         A.      The False Statements and False Claims Statutes
                 ----------------------------------------------
         A false "statement" under the False Statements Act includes any oral
statement or written assertion, including a signature on a form. Accordingly, it
is Wellco's policy that any invoice, statement of billable work, certification
or other document submitted by the Company or its employees to any government
customer be entirely accurate and truthful.

         The criminal False Statements Act and False Claims Acts are quite
similar, and the same conduct often violates both statutes. Thus, signing a form
which represents that a product meets government specifications when, in truth,
it does not, could violate the criminal False Statements Act if the product did
not meet the specifications and the individual who certified knew it didn't. If
the representation is made in connection with a request for payment, the
employee involved and the Company would also be subject to criminal charges
under the criminal False Claims Act.

          EXAMPLE: Manufacturer A is required under its contract with the DOD to
          test the sole of its NBN boot to ensure that it will perform under
          certain conditions. A sends some boots to an independent laboratory
          for testing and gets back unfavorable test results. Because A believes
          its boot is really a good product and will hold up during combat, A
          falsifies the test results to make it appear that the boots passed the
          test. Each invoice for the defective boots will be charged as a
          separate false claim under the criminal False Claims Act and A's
          conduct also Violates the False Statements Act. If convicted,
          manufacturer A and any employee who falsified the test results will be
          subject to a substantial fine and jail respectively, and will both be
          barred from receiving any new government contracts for a period of up
          to three years.

          EXAMPLE: Company A's contract with DOD requires the use of a
          particular type of rubber which is highly durable on the heel of the
          NBN boot ("Super Rubber"). Manufacturer A is unable to obtain Super
          Rubber in time to meet the contract's performance schedule, so Mr. X,
          the President of Manufacturer A, asks the DOD Quality Assurance
          Representative ("QAR"), Mr. Y, to accept nonconforming boots with
          heels made of another type of rubber ("Replacement Rubber"). Although
          Mr. X knows that this other type of rubber is not as durable as "Super
          Rubber" and that the heels on the boots will likely wear down in 2-3
          months, rather than 12-18 months, if Replacement Rubber is used in
          place of "Super Rubber", he tells Mr. Y that Replacement Rubber is
          just as durable as "Super Rubber" The DOD relies upon this oral
          statement and accepts 10,000 pairs of nonconforming boots from Company
          A. Within 3 months after the boots are distributed to recruits, the
          heels must all be replaced at a substantial cost to the government. As
          a result of Mr. X's false oral statement, he and Company A will be
          subject to criminal and civil penalties under the False Statements Act
          and debarment from government contracting under the False Statements
          Act.



<PAGE>




         o     Independent Pricing Certifications
               ----------------------------------
         Wellco employees should also be aware that bid rigging, which was
discussed on Page 5 in Section I.E above, violates not only the antitrust laws,
but also the anti-fraud laws, including the False Statements Act. Specifically,
government regulations require companies bidding on DOD contracts to certify
that they have arrived at prices independently and have not:

           o     consulted, communicated or agreed with any other competitor
                 relating to its prices;

           o     unlawfully disclosed its prices to any competitor, or

           o     attempted to induce any competitor not to submit an offer.

          Under these regulations, a false certification that a company has not
discussed prices with a competitor when, in fact, such a discussion has
occurred, constitutes a violation of the False Statements Act. Moreover,
communications between competitors that fall short of violating the antitrust
laws may nonetheless violate the False Statements Act or other anti-fraud laws.
Thus, Wellco's policy is to refrain from having any communications with
competitors about prices, bids or costs on any solicitation or IFB which the
company may submit a bid or offer on.

           B.    The Truth In Negotiations Act
                 -----------------------------
         The Truth in Negotiations Act is a narrower anti-fraud law because it
only applies to misrepresentations regarding "cost and pricing data" in
negotiated government procurements with a value greater than $500,000, excluding
those procurements which are exempt because competition or some other factor
guarantees the Government a fair price. The Act also applies to changes over
$500 ,000 under all government contracts. The Truth in Negotiations Act requires
that, where such information is required, all facts which would have a
significant effect on the cost or price of a federal contract be disclosed and
be accurate, complete and current. The "knowing" submission of defective cost or
pricing data can violate both the criminal False Statements Act and the criminal
and civil False Claims Acts.

         Also, submission of cost or pricing data during the bidding process for
a negotiated contract that is incomplete, inaccurate or not current will result
in a reduction in the money paid by Wellco, regardless of fault, intent or
knowledge.




<PAGE>



           C.    Conspiracy Statute
                 ------------------
         The conspiracy statute applies whenever two or more people form an
agreement to commit a federal crime or defraud the federal government, and do
something, i.e., perform an act, to attempt to achieve the objective of the
agreement. Prosecutors tend to use the conspiracy statute to charge all of the
individuals involved in another federal crime.

         EXAMPLE: X, Y and Z, all employees of A, discuss the fact that A has
         used materials of foreign origin to produce its NBN boot, but decide to
         certify to the Government that the boots are made entirely of U.S.
         origin materials in connection with a request for payment. X, Y, Z and
         Company A are likely to be charged not only with causing the submission
         of false claims and statements to the government, but also with
         conspiring to do so.

           D.    Consequences of Violating The Anti-Fraud  Laws
                 ----------------------------------------------

       o      Criminal Penalties
              ------------------
         Like the antitrust laws, a violation of the anti-fraud laws has three
kinds of adverse consequences for Wellco and its employees: (1) criminal
penalties, namely, restitution, imprisonment and fines; (2) a civil suit for
money damages and civil penalties; and (3) being suspended or debarred from
receiving federal contracts.

         The criminal penalties are: employees may be imprisoned for as much as
five years, ordered to make restitution and fined up to $250,000, while the
Company may be ordered to make restitution and fined up to twice the gross gain
or gross loss resulting from the violation or $1,000,000, whichever is higher.

       o     Civil False Claims Act And Other Civil Remedies
             -----------------------------------------------
         In addition, Wellco may be sued by the federal government under the
civil False Claims Act, which provides for the recovery of treble damages and a
civil penalty of between $5,000 and $10,000 for each false claim. The major
differences between the civil and criminal false claims statutes are that the
Government doesn't need to prove that the defendant knew the claim was false to
establish liability under the civil statute. Reckless conduct or conduct done in
deliberate ignorance of the truth violates the civil False Claims Act and
exposes the individual involved and the Company to substantial civil fines.

       o      Suspension/Debarment of the Company and Individuals
              ---------------------------------------------------
         As with the antitrust laws, Wellco may be barred on receiving any
federal contracts for up to three years as a result of a violation of the civil
or criminal anti-fraud statutes. Employees or officers of Wellco may also be
debarred or suspended from government contracting as a result of a violation of
the civil or criminal anti-fraud statutes.  Individuals who are debarred or



<PAGE>



suspended may not be awarded  government  contracts or subcontracts and are also
precluded from conducting  business with the Government or acting as an agent or
representative of another contractor.

       o      Withholding Contract Funds Or Cancelling Contracts
              --------------------------------------------------
          The Government may also exercise its authority to withhold contract
payments or terminate contracts based upon a reasonable suspicion of fraud in
connection with a contract (even assuming the Government has already accepted
goods or services under the contract).

III.     BRIBERY, GRATUITIES AND KICKBACKS
         ---------------------------------
         Government contractors are subject to anti-bribery, anti-gratuity and
anti-kickback statutes which do not apply in a purely commercial setting.

         A.    The Anti-Kickback Statute
               -------------------------
         The Anti-Kickback Act of 1986, 41 U.S.C. ss.ss. 51 - 58, prohibits
prime contractors, like Wellco, from soliciting, accepting or attempting to
accept a kickback, i.e., anything of value or compensation of any kind, from a
subcontractor or supplier which was provided for the purpose of rewarding
favorable treatment in connection with the subcontract. Similarly, the Act
prohibits subcontractors from offering or providing, or attempting to offer or
provide, a kickback to any prime contractor for the purpose of improperly
obtaining favorable treatment in connection with a contract or subcontract.

          EXAMPLE: Subcontractor B, a supplier of Leather, which is used to
          manufacture the NBN boot, provides prime contractor A with payments
          totaling 2% of the total contract price to reward Contractor A for
          awarding the subcontract to B. Companies A and B and any employees
          involved in the scheme have violated the Anti-Kickback Statute. If
          convicted, the employees will, spend up to 10 years in jail and pay a
          large fine. The Company will pay a substantial fine and more than
          likely be barred from contracting with the Government.

          The Act requires Wellco to promptly report any violations to the
appropriate federal authorities. Accordingly, as with any other violation of
Wellco's Code of Conduct, Wellco employees are required to immediately report
any violation or potential violation of the Anti-Kickback Act to President David
Lutz or Wellco's legal counsel, Richard A. Wood, Jr. of McGuire, Wood &
Bissette, P.A., attorneys in Asheville, North Carolina, at (828) 254-8800.

         The criminal penalty for violating the Anti-Kickback Act is a fine of
up to $1,000,000 for individuals and $1,000,000 for corporations and up to 10



<PAGE>



years  imprisonment The Government can also recover civil penalties in two times
the amount of the kickback and $10,000 for each occurrence of a kickback.

         B.    Bribery and Gratuities
               ----------------------
         The federal bribery statute prohibits Wellco or its employees from
directly or indirectly offering, promising or giving anything of value to any
public official in order to influence an official act of such public official,
In order to establish a violation of the bribery statute there must be a "quid
pro quo" for the bribe, i.e., there must be a connection between the thing of
value offered or received by the public official and the official act.

         In contrast, the gratuities statute, which also prohibits offering or
giving gifts to public officials, does not require that the gift be given or
offered in connection with an official act. Thus, giving or offering to give a
public official anything of value for the performance of their normal duties
violates the gratuities statute.

         EXAMPLE: Mr. X, an employee of Company A, wants the Department of
         Defense to issue a solicitation for the procurement of 200,000 pairs of
         NBN boots so that Company D will be able to compete for the procurement
         and, perhaps, obtain a new contract. He discusses the matter with Mr.
         Y, a contracting officer, over dinner and picks up the tab. One week
         later, he sends Mr. Y tickets to a professional baseball game.
         Irrespective of whether the DOD ever issues the solicitation,
         manufacturer A, Mr. X and Mr. Y may have violated the gratuities
         statute. If Manufacturer A provided the gifts to Mr. X as a "quid pro
         quo' for Mr. Y's recommendation that a new solicitation be issued, then
         Manufacturer A also violated the bribery statute.

         EXAMPLE: Mr. X, an employee of Company B, gives Mr. Y, a Department of
         Defense employee and the quality assurance representative ('QAR") on
         Company B's contract to manufacture combat boots, $50 each time Mr. Y
         visits Company B's plant to inspect the boots being produced under the
         contract. Mr. X, and perhaps Company B, have violated the gratuities
         statute, irrespective of whether Mr. X is providing Mr. Y with the cash
         payments in exchange for a favorable quality rating. Assuming Mr. X
         provided the cash as a "quid pro quo" for Mr. Y's favorable quality
         rating, then Mr. X and Company B may have also violated the bribery
         statute.

         Wellco's policy is that its employees should not give, offer or discuss
offering, a gift, favor, entertainment, transportation, loan, hospitality,
further employment with Wellco, or any other tangible or intangible thing to any
government employee which is prohibited by the Procurement Integrity Act and
regulations promulgated thereunder. Gifts include any gratuity, favor, discount,
entertainment, hospitality, loan, forbearance, or other item having monetary
value, and includes gifts of transportation, local travel, lodgings and meals.



<PAGE>



         However, these regulations do permit federal government employees to
accept unsolicited gifts with a market value of $20.00 or less per occasion,
provided that the aggregate market value of the individual gifts given to any
one federal government employee in a calendar year does not exceed $50.00. These
dollar limits are applied to the corporation as a whole. Any gifts from our
employees will be aggregated for purposes of the $50.00 calendar year limit.
This does not apply to gifts of cash or of investment interests such as stocks,
bonds or certificates of deposit. However, competing contractors are prohibited
from providing gifts in excess of $10.00 to procurement officials during the
conduct of a federal procurement, The term gift does not include: modest items
of food and refreshments (coffee, soft drinks, etc.); greeting cards, plaques
and certificates; and favorable rates and commercial discounts available to the
public or to all Government employees or all uniformed military personnel.

         If you encounter any situation in which you are in doubt as to its
being an improper gratuity, gift, etc., you should immediately contact Wellco
President David Lutz who will advise you. If for any reason you do not want to
contact the President you should call Wellco's legal counsel, Richard A. Wood,
Jr. of McGuire, Wood & Bissette, P.A., attorneys in Asheville, North Carolina,
at (828) 254-8800.

IV.      CONFLICTS OF INTEREST
         ---------------------

         Wellco employees should avoid any personal, financial or business
relationship that could cause any conflict or interest with their positions and
duties at the Company. A conflict of interest exists when there is a conflict
between your private interests and your responsibilities as a Wellco employee.

         For example, Wellco employees should not:

         o Place Wellco business of any kind with a supplier owned or controlled
by an employee or a member of his/her household or a close relative, unless such
placement was the result of open competitive bidding in accordance with

                                                            -31-

<PAGE>



established Company procurement procedures.

         o Work part-time for, or serve as a consultant to, a Wellco customer,
supplier, or competitor with or without compensation, unless previously
consented to by Wellco in writing.

          o Accept a loan, guarantee for a loan, payment or service, excessive
entertainment, travel or a gift of more than nominal value from any individual
or firm which does or seeks to do business with Wellco.

          o Acquire or sell any Wellco products, property or services in
exchange for direct or indirect compensation to an employee of Wellco or a
member of the employee's family.

          o Become employed by any competitor while remaining under the
employment of Wellco.

          o Use Wellco or client equipment, materials, resources or "inside"
information for outside work.

          o Solicit business or clients, or perform outside work, on Wellco
premises.

          o Do business with a company merely because that company employs a
relation or acquaintance.

         Wellco employees are required to notify President David Lutz or
Wellco's legal counsel, Richard A. Wood, Jr. of McGuire, Wood & Bissette, P.A.,
attorneys in Asheville, North Carolina, at (828) 254-8800 of any present or
potential conflict of interest involving themselves or any other Wellco
employee.

         o        Improper Use of Proprietary Information
                  ---------------------------------------
         Wellco employees are prohibited from disclosing, or making improper use
of, Wellco's confidential or proprietary information to anyone outside of the
Company during or after their employment. Wellco's confidential or proprietary
information includes any information which is not generally disclosed to the
public and which is useful or helpful to Wellco and/or which would be useful or
helpful to Wellco's competitors. Examples include financial data, sales figures,
planned new products, methods of manufacturing, lists of suppliers or customers,
wage and salary data and suppliers' pricing information. Wellco will take
disciplinary and/or legal action against any employee who violates Wellco's ban
on the disclosure or improper use of the Company's confidential or proprietary
information.
         o        Protection and Proper Use of Corporate Assets
                  ---------------------------------------------
         Employees should seek to protect the Company's assets. Theft,
carelessness and waste have a direct impact on the Company's financial
performance. Employees, officers and directors must use the Company's assets and
services solely for legitimate business purposes of the Company and not for any
personal benefit or the personal benefit of anyone else.



<PAGE>



         Employees must advance the Company's legitimate interests when the
opportunity to do so arises. You must not take for yourself personal
opportunities that are discovered through your position with the Company or the
use of property or information of the Company.

V.       THE PROCUREMENT INTEGRITY PROVISIONS
         ------------------------------------

         The Procurement Integrity statute and the regulations promulgated
thereunder generally parrot other federal criminal statutes, such as the
anti-bribery and anti-gratuity statutes, which are discussed above, but
specifically prohibit certain conduct during a federal procurement of property
or services, namely: (1) discussing any future employment or business
opportunities with certain procurement officials; (2) offering, giving or
promising to offer or give anything of value to certain procurement officials;
and (3) asking for, obtaining or disclosing certain "proprietary" or "source
selection" information regarding a procurement.

         In order to avoid violations of the Procurement Integrity Act, it is
Wellco's policy to preclude any employee from discussing future employment with
the Company with any federal employee. Additionally, no Wellco employee should
ever obtain, or seek to obtain, any information which is marked "proprietary" or
any information developed or prepared by the federal government in connection
with a federal procurement where disclosure would jeopardize the integrity of
the procurement or which is required to be kept secret, including:

          o     Proposed prices or costs;

          o     Federal agency source selection or technical evaluation plans;

          o     Federal agency technical cost or price evaluations;

          o     Federal agency determinations of competitive offers;

          o     Federal agency rankings of offerors;

          o     Reports of any panels or boards used by federal agencies in the
                selection of the winning contractor, and

          o     Any document marked as "SOURCE SELECTION INFORMATION - SEE FAR
                3.104."



<PAGE>



         Like the anti-fraud statues, a violation of the Procurement Integrity
provisions subjects Wellco and any involved employee to a variety of potential
contractual, administrative, civil and criminal penalties.

VI.      INSIDER TRADING
         ---------------
         It is a violation of the insider trading statute and Company policy for
any individual to profit from non-public information relating to Wellco or any
other company we do business with.

          o Employees in possession of non-public material information about
Wellco may not disclose the information to any individual not employed by the
Company unless it is in the course of performing their corporate duties. The
term "material" information means any information about the Company, which has
not yet become public knowledge, but which, if publicly known, could reasonably
be expected to either affect the price of the Company's stock, or would likely
be considered important by a reasonable investor.

          o Employees in possession of non-public material information
concerning Wellco are prohibited from purchasing or selling any of the Company's
securities. They are also prohibited from buying or selling any of the Company's
securities for a period of forty-eight (48) hours after general publication of
the material information in a national financial medium. Similarly, employees in
possession or inside or unpublished information about any of our suppliers,
customers, or any company we do business with may not purchase or sell the
securities of those companies.

         o Employees with supervisory responsibilities may also be liable for
violating the insider trading statute as "controlling persons" if they fail to
take appropriate action when they either know or should have known that other
employees under their supervision were violating the statute. Thus, employees
with supervisory responsibilities should immediately report any suspected
violation of the company's policy against insider trading to President David
Lutz or Wellco's legal counsel, Richard A. Wood, Jr. of McGuire, Wood &
Bissette, P.A., attorneys in Asheville, North Carolina, at (828) 254-8800.

          o Employees are prohibited from trading in the Company's securities
or the securities of any other company in a way which attempts to hide the true
identity of the trader or to mislead others as to exactly who is doing the
trading. No Company employee should trade in Wellco's securities using a
fictitious name, or the name of a relative or friend, or establish brokerage
accounts under fictitious names.

VII.     THE FOREIGN CORRUPT PRACTICES ACT
         ---------------------------------



<PAGE>




         o     Summary of the Foreign Corrupt Practices Act
               --------------------------------------------

         Because of the possibility that Wellco may be involved in selling boots
to foreign countries and firms, all Company employees must be aware of the
prohibitions set forth in the Foreign Corrupt Practices Act. The most important
provision in the Foreign Corrupt Practices Act prohibits the bribing of foreign
government officials.

         Specifically, the Foreign Corrupt Practices Act prohibits American
companies or individuals from making payments, or offering to make payments,
either directly or indirectly, to any foreign government official for the
purpose of obtaining business for the Company. The Foreign Corrupt Practices Act
is violated where an employee knows that some part of a payment is intended to
corruptly influence a foreign government official to assist the Company in
obtaining business. This prohibition includes payments to agents who in turn pay
money to foreign government officials.

         The Foreign Corrupt Practices Act is violated even if the payer of the
money does not actually know for a fact that the money will be corruptly given
to a foreign government official; reckless indifference is enough. An employee
cannot bury his or her head in the sand and hope that the money will not be used
to bribe a foreign official.

          Payments made to merely expedite routine foreign government actions do
not violate the Foreign Corrupt Practices Act, although actions to award
contracts are not ever considered to be "routine" actions.

         o     Consequences of Violating the Foreign Corrupt Practices Act.
               ------------------------------------------------------------

         A violation of the Foreign Corrupt Practices Act can lead to both
criminal and civil liability for both the Company and the individual. Individual
employees can be imprisoned for up to five years and be fined up to $100,000.00.
The Company can be fined $2,000,000. A civil action can also be brought against
the Company and/or its employees.

         o     The Company's Policy Regarding Payments to Foreign Officials.
                  ------------------------------------------------------------
         As is the case with gifts or payments to U.S. government employees,
Wellco wishes to avoid any possibility that the actions of its employees will be
misconstrued as violating the Foreign Corrupt Practices Act. Consequently, any
such payments are flatly forbidden. Additionally, because actual knowledge is
not required to violate the Act, employees involved with payments going to
foreign countries should attempt to account for the destination and the purpose



<PAGE>



of all such payments; employees should be vigilant regarding any indications of
improper or illegal uses of the Company's money and report any such violations
to President David Lutz or Wellco's legal counsel, Richard A. Wood, Jr. of
McGuire, Wood & Bissette, P.A., attorneys in Asheville, North Carolina, at (828)
 254-8800.

VIII.            DRUG-FREE WORKPLACE
                 -------------------
         Wellco is committed to ensuring that its workplace is completely
drug-free, for the health, safety and efficiency of its employees and to qualify
as a "responsible source" for federal contracting. The Company's failure to
adhere to the requirements of the Drug-Free Workplace statute could result in
debarment from government contracting for a period of five years. It is
therefore the Company's policy that the unlawful manufacture, distribution,
dispensing, possession or use of a controlled substance in Wellco's workplace by
any employee is prohibited.

         The term "controlled substance" means a controlled substance listed in
Schedules I through V of Section 202 of the Controlled Substances Act (the
"CSA"), 21 U.S.C. ss.812, and further defined in regulations implementing the
CSA, 21 C.F.R. ss.ss.1308.11 - 1308.15, copies of which are available from
Personnel Director Linda Webb.

         Wellco will periodically inform its employees about: (1) the dangers of
drug abuse in the workplace; (2) Wellco's policy of maintaining a drug-free
workplace; (3) drug counseling, rehabilitation, and employee assistance programs
available to employees; and (4) the disciplinary action which will be taken
against employees who violate Wellco's drug-free workplace policy.








<PAGE>



         Any employee convicted of a drug offense which occurred in Wellco's
workplace must notify personnel Director Linda Webb in writing of the conviction
within five (5) days after such conviction. Written notice of such conviction
will then be provided by Wellco to the appropriate contracting officials within
ten (10) days after receiving such notice from an employee or actual notice of a
conviction.

         The term "conviction" is defined in the regulations implementing the
Drug-Free Workplace Act as "a finding of guilt (including a plea of nolo
contendere) or imposition of sentence, or both, by any judicial body charged
with the responsibility to determine violations of the Federal or State criminal
drug statutes."

          A "criminal drug statute" is any federal, state or local criminal
statute involving the manufacture, distribution, dispensing, possession, or use
of any controlled substance.

          The Company will take disciplinary action, including terminating the
employment of any Wellco employee convicted of a drug offense in the workplace,
within thirty (30) days after receiving notice of such conviction.

IX.       HARASSMENT
          ----------
          All Wellco employees are expected to promote a harassment-free
workplace.

          It is illegal to harass others on the basis of their sex, age over 40,
race, color, national origin, religion, marital status, citizenship, disability
and other personal characteristics. Harassment includes making derogatory
remarks about such characteristics, making "jokes" about ethnic or other groups,
and other verbal, physical and visual behavior.

          Sexual harassment is also prohibited. It is illegal and against the
policy of Wellco for any worker, male or female, to harass another worker by:
performing sexual acts, unwelcome sexual advances or other verbal or physical
conduct of a sexual nature as a condition of any worker's employment; using a
worker's submission to or rejection of such conduct as the basis for, or as a
factor in, any employment decision affecting the individual; or otherwise
creating an intimidating hostile, or offensive working environment by such
conduct.

          The creation of an intimidating, hostile, or offensive working
environment may include such actions as persistent comments on a worker's sexual
preferences or the display of obscene or sexually oriented photographs or
drawings. However, conduct or actions that arise out of a personal or social
relationship and that are not intended to have a discriminatory employment



<PAGE>



effect may not be viewed as harassment. The employer will determine whether such
conduct constitutes sexual harassment, based on a review of the facts and
circumstances of each situation.

          Wellco will not condone any sexual harassment of its employees. All
workers, including supervisors and managers, will be subject to severe
discipline, up to and including discharge, for any act of sexual harassment they
commit.
          An employee who feels victimized by harassment, sexual or otherwise,
should speak first with his or her immediate supervisor (unless it is felt that
the supervisor participated in or condoned this harassment), to Wellco's local
legal counsel, Amelia Fortuno-Ruiz of Martinez Odell & Calabria in San Juan,
Puerto Rico, at (787) 753-8914, if employed in Puerto Rico, or lastly to Wellco
President David Lutz or Wellco's legal counsel, Richard A. Wood, Jr. of McGuire,
Wood & Bissette, P.A., attorneys in Asheville, North Carolina, at (828)
254-8800.

X.        SARBANES-OXLEY AND AMEX REQUIREMENTS
          ------------------------------------
          As discussed in the Introduction, as the result of enactment in 2002,
the "Sarbanes-Oxley" legislation and resulting new requirements imposed by the
AMEX for issuers such as Wellco as a condition to having its stock listed and
traded on the AMEX, certain new rules are applicable with reference to any
questionable accounting, internal controls and auditing matters. As a result,
there is a special opportunity on a confidential anonymous basis for any
employee to report violations or concerns as to such matters. In these instances
only, employees should report such concerns by the procedure described on page
22 of this Code.

          It is the responsibility of the Company's President, as Chief
Financial Officer, to furnish a full, fair, accurate, timely, and understandable
disclosure in reports and documents that the Company files with, or submits to,
the Securities & Exchange Commission and in other public communications made by
the Company.

XI.      PROCEDURES FOR IMPLEMENTING AND ENFORCING THE STANDARDS
         -------------------------------------------------------
         Every Wellco employee covered by this Code is responsible for reading,
understanding and complying with this Code. In June of each year, Wellco
employees covered by this Code will be required to sign the form attached hereto
certifying that they have read, understand and will comply with the Code and
that they have reported any potential violations of the Code by the procedures



<PAGE>



discussed below.

          o     Reporting Violations of the Code
                --------------------------------
          All Wellco employees are required to report any violation of the Code
discussed in Items I through IX of the Code above to President David Lutz or if
an employee prefers in a particular instance Wellco's legal counsel, Richard A.
Wood, Jr., of McGuire, Wood & Bissette, P.A., attorneys in Asheville, North
Carolina [(828) 254-8800;  P. 0.  Box 3180,  Asheville,  NC    28802].1

          As to accounting and auditing practices of the Company discussed in
Item X above, employees are required to report violations or concerns as to such
practices on a confidential anonymous basis by contacting Wellco's legal
counsel, Richard A. Wood, Jr. of McGuire, Wood & Bissette, P.A., attorneys in
Asheville, North Carolina, at 1 (866) 706-5005, who will communicate your
concerns directly to the Chairman of the Audit Committee of the Board of
Directors.

          President David Lutz is annually required by Resolution of the
Company's Board of Directors to report compliance by employees with this Code of
Conduct to the Audit Committee of the Board of Directors. Any waivers of this
Code of Conduct must be approved by Wellco's Board of Directors and disclosed in
an SEC Form 8-K within five days after such waiver.

          Employees who intentionally fail to report a violation of the Code
will be subject to disciplinary action. No employee will be retaliated against,
directly or indirectly, for reporting a violation of the Code or of any federal,
state or local law governing the Company's business conduct. Employees who
violate the Company's policy against retaliation, or encourage others to do so,
will be subject to disciplinary action.

          o       Employee Training
                  -----------------
          In order to assist employees with understanding the laws described in
this Code, Wellco will periodically conduct employee training sessions.

          o       Cooperating with the Government
                  -------------------------------

          Wellco's policy is to cooperate with federal, state and local
investigators seeking information about the Company for purposes of enforcing
the laws and regulations under their jurisdiction. At the same time, the Company

1 Any written request to legal counsel for guidance should bear the following
entry at the top of the first page: "Privileged & Confidential," and the words
"Attorney-Client Communication" just underneath such entry. These entries are
needed to ensure the application of the Company's Attorney-Client privilege.



<PAGE>



and its employees are entitled to the safeguards applicable to any
person involved in an investigation, including representation by counsel.
Accordingly, if you are contacted (in writing or personally) by any federal,
state or local government investigator regarding an interview or access to any
company documents or information, you should immediately refer the matter to
President David Lutz or Wellco's legal counsel, Richard A. Wood, Jr. of McGuire,
Wood & Bissette, P.A., attorneys in Asheville, North Carolina, at (828)
254-8800.

          Should the Government undertake an investigation of Wellco or its
employees the manner in which the Company conducts itself during the course of
such an investigation is very important. Under the supervision of Wellco's
attorney, Company employees should cooperate fully with the government official
conducting the investigation.

          No Wellco employee should ever:

          o Destroy any Company documents in anticipation of a request for those
documents from any government agency or a court.

          o Lie or make any misleading statements to any government
investigator.

          o Attempt to cause any other Company employee or any other person, to
fail to provide information to any government investigator or to provide any
false or misleading information.

          o Disciplinary Actions
            --------------------
         An employee's failure to comply with this Code of Conduct may result in
disciplinary action, including reprimand, probation, suspension, salary
reduction or termination of employment. Additionally, the Company may refer the
matter to the Government for criminal investigation and prosecution, and/or seek
reimbursement from the employee for any losses or damages resulting from the
violation.

CONCLUSION
----------
          Given its importance, all Wellco employees should view understanding
and complying with this Code as an essential part of their overall
responsibilities to the Company.

<PAGE>




                                                                 Exhibit 21

                            WELLCO ENTERPRISES, INC.
                         SUBSIDIARIES OF THE REGISTRANT


                                                            Percentage of Voting
                              Jurisdiction of                Securities Owned by
Name of Company                 Incorporation                   Immediate Parent
--------------------------------------------------------------------------------
Wellco Enterprises, Inc.       North Carolina                         Registrant
--------------------------------------------------------------------------------
Wholly-Owned Subsidiaries:
--------------------------------------------------------------------------------
Ro-Search, Incorporated        North Carolina                           100%
--------------------------------------------------------------------------------
Mo-Ka Shoe Corporation                Delaware                          100%
--------------------------------------------------------------------------------

All  of  the  Registrant's   wholly-owned   subsidiaries  are  included  in  the
consolidated financial statements.











                                      -17-

<PAGE>

<PAGE>



                                                                   Exhibit 23

                            WELLCO ENTERPRISES, INC.
                         CONSENT OF INDEPENDENT AUDITORS

          We consent to the incorporation by reference Registration Statement
No. 1-333-72824 of Wellco Enterprises, Inc. on Form S-8 of our report dated
September 22, 2004  appearing in this Annual Report on Form 10-K of Wellco
Enterprises, Inc. for the fiscal year ended July 3, 2004.



          DIXON HUGHES PLLC

          Asheville, North Carolina
          September 27, 2004












                                      -18-

<PAGE>



                                                                  Exhibit 23


                         INDEPENDENT AUDITORS' CONSENT


We consent to the  incorporation by reference in the  Registration  Statement of
Wellco  Enterprises,  Inc.and  subsidiaries  on Form S-8 (No.  333-72824) of our
report dated  October 14, 2002,  appearing in the Annual  Report on Form 10-K of
Wellco  Enterprises,  Inc.  and  subsidiaries  for the fiscal year ended July 3,
2004.



          DELOITTE & TOUCHE LLP
          Charlotte, North Carolina

          October 1, 2004






                                      -19-




                                                                    Exhibit 31

                            WELLCO ENTERPRISES, INC.
                FORM 10-K FOR THE FISCAL YEAR ENDED JULY 3, 2004
              CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
           18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302
                        OF THE SARBANES-OXLEY ACT OF 2002

          I, David Lutz, certify that:

          1.      I have reviewed this annual report on Form 10-K of Wellco
                  Enterprises, Inc.(the registrant);

          2.      Based on my knowledge, this annual report does not contain any
                  untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  annual report;

          3       Based on my knowledge, the financial statements, and other
                  financial information included in this annual report, fairly
                  present in all material respects the financial condition,
                  results of operations and cash flows of the registrant as of,
                  and for, the periods presented in this annual report;

          4.      The registrant's other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-15(e) and 15d- 15(e)) for the registrant and have:

                           (a) Designed such disclosure controls and procedures,
                           or caused such disclosure controls and procedures to
                           be designed under our supervision, to ensure that
                           material information relating to the registrant,
                           including its consolidated subsidiaries, is made
                           known to us by others within those entities,
                           particularly during the period in which this report
                           is being prepared;

                           (b) Evaluated the effectiveness of the registrant's
                           disclosure controls and procedures and presented in
                           this report our conclusions about the effectiveness
                           of the disclosure controls and procedures, as of the
                           end of the period covered by this report based on
                           such evaluation; and

                           (c) Disclosed in this report any change in the
                           registrant's internal controls over financial
                           reporting that occurred during the registrant's
                           fourth fiscal quarter that has materially affected,
                           or is reasonably likely to materially affect, the
                           registrant's internal control over financial
                           reporting; and

          5.      The registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation of internal
                  control over financial reporting, to the registrant's auditors
                  and the audit committee of the registrant's board of directors
                  (or persons performing the equivalent functions):

                           (a) All significant deficiencies and material
                           weaknesses in the design or operation of internal
                           control over financial reporting which are reasonably
                           likely to adversely affect the registrant's ability
                           to record, process, summarize and report financial
                           information; and

                                      -20-

<PAGE>



                           (b) Any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal control over
                           financial reporting.


                  Date: October 1, 2004


                  /s/ David Lutz
                  ------------------------------------------------------
                  By: David Lutz, Chief Executive Officer and President
                  (Chief Executive Officer)









                                      -21-

<PAGE>





                                                                   Exhibit 31

                            WELLCO ENTERPRISES, INC.
                FORM 10-K FOR THE FISCAL YEAR ENDED JULY 3, 2004
              CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
   18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-
                                OXLEY ACT OF 2002

          I, Tammy Francis, certify that:

          1.      I have reviewed this annual report on Form 10-K of Wellco
                  Enterprises, Inc.(the registrant);

          2.      Based on my knowledge, this annual report does not contain any
                  untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  annual report;

          3.      Based on my knowledge, the financial statements, and other
                  financial information included in this annual report, fairly
                  present in all material respects the financial condition,
                  results of operations and cash flows of the registrant as of,
                  and for, the periods presented in this annual report;

          4.      The registrant's other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-15(e) and 15d- 15(e)) for the registrant and have:

                           (a) Designed such disclosure controls and procedures,
                           or caused such disclosure controls and procedures to
                           be designed under our supervision, to ensure that
                           material information relating to the registrant,
                           including its consolidated subsidiaries, is made
                           known to us by others within those entities,
                           particularly during the period in which this report
                           is being prepared;

                           (b) Evaluated the effectiveness of the registrant's
                           disclosure controls and procedures and presented in
                           this report our conclusions about the effectiveness
                           of the disclosure controls and procedures, as of the
                           end of the period covered by this report based on
                           such evaluation; and

                           (c) Disclosed in this report any change in the
                           registrant's internal controls over financial
                           reporting that occurred during the registrant's
                           fourth fiscal quarter that has materially affected,
                           or is reasonably likely to materially affect, the
                           registrant's internal control over financial
                           reporting; and

          5.      The registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation of internal
                  control over financial reporting, to the registrant's auditors
                  and the audit committee of the registrant's board of directors
                  (or persons performing the equivalent functions):

                           (a) All significant deficiencies and material
                           weaknesses in the design or operation of internal
                           control over financial reporting which are reasonably
                           likely to adversely affect the registrant's ability
                           to record, process, summarize and report financial
                           information;

                                      -22-

<PAGE>



                           and

                           (b) Any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal control over
                           financial reporting.

          Date: October 1, 2004

          /s/ Tammy Francis
          -------------------------------------------
          By: Tammy Francis, Controller and Treasurer
           (Chief Financial Officer)

                                      -23-

<PAGE>



                                                                   Exhibit 32

                            WELLCO ENTERPRISES, INC.
                FORM 10-K FOR THE FISCAL YEAR ENDED JULY 3, 2004
              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

          I, David Lutz, certify that:

1.        I am the chief executive officer of Wellco Enterprises, Inc.

2.        Attached to this certification is Form 10-K for the fiscal year ended
          July 3, 2004, a periodic report (the "periodic report") filed by the
          issuer with the Securities Exchange Commission pursuant to Section 13
          (a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange
          Act:), which contains financial statements.

3.       I hereby certify, pursuant to 18 U.S.C.  Section 1350, as adopted
         pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
                           o        the periodic report containing the financial
                                    statements fully complies with the
                                    requirements of Section 13(a) or 15(d) of
                                    the Exchange Act, and

                           o        the information in the periodic report
                                    fairly presents, in all material respects,
                                    the financial condition and results of
                                    operations of the issuer for the periods
                                    presented.


                  Date: October 1, 2004


                  /s/ David Lutz
                  ----------------------------------------------------
                  By: David Lutz, Chief Executive Officer and President
                  (Chief Executive Officer)

          A signed original of this written statement required by Section 906
has been provided to the Company and will be retained by Wellco Enterprises Inc.
and furnished to the Securities and Exchange Commission or its staff upon
request.
          This certification will not be deemed "filed" for purposes of Section
18 of the Securities Exchange Act of 1934, or otherwise subject to the liability
of that section. This certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934 even if the document with which it is submitted to the
Securities and Exchange Commission is so incorporated by reference.



                                      -24-

<PAGE>



                                                                   Exhibit 32

                            WELLCO ENTERPRISES, INC.
                FORM 10-K FOR THE FISCAL YEAR ENDED JULY 3, 2004
              CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
        18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
                           SARBANES-OXLEY ACT OF 2002

          I, Tammy Francis, certify that:

          1.      I am the chief financial officer of Wellco Enterprises, Inc.

          2.      Attached to this certification is Form 10-K for the fiscal
                  year ended July 3, 2004, a periodic report (the "periodic
                  report") filed by the issuer with the Securities Exchange
                  Commission pursuant to Section 13(a) or 15(d) of the
                  Securities Exchange Act of 1934 (the "Exchange Act:), which
                  contains financial statements.

          3.      I hereby certify, pursuant to 18 U.S.C. Section 1350, as
                  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002, that

                           o        the periodic report containing the financial
                                    statements fully complies with the
                                    requirements of Section 13(a) or 15(d) of
                                    the Exchange Act, and

                           o        the information in the periodic report
                                    fairly presents, in all material respects,
                                    the financial condition and results of
                                    operations of the issuer for the periods
                                    presented.

          Date: October 1, 2004


          /s/ Tammy Francis
          -------------------------------------------
          By: Tammy Francis, Controller and Treasurer
          (Chief Financial Officer)

          A signed original of this written statement required by Section 906
has been provided to the Company and will be retained by Wellco Enterprises Inc.
and furnished to the Securities and Exchange Commission or its staff upon
request.
          This certification will not be deemed "filed" for purposes of Section
18 of the Securities Exchange Act of 1934, or otherwise subject to the liability
of that section. This certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934 even if the document with which it is submitted to the
Securities and Exchange Commission is so incorporated by reference.

                                      -25-

<PAGE>



                                                                SCHEDULE II

             WELLCO ENTERPRISES, INC. AND WHOLLY-OWNED SUBSIDIARIES
    VALUATION ACCOUNTS FOR THE FISCAL YEARS ENDED JULY 3, 2004, JUNE 28, 2003
                                AND JUNE 29, 2002




                           Balance     Additions
                   at Beginning of     Charged to   Deductions           Balance
Description                   Year     Income (A)          (B)    at End of Year
--------------------------------------------------------------------------------
Allowance
for Doubtful
Accounts-
--------------------------------------------------------------------------------
     2004                 $28              10            1              $37
--------------------------------------------------------------------------------
     2003                 $28               3            3              $28
--------------------------------------------------------------------------------
     2002                 $28               1            1              $28
--------------------------------------------------------------------------------

    (A) Additions for allowance for doubtful accounts.
    (B) Write-off of uncollectible accounts.















                                      -26-

<PAGE>