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 June 28, 2003

                          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, 2003, 1,185,746 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, 2003) of Wellco
Enterprises, Inc. held by nonaffiliates was approximately $2,300,000.

Documents incorporated by reference:
         Definitive Proxy Statement, to be dated October 17, 2003, in PART IV.
         Form 8-K , dated March 17, 2003, in Item 4. 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 1, 1995, 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
($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.

For more than the last five years, the Company has manufactured and sold
military combat boots under firm fixed price contracts with DSCP. Boot products
are the general issue combat boot, the hot wet (jungle) boot and the hot dry
(desert) boot, all manufactured using the government specified Direct Molded
Sole (DMS) process and the Infantry Combat Boot (ICB). The Company has also
supplied the Intermediate Cold/Wet Boot (ICW) and anti-personnel mine protective
boots and overboots. The government awards fixed price boot contracts on the
basis of bids from several qualified U. S. manufacturers. The Company also sells
some of these same boot 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 2003 fiscal year was $823,000 ($0.68 diluted income per
share) compared to net income of $683,000 ($0.56 diluted income per share) for
the 2002 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
$4,852,000. 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. 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 44,000 more pairs of
combat boots than in the prior year. Also during the 2003 fiscal year, the
Company began shipping under a small contract with DSCP to supply the Extreme
Cold Weather (Mukluk) boots. Sales from this contract for the current year were
$1,467,000.

In fiscal 2003, 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 1970 and,
under the guidance of Accounting Principles Board Opinion No. 17, had not been
amortized.

                                       -1-

<PAGE>



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.

More information about these, and other events affecting Wellco's 2003 and 2002
operating results, are contained in the Management's Discussion and Analysis of
Results of Operations and Financial Condition section of the Company's 2003
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.

                                       -2-

<PAGE>




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
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. The Company
developed the desert combat boot, first used in Operation Desert Storm. In 1999
the Company completed a boot development research and development contract with
the U. S. Army that resulted in a 30% reduction in recruit lower extremity
injuries.

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
2003, 2002 and 2001 is $110,000, $180,000 and $98,000.

The Company's backlog of all sales, not including license fees and rentals, as
of August 31, 2003 was approximately $19,100,000 compared to $6,500,000 at
August 31, 2002. The Company estimates that substantially all of the current
year backlog will be shipped in the 2004 fiscal year. The current year's backlog
increased because in late March 2003, DSCP ordered the Company to accelerate its
rate of boot production by exercising a contract's surge option clause and the
Company was awarded a contract to supply the U.S. Army with the Infantry Combat
Boot (ICB).

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 271 persons during the 2003 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

                                       -3-

<PAGE>



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
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 2003.






                                       -4-



<PAGE>












                                    WELLCO(R)
                                ENTERPRISES, INC.
                                  ANNUAL REPORT
                                      2003






<PAGE>



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

                                             Fiscal Year Ended

                             June 28,   June 29,   June 30,   July 1,   July 3,
                                 2003       2002       2001      2000      1999
                              --------------------------------------------------
Revenues                     $ 24,833   $ 19,981   $ 19,417  $ 22,225  $ 21,312
--------------------------------------------------------------------------------
Net Income (Loss)            (A)  823        683      1,153       711      (837)
--------------------------------------------------------------------------------
Basic Earnings (Loss)
per Share                        0.70       0.58       0.99      0.61     (0.72)
--------------------------------------------------------------------------------
Diluted Earnings (Loss)
per Share                        0.68       0.56       0.97      0.61     (0.72)
--------------------------------------------------------------------------------
Cash Dividends Declared
Per Share of Common Stock        0.40       0.40       0.40      0.25      0.20
--------------------------------------------------------------------------------
Total Assets at Year End       15,310     12,929     12,787    12,950    14,853
--------------------------------------------------------------------------------
Long-Term Liabilities at
Year End                      $ 1,972    $ 1,328    $ 1,532   $ 1,593   $ 1,721
--------------------------------------------------------------------------------


(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
Crisp Hughes Evans LLP
Asheville, N.C.

Annual Meeting
November 18, 2003
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 2003, your company had net income of $823,000, equivalent to
basic earnings per share of $.70 (diluted $.68), from revenues of $24,833,000.
This compares with net income of $683,000, equivalent to basic earnings per
share of $.58 (diluted $.56) in the 2002 fiscal year.

The major events affecting operations and net income in fiscal year 2003 were:

1.   In late March, 2003, and in response to the need for desert boots by our U.
     S. Armed Forces personnel serving in Iraq, the Defense Supply Center
     Philadelphia (DSCP) invoked the surge option clause under our contract. We
     responded by significantly increasing our rate of production, and this is
     the primary reason for the increase in revenues.

     In the fourth quarter, we incurred $279,000 of additional costs related to
     surge (overtime, new employee training loss, etc.). We believe that under
     the related surge option contract clause, we are to submit a proposal for
     reimbursement of these costs. DSCP has a different interpretation of this
     clause. On the advice of our legal counsel, we took certain action in the
     event we need to pursue legal avenues. The $279,000 is included in fiscal
     year 2003 Cost of Sales and Services.

2.   Production and shipment of boots to DSCP in fiscal year 2003 were under
     three extensions of a contract that expired in fiscal year 2002. During the
     year, we also had an outstanding response to a boot solicitation that
     offered lower prices than those under the expired contract. When you have
     current offered prices that are lower than those on an expired contract, it
     is difficult to argue that your prices for a contract extension should not
     be at the current offered prices . So, the extensions were at lower prices
     and this reduced gross profit by $268,000.

3.   Many decades ago, Wellco acquired Ro-Search, Inc. as a wholly-owned
     subsidiary. The value of Wellco stock issued was $228,000 greater than the
     value of the Ro-Search assets acquired, and has been reflected in the
     Consolidated Balance Sheets under the caption "Excess of cost over net
     assets of subsidiary at acquisition", which is commonly called goodwill.
     Several years after Wellco acquired Ro-Search, an Accounting Principles
     Board Opinion was issued requiring amortization of goodwill, but, because
     Wellco's goodwill arose prior to that opinion, amortization was not
     required.

     Statement of Financial Accounting Standards 142 (SFAS 142), "Goodwill and
     Other Intangible Assets", became effective for our 2003 fiscal year. SFAS
     142 provides for a specific method to determine if goodwill is impaired,
     and, as a result, the $228,000 of goodwill was charged against income in
     fiscal year 2003.

4.   In fiscal year 2002, we responded to a DSCP solicitation for the
     manufacture of berets, but were not awarded a contract. Although we passed
     a DSCP pre-award survey, a Canadian beret manufacturer, who had to
     establish manufacturing in the U. S., was awarded the contract. In
     anticipation of contract award, we purchased certain equipment which was
     written down to $70,000 at the end of fiscal year 2002. In fiscal year 2003
     and after being unsuccessful in finding a buyer for the equipment, this
     remaining $70,000 was written off. However, in the past month we have found
     a potential buyer, and hope to recover at least some of our investment.

5.   We actively market to state prison systems installations for inmate
     manufacture of work shoes. Prior to fiscal year 2003, we sold six
     installations. In fiscal year 2003, we sold our seventh system to the State
     of Pennsylvania.


                                       -2-

<PAGE>



6.   The income tax rate as shown in the Consolidated Statements of Operations
     and Comprehensive Income (Loss) is 9% compared to 34% for fiscal year 2002.
     The rate for 2002 reflects a $300,000 valuation allowance against
     previously recorded deferred tax assets.

For a couple of years, our financial reports and releases have talked about the
Army replacing the all leather combat boot, one of the three Direct Molded Sole
boots we manufacture, with a new boot known as the Infantry Combat Boot (ICB).
The all leather combat boot was approximately 50% of our DSCP contract business.
We responded to the solicitation for the ICB boot and in March, 2003 we were one
of three manufacturers awarded a contract. Before getting production orders, we
manufactured 2,000 pairs which were inspected and tested. Our boots passed and
production orders have been issued. The contract is for one year with four,
one-year options. Incorporating this new boot while also being under surge has
not been easy, but we are meeting delivery dates.

In excess of a year, we have discussed the DSCP outstanding solicitation which
will result in contracts replacing the expired ones. On September 30, 2003, DSCP
announced contract awards. There were four expired contracts and ours was for
25% of total Direct Molded Sole (DMS) boots bought by DSCP. DSCP again awarded
four new contracts and ours is for 30% of total DMS boots. The other contractors
were awarded 35%, 20% and 15%. The contract is for one year with two, one-year
options.

Prices under our new DMS contract are substantially lower than those under the
expired contract. When evaluating solicitation responses for the expired
contract, DSCP specified that a contractor's technical rating (quality, timely
delivery, etc.) was much more important than price. However, for the new
contracts, a contractor's technical rating was evaluated as approximately equal
to price. This simply means that a lower bid price became much more important in
determining the percent awarded a contractor. Since the new contract does not
include the all leather combat boot, we wanted either the 35% or 30% award. Our
future operating results will be better with the 30% award and lower prices than
they would be with a 20% or 15% award at somewhat higher prices.

We were recently notified that surge will continue under the new DMS contract.
Continuing surge, combined with expanding manufacturing capacity for the ICB
boot will make for an interesting and busy 2004 fiscal year.

In the past year, I have learned that we are fortunate in having many talented,
dedicated and determined employees. Their tireless efforts are laying the
foundation for the future of Wellco.







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

October 6, 2003





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

For the fiscal year ended June 28, 2003 ("current year"), Wellco had net income
after a cumulative effect of a change in accounting principle of $823,000
compared to a net income of $683,000 in the prior fiscal year ended June 29,
2002 ("prior year"). Income before cumulative effect of change in accounting
principle for goodwill for the fiscal year ended June 28, 2003 is $1,051,000.
The major reasons for the increase in net income are:

     o   Compared to the prior year, total revenues in the current year
         increased by $4,852,000. 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. 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 44,000 more pairs
         of combat  boots than in the prior year.  Also during the 2003 fiscal
         year, the Company began shipping under a small contract with DSCP to
         supply the Extreme Cold Weather (Mukluk) boots. Sales  from this
         contract for the current year were $1,467,000. The sale of boot
         manufacture equipment to a state prison caused an increase of $353,000
         in sales of certain boot manufacturing equipment and materials.

     o   Cost of Sales and Services in the current year increased by $4,911,000.
         Substantially all of combat boots sold to DSCP in the current period
         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 boot solicitation.
         Prices offered by Wellco on the outstanding solicitation, 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 current 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 current year includes $279,000 of
         cost incurred in the fourth quarter of the current year which
         represents additional cost incurred because of the DSCP surge. Wellco
         interprets the related surge option contract clause to require its
         submitting and subsequently negotiating with DSCP a proposal for
         reimbursement of these costs. DSCP has a different interpretation of
         this clause. Based on the advice of its legal counsel, Wellco has
         notified DSCP that when total additional costs incurred because of
         surge are known, a request for reimbursement of these costs will be
         submitted.

         In addition, employee group health insurance, workers compensation
         insurance and general property insurance costs increased $259,000
         during the current year. Since Wellco's group health insurance is
         self-funded, there was additional expense as a result of two employees'
         major medical procedures.

     o   In fiscal year 2003, 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.

                                       -5-

<PAGE>




     o   The current year 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 current 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.

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

     o   Interest income in the prior 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 current year rate is lower, on the higher pretax income, because
during the prior period the Company recorded a valuation allowance of $300,000
to reflect the estimated amount of deferred tax assets that may not be realized.

Comparing the Fiscal Year ended June 29, 2002 to the Fiscal Year ended June 30,
2001:
-------------------------------------------------------------------------------

For the fiscal year ended June 29, 2002 ("current year"), Wellco had net income
of $683,000 compared to a net income of $1,153,000 in the prior fiscal year
ended June 30, 2001 ("prior year"). The major reasons for the decrease in net
income are:

     o   The current year includes $335,000 of unrecovered contract preparation
         costs. In the current year, Wellco submitted a solicitation response to
         a U. S. government procurement for berets to be used by U. S. Army
         personnel. Contracts to be awarded under this solicitation would have
         been significant to the Company's operations. Not previously having
         manufactured berets, Wellco committed costs totaling $405,000 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 required delivery schedule.

         In February, 2002 the government conducted a pre-award survey, the
         purpose of which was to determine if Wellco had the manufacturing and
         financial capability to successfully perform, should it be awarded the
         contract. Wellco understood that from this survey it received the
         "highest recommendation for award". However, subsequent to year-end,
         other entities were awarded the contracts.

                                       -6-

<PAGE>



         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 can be sold. This write-down, along with $176,000 of other
         direct costs incurred (employee training and materials, consultant
         fees, travel), totaling $335,000 and this is shown as Unrecovered
         Contract Preparation Costs in the Consolidated Statements of Operations
         and Comprehensive Income.

     o   The current year includes $300,000 in tax provision that resulted from
         an increase in the valuation allowance for recorded deferred tax
         assets.

     o   Compared to the prior year, total revenues in the current year
         increased by $564,000. Since September 11, 2001, pairs of boots sold to
         the U.S. Department of Defense have increased (revenue increase
         $1,737,000). Somewhat offsetting this increase, sales of certain boot
         manufacturing equipment and materials, which vary with the needs of
         existing licensees and the licensing of new customers, were
         significantly less in the current period (revenue decrease of
         $672,000). In addition, total boot sales to customers other than the U.
         S. Department of Defense in the prior year included sales to two
         foreign militaries that did not occur in the current year.

     o   Cost of Sales and Services in the current year increased by $878,000.
         The margin decrease that resulted from lower sales of boot
         manufacturing equipment and materials more than offset the margin
         increase that resulted from higher boot sales to the Defense
         Department. In addition, prices of certain materials used in the
         manufacture of boots have increased.

     o   General and Administrative expenses increased $57,000. This increase
         was primarily caused by increased professional fees and administrative
         personnel pension costs.

     o   Interest expense decreased $106,000 because of very limited use of the
         bank line of credit in the current year and because the prior year
         expense included the accrual of imputed interest (see below).

     o   The Consolidated Statements of Operations and Comprehensive Income for
         the current year includes grant income of $80,000 and the prior year
         included $160,000. In the prior period the Company received $100,000
         representing partial payment from the government of Puerto Rico under a
         Special Incentives Contract related to its 1999 consolidation of boot
         manufacturing operations in Puerto Rico. After the Contract was
         executed on May 23, 2001,final payment of $300,000 was received on
         July 2, 2001.  This grant requires the Company to maintain operations
         in Puerto Rico for its five fiscal years 2000 through 2004. If this
         requirement is not met, the Company is required to refund a pro-rata
         portion of the total grant.  Grant income was not recognized until the
         $100,000 was received, and the  prior period income includes this
         amount as a cumulative catch-up adjustment.  Subsequent to receiving
         the final $300,000 payment, grant income is being recognized on a
         straight line basis over this five year period at the rate of $20,000
         per fiscal quarter. At June 29, 2002, $160,000 was remaining to be
         amortized during fiscal years 2003 and 2004.

     o   Interest income in the current period 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

                                       -7-

<PAGE>



         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 2002 was 34% compared to 23% for the prior
year. The current year rate is higher, on the lower pretax income, because the
Company has recorded a valuation allowance of $300,000 to reflect the estimated
amount of deferred tax assets that may not be realized.


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

Wellco is presently shipping Direct Molded Sole (DMS) combat boots under the
third extension of a DSCP contract which was initially scheduled to expire in
April, 2002. In late March, 2003, DSCP invoked its surge option under this
contract. Under surge, a contractor is to make as many boots as fast as
reasonably possible. Based on information supplied by DSCP, surge is expected to
last throughout the first and second quarters of fiscal year 2004, which will
end December 27, 2003. Wellco estimates that it will ship approximately 105,000
pairs during the first quarter ending September 27, 2003 and between 85,000 and
100,000 pairs during the second quarter ending December 27, 2003, which is
significantly more than the corresponding quarters of the prior year.

On September 30, 2003, DSCP awarded Wellco a new contract for DMS combat boots.
Wellco's award is 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. Under the old DMS contract mentioned
above, Wellco supplied 25% of total DSCP 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 Infantry Combat
Boot (ICB), as discussed below. 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.

In 2002, the U. S. Army announced that it would replace its all-leather combat
boot, one of the three DMS boots supplied by Wellco, with the Infantry Combat
Boot (ICB). On March 11, 2003, Wellco, along with two other manufacturers, was
awarded a contract to supply the U.S. Army with this boot. This contract is for
a one year period, with four one year options which are exercisable at the
government's discretion.

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).

The Company is continuing in its attempts to sell the previously mentioned beret
manufacturing machinery, which has no value in the Consolidated Balance Sheets
at June 28, 2003.

The Company recently received machinery orders from a customer totaling
$370,000. The Company estimates that delivery will be in the second and third
quarters of fiscal year 2004.

A 1% increase in the assumed discount rate used to compute the Company's pension
benefit obligation would decrease the obligation at June 30, 2003 by $552,000.
Conversely, a 1% decrease in the assumed discount rate would increase the
benefit obligation at June 30, 2003 by $662,000.

A 1% increase in the assumed discount rate used to compute the Company's retiree
health benefit obligation would decrease the benefit obligation at June 28, 2003

                                       -8-

<PAGE>



by  $34,000.  Conversely,  a 1%  decrease  in the  assumed  discount  rate would
increase the benefit obligation at June 28, 2003 by $40,000.

Except for historical information, this Annual Report includes forward looking
statements that involve risks and uncertainties, including, but 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 June 28, 2003. 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.



                         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)

                                    2003          2002           2001
---------------------------------------------------------------------
Cash and Cash Equivalents          $ 133         $ 270          $ 653
---------------------------------------------------------------------
Unused Bank Line of Credit   *       910         3,000          3,000
---------------------------------------------------------------------
Total                            $ 1,043      $  3,270       $  3,653
---------------------------------------------------------------------
 * Note: On September 18, 2003 the bank line of credit was increased to $4.5
   million.

The following table summarizes the other major sources and (uses) of cash and
cash equivalents for the last three years:
                                                          (in thousands)

                                                    2003       2002       2001
------------------------------------------------------------------------------
Income Before Depreciation and Other Non-cash
Adjustments                                     $  2,080   $  1,616   $  2,049
------------------------------------------------------------------------------
Net Change in Accounts Receivable, Inventory,
Accounts Payable and Accrued Compensation         (1,087)      (629)     1,515
------------------------------------------------------------------------------
Net Change in Income Taxes, Pension Obligation,
and Other                                            (87)       (99)       186
------------------------------------------------------------------------------
Net Cash Provided By (Used In) Operations            906        888      3,750
------------------------------------------------------------------------------
Cash From Bank  Line of Credit                       995        370        -
------------------------------------------------------------------------------
Cash Used to Repay Bank Line of Credit              (405)      (370)    (1,700)
------------------------------------------------------------------------------


                                       -9-

<PAGE>



                                                    2003       2002       2001
------------------------------------------------------------------------------
Cash From Note Payable                               -          -          300
------------------------------------------------------------------------------
Cash Used to Repay Note Payable                      -          -          (36)
------------------------------------------------------------------------------
Cash Used to Purchase Plant and Equipment         (1,183)    (962)      (1,269)
------------------------------------------------------------------------------
Cash Provided by Exercise of Stock Options            24      163          -
------------------------------------------------------------------------------
Cash Dividends Paid                                 (474)    (472)        (465)
------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash
Equivalents                                       $ (137)  $ (383)      $  580
------------------------------------------------------------------------------

In 2003, cash provided by operations was $906,000. Net income of $823,000,
depreciation and amortization of $995,000 and a $1,832,000 increase in accounts
payable were the main sources of cash provided by operations. The main use of
cash for operations was an increase of $2,076,000 in accounts receivable and an
increase of $761,000 in inventory. The increase in accounts receivable and raw
materials inventory is a result of DSCP invoking the surge option and thus,
production was substantially increased. 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. Purchases of plant and equipment were primarily for
equipment for manufacture of the ICB boot and to meet the increased demand of
DSCP for the DMS boot.

In 2002, cash provided by operations was $888,000. Net income of $683,000 and
depreciation and amortization of $856,000 were the main sources. $556,000 of
operating cash was provided by a reduction in accounts receivable. The main use
of cash for operations was a $1,101,000 increase in inventory, less the increase
in accounts payable. Cash from operations and $383,000 of cash from the
beginning of the fiscal year, along with $163,000 of cash from stock option
exercises, provided the cash for purchases of equipment and the payment of cash
dividends.

In 2001, cash provided by operations was $3,750,000. This primarily resulted
from net income plus depreciation and amortization, which totaled $1,878,000. A
$1,066,000 reduction in accounts receivable, primarily from completion of a
contract, and an increase in accounts payable and accrued liabilities of
$618,000, also provided operating cash.


The following table shows aggregated information about contractual obligations
as of June 28, 2003:

                               Payments Due by Period

                     Total   Less Than 1  1-3 Years   4-5 Years   After 5 Years
                                    Year
--------------------------------------------------------------------------------
Long -Term
Debt              $300,000         -           -           -           $300,000
--------------------------------------------------------------------------------
Building Lease     990,000     $150,000    $318,000    $342,000         180,000
--------------------------------------------------------------------------------
Total           $1,290,000     $150,000    $318,000    $342,000        $480,000
--------------------------------------------------------------------------------


                                      -10-

<PAGE>




The Company's remaining equipment need for ICB boot production is estimated to
be between $300,000 and $500,000. Other than this, Wellco does not know of any
other demands, commitments, uncertainties, or trends that will result in or that
are reasonablely likely to result in its liquidity increasing or decreasing in
any material way.

Prior to February 5, 2003, the bank line of credit provided for borrowings of up
to $3,000,000. Because of infrequent and limited line use, and in order to
reduce the bank's line maintenance charge, on February 5, 2003 the line was
reduced from $3,000,000 to $1,500,000. Due to 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 to $4,500,000 on September 18, 2003.

The bank line of credit, which provides for total borrowing of $4,500,000, will
expire on December 31, 2003 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 the line of credit. Events that would cause a substantial reduction
in operations include: cancellation of existing government contracts; and,
receiving government contracts that do not provide enough revenues to provide
adequate liquidity.

There was borrowing of $590,000 under the line of credit at June 28, 2003 and
the Company was in compliance with the loan covenants on that date. Because of
surge and the investment in inventory for manufacture of the ICB boot, the
Company expects significant use of the line of credit in the next few months.

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 such events should not
occur in its fiscal year 2004.

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, 2003, unless the
         Note is extended by the bank under terms satisfactory to the bank.
     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.







                                      -11-

<PAGE>



                            WELLCO ENTERPRISES, INC.
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                           FOR THE FISCAL YEARS ENDED
                 JUNE 28, 2003, JUNE 29, 2002 AND JUNE 30, 2001
                     (in thousands except per share amounts)

                                                JUNE 28,   JUNE 29,    JUNE 30,
                                                    2003       2002        2001
                                                --------------------------------
REVENUES (Notes  5, 15 and 16) .............   $ 24,833    $ 19,981    $ 19,417
                                               --------    --------    --------

COSTS AND EXPENSES
      Cost of sales and services ...........     21,272      16,361      15,483
      Unrecovered contract preparation costs
      (Note 18) ............................         70         335        --
      General and administrative expenses ..      2,390       2,551       2,494
                                               --------    --------    --------
      Total ................................     23,732      19,247      17,977
                                               --------    --------    --------

GRANT INCOME (Note 17) .....................         80          80         160
                                               --------    --------    --------

OPERATING INCOME ...........................      1,181         814       1,600

INTEREST EXPENSE ...........................         30          32         138

DIVIDEND AND INTEREST INCOME (Note 12) .....          9         260          28
                                               --------    --------    --------

INCOME BEFORE INCOME TAXES .................      1,160       1,042       1,490

PROVISION FOR INCOME TAXES (Note 11) .......        109         359         337
                                               --------    --------    --------

INCOME BEFORE CUMULATIVE EFFECT
      OF CHANGE IN ACCOUNTING PRINCIPLE ....      1,051         683       1,153

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

NET INCOME .................................        823         683       1,153

OTHER COMPREHENSIVE LOSS (Note 9):
      Increase in additional minimum pension
      liability, net of tax in 2001 ........       (924)       (159)       (130)
                                               --------    --------    --------

COMPREHENSIVE INCOME (LOSS) ................   $   (101)   $    524    $  1,023
                                               ========    ========    ========

EARNINGS PER SHARE (Note 14):
      Basic, before cumulative effect ......   $   0.89    $   0.58    $   0.99
      Cumulative effect ....................      (0.19)       --          --
                                               --------    --------    --------
      Basic, after cumulative effect .......   $   0.70    $   0.58    $   0.99
                                               ========    ========    ========

      Diluted, before cumulative effect ....   $   0.87    $   0.56    $   0.97
      Cumulative effect ....................      (0.19)       --          --
                                               --------    --------    --------
      Diluted, after cumulative effect .....   $   0.68    $   0.56    $   0.97
                                               ========    ========    ========

See Notes to Consolidated Financial Statements.
                                      -12-
<PAGE>


                            WELLCO ENTERPRISES, INC.
                           CONSOLIDATED BALANCE SHEETS
                         JUNE 28, 2003 AND JUNE 29, 2002
                                 (in thousands)

                                     ASSETS


                                                           JUNE 28,     JUNE 29,
                                                               2003         2002
                                                           ---------------------
CURRENT ASSETS:
      Cash and cash equivalents ....................       $   133       $   270
      Receivables, net (Notes 3 and 7) .............         3,450         1,374
      Inventories (Notes 4 and 7) ..................         7,001         6,240
      Deferred taxes  (Note 11) ....................           185           206
      Prepaid expenses .............................           290           175
      Assets held for sale (Note 18) ...............          --              70
                                                           -------       -------
      Total ........................................        11,059         8,335
                                                           -------       -------

MACHINERY LEASED TO LICENSEES, net
      (Notes 2 and 5) ..............................            23            28

PROPERTY, PLANT AND EQUIPMENT, net
      (Notes 6 and 7) ..............................         4,119         3,926

INTANGIBLE ASSETS:
      Excess of cost over net assets of
         subsidiary at acquisition
      (Notes 2 and 21) .............................          --             228
      Intangible pension asset (Note 9) ............            29            21
                                                           -------       -------
      Total ........................................            29           249
                                                           -------       -------

DEFERRED TAXES (Note 11) ...........................            80           391
                                                           -------       -------

TOTAL ..............................................       $15,310       $12,929
                                                           =======       =======











                            (continued on next page)

                                      -13-
<PAGE>

                            WELLCO ENTERPRISES, INC.
                           CONSOLIDATED BALANCE SHEETS
                         JUNE 28, 2003 AND JUNE 29, 2002
                        (in thousands except share data)

                      LIABILITIES AND STOCKHOLDERS' EQUITY


                                                           JUNE 28,     JUNE 29,
                                                               2003         2002
                                                           ---------------------

CURRENT LIABILITIES:
      Short-term borrowing from bank (Note 7) ........    $    590     $   --
      Accounts payable ...............................       3,138        1,306
      Accrued compensation ...........................         810          892
      Accrued liabilities (Notes 8, 9, 10, and 17) ...         582          587
      Accrued income taxes (Note 11) .................         722          769
                                                          --------     --------
          Total ......................................       5,842        3,554
                                                          --------     --------

LONG-TERM LIABILITIES:
      Pension obligation (Note 9) ....................       1,672        1,028
      Notes payable (Note 12) ........................         213          205
      Deferred revenues (Note 12) ....................          87           95

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 - 1,185,746 ................       1,186        1,183
      Additional paid-in capital .....................         357          336
      Retained earnings ..............................       7,596        7,247
      Accumulated other comprehensive loss ...........      (1,643)        (719)
                                                          --------     --------
          Total ......................................       7,496        8,047
                                                          --------     --------

TOTAL ................................................    $ 15,310     $ 12,929
                                                          ========     ========

See Notes to Consolidated Financial Statements.










                                      -14-

<PAGE>



                            WELLCO ENTERPRISES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           FOR THE FISCAL YEARS ENDED
                 JUNE 28, 2003, JUNE 29, 2002 AND JUNE 30, 2001
                                 (in thousands)

                                                  JUNE 28,   JUNE 29,   JUNE 30,
                                                      2003       2002       2001
                                                  ------------------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
      Net income ..............................   $   823    $   683    $ 1,153
                                                  -------    -------    -------
      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 .......       995        856        725
          Deferred income taxes ...............        44        232        171
          Non-cash reduction in accrued
            interest ..........................      --         (234)      --
          Non-cash asset impairment ...........        70        159       --
          Non-cash grant income recognized ....       (80)       (80)      --
          Non-cash interest expense ...........         8          7
          Non-cash reduction in deferred
            revenues ..........................        (8)        (7)      --
          (Increase) decrease in-
              Receivables .....................    (2,076)       556      1,066
              Inventories .....................      (761)    (1,230)        87
              Other current assets ............        57        (78)        15
          Increase (decrease) in-
              Accounts payable ................     1,832        129        316
              Accrued compensation ............       (82)       (84)        46
              Other accrued liabilites ........        95         79        256
              Accrued income taxes ............       (47)        37        103
              Pension obligation ..............      (192)      (137)      (188)
                                                  -------    -------    -------
      Total adjustments .......................        83        205      2,597
                                                  -------    -------    -------
NET CASH PROVIDED BY (USED IN)
      OPERATING ACTIVITIES ....................       906        888      3,750
                                                  -------    -------    -------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases of equipment ..................    (1,183)      (962)    (1,269)
                                                  -------    -------    -------
NET CASH PROVIDED BY (USED IN)
      INVESTING  ACTIVITIES ...................    (1,183)      (962)    (1,269)
                                                  -------    -------    -------











                            (continued on next page)

                                      -15-

<PAGE>


                            WELLCO ENTERPRISES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           FOR THE FISCAL YEARS ENDED
                 JUNE 28, 2003, JUNE 29, 2002 AND JUNE 30, 2001
                                 (in thousands)

                                                  JUNE 28,   JUNE 29,   JUNE 30,
                                                      2003       2002       2001
                                                  ------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Net advances (repayment) of line
      of credit borrowings ....................       590       --       (1,700)
      Proceeds from note payable ..............      --         --          300
      Repayment of note payable ...............      --         --          (36)
      Cash dividends paid .....................      (474)      (472)      (465)
      Stock option exercise ...................        24        163       --
                                                  -------    -------    -------
NET CASH PROVIDED BY (USED IN)
      FINANCING ACTIVITIES ....................       140       (309)    (1,901)
                                                  -------    -------    -------

NET INCREASE (DECREASE) IN CASH ...............      (137)      (383)       580
      AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT
      BEGINNING OF YEAR .......................       270        653         73
                                                  -------    -------    -------

CASH AND CASH EQUIVALENTS AT
      END OF YEAR .............................   $   133    $   270    $   653
                                                  =======    =======    =======

SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid (received) for-
          Interest ............................   $    22    $    32    $    63
          Income taxes ........................       113         65         52
NONCASH INVESTING AND FINANCING
ACTIVITY:
Adjustment of stock repurchase note ...........      (347)      (355)
      Increase in leasehold improvements ......   $  --      $   112    $  --
                                                  =======    =======    =======


See Notes to Consolidated Financial Statements.








                                      -16-
<PAGE>





                            WELLCO ENTERPRISES, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                           FOR THE FISCAL YEARS ENDED
                 JUNE 28, 2003, JUNE 29, 2002 AND JUNE 30, 2001
                        (in thousands except share data)


                                                JUNE 28,    JUNE 29,    JUNE 30,
                                                    2003        2002        2001
                                                --------------------------------
COMMON STOCK :
      Balance at beginning of year .........    $ 1,183     $ 1,164     $ 1,164
      Stock option exercise (Note 13) ......          3          19        --
                                                -------     -------     -------
      Balance at  end of year ..............      1,186       1,183       1,164
                                                -------     -------     -------

ADDITIONAL PAID-IN CAPITAL:
      Balance at beginning of year .........        336         192         192
      Stock option exercise (Note 13) ......         21         144        --
                                                -------     -------     -------
      Balance at  end of year ..............        357         336         192
                                                -------     -------     -------

RETAINED EARNINGS:
      Balance at beginning of year .........      7,247       6,689       5,646
      Adjustment of note payable
      from stock repurchase (Note 12) ......       --           347         355
      Net income ...........................        823         683       1,153
      Cash dividends (per share:
        2003 - $.40, 2002 - $.40,
        2001 - $.40) .......................       (474)       (472)       (465)
                                                -------      ------     -------
      Balance at end of year ...............      7,596       7,247       6,689
                                                -------      ------     -------

ACCUMULATED OTHER COMPREHENSIVE LOSS
      Additional minimum pension
      liability,  net of tax (Note 9):
      Balance at beginning of year .........       (719)       (560)       (430)
      Change for the year ..................       (924)       (159)       (130)
                                                -------     -------     -------
      Balance at end of year ...............     (1,643)       (719)       (560)
                                                -------     -------     -------

TOTAL STOCKHOLDERS' EQUITY .................    $ 7,496     $ 8,047     $ 7,485
                                                =======     =======     =======

See Notes to Consolidated Financial Statements.









                                      -17-
<PAGE>






NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended June 28, 2003, June 29, 2002, and June 30, 2001
--------------------------------------------------------------------------

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 ($18,209,000 in 2003,
     $14,875,000 in 2002, and $13,962,000 in 2001) 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.


                                      -18-

<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 June
         28, 2003 and June 29, 2002 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 $110,000 in 2003 and $180,000 in 2002. Records to
         determine the costs were not maintained during 2001.

     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, 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 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

                                      -19-

<PAGE>



         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 2003-2007. 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 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

                                      -20-

<PAGE>



         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 2003, 2002, and 2001 fiscal years contain 52 weeks of
         operating results.

     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. 123 (SFAS 123), "Accounting for
         Stock-Based Compensation." 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 June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
         Associated with Exit or Disposal Activities", which addresses financial
         accounting and reporting for costs associated with exit or disposal
         activities and nullifies Emerging Issues Task Force (EITF) Issue No.
         94-3, "Liability Recognition for Certain Employee Termination Benefits
         and Other Costs to Exit an Activity (including Certain Costs Incurred
         in a Restructuring)". This Statement applies to costs associated with
         specific exit activities and requires a liability for a cost associated
         with an exit or disposal activity to be recognized and measured
         initially at its fair value in the period in which the liability is
         incurred. A liability for a cost associated with an exit or disposal
         activity is incurred when the definition of a liability is met. The
         provisions of this statement are effective for exit or disposal
         activities that are initiated after December 31, 2002. We adopted the
         provisions of this statement on January 1, 2003 with no impact on our
         financial position or results of operations.

         In December 2002, SFAS No. 148, "Accounting for Stock-Based
         Compensation - Transition and Disclosure" was issued to amend
         disclosure requirements of FASB Statement No. 123, "Accounting for
         Stock-Based Compensation" to require disclosures in both annual and
         interim financial statements about the method of accounting for

                                      -21-

<PAGE>



         stock-based employee compensation and the effect of the method used on
         reported results. The disclosure provisions for annual financial
         information is effective for all periods presented in the financial
         reports.

         In November 2002, FASB Interpretation No. 45, "Guarantor's Accounting
         and Disclosure Requirements for Guarantees, Including Indirect
         Guarantees of Indebtedness of Others" was issued to clarify the
         requirements for a guarantor's accounting for and disclosures of
         certain guarantees issued and outstanding. The initial recognition and
         measurement provisions are effective for guarantees issued or modified
         after December 31, 2002. The Company has determined that it has no
         guarantees issued and outstanding at June 28, 2003.

         Other accounting standards that have been issued or proposed by the
         FASB or other standards- setting bodies that do not require adoption
         until a future date are not expected to have a material impact on our
         consolidated financial statements upon adoption.

3. RECEIVABLES:

     The majority of receivables at June 28, 2003 and June 29, 2002 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 2003, 2002 and
     2001 are not significant.

     Receivables at June 28, 2003 and June 29, 2002 include $38,000 from the
     Puerto Rican government for reimbursement of certain costs incurred by the
     Company and related to leasehold improvements made to the Company's Puerto
     Rican facility. At June 29, 2002, this receivable, which was initially
     recorded at $150,000 in fiscal year 2000, was reduced by, and leasehold
     improvements was increased by, $112,000, adjusting the receivable to the
     amount the Puerto Rican government has agreed to pay at June 29, 2002. Any
     additional reimbursements from the Puerto Rican government will be recorded
     as a reduction in leasehold improvements.

4. INVENTORIES:
                  The components of inventories are:
                                         (in thousands)
                                          2003    2002
------------------------------------------------------
Finished Goods                         $ 1,247 $ 2,509
------------------------------------------------------
Work in Process                          1,753   1,268
------------------------------------------------------
Raw Materials and Supplies               4,001   2,463
------------------------------------------------------
Total                                  $ 7,001 $ 6,240
------------------------------------------------------




                                      -22-

<PAGE>



5. MACHINERY LEASED TO LICENSEES:

     Accumulated depreciation netted against the cost of leased assets in the
     Consolidated Balance Sheets at June 28, 2003 and June 29, 2002 is
     $1,537,000 and $1,532,000, respectively. Rental revenues for the fiscal
     years 2003, 2002, and 2001 were $178,000, $148,000 and $105,000,
     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)

                                    2003         2002      Estimated Useful Life
--------------------------------------------------------------------------------
Land                             $   107      $   107                N/A
--------------------------------------------------------------------------------
Buildings                          1,439        1,176                40-45 Years
--------------------------------------------------------------------------------
Machinery & Equipment              7,559        6,727                 2-20 Years
--------------------------------------------------------------------------------
Furniture & Fixtures                 951          967                 2-10 years
--------------------------------------------------------------------------------
Leasehold Improvements               771          735                         *
--------------------------------------------------------------------------------
Total Cost                      $ 10,827      $ 9,712
--------------------------------------------------------------------------------
Total Accumulated
Depreciation and Amortization   $  6,708     $  5,786
--------------------------------------------------------------------------------

         *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:

     The Company maintains a $1,500,000 bank line of credit. The line, which
     expires December 31, 2003, can be renewed annually at the bank's
     discretion. This line of credit is secured by a blanket lien on all
     machinery and equipment (carrying value of $2,712,000 at June 28, 2003) and
     all non-governmental receivables and inventory ($1,310,000 at June 28,
     2003). At June 28, 2003, borrowings on this line of credit were $ 590,000
     with $ 910,000 available in additional borrowings.

     Interest is at the London Interbank Offered Rate (LIBOR) plus 2.25 points
     or 3.37% at June 28, 2003. 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 June 28, 2003. 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

                                      -23-

<PAGE>



     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)

                                            2003           2002
---------------------------------------------------------------
Retiree Health Benefits (Note 10)        $   231        $   176
---------------------------------------------------------------
Interest Expense (Note 12)                     2              2
---------------------------------------------------------------
Accrued Lease Payments (Note 20)             135            128
---------------------------------------------------------------
Deferred Grant Revenues (Note 17)             80            160
---------------------------------------------------------------
Other                                        134            121
---------------------------------------------------------------
Total                                    $   582        $   587
---------------------------------------------------------------

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)

                                              2003        2002       2001
-------------------------------------------------------------------------
Benefits Earned for Service in the
Current Year                                $  132      $  119     $   95
-------------------------------------------------------------------------
Interest on the Projected Benefit
Obligation                                     365         372        376
-------------------------------------------------------------------------
Expected Return on Plan Assets                (286)       (303)      (315)
-------------------------------------------------------------------------
Amortization of: Unrecognized Net
Pension Obligation at July 1, 1987;
Cost of Benefit Changes Since That
Date; and Gains and Losses                      80         119        102
-------------------------------------------------------------------------
Against Actuarial  Assumptions
Pension Expense                             $  291      $  307     $  258
-------------------------------------------------------------------------

                                      -24-
<PAGE>


Below are various  analyses  and other  information  relating  to the  Company's
pension  liability,  assets  and  expense  as of June 2003 and June  2002,  (all
amounts are in thousands except for those indicated as percent):


Change in Benefit Obligation:                         2003          2002
------------------------------------------------------------------------
Benefit Obligation at Beginning of Year          $   5,658     $   5,516
------------------------------------------------------------------------
Current Year Service Cost                              132           119
------------------------------------------------------------------------
Interest Cost on Projected Liability                   365           372
------------------------------------------------------------------------
Benefit Payments                                      (580)         (489)
------------------------------------------------------------------------
Actuarial Loss                                         583           140
------------------------------------------------------------------------
Benefit Obligation at End of Year                $   6,158     $   5,658
------------------------------------------------------------------------


Change in Plan Assets:                                2003          2002
------------------------------------------------------------------------
Fair Value of Plan Assets at Beginning of Year   $   4,247     $   4,314
------------------------------------------------------------------------
Company Contributions                                  482           443
------------------------------------------------------------------------
Actual Return on Plan Assets                           225           (21)
------------------------------------------------------------------------
Benefit Payments                                      (580)         (489)
------------------------------------------------------------------------
Fair Value of Plan Assets at End of Year        $    4,374     $   4,247
------------------------------------------------------------------------


Reconciliation of Funded Status:                      2003          2002
------------------------------------------------------------------------
Funded Status                                   $   (1,785)    $  (1,412)
------------------------------------------------------------------------
Unrecognized Actuarial Loss                          2,001         1,426
------------------------------------------------------------------------
Unrecognized Prior Service Cost                         29            39
------------------------------------------------------------------------
Net Amount Recognized                           $      245     $      53
------------------------------------------------------------------------


Amounts Recognized in the Consolidated Balance
Sheets:                                               2003          2002
------------------------------------------------------------------------
Intangible Pension Asset                        $       29     $      21
------------------------------------------------------------------------
Deferred Tax Asset                                       -           288
------------------------------------------------------------------------
Accumulated Other Comprehensive Loss                 1,643           719
------------------------------------------------------------------------


                                      -25-

<PAGE>



Amounts Recognized in the Consolidated Balance
Sheets:                                               2003          2002
------------------------------------------------------------------------

Accrued Pension Liability:
------------------------------------------------------------------------
   Prepaid Benefit Cost                                463           331
------------------------------------------------------------------------
   Accrued Benefit Cost                               (218)         (278)
------------------------------------------------------------------------
   Additional Minimum Pension Liability             (1,672)       (1,028)
------------------------------------------------------------------------
Net Amount Recognized in Financial Statements   $      245     $      53
------------------------------------------------------------------------


CERTAIN ACTUARIAL ASSUMPTIONS:                        2003          2002
------------------------------------------------------------------------
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    5.5%          5.5%
Benefit Plan
-----------------------------------------------------------------------

At June 2003,  one of the pension  plans has a benefit  obligation  ($2,714,000)
that is greater than its plan assets  ($1,963,000)  resulting in the  additional
liability  of  $1,215,000  and at June 2002,  the plan had a benefit  obligation
($2,619,000) that was greater than its plan assets ($1,923,000) resulting in the
additional  liability of $1,028,000.  At June 2003, the other pension plan has a
benefit   obligation   ($3,087,000)   that  is  greater  than  its  plan  assets
($2,412,000) resulting in the additional liability of $457,000 and at June 2002,
this plan did not have an additional liability.

A 1% increase in the assumed discount rate would decrease the benefit obligation
at June 2003 by $552,000. Conversely, a 1% decrease in the assumed discount rate
would increase the benefit obligation at June 2003 by $662,000.

The  Consolidated  Statement 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  was recorded for the  deferred tax asset  ($558,000)  that
arose from the Other  Comprehensive  Loss for  fiscal  year  2003.  A  valuation
allowance was recorded for the deferred tax asset  ($54,000) that arose from the
Other  Comprehensive Loss for fiscal year 2002. The Other Comprehensive Loss for
fiscal year 2001 was reduced by an increase in deferred tax assets of $67,000.

In  addition,  the Company  provides  retirement  benefits to certain  employees
through deferred  compensation  contracts and the unfunded liability  associated
with these contracts was $76,000 at June 28, 2003 and $83,000 at June 29, 2002.

                                      -26-

<PAGE>



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.

     The cost of retiree health benefits included in the 2003, 2002 and 2001
     Statements of Operations and Comprehensive Income was:

                                                          (in thousands)

                                              2003          2002          2001
------------------------------------------------------------------------------
Benefits Earned for Current Service        $    28        $   20       $    19
------------------------------------------------------------------------------
Interest Cost on Accumulated Liability          22            27            28
------------------------------------------------------------------------------
Amortization of the July 4, 1993 Liability       4             4             4
------------------------------------------------------------------------------
Total Cost                                 $    54        $   51       $    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 June 28, 2003 and June 29, 2002 is as follows:
                                                             (in thousands)

                                                              2003         2002
-------------------------------------------------------------------------------
Total Obligation at Beginning of Year                      $   330      $   377
-------------------------------------------------------------------------------
Liability for Current Service                                   28           20
-------------------------------------------------------------------------------
Interest on Liability                                           22           27
-------------------------------------------------------------------------------
Benefit Payments                                                 0          (15)
-------------------------------------------------------------------------------
Actuarial (Gain) Loss                                           34          (79)
-------------------------------------------------------------------------------
Total Obligation at End of Year                                414          330
-------------------------------------------------------------------------------
Less Unamortized Liability at July 4, 1993                     (46)         (50)
-------------------------------------------------------------------------------
Unrecognized Gain (Loss)                                      (137)        (104)
-------------------------------------------------------------------------------
Liability Recognized in the Consolidated Balance Sheets    $   231      $   176
-------------------------------------------------------------------------------

                                      -27-
<PAGE>


     The assumed health care cost trend rate used to project expected future
     cost was 15% in 2003 and 2002, gradually decreasing to 6% by 2009 and
     remaining at 6% thereafter. The assumed discount rate used to determine the
     accumulated liability was 6.00% for 2003 and 6.75% for 2002.

     A 1% increase  in the assumed health care cost trend rate would increase
     the benefit obligation at June 28, 2003 by $16,000. Conversely, a 1%
     decrease in the assumed health care cost trend rate would decrease the
     benefit obligation at June 28, 2003 by $15,000.

     A 1% increase in the assumed discount rate would decrease the benefit
     obligation at June 28, 2003 by $34,000. Conversely, a 1% decrease in the
     assumed discount rate would increase the benefit obligation at June 28,
     2003 by $40,000.

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)

                                                  2003       2002         2001
------------------------------------------------------------------------------
Federal Provision:
------------------------------------------------------------------------------
    Currently Payable                          $    50   $     92     $     36
------------------------------------------------------------------------------
    Deferred                                        44        232          171
------------------------------------------------------------------------------
    Total Federal                                   94        324          207
------------------------------------------------------------------------------
State Provision Currently Payable                   15         35          130
------------------------------------------------------------------------------
Total Provision                                $   109   $    359     $    337
------------------------------------------------------------------------------

A  reconciliation  of the effective  income tax rate for the 2003, 2002 and 2001
fiscal years is as follows:


                                                  2003        2002        2001
------------------------------------------------------------------------------
Statutory Federal Income Tax Rate                  34%         34%         34%
------------------------------------------------------------------------------
Current Period Income of Puerto Rico
Subsidiary Substantially Exempt From Puerto      (28)%       (25)%       (42)%
Rican and Federal Income Taxes
------------------------------------------------------------------------------
Deferred Tax Valuation Allowance                     -         29%         20%
------------------------------------------------------------------------------
State Taxes, Net of Federal Tax Benefit             1%          3%          9%
------------------------------------------------------------------------------
Other                                               2%        (7)%          2%
------------------------------------------------------------------------------
Effective Income Tax Rate                           9%         34%         23%
------------------------------------------------------------------------------

                                      -28-
<PAGE>

     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.

     The accumulated undistributed earnings ($3,431,000) 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 2003 and 2002 are as follows:
                                                              (in thousands)

Deferred Tax Assets:                                          2003         2002
-------------------------------------------------------------------------------
Tax Effect of Pension Liability Charged Against Equity     $   558     $    342
-------------------------------------------------------------------------------
Employee Compensation Charged Against Financial
Statement Income, Not Yet Deducted From Taxable                237          162
Income
-------------------------------------------------------------------------------
Additional Costs Inventoried for Tax Purposes                   81           69
-------------------------------------------------------------------------------
Federal NOL Carryforward                                       625          682
-------------------------------------------------------------------------------
State NOL Carryforward                                         334          337
-------------------------------------------------------------------------------
Alternative Minimum Tax Credit                                  70           70
-------------------------------------------------------------------------------
Equipment Impairment Loss Not Yet Deductible                    78            -
-------------------------------------------------------------------------------
Other                                                          186           77
-------------------------------------------------------------------------------
Deferred Tax Assets Before Valuation Allowance               2,169        1,739
-------------------------------------------------------------------------------
Valuation Allowance                                         (1,767)      (1,031)
-------------------------------------------------------------------------------
Total Deferred Tax Assets                                      402          708
-------------------------------------------------------------------------------
Deferred Tax Liabilities:
-------------------------------------------------------------------------------
Depreciation and Prepaid Pension Costs Deducted From
Taxable Income Not Yet Charged Against Financial               137          111
Statement Income
-------------------------------------------------------------------------------
Net Deferred Tax Assets                                    $   265     $    597
-------------------------------------------------------------------------------

                                      -29-
<PAGE>


     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 operating loss carryforwards of $1,861,000, which begin to
     expire in 2019, available to reduce future federal taxable income. In
     addition, $4,824,000 of operating loss carryforwards, which begin to expire
     in 2013, are available to reduce certain 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 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 is less than the defined amount that cumulative net income has 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. The Company also revised its estimate of the amount
     that might be paid during fiscal year 2001. For fiscal year 2001, the
     revised estimate decreased the Note Payable and increased Retained Earnings
     by $355,000 (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. Interest expense on the Stock Repurchase
     Agreement for the fiscal years 2002 and 2001 was $0 and $75,000
     respectively.

     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 2003, 2002 and 2001 include
     service fee income of $8,000, $7,000 and $2,000, respectively, and interest
     expense of $17,000, $16,000 and $4,000, respectively. The Consolidated
     Balance Sheets at June 28, 2003 and at June 29, 2002 includes $213,000 and

                                      -30-

<PAGE>



     $205,000, respectively, for this note, and $87,000 and $95,000,
     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 June 28, 2003, no 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 June 28, 2003 options have been granted for 70,000 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.

     The 1997 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 99,000 shares and 16,000 shares,
     respectively. At June 28, 2003 options have been granted for 93,000 shares
     under the 1999 Employee Plan and 14,000 shares under the 1999 Director
     Plan.

     The 1996 Stock Option Plan for Key Employees provides for granting options
     to purchase 60,000 shares. At June 28, 2003 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 June
     28, 2003, 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 July 1, 2000                   190,000               $9.80
-------------------------------------------------------------------------
Granted*                                       50,000                9.13
-------------------------------------------------------------------------
Forfeited                                      (7,000)               9.14
-------------------------------------------------------------------------
Outstanding at June 30, 2001                  233,000                9.67
-------------------------------------------------------------------------


                                      -31-

<PAGE>

                                                                Weighted-
                                               No. of             Average
Option Shares:                                 Shares      Exercise Price
-------------------------------------------------------------------------

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
-------------------------------------------------------------------------
* Not exercisable. All other shares shown are fully exercisable.


The following table summarizes information about fixed stock options outstanding
at June 28, 2003:


                                                                Weighted-Average
                                                                       Remaining
                  Range of Exercise       Weighted Average      Contractual Life
Number                       Prices         Exercise Price              in Years
--------------------------------------------------------------------------------
15,000                        $5.00                  $5.00                   2.0
--------------------------------------------------------------------------------
83,000                $12.00-$17.50                 $12.13                   4.0
--------------------------------------------------------------------------------
50,500                        $8.00                  $8.00                   6.0
--------------------------------------------------------------------------------
50,000*                       $9.13                  $9.13                   7.0
--------------------------------------------------------------------------------
* Not exercisable. All other shares shown are fully exercisable.

The following table summarizes  information  concerning options issued,  options
available for future issuance and approval of plans by security  holders at June
28, 2003:

                                      -32-

<PAGE>




                       (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       198,500            $9.78             75,500
--------------------------------------------------------------------------------
Equity Compensation
Plans Not Approved by
Security Holders          -                 -                 -
--------------------------------------------------------------------------------
Total                  198,500            $9.78             75,500
--------------------------------------------------------------------------------

     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.


                                            2003            2002           2001
-------------------------------------------------------------------------------
Net Income, As Reported                   $  823          $  683        $ 1,153
-------------------------------------------------------------------------------
Net Income, Pro Forma                     $  800          $  660        $ 1,102
-------------------------------------------------------------------------------
Basic Earnings Per Share, As Reported     $ 0.70          $ 0.58        $  0.99
-------------------------------------------------------------------------------
Basic Earnings Per Share, Pro Forma       $ 0.68          $ 0.56        $  0.95
-------------------------------------------------------------------------------
Diluted Earnings Per Share, As Reported   $ 0.68          $ 0.56        $  0.97
-------------------------------------------------------------------------------
Diluted Earnings Per Share, Pro Forma     $ 0.66          $ 0.54        $  0.93
-------------------------------------------------------------------------------

The fair value on the date the last year options were  granted,  which was 2001,
was estimated using the Black-Scholes option pricing model using the following

                                      -33-

<PAGE>



assumptions:

                                                2001
----------------------------------------------------
Expected Dividend Yield                       4.384%
----------------------------------------------------
Expected Stock Price Volatility               31.53%
----------------------------------------------------
Risk-Free Interest Rate                        6.25%
----------------------------------------------------
Expected Life of Options in Years                5.0
----------------------------------------------------
Weighted-Average Fair Value of Options
Granted                                        $2.20
----------------------------------------------------

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 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
-------------------------------------------------------------------------------





                                      -34-

<PAGE>



                                             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
-------------------------------------------------------------------------------


                                             For the Fiscal Year Ended 6/30/01
                                           Net Income     Shares      Per-Share
                                          (Numerator) (Denominator)      Amount

Basic EPS Available to Shareholders      $ 1,153,000      1,163,246     $  0.99
-------------------------------------------------------------------------------
Effect of Dilutive Stock-based
Compensation Arrangements                                    22,524
-------------------------------------------------------------------------------
Diluted EPS Available to Shareholders    $ 1,153,000      1,185,770     $  0.97
-------------------------------------------------------------------------------


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)

                                            2003           2002            2001
-------------------------------------------------------------------------------
Sales of Footwear and Related Items     $ 24,012       $ 19,349        $ 18,979
-------------------------------------------------------------------------------
Revenues from Licensees                      821            632             438
-------------------------------------------------------------------------------
Total Revenues by Major Product Group   $ 24,833       $ 19,981        $ 19,417
-------------------------------------------------------------------------------


                                      -35-

<PAGE>



                                            2003           2002            2001
-------------------------------------------------------------------------------

Revenues from U. S. Customers           $ 24,631       $ 18,826        $ 16,531
-------------------------------------------------------------------------------
Revenues from International Customers        202          1,155           2,886
-------------------------------------------------------------------------------
Total Revenues by Geographic Region     $ 24,833       $ 19,981        $ 19,417
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
Location of Major International Customers:
-------------------------------------------------------------------------------
Latin America                           $    127       $    664        $    976
-------------------------------------------------------------------------------
Canada                                        12            332             853
-------------------------------------------------------------------------------
Asia/Pacific                                  47            154             399
-------------------------------------------------------------------------------
Mexico                                         2              2               1
-------------------------------------------------------------------------------
United Kingdom/Europe/South Africa      $     14       $      -        $    579
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
Major Customer- U. S. Government        $ 18,209       $ 14,875        $ 13,962
-------------------------------------------------------------------------------

     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.

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.

     The Company has incurred certain contract material costs which are
     reimbursable under a contract price adjustment clause. Under this contract
     clause, the Company cannot, unless the amount exceeds a specified amount,
     submit a claim to the government for these costs until the contract's end.
     After a claim is filed, it is reviewed and audited by the government. It
     has been several years since the Company has had a claim of this type, and
     therefore the Company lacks any recent experience of government audits of
     this type of claim. The Company has determined that under the Securities
     and Exchange Commission Staff Accounting Bulletin No. 101, "Revenue
     Recognition in Financial Statements", the claim amount is not fixed or
     determinable, therefore the estimated amount should not be recorded at this
     time. The amount of this claim will be recorded in revenues in the period
     in which it becomes fixed or determinable.


                                      -36-

<PAGE>



     In late March 2003, DSCP ordered the Company to accelerate its rate of boot
     production by exercising a contract's surge option clause. The Consolidated
     Statements of Operations and Comprehensive Income for the year ended June
     28, 2003 includes surge related costs (overtime, new employee training,
     etc.), totaling $279,000. Wellco interprets the related surge option
     contract clause to require its submitting and subsequently negotiating with
     DSCP a proposal for reimbursement of these costs. 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. The probability of successfully resolving this
     issue, or the outcome of any legal action, cannot be reasonably predicted.
     The reimbursement of surge costs will be recognized in revenues in the
     period when and if DSCP acknowledges Wellco's right to reimbursement, or
     when any ensuing legal action awards reimbursement.

17. GRANT MONEY RECEIVED AND CONTRACT CLAIM:

     The Company has 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 requires the Company to maintain operations in Puerto
     Rico for five years (fiscal years 2000 through 2004). If this requirement
     is not met, the Company is required to refund a pro-rata portion of the
     total grant. Grant income was not recognized until the $100,000 was
     received in November, 2000, and the 2001 Consolidated Statement of
     Operations and Comprehensive Income includes, 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 is
     being 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 2003 and 2002 both
     include an income item from this grant of $80,000.

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 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 is shown as Unrecovered Contract Preparation Costs in the
     Consolidated Statements of Operations and Comprehensive Income for the
     fiscal year ended June 28, 2003. For the 2003 and 2002 fiscal years, the
     revised estimated amounts for which this machinery can be sold is included
     in the Consolidated Balance Sheets as Assets Held For Sale.

                                      -37-

<PAGE>




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,
     or will be, 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
     year ending June 28, 2003 were $2,435.

     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. During fiscal year ending
     June 28, 2003, there were no payments to the former Chairman for consulting
     services.

20. COMMITMENTS:

     Under a Resolution of its Board of Directors, Wellco is committed to
     purchase its Common Stock which was owned by or under option with an active
     or retired employee at September 6, 1990. This purchase is at the employee
     or retiree option and is activated only by the termination of employment or
     death of the retiree. The purchase price is to be based on Wellco's
     tangible book value at the time of purchase. The maximum number of shares
     that could be purchased at June 28, 2003 is approximately 5,000.

     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 1,
     2003 through June 30, 2009 are $990,000. Lease payments for each of the
     Company's five fiscal years ending after June 28, 2003 are: $150,000,
     $156,000, $162,000, $168,000, and $174,000. Lease expense for the Company's
     current Puerto Rican facility in the 2003, 2002 and 2001 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 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.


                                      -38-

<PAGE>



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

                                                    ( in thousands)

                                                  2003           2002
---------------------------------------------------------------------
Excess of cost over net assets of
subsidiary at acquisition, at beginning of
year                                            $  228         $  228
---------------------------------------------------------------------
Cumulative effect of change in
accounting principle                              (228)            -
---------------------------------------------------------------------
Excess of cost over net assets of
subsidiary at acquisition, at end of year           -          $  228
---------------------------------------------------------------------











                                      -39-

<PAGE>





INDEPENDENT AUDITORS' REPORT


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

We  have  audited  the  accompanying   consolidated   balance  sheet  of  Wellco
Enterprises,  Inc. and subsidiaries  (the "Company") as of June 28, 2003 and the
related  consolidated   statements  of  operations  and  comprehensive   income,
stockholders' equity, and cash flows for the year 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 audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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
June 28, 2003 and the results of their operations and their cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States of America.

As discussed in Note 2 to the consolidated financial statements, in 2003, the
Company changed its method of accounting for goodwill and other intangible
assets to conform with the provisions of Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets."


CRISP HUGHES EVANS  LLP
Asheville, North Carolina

October 2, 2003


                                      -40-

<PAGE>





INDEPENDENT AUDITORS' REPORT


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

We  have  audited  the  accompanying   consolidated   balance  sheet  of  Wellco
Enterprises,  Inc. and subsidiaries  (the "Company") as of June 29, 2002 and the
related  consolidated   statements  of  operations  and  comprehensive   income,
stockholders'  equity,  and cash flows for each of the two  fiscal  years in the
period 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 audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of the Company as of June 29, 2002 and
the  results  of its  operations  and its cash  flows for each of the two fiscal
years  in the  period  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






                                      -41-

<PAGE>





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

                                                   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
--------------------------------------------------------------------------------


                                                   Fiscal Year 2002 Quarters

                                             First   Second    Third    Fourth
--------------------------------------------------------------------------------
Market Price Per Share-
--------------------------------------------------------------------------------
High                                        $17.20   $15.20   $15.95    $15.20
--------------------------------------------------------------------------------
Low                                          $8.45   $12.80   $13.80    $13.90
--------------------------------------------------------------------------------
Per Share Cash Dividend Declared               -      $0.20    $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 5, 2003
was 203.



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




                                      -42-

<PAGE>



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

                                                   Fiscal Year 2003 Quarters

                                             First   Second    Third (B)Fourth
--------------------------------------------------------------------------------
Revenues                                   $ 5,258  $ 5,248  $ 5,572   $ 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)                          (A) 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
--------------------------------------------------------------------------------

                                                   Fiscal Year 2002 Quarters

                                             First   Second    Third    Fourth
--------------------------------------------------------------------------------
Revenues                                   $ 3,570  $ 6,390  $ 5,174   $ 4,847
--------------------------------------------------------------------------------
Cost of Sales and Services                   3,207    5,249    4,176     4,065
--------------------------------------------------------------------------------
Net Income (Loss)                             (205)     645      368  (C) (125)
--------------------------------------------------------------------------------
Basic Earnings (Loss) Per Share              (0.18)    0.55     0.31     (0.10)
--------------------------------------------------------------------------------
Fully Diluted (Loss) Per Share             $ (0.18) $  0.54  $  0.30   $ (0.10)
--------------------------------------------------------------------------------

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

(B)  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.

(C)  Includes a $300,000 adjustment in the fourth quarter to increase the
     provision for income taxes for additional valuation allowance for deferred
     tax assets. Also, includes $335,000 of charges for Unrecovered Contract
     Preparation Costs (See Note 18 to the Consolidated Financial Statements).


                                      -43-

<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

CHANDRA WIJEWICKRAMA
V. P. - Caribbean Operations

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)

                                      -44-

<PAGE>



JAMES T. EMERSON
Retired Engineer

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










                                      -45-

<PAGE>




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

The information called for by the following items is in the Company's 2003
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                                                42
Item 6.   Consolidated Selected Financial Data                                1
Item 7.   Management's Discussion and Analysis of Results of
          Operations and Financial Condition                               4-11
Item 7A.  Quantitative and Qualitative Disclosures About Market Risk         **
Item 8.   Consolidated Financial Statements and Supplementary Data    12-39, 43

** This information is not required because the registrant is a small business
issuer.

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

On March 17, 2003, we filed a Form 8-K reporting under Item 4, Changes in
Registrant's Certifying Accountants, that we had dismissed our independent
auditors, Deloitte & Touche LLP, and engaged the services of Crisp Hughes Evans
LLP as our new independent auditors for our fiscal year ending June 28, 2003.
Our Finance and Audit Committee of the Board of Directors authorized the
dismissal of Deloitte & Touche LLP and the engagement of Crisp Hughes Evans LLP.

Disclosure was filed in Item 4 of Form 8-K dated March 17, 2003, 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
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 June 28, 2003, and
based on its evaluation, our chief executive officer and chief financial officer
have concluded that these controls and procedures are effective.




                                       -5-

<PAGE>



(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 and 13,
except for certain information about executive officers provided 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 17, 2003,
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                  58      Chairman, Board of Directors,
                                         Chief Executive Officer, President
--------------------------------------------------------------------------------
Horace Auberry                   72      Chairman Emeritus, Board of Directors
--------------------------------------------------------------------------------
Rolf Kaufman                     73      Vice Chairman, Board of Directors
--------------------------------------------------------------------------------
Sven Oberg                       64      Vice President-Engineering and
                                         Process Development
--------------------------------------------------------------------------------
Chandra Wijewickrama             65      Vice President-Caribbean Operations
--------------------------------------------------------------------------------
Chris Castleberry                30      Vice President-Technical Director
--------------------------------------------------------------------------------
Fred K. Webb, Jr.                43      Vice President of Marketing
--------------------------------------------------------------------------------
Richard A. Wood, Jr.             66      Secretary
--------------------------------------------------------------------------------
Tammy Francis, CPA               44      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. Wijewickrama has been an employee of the Company for thirty-seven years and
was elected Vice President, Caribbean Operations in November, 2000.

                                       -7-

<PAGE>



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 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.

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 2003 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 2003 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.

                                     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 2003 Annual Report
to Shareholders which is integrated into Part II of this Form
10-K immediately after page 4
--------------------------------------------------------------------------------
Consolidated Balance Sheets - at June 28, 2003 and June 29, 2002          13-14*
--------------------------------------------------------------------------------


                                       -8-

<PAGE>


                                                                            Page
                                                                          Number
--------------------------------------------------------------------------------
Consolidated Statements of Operations and Comprehensive Income -
for the years ended June 28, 2003, June 29, 2002 and  June 30, 2001          12*
--------------------------------------------------------------------------------
Consolidated Statements of Cash Flows - for the years ended
June 28, 2003, June 29, 2002 and June 30, 2001                            15-16*
--------------------------------------------------------------------------------
Consolidated Statements of Stockholders' Equity - for the years
ended June 28, 2003, June 29, 2002 and June 30, 2001                         17*
--------------------------------------------------------------------------------
Independent Auditors' Reports                                             40-41*
--------------------------------------------------------------------------------
Notes to Consolidated Financial Statements                                18-39*
--------------------------------------------------------------------------------

* Page number in the 2003 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                           24
--------------------------------------------------------------------------------

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                       (a)
--------------------------------------------------------------------------------
  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           Description                                              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)
--------------------------------------------------------------------------------
  21             Subsidiaries of Registrant                                  15
--------------------------------------------------------------------------------
  23             Consent of Experts                                      16 -17
--------------------------------------------------------------------------------
  31             Certifications of the Chief Executive Officer and
                 Chief Financial Officer under Section 302 of the
                 Sarbanes-Oxley Act of 2002, filed herewith.            18 - 21
--------------------------------------------------------------------------------
  32             Certifications of the Chief Executive Officer and
                 Chief Financial Officer under Section 906 of the
                 Sarbanes-Oxley Act of 2002, filed herewith.            22 - 23
--------------------------------------------------------------------------------


* 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

         (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.
         (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.

                                      -10-

<PAGE>



         (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 March 17, 2003, we filed a current report of Form 8-K reporting under Item 4,
Changes in Registrant's Certifying Accountants, that we had dismissed our
independent auditors, Deloitte & Touche LLP, and engaged the services of Crisp
Hughes Evans LLP as our new independent auditors for our fiscal year ending June
28, 2003. Our Finance and Audit Committee of the Board of Directors authorized
the dismissal of Deloitte & Touche LLP and the engagement of Crisp Hughes Evans
LLP.

On May 14, 2003, we filed a current report of Form 8-K reporting under Item 9.














                                      -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 13, 2003

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 13, 2003








                                      -12-

<PAGE>







INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying consolidated balance sheet of Wellco
Enterprises, Inc. and subsidiaries (the "Company") as of June 28, 2003 and the
related consolidated statements of operations and comprehensive income,
stockholders' equity, and cash flows for the year then ended. Our audit 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 audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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
June 28, 2003 and the results of their operations and their cash flows for the
year 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.

As discussed in Note 2 to the consolidated financial statements, in 2003, the
Company changed its method of accounting for goodwill and other intangible
assets to conform with the provisions of Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets."



CRISP HUGHES EVANS  LLP
Asheville, North Carolina

October 2, 2003







                                      -13-

<PAGE>







INDEPENDENT AUDITORS' REPORT


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

We have audited the  consolidated  financial  statements of Wellco  Enterprises,
Inc. and  subsidiaries  as of June 29, 2002 and for each of the two fiscal years
in the period  ended June 29,  2002,  and have issued our report  thereon  dated
October 14,2002; such financial statements and report are included in your 2003
Annual  Report to  Shareholders  included  herein.  Our audits 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 audits. 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 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.









                                      -15-

<PAGE>






                                                              Exhibit 23
                                                              ----------

                            WELLCO ENTERPRISES, INC.
                         CONSENT OF INDEPENDENT AUDITORS


We consent to the  incorporation  by  reference  in the  Registration  Statement
333-72824 of Wellco Enterprises, Inc. on Form S-8 of our report dated October 2,
2003 (which report expresses an unqualified  opinion and includes an explanatory
paragraph  relating  to  the  adoption  of  Statement  of  Financial  Accounting
Standards No. 142,  "Goodwill and Other  Intangible  Assets")  appearing in this
Annual Report on Form 10-K of Wellco  Enterprises,  Inc. for the year ended June
28, 2003.


CRISP HUGHES EVANS  LLP
Asheville, North Carolina

October 10, 2003











                                      -16-

<PAGE>





                                                              Exhibit 23
                                                              ----------

                            WELLCO ENTERPRISES, INC.
                         CONSENT OF INDEPENDENT AUDITORS


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
reports  dated  October 14, 2002  appearing in the Annual Report on Form 10-K of
Wellco  Enterprises,  Inc.and  subsidiaries  for the fiscal  year ended June 29,
2002.



DELOITTE & TOUCHE LLP
Charlotte, North Carolina

October 14, 2002










                                      -17-

<PAGE>




                                                              Exhibit 31
                                                              ----------


                            WELLCO ENTERPRISES, INC.
                FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 28, 2003
              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):

                                      -18-

<PAGE>





                  (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

                  (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 13, 2003


/s/ David Lutz
-----------------------------------------------------
By: David Lutz, Chief Executive Officer and President
(Chief Executive Officer)













                                      -19-

<PAGE>




                                                              Exhibit 31
                                                              ----------

                            WELLCO ENTERPRISES, INC.
                FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 28, 2003
              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):

                                      -20-

<PAGE>




                  (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

                  (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 13, 2003


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









                                      -21-

<PAGE>



                                                              Exhibit 32
                                                              ----------

                            WELLCO ENTERPRISES, INC.
                FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 28, 2003
              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 June
    28, 2003, 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 13, 2003
----------------------


/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.

                                      -22-

<PAGE>



                                                              Exhibit 32
                                                              ----------

                            WELLCO ENTERPRISES, INC.
                FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 28, 2003
              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
    June 28, 2003, 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 13, 2003


/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.


                                      -23-

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                                                              SCHEDULE II

             WELLCO ENTERPRISES, INC. AND WHOLLY-OWNED SUBSIDIARIES
                               VALUATION ACCOUNTS
    FOR THE FISCAL YEARS ENDED JUNE 28, 2003, JUNE 29, 2002 AND JUNE 30, 2001


               Balance at the     Additions Charged                  Balance at
Description    Beginning of Year  to Income (A)      Deductions (B)  End of Year
--------------------------------------------------------------------------------
Allowance for
Doubtful
Accounts-
--------------------------------------------------------------------------------
2003                 $28               3                  3               $28
--------------------------------------------------------------------------------
2002                 $28               1                  1               $28
--------------------------------------------------------------------------------
2001                 $27               1                                  $28
--------------------------------------------------------------------------------

(A) Additions for allowance for doubtful accounts.

(B) Write-off of uncollectible accounts.






                                      -24-
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