UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
  For the fiscal year ended
June 26, 2009
 Commission File
No. 1-9309
   
  DELAWARE
(State or other jurisdiction of Incorporation or organization)
    
    54-0852979
(I.R.S. employer identification no.)
 6850 Versar Center, Springfield, Virginia
(Address of principal executive offices)
    
    22151
(Zip code)
 (703) 750-3000
 Common Stock, $.01 par value
 NYSE Amex
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  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ  o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS  PART IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market for Registrants Common Stock, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial Data (unaudited)ITEM 7 Managements Discussion and Analysis of Financial Condition and Results of OperationsITEM 7 Managements Discussion and Analysis of Financial Condition and Results of Operations (continued)ITEM 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9(T). Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors and Executive Officers of the RegistrantItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and ManagementItem 13. Certain Relationships and Related TransactionsItem 14. Principal Accountant Fees and ServicesPART IVItem 15. Exhibits and Financial Statement SchedulesExhibit IndexSIGNATURES 
 PART I
 
 Item 1. Business
 Forward-Looking Statements
 This report contains certain forward-looking statements which are based on current
expectations. Actual results may differ materially. The forward-looking statements include,
without limitation, those regarding the continued award of future work or task orders from
government and private clients, cost controls and reductions, the expected resolution of delays in
billing of certain projects, and the possible impact of current and future claims against the
Company based upon negligence and other theories of liability. Forward-looking statements involve
numerous risks and uncertainties that could cause actual results to differ materially, including,
but not limited to, the possibility that the demand for the Companys services may decline as a
result of possible changes in general and industry specific economic conditions and the effects of
competitive services and pricing; the possibility that the Company will not be able to perform work
within budget or contractual limitations; one or more current or future claims made against the
Company may result in substantial liabilities; the possibility that the Company will not be able
to attract and retain key professional employees; changes to or failure of the Federal or municipal
governments to fund certain programs in which the Company participates; delays in project funding;
and such other risks and uncertainties set forth in this report and in other reports and other
documents filed by the Company from time to time with the Securities and Exchange Commission.
 Business Overview
    Program Management Business Segment :
 2




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Compliance and Environmental Programs Business Segment:
   3




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Professional Services Business Segment:
 National Security Business Segment:
 Personal Protection Equipment: ® Standard on
Protective Ensembles for Chemical/Biological Terrorism Incidents
 Chemical Testing Laboratory:
   4




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Markets
      Competition
   5




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Backlog
     6




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Employees
  
 Item 1A. Risk Factors
 We are dependent on government contracts for the majority of our revenue, and a reduction or delay
in spending by government agencies could adversely affect our business and operating results.
  
    
    a competitive procurement process with no guaranty of being awarded contracts;
    
    dependence on congressional appropriations and administrative allotment of funds;
    
    policies and regulations that can be changed at any time by Congress or a
presidential administration;
    
    competing political priorities and changes in the political climate regarding
funding and operations of the services;
    
    changes in and delays or cancellations of government programs or requirements;
    
    government contracts that are usually awarded for relatively short periods of time
and are subject to renewal options in favor of the government; and
    
    many contracts with Federal government agencies require annual funding and may be
terminated at the agencys discretion.
 7




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Our government contracts are subject to audit and potential reduction of costs and fees.
  As a government contractor, we are subject to a number of procurement laws and regulations; a
violation of any such law or regulation could result in sanctions, contract termination, forfeiture
of profit, harm to our reputation or loss of our status as an eligible government contractor.
  Since we depend on federal, state and local governments for a significant portion of our revenue,
our inability to win or renew government contracts could harm our operations and financial
condition.
  Robust enforcement of regulations is important to our financial success.
  8




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A large portion of our backlog is subject to cancellation and adjustments which makes backlog an
uncertain indicator of future operating results.
    We could face potential liability for failure to properly design remediation.
  Our failure to properly manage projects may result in additional costs or claims.
  Our services expose us to significant risks of liability and it may be difficult to obtain or
maintain adequate insurance coverage.
  9




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Economic downturn.
  If our partners fail to perform their contractual obligations on a project, we could be exposed to
legal liability, loss of reputation or reduced profits.
  We operate in highly competitive industries.
  Our quarterly and annual revenue, expenses and operating results may fluctuate significantly, which
could have a negative effect on the price of our common stock.
  
    
    the seasonality of the spending cycle of our public sector clients, notably the Federal
government, and the spending patterns of our private sector clients;
    
    employee hiring and utilization rates in the United States and internationally;
    
    the number and significance of client engagements commenced and completed during the period;
    
    delays incurred in connection with an engagement because of weather or other factors;
    
    ability to work within foreign countries regulations, tax requirements and obligations;
    
    business and financial risk working in foreign countries;
    
    the ability of clients to terminate engagements without penalties;
    
    the creditworthiness and solvency of clients;
    
    the size and scope of engagements;
 10




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
    
    the ability to perform contracts within budget or contractual limitations;
    
    the timing of expenses incurred for corporate initiatives;
    
    threatened or pending litigation matters;
    
    reductions in the prices of services offered by our competitors;
    
    winning re-bids of our existing large government contracts;
    
    general economic and political conditions; and
    
    volatility of currencies in foreign countries.
  We are highly dependent on key personnel.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
    
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  11




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EXECUTIVE OFFICERS OF THE REGISTRANT
  NAME
    
    AGE
    
    POSITION WITH THE COMPANYTheodore M. Prociv
    
    
    61
    
    
    President and Chief Executive OfficerLawrence W. Sinnott
    
    
    47
    
    
    Executive Vice President, Chief Operating Officer,
Chief Financial Officer and TreasurerJeffrey A. Wagonhurst
    
    
    61
    
    
    Executive Vice President, Program Management Business SegmentPaul W. Kendall
    
    
    56
    
    
    Senior Vice President, Global Marketing and
PlanningJames C. Dobbs
    
    
    64
    
    
    Senior Vice President, General Counsel and
SecretaryGina Foringer
    
    
    40
    
    
    Senior Vice President, Professional Services Business SegmentMichael J. Abram
    
    
    53
    
    
    Senior Vice President, Corporate Development
and Chief Administrative OfficerCharles S. Cox
    
    
    64
    
    
    Senior Vice President and President, VIAP, Inc.
(Versar International Assistance Projects)Jeffrey M. Moran
    
    
    46
    
    
    Senior Vice President, Compliance and
Environmental Programs SegmentPeter J. Cooper
    
    
    60
    
    
    Senior Vice President, National Security
Business SegmentDaniel J. Cummings
    
    
    47
    
    
    Senior Vice President, CONUS based Program
Management Business Segment
 Theodore M. Prociv
 Lawrence W. Sinnott
 Jeffrey A. Wagonhurst
 12




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Paul W. Kendall
 James C. Dobbs
 Gina Foringer
 Michael J. Abram
 Charles S. Cox
 Jeffrey M. Moran
 Peter J. Cooper
 Daniel J. Cummings th
 13




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PART II
 
 Item 5. Market for Registrants Common Stock, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 Common Stock
  Fiscal Year 2009
    
    High
    
    
    Low4th Quarter
    
    $
    5.20
    
    
    $
    2.253rd Quarter
    
    
    4.62
    
    
    
    2.072nd Quarter
    
    
    4.35
    
    
    
    2.261st Quarter
    
    
    6.00
    
    
    
    4.20
 Fiscal Year 2008
    
    High
    
    
    Low4th Quarter
    
    $
    6.44
    
    
    $
    4.703rd Quarter
    
    
    7.00
    
    
    
    5.362nd Quarter
    
    
    9.25
    
    
    
    5.421st Quarter
    
    
    15.35
    
    
    
    6.80
   Equity Compensation Plan Information
 Number ofsecuritiesremaining availableNumber of
    
    
    
    
    
    
    for future issuanceSecurities to be
    
    
    
    
    
    
    under equityissued upon
    
    
    Weighted-average
    
    
    compensation plansexercise of
    
    
    exercise price of
    
    
    (excludingoutstanding
    
    
    outstanding
    
    
    securitiesoptions, warrants
    
    
    options, warrants
    
    
    reflected in columnand rights
    
    
    and rights
    
    
    (a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    542,000
    
    
    $
    3.10
    
    
    
    275,000
 14




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Purchase of Equity Securities
 Maximum Number (orTotal Number of
    
    
    Approximate DollarShares Purchased as
    
    
    Value) of SharesPart of Publicly
    
    
    that May Yet beTotal Number of
    
    
    Average Price Paid
    
    
    Announced Plans or
    
    
    Purchased Under thePeriod
    
    Shares Purchased
    
    
    Per Share
    
    
    Programs
    
    
    Plans or ProgramsDecember 1-31, 2008
    
    
    912
    
    
    $
    3.57
    
    
    
    
    
    
    
    January 1-31, 2009
    
    
    34,389
    
    
    
    3.64
    
    
    
    
    
    
    
    Total
    
    
    35,301
    
    
    $
    3.64
    
    
    
    
    
    
    
    
 15




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6/04
    
    6/05
    
    6/06
    
    6/07
    
    6/08
    
    6/09Versar, Inc.
    
    
    100.00
    
    
    
    64.65
    
    
    
    83.23
    
    
    
    169.94
    
    
    
    96.97
    
    
    
    80.20S&P 500
    
    
    100.00
    
    
    
    106.32
    
    
    
    115.50
    
    
    
    139.28
    
    
    
    121.01
    
    
    
    89.29Peer Group
    
    
    100.00
    
    
    
    128.57
    
    
    
    236.38
    
    
    
    449.11
    
    
    
    369.39
    
    
    
    295.16
  16




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Item 6. Selected Financial Data (unaudited)
  For the Years EndedJune 26,
    
    June 27,
    
    June 29,
    
    June 30,
    
    July 1,2009
    
    2008
    
    2007
    
    2006
    
    2005(In thousands, except per share data)Consolidated Statements of Income
related data:Gross Revenue
    
    $
    112,196
    
    
    $
    115,602
    
    
    $
    102,726
    
    
    $
    60,888
    
    
    $
    67,678Gross Profit
    
    
    14,480
    
    
    
    13,788
    
    
    
    10,822
    
    
    
    6,354
    
    
    
    7,759Operating Income
    
    
    5,604
    
    
    
    5,491
    
    
    
    4,153
    
    
    
    681
    
    
    
    1,419Income from Continuing Operations
    
    
    3,169
    
    
    
    3,391
    
    
    
    5,282
    
    
    
    1,637
    
    
    
    1,361Loss from Discontinued Operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (290
    )
    
    
    (1,159
    )Net Income
    
    
    3,169
    
    
    
    3,391
    
    
    
    5,282
    
    
    
    1,347
    
    
    
    202Income per share from Continuing
Operations  Diluted
    
    $
    .35
    
    
    $
    .36
    
    
    $
    .62
    
    
    $
    .20
    
    
    $
    .16Loss per share from Discontinued
Operations  Diluted
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (.04
    )
    
    $
    (.14
    )Net Income per share  Diluted
    
    $
    .35
    
    
    $
    .36
    
    
    $
    .62
    
    
    $
    .16
    
    
    $
    .02Weighted Average Shares Outstanding 
Diluted
    
    
    9,150
    
    
    
    9,331
    
    
    
    8,466
    
    
    
    8,347
    
    
    
    8,263Consolidated Balance Sheet related data:Working Capital
    
    $
    25,513
    
    
    $
    22,271
    
    
    $
    16,176
    
    
    $
    9,119
    
    
    $
    7,887Current Ratio
    
    
    3.04
    
    
    
    2.67
    
    
    
    2.01
    
    
    
    1.99
    
    
    
    1.86Total Assets
    
    
    42,594
    
    
    
    39,828
    
    
    
    36,817
    
    
    
    22,802
    
    
    
    20,912Stockholders Equity
    
    $
    28,654
    
    
    $
    25,053
    
    
    $
    19,422
    
    
    $
    12,572
    
    
    $
    10,552
 17




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ITEM 7 Managements Discussion and Analysis of Financial Condition and Results of Operations
 Financial Trends
      
    
    General economic or political conditions;
    
    Threatened or pending litigation;
    
    The timing of expenses incurred for corporate initiatives;
    
    Employee hiring, utilization, and turnover rates;
    
    The seasonality of spending in the federal government and for commercial clients;
    
    Delays in project contracted engagements;
    
    Unanticipated contract changes impacting profitability;
    
    Reductions in prices by our competitors;
    
    The ability to obtain follow-on work;
    
    Failure to properly manage projects resulting in additional costs;
    
    The cost of compliance for the Companys laboratories;
    
    The results of a negative government audit potentially impacting our costs, reputation and
ability to work with the federal government;
    
    Loss of key personnel;
 18




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ITEM 7 Managements Discussion and Analysis of Financial Condition and Results of Operations (continued)
 
    
    The ability to compete in a highly competitive environment; and
    
    Federal funding delays due to wars in Iraq and Afghanistan.
 Results of Operations
  Years EndedJune 26,
    
    
    June 27,
    
    
    June 29,2009
    
    
    2008
    
    
    2007(In thousands)GROSS REVENUEProgram Management
    
    $
    71,526
    
    
    $
    68,896
    
    
    $
    58,765Compliance and Environmental
Programs
    
    
    19,649
    
    
    
    30,429
    
    
    
    29,839Professional Services
    
    
    11,476
    
    
    
    8,101
    
    
    
    7,318National Security
    
    
    9,545
    
    
    
    8,176
    
    
    
    6,804$
    112,196
    
    
    $
    115,602
    
    
    $
    102,726
  19




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ITEM 7 Managements Discussion and Analysis of Financial Condition and Results of
Operations (continued)
    Years EndedJune 26,
    
    
    June 27,
    
    
    June 29,2009
    
    
    2008
    
    
    2007(In thousands)GROSS PROFITProgram Management
    
    $
    10,467
    
    
    $
    9,398
    
    
    $
    7,037Compliance and Environmental
Programs
    
    
    884
    
    
    
    2,390
    
    
    
    2,313Professional Services
    
    
    1,734
    
    
    
    1,290
    
    
    
    1,257National Security
    
    
    1,395
    
    
    
    710
    
    
    
    215$
    14,480
    
    
    $
    13,788
    
    
    $
    10,822
  20




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ITEM 7 Managements Discussion and Analysis of Financial Condition and Results of
Operations (continued)
       21




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ITEM 7 Managements Discussion and Analysis of Financial Condition and Results of
Operations (continued)
   For the Years EndedJune 26, 2009
    
    
    June 27, 2008
    
    
    June 29, 2007(In thousands)GovernmentEPA
    
    $
    1,891
    
    
    
    2
    %
    
    $
    2,399
    
    
    
    2
    %
    
    $
    2,753
    
    
    
    3
    %State & Local
    
    
    8,589
    
    
    
    7
    %
    
    
    16,236
    
    
    
    14
    %
    
    
    13,936
    
    
    
    14
    %Department of Defense
    
    
    92,583
    
    
    
    83
    %
    
    
    88,245
    
    
    
    76
    %
    
    
    65,997
    
    
    
    64
    %Other
    
    
    2,576
    
    
    
    2
    %
    
    
    3,657
    
    
    
    3
    %
    
    
    16,512
    
    
    
    16
    %Commercial
    
    
    6,557
    
    
    
    6
    %
    
    
    5,065
    
    
    
    5
    %
    
    
    3,528
    
    
    
    3
    %Gross Revenue
    
    $
    112,196
    
    
    
    100
    %
    
    $
    115,602
    
    
    
    100
    %
    
    $
    102,726
    
    
    
    100
    %
 Liquidity and Capital Resources
  1 2 1 2
   22




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ITEM 7 Managements Discussion and Analysis of Financial Condition and Results of Operations (continued)
 Contractual Obligations
  Contractual
    
    
    
    
    
    Less than
    
    
    1-3
    
    
    4-5
    
    
    After 5Obligations
    
    Total Cost
    
    
    1 year
    
    
    Years
    
    
    Years
    
    
    Years(In thousands)Operating
lease obligations
    
    $
    11,950
    
    
    $
    2,701
    
    
    $
    3,939
    
    
    $
    3,455
    
    
    $
    1,855Capital lease obligations
    
    
    835
    
    
    
    76
    
    
    
    126
    
    
    
    133
    
    
    
    500Notes payable
    
    
    336
    
    
    
    336
    
    
    
    
    
    
    
    
    
    
    
    Estimated interest
obligations
    
    
    220
    
    
    
    33
    
    
    
    54
    
    
    
    49
    
    
    
    84Total contractual cash
obligations
    
    $
    13,341
    
    
    $
    3,146
    
    
    $
    4,119
    
    
    $
    3,637
    
    
    $
    2,439
 Critical Accounting Policies and Related Estimates That Have a Material Effect on Versars
Consolidated Financial Statements
  Revenue recognition:
  Allowance for doubtful accounts
 23




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ITEM 7 Managements Discussion and Analysis of Financial Condition and Results of Operations (continued)
  Net deferred tax asset
 Asset retirement obligation 1 2
 Goodwill and other intangible assets
 Share-based compensation
   New accounting pronouncements Business Combinations
 24




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ITEM 7 Managements Discussion and Analysis of Financial Condition and Results of Operations (continued)
   Fair Value Measurements Effective Dates
of FASB Statement No. 157
 Noncontrolling Interests in Consolidated Financial StatementsAn Amendment of ARB No. 51
    25




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ITEM 7 Managements Discussion and Analysis of Financial Condition and Results of Operations (continued)
   Impact of Inflation
  Business Segments
  
 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9(T). Controls and Procedures
 Disclosure Controls and Procedures
  26




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Managements Annual Report on Internal Control Over Financial Reporting
  
    
    Pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the company;
    
    Provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and
    
    Provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the companys assets that could have a material effect on the
financial statements.
     Attestation Report of the Independent Registered Public Accounting Firm
  Changes in Internal Control Over Financial Reporting
  27




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Item 9B. Other Information
  
 PART III
 
 Item 10. Directors and Executive Officers of the Registrant
    
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management
  
 Item 13. Certain Relationships and Related Transactions
  
 Item 14. Principal Accountant Fees and Services
  
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
   a)
    
    Report of Independent Registered Public Accounting Firm
 28




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b)
    
    Consolidated Balance Sheets as of June 26, 2009 and June 27, 2008c)
    
    Consolidated Statements of Income for the Years Ended June 26, 2009, June 27, 2008, and
June 29, 2007d)
    
    Consolidated Statements of Changes in Stockholders Equity for the Years Ended June 26,
2009, June 27, 2008 and June 29, 2007e)
    
    Consolidated Statements of Cash Flows for the Years Ended June 26, 2009, June 27, 2008,
and June 29, 2007f)
    
    Notes to Consolidated Financial Statements
  a)
    
    Schedule II  Valuation and Qualifying Accounts for the Years Ended June 26, 2009, June
27, 2008 and June 29, 2007
    29




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Exhibit Index
 Item No.
    
    Description
    
    Reference3.1
    
    
    Restated Articles of Incorporation of Versar, Inc. filed as an exhibit to the
Registrants Registration Statement on Form S-1 effective November 20, 1986
(File No. 33-9391)
    
    
    (A
    )3.2
    
    
    Amended and Restated By-Laws of Versar, Inc.
    
    
    (AE
    )4
    
    
    Specimen of Certificate of Common Stock of Versar, Inc.
    
    
    (A
    )10.10
    
    
    Incentive Stock Option Plan *
    
    
    (B
    )10.11
    
    
    Executive Tax and Investment Counseling Program
    
    
    (A
    )10.12
    
    
    Nonqualified Stock Option Plan *
    
    
    (B
    )10.105
    
    
    4P Architect-Engineering Contract dated March 14, 2003
    
    
    (W
    )10.107
    
    
    Line of Credit Commitment Letter, dated September 16, 2003 between
the Registrant and United Bank
    
    
    (W
    )10.113
    
    
    2002 Stock Incentive Plan*
    
    
    (Y
    )10.114
    
    
    Employment Agreement dated February 8, 2005 between Versar, Inc. and Theodore
M. Prociv*
    
    
    (Z
    )10.115
    
    
    Form of Stock Option Agreement*
    
    
    (Z
    )10.116
    
    
    Air National Guard Contract dated July 6, 2005
    
    
    (Z
    )10.117
    
    
    2005 Stock Incentive Plan and definitions as approved by the Board of Directors
on September 7, 2005 and by the stockholders on November 16, 2005
    
    
    (AA
    )10.123
    
    
    Modification Agreement of the Revolving Commercial Note, dated September 24,
2007, between Registrant and United Bank
    
    
    (AB
    )10.124
    
    
    Amendment to Employment Agreement dated February 8, 2005 between Versar, Inc.
and Theodore M. Prociv, September 25, 2007*
    
    
    (AB
    )10.125
    
    
    Amended and Restated Change of Control Severance Agreements dated March 17,
2008 between the Registrant and each of Lawrence W. Sinnott, James C. Dobbs,
Paul W. Kendall, Michael Abram and Jeffrey A. Wagonhurst (In reliance on
instruction 2 to Item 601 of Regulation S-K, the Registrant has filed the form of
Change of Control Severance Agreement entered into with each of the individuals
listed above).*
    
    
    (AC
    )10.126
    
    
    Employment agreement between Charles S. Cox and Versar, Inc. entered into on
February 2, 2009 and effective as of January 3, 2009.*
    
    
    (AD
    )10.127
    
    
    Amendment to Employment Agreement dated September 3, 2008 between
Versar, Inc. and Mr. Theodore M. Prociv.*
    
    
    35-4710.128
    
    
    Form of Indemnification Agreement*
    
    
    (AE
    )
 30




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##### 



Item No.
    
    Description
    
    Reference21
    
    
    Subsidiaries of the Registrant
    
    
    4823
    
    
    Consent of Independent Registered Public Accounting Firm, Grant Thornton LLP to the
incorporation by reference of the previously filed Forms S-8.
    
    
    4931.1
    
    
    Certifications by Theodore M. Prociv, Chief Executive Officer and President
Pursuant to Securities Exchange Rule 13a-14
    
    
    5031.2
    
    
    Certifications by Lawrence W. Sinnott, Exec. Vice President, Chief Operating Officer,
Chief Financial Officer and Treasurer pursuant to Securities Exchange Rule 13a-14
    
    
    5132.1
    
    
    Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
Of the Sarbanes-Oxley Act of 2002, for the period ending June 26, 2009 by Theodore
M. Prociv, Chief Executive Officer and President
    
    
    5232.2
    
    
    Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
Of the Sarbanes-Oxley Act of 2002, for the period ending June 26, 2009 by Lawrence W.
Sinnott, Exec. Vice President, Chief Operating Officer, Chief Financial Officer
and Treasurer
    
    
    53
 
 *
    
    Indicates management contract or compensatory plan or arrangement 31




---



##### 



(A)
    
    Incorporated by reference to the similarly numbered exhibit to the Registrants Form S-1
Registration Statement effective November 20, 1986 (File No. 33-9391).(B)
    
    Incorporated by reference to the similarly numbered exhibit to the Registrants Form 10-K
Annual Report for the Fiscal Year Ended June 30, 1987 filed with the Commission on September 28, 1987.(W)
    
    Incorporated by reference to similarly numbered exhibit to the Registrants Form 10-K
Annual Report for Fiscal Year Ended June 30, 2003 filed with the Commission on September 26, 2003.(Y)
    
    Incorporated by reference to similarly numbered exhibit to the Registrants Form S-8
Registration Statement filed with the Commission on November 4, 2005 (File No. 333-129489).(Z)
    
    Incorporated by reference to similarly numbered exhibit to the Registrants Form 10-K
Annual Report for Fiscal Year Ended July 1, 2005 filed with the Commission on October 4, 2005.(AA)
    
    Incorporated by reference to similarly numbered exhibit to the Registrants Form 10-K
Annual Report for Fiscal Year Ended June 30, 2006 filed with the Commission on September 19, 2006.(AB)
    
    Incorporated by reference to similarly numbered exhibit to the Registrants Form 10-K
Annual Report for Fiscal Year Ended June 29, 2007 filed with the Commission on September 27, 2007.(AC)
    
    Incorporated by reference to the exhibit to the Registrants Form 8-K Current Report dated April 2, 2008
filed with the Commission on April 4, 2008.(AD)
    
    Incorporated by reference to the exhibit to the Registrants Form 8-K Current Report dated February 2,
2009 filed with the Commission on February 6, 2009.(AE)
    
    Incorporated by reference to the exhibit to the Registrants Form 8-K Current Report dated May 6, 2009
filed with the Commission on May 11, 2009. 32




---



##### 



VERSAR, INC.(Registrant) Date:  September 21, 2009
    /S/ Paul J. HeoperPaul J. HoeperChairman and Director  SIGNATURES
    
    TITLE
    
    DATE/S/ Paul J. Hoeper
    
    Chairman and Director
    
    September 21, 2009Paul J. Hoeper/S/ Theodore M. Prociv
    
    Chief Executive Officer, President, and
    
    September 21, 2009Theodore M. Prociv
    
    Director/S/ Lawrence W. Sinnott
    
    Executive Vice President, Chief
    
    September 21, 2009Lawrence W. Sinnott
    
    Operating Officer, Chief Financial
Officer, Treasurer, and Principal
Accounting Officer/S/ Michael Markels, Jr.
    
    Chairman Emeritus and Director
    
    September 21, 2009Michael Markels, Jr./S/ Robert L. Durfee
    
    Director
    
    September 21, 2009Robert L. Durfee/S/ James L. Gallagher
    
    Director
    
    September 21, 2009James L. Gallagher
 33




---



##### 



SIGNATURES
    
    TITLE
    
    DATE/S/ James V. Hansen
    
    Director
    
    September 21, 2009James V. Hansen/S/ Amoretta M. Hoeber
    
    Director
    
    September 21, 2009Amoretta M. Hoeber/S/ Amir A. Metry
    
    Director
    
    September 21, 2009Amir A. Metry/S/ Anthony L. Otton
    
    Director
    
    September 21, 2009Anthony L. Otten
 34




---



##### 



Report of Independent Registered Public Accounting Firm
 
     
 F-1




---



##### 



VERSAR, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
 June 26,
    
    
    June 27,2009
    
    
    2008ASSETSCurrent assetsCash and cash equivalents
    
    $
    8,400
    
    
    $
    11,938Accounts receivable, net
    
    
    27,695
    
    
    
    21,596Prepaid expenses and other current assets
    
    
    1,207
    
    
    
    1,080Deferred income taxes
    
    
    720
    
    
    
    1,015Total current assets
    
    
    38,022
    
    
    
    35,629Property and equipment, net
    
    
    2,348
    
    
    
    2,152Deferred income taxes
    
    
    765
    
    
    
    517Goodwill
    
    
    776
    
    
    
    776Other assets
    
    
    683
    
    
    
    754Total assets
    
    $
    42,594
    
    
    $
    39,828LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    7,405
    
    
    $
    7,731Billings in excess of revenue
    
    
    
    
    
    
    156Accrued salaries and vacation
    
    
    1,959
    
    
    
    1,719Accrued bonus
    
    
    1,358
    
    
    
    2,066Other liabilities
    
    
    1,787
    
    
    
    1,686Total current liabilities
    
    
    12,509
    
    
    
    13,358Other long-term liabilities
    
    
    1,431
    
    
    
    1,417Total liabilities
    
    
    13,940
    
    
    
    14,775Commitments and contingenciesStockholders equityCommon stock, $.01 par value; 30,000,000 shares
authorized; 9,193,635 shares and 9,059,135 shares
issued; 9,074,300 shares and 8,975,101 shares outstanding
    
    
    92
    
    
    
    91Capital in excess of par value
    
    
    27,734
    
    
    
    27,115Retained earnings (accumulated deficit)
    
    
    1,615
    
    
    
    (1,554
    )Treasury stock, at cost (119,335 and 84,034 shares, respectively)
    
    
    (706
    )
    
    
    (578
    )Accumulated other comprehensive loss
    
    
    (81
    )
    
    
    (21
    )Total stockholders equity
    
    
    28,654
    
    
    
    25,053Total liabilities and stockholders equity
    
    $
    42,594
    
    
    $
    39,828
  F-2




---



##### 



VERSAR, INC. AND SUBSIDIARIES
Consolidated Statements of Income
 Years EndedJune 26,
    
    
    June 27,
    
    
    June 29,2009
    
    
    2008
    
    
    2007GROSS REVENUE
    
    $
    112,196
    
    
    $
    115,602
    
    
    $
    102,726Purchased services and materials, at cost
    
    
    60,583
    
    
    
    68,507
    
    
    
    62,750Direct costs of services and overhead
    
    
    37,133
    
    
    
    33,307
    
    
    
    29,154GROSS PROFIT
    
    
    14,480
    
    
    
    13,788
    
    
    
    10,822Selling, general and administrative expenses
    
    
    8,876
    
    
    
    8,297
    
    
    
    6,669OPERATING INCOME
    
    
    5,604
    
    
    
    5,491
    
    
    
    4,153OTHER EXPENSELoss on marketable securities
    
    
    328
    
    
    
    
    
    
    
    Interest expense (income)
    
    
    36
    
    
    
    (173
    )
    
    
    (24
    )INCOME BEFORE INCOME TAXES
    
    
    5,240
    
    
    
    5,664
    
    
    
    4,177Income tax expense (benefit)
    
    
    2,071
    
    
    
    2,273
    
    
    
    (1,105
    )NET INCOME
    
    $
    3,169
    
    
    $
    3,391
    
    
    $
    5,282NET INCOME PER SHARE  BASIC
    
    $
    0.35
    
    
    $
    0.38
    
    
    $
    0.64NET INCOME PER SHARE  DILUTED
    
    $
    0.35
    
    
    $
    0.36
    
    
    $
    0.62WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING  BASIC
    
    
    9,123
    
    
    
    8,932
    
    
    
    8,201WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING  DILUTED
    
    
    9,150
    
    
    
    9,331
    
    
    
    8,466
  F-3




---



##### 



VERSAR, INC.
Consolidated Statements of Changes in Stockholders Equity
  Accumu-lated(Accumu-
    
    
    
    
    
    
    
    
    
    
    OtherCapital in
    
    
    Lated
    
    
    
    
    
    
    
    
    
    
    Compre-
    
    
    TotalExcess
    
    
    Deficit)
    
    
    
    
    
    
    
    
    
    
    hensive
    
    
    Stock-Common Stock
    
    
    of Par
    
    
    Retained
    
    
    Treasury
    
    
    Income
    
    

holdersShares
    
    
    Amount
    
    
    Value
    
    
    Earnings
    
    
    Shares
    
    
    Stock
    
    
    (Loss)
    
    
    EquityBalance, July 1, 2006
    
    
    8,145
    
    
    $
    81
    
    
    $
    22,790
    
    
    $
    (10,227
    )
    
    
    (16
    )
    
    $
    (72
    )
    
    $
    
    
    
    $
    12,572Exercise of stock options
    
    
    231
    
    
    
    2
    
    
    
    713
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    715Issuance of restricted stock
    
    
    21
    
    
    
    1
    
    
    
    84
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85Exercise of stock warrants
    
    
    180
    
    
    
    2
    
    
    
    717
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    719Stock exchange
    
    
    129
    
    
    
    1
    
    
    
    327
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    328Treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38
    )
    
    
    (327
    )
    
    
    
    
    
    
    (327
    )Share-based compensation
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,282Balance, June 29, 2007
    
    
    8,706
    
    
    
    87
    
    
    
    24,679
    
    
    
    (4,945
    )
    
    
    (54
    )
    
    
    (399
    )
    
    
    
    
    
    
    19,422Exercise of stock options
    
    
    275
    
    
    
    3
    
    
    
    1,052
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,055Issuance of restricted stock
    
    
    78
    
    
    
    1
    
    
    
    507
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    508Treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    (179
    )
    
    
    
    
    
    
    (179
    )Share-based compensation
    
    
    
    
    
    
    
    
    
    
    303
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    303Tax benefit from
exercise of stock options
    
    
    
    
    
    
    
    
    
    
    574
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    574Comprehensive Income 

Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,391
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,391Other Comprehensive Income 

Foreign currency translations
Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    (21
    )Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,370Balance, June 27, 2008
    
    
    9,059
    
    
    
    91
    
    
    
    27,115
    
    
    
    (1,554
    )
    
    
    (84
    )
    
    
    (578
    )
    
    
    (21
    )
    
    
    25,053Exercise of stock options
    
    
    26
    
    
    
    
    
    
    
    48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48Issuance of restricted stock
    
    
    109
    
    
    
    1
    
    
    
    691
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    692Treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35
    )
    
    
    (128
    )
    
    
    
    
    
    
    (128
    )Tax shortfall in exercise of
stock options
    
    
    
    
    
    
    
    
    
    
    (120
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (120
    )Comprehensive Income 

Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,169
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,169Other comprehensive income 

Foreign currency translations
Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (60
    )
    
    
    (60
    )Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,109Balance, June 26, 2009
    
    
    9,194
    
    
    $
    92
    
    
    $
    27,734
    
    
    $
    1,615
    
    
    
    (119
    )
    
    $
    (706
    )
    
    $
    (81
    )
    
    $
    28,654
  F-4




---



##### 



VERSAR, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
 Years EndedJune 26,
    
    
    June 27,
    
    
    June 29,2009
    
    
    2008
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    3,169
    
    
    $
    3,391
    
    
    $
    5,282Adjustments to reconcile net income to net cash (used in) provided
by continuing operationsDepreciation and amortization
    
    
    958
    
    
    
    876
    
    
    
    687Loss on sale of property and equipment
    
    
    1
    
    
    
    
    
    
    
    19Provision for doubtful accounts receivable
    
    
    155
    
    
    
    1
    
    
    
    336Loss on marketable securities
    
    
    328
    
    
    
    
    
    
    
    Loss (gain) on life insurance policy cash surrender value
    
    
    116
    
    
    
    29
    
    
    
    (39
    )Deferred tax (benefit) expense
    
    
    (114
    )
    
    
    1,952
    
    
    
    (1,200
    )Share-based compensation
    
    
    692
    
    
    
    811
    
    
    
    132Tax benefits on share-based compensation
    
    
    
    
    
    
    (574
    )
    
    
    Changes in assets and liabilities(Increase) decrease in accounts receivable
    
    
    (6,256
    )
    
    
    909
    
    
    
    (6,616
    )(Increase) decrease in prepaid expenses and other assets
    
    
    60
    
    
    
    199
    
    
    
    187(Decrease) increase in accounts payable
    
    
    (260
    )
    
    
    (2,723
    )
    
    
    4,504Increase in accrued salaries and vacation
    
    
    240
    
    
    
    115
    
    
    
    130(Decrease) increase in other liabilities
    
    
    (823
    )
    
    
    (12
    )
    
    
    2,320Net cash (used in) provided by continuing operations
    
    
    (1,734
    )
    
    
    4,974
    
    
    
    5,742Changes in net assets/liabilities of discontinued operations
    
    
    
    
    
    
    
    
    
    
    (285
    )Net cash (used in) provided by operating activities
    
    
    (1,734
    )
    
    
    4,974
    
    
    
    5,457Cash flows from investing activitiesPurchase of property and equipment
    
    
    (1,172
    )
    
    
    (722
    )
    
    
    (693
    )Purchase of marketable securities
    
    
    (3,000
    )
    
    
    
    
    
    
    Proceeds from sale of marketable securities
    
    
    2,672
    
    
    
    
    
    
    
    Premium paid on life insurance policies
    
    
    (38
    )
    
    
    (39
    )
    
    
    (43
    )Short term financing loan
    
    
    (200
    )
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (1,538
    )
    
    
    (761
    )
    
    
    (736
    )Cash flows from financing activitiesPurchase of treasury stock
    
    
    (128
    )
    
    
    (179
    )
    
    
    (327
    )Proceeds from exercise of options and warrants
    
    
    48
    
    
    
    1,055
    
    
    
    1,762Tax benefit on exercise of share-based compensation
    
    
    
    
    
    
    574
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (280
    )
    
    
    1,450
    
    
    
    1,435Effect of exchange rate changes
    
    
    14
    
    
    
    (21
    )
    
    
    Net (decrease) increase in cash and cash equivalents
    
    
    (3,538
    )
    
    
    5,642
    
    
    
    6,156Cash and cash equivalents at the beginning of the year
    
    
    11,938
    
    
    
    6,296
    
    
    
    140Cash and cash equivalents at the end of the year
    
    $
    8,400
    
    
    $
    11,938
    
    
    $
    6,296Supplementary disclosure of cash flow information:Cash paid during the period forInterest
    
    $
    60
    
    
    $
    57
    
    
    $
    70Income Taxes
    
    $
    1,762
    
    
    $
    199
    
    
    $
    55
  F-5




---



##### 



VERSAR, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE A SIGNIFICANT ACCOUNTING POLICIES
 Principles
of consolidation and business operations:
 Accounting estimates:
 Contract accounting:
 Pre-contract costs:
 Depreciation
and amortization:
 Goodwill and other intangible assets:
 Direct costs of services and overhead:
 Notes receivable:
 F-6




---



##### 



VERSAR, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 Income taxes:
 Asset retirement obligation: 1 2
 Share-based compensation:
    Net income per share:
 F-7




---



##### 



VERSAR, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Years EndedJune 26,
    
    June 27,
    
    June 29,2009
    
    2008
    
    2007(In thousands)Weighted average number of shares
outstanding  basic
    
    
    9,123
    
    
    
    8,932
    
    
    
    8,201Effect of assumed exercise of stock options
and vesting of restricted stock
    
    
    27
    
    
    
    399
    
    
    
    265Weighted average number of shares
outstanding  diluted
    
    
    9,150
    
    
    
    9,331
    
    
    
    8,466
  Deferred compensation:
 Cash and cash equivalents:
 Foreign Currency Translation:
 Fair value of financial instruments:
 Classification:
 New accounting pronouncements: Business Combinations
 F-8




---



##### 



VERSAR, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Fair Value Measurements Effective Dates
of FASB Statement No. 157
 Noncontrolling Interests in Consolidated Financial StatementsAn Amendment of ARB No. 51
    F-9




---



##### 



VERSAR, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  NOTE B BUSINESS SEGMENTS
     F-10




---



##### 



VERSAR, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Years EndedJune 26,
    
    
    June 27,
    
    
    June 29,2009
    
    
    2008
    
    
    2007(In thousands)GROSS REVENUEProgram Management
    
    $
    71,526
    
    
    $
    68,896
    
    
    $
    58,765Compliance and Environmental
Programs
    
    
    19,649
    
    
    
    30,429
    
    
    
    29,839Professional Services
    
    
    11,476
    
    
    
    8,101
    
    
    
    7,318National Security
    
    
    9,545
    
    
    
    8,176
    
    
    
    6,804$
    112,196
    
    
    $
    115,602
    
    
    $
    102,726GROSS PROFIT (A)Program Management
    
    $
    10,467
    
    
    $
    9,398
    
    
    $
    7,037Compliance and Environmental
Programs
    
    
    884
    
    
    
    2,390
    
    
    
    2,313Professional Services
    
    
    1,734
    
    
    
    1,290
    
    
    
    1,257National Security
    
    
    1,395
    
    
    
    710
    
    
    
    215$
    14,480
    
    
    $
    13,788
    
    
    $
    10,822Selling, general and administrative
expenses
    
    
    (8,876
    )
    
    
    (8,297
    )
    
    
    (6,669
    )OPERATING INCOME
    
    $
    5,604
    
    
    $
    5,491
    
    
    $
    4,153
 
 (A)
    
    Gross Profit is defined as gross revenue less purchased services and
materials and direct costs of services and overhead. Years EndedJune 26,
    
    
    June 27,2009
    
    
    2008(In thousands)IDENTIFIABLE ASSETSProgram Management
    
    $
    19,531
    
    
    $
    11,405Compliance and Environmental Programs
    
    
    5,910
    
    
    
    8,762Professional Services
    
    
    2,561
    
    
    
    1,554National Security
    
    
    2,447
    
    
    
    2,693Corporate and Other
    
    
    12,145
    
    
    
    15,414Total Assets
    
    $
    42,594
    
    
    $
    39,828
 F-11




---



##### 



VERSAR, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 NOTE C CUSTOMER INFORMATION
  Years EndedJune 26,
    
    
    June 27,
    
    
    June 29,2009
    
    
    2008
    
    
    2007(In Thousands)U.S. Department of Defense
    
    $
    92,583
    
    
    $
    88,245
    
    
    $
    65,997U.S. Environmental Protection Agency
    
    
    1,891
    
    
    
    2,399
    
    
    
    2,753Other U.S. Government Agencies
    
    
    2,576
    
    
    
    3,657
    
    
    
    16,512Total U.S. Federal Government
    
    $
    97,050
    
    
    $
    94,301
    
    
    $
    85,262
  NOTE D NOTES RECEIVABLE
  NOTE E ACCOUNTS RECEIVABLE
 Years EndedJune 26,
    
    
    June 27,2009
    
    
    2008(In thousands)Billed receivablesU.S. Government
    
    $
    9,516
    
    
    $
    10,312Commercial
    
    
    8,483
    
    
    
    2,063Unbilled receivablesU.S. Government
    
    
    9,742
    
    
    
    9,282Commercial
    
    
    423
    
    
    
    28228,164
    
    
    
    21,939Allowance for doubtful accounts
    
    
    (469
    )
    
    
    (343
    )$
    27,695
    
    
    $
    21,596
  F-12




---



##### 



VERSAR, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  NOTE F PROPERTY AND EQUIPMENT
 Estimated
    
    Years EndedUseful Life
    
    June 26,
    
    
    June 27,in Years
    
    2009
    
    
    2008(In thousands)Furniture and fixtures
    
    10
    
    $
    824
    
    
    $
    827Equipment
    
    3 to 10
    
    
    7,762
    
    
    
    7,029Capital leases
    
    Life of lease
    
    
    568
    
    
    
    568Leasehold improvements
    
    Shorter of  lease term or asset
life
    
    
    2,184
    
    
    
    2,11511,338
    
    
    
    10,539Accumulated depreciation
and amortization
    
    
    
    
    (8,990
    )
    
    
    (8,387
    )$
    2,348
    
    
    $
    2,152
   NOTE G MARKETABLE SECURITIES
  NOTE H DEBT
 1 2
 F-13




---



##### 



VERSAR, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 1 2
 NOTE I STOCK OPTIONS
      F-14




---



##### 



VERSAR, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
   Weighted-Optioned
    
    
    Average OptionShares
    
    
    Price Per Share
    
    
    Total(In thousands, except per share price)Outstanding at June 30, 2006
    
    
    1,026
    
    
    $
    3.13
    
    
    $
    3,210Exercised
    
    
    (332
    )
    
    
    2.87
    
    
    
    (952
    )Cancelled
    
    
    (27
    )
    
    
    3.72
    
    
    
    (99
    )Reclassified to non-qualified
    
    
    (12
    )
    
    
    3.50
    
    
    
    (42
    )Outstanding at June 29, 2007
    
    
    656
    
    
    $
    3.23
    
    
    $
    2,117Exercised
    
    
    (219
    )
    
    
    3.58
    
    
    
    (784
    )Cancelled
    
    
    (7
    )
    
    
    4.10
    
    
    
    (27
    )Outstanding at June 27, 2008
    
    
    430
    
    
    $
    3.03
    
    
    $
    1,306Exercised
    
    
    (6
    )
    
    
    2.19
    
    
    
    (13
    )Cancelled
    
    
    (3
    )
    
    
    3.45
    
    
    
    (10
    )Outstanding at June 26, 2009
    
    
    421
    
    
    $
    3.05
    
    
    $
    1,283
  Number ofNumber of
    
    
    
    
    
    
    
    
    
    
    
    
    SharesShares
    
    
    
    
    Weighted-
    
    
    Weighted-
    
    
    UnderlyingUnderlying
    
    
    Range of
    
    Average
    
    
    Average
    
    
    ExercisableOptions
    
    
    Option Price
    
    Option Price
    
    
    Remaining Life
    
    
    Options(In thousands, except as noted)261
    
    
    $1.81 to $2.80
    
    
    2.50
    
    
    2.7-years
    
    
    261113
    
    
    $3.40 to $3.82
    
    
    3.73
    
    
    5.1-years
    
    
    11347
    
    
    $4.00 to $4.95
    
    
    4.38
    
    
    5.5-years
    
    
    47421
    
    
    
    
    $
    3.05
    
    
    3.9-years
    
    
    421
 F-15




---



##### 



VERSAR, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
   Weighted-Optioned
    
    
    Average OptionShares
    
    
    Price Per Share
    
    
    Total(In thousands, except per share price)Outstanding at June 30, 2006
    
    
    203
    
    
    $
    3.24
    
    
    $
    659Exercised
    
    
    (29
    )
    
    
    3.16
    
    
    
    (92
    )Cancelled
    
    
    (14
    )
    
    
    2.77
    
    
    
    (37
    )Reinstated
    
    
    10
    
    
    
    3.49
    
    
    
    33Reclassified from ISO
    
    
    12
    
    
    
    3.50
    
    
    
    42Outstanding at June 29, 2007
    
    
    182
    
    
    $
    3.32
    
    
    $
    605Granted
    
    
    10
    
    
    
    7.77
    
    
    
    78Exercised
    
    
    (51
    )
    
    
    4.87
    
    
    
    (248
    )Outstanding at June 27, 2008
    
    
    141
    
    
    $
    3.07
    
    
    $
    435Exercised
    
    
    (20
    )
    
    $
    1.75
    
    
    
    (35
    )Outstanding at June 26, 2009
    
    
    121
    
    
    $
    3.31
    
    
    $
    400
  Number ofNumber of
    
    
    
    
    
    
    
    
    
    
    
    
    
    SharesShares
    
    
    
    
    
    Weighted-
    
    
    Weighted-
    
    
    UnderlyingUnderlying
    
    Range of
    
    
    Average
    
    
    Average
    
    
    ExercisableOptions
    
    Option Price
    
    
    Option Price
    
    
    Remaining Life
    
    
    Options(In thousands, except as noted)55
    
    $
    1.81 to $2.80
    
    
    
    1.91
    
    
    3.5-years
    
    
    5527
    
    $
    3.10 to $3.65
    
    
    
    3.35
    
    
    3.4-years
    
    
    2729
    
    $
    4.14 to $4.58
    
    
    
    4.35
    
    
    5.5-years
    
    
    2910
    
    $
    7.77
    
    
    
    7.77
    
    
    8.4-years
    
    
    121
    
    
    
    
    
    $
    3.31
    
    
    4.3-years
    
    
    111
   F-16




---



##### 



VERSAR, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
  NOTE J INCOME TAXES
  Years EndedJune 26,
    
    
    June 27,
    
    
    June 29,2009
    
    
    2008
    
    
    2007(In thousands)CurrentFederal
    
    $
    1,945
    
    
    $
    274
    
    
    $
    85State
    
    
    198
    
    
    
    47
    
    
    
    10Foreign
    
    
    42
    
    
    
    
    
    
    
    DeferredFederal
    
    
    (225
    )
    
    
    1,528
    
    
    
    1,404State
    
    
    115
    
    
    
    421
    
    
    
    350Foreign
    
    
    (4
    )
    
    
    3
    
    
    
    Valuation Allowance
    
    
    
    
    
    
    
    
    
    
    (2,954
    )$
    2,071
    
    
    $
    2,273
    
    
    $
    (1,105
    )
  June 26,
    
    
    June 27,2009
    
    
    2008Deferred Tax Assets:Employee benefits
    
    $
    299
    
    
    $
    295Bad debt reserves
    
    
    173
    
    
    
    130All other reserves
    
    
    296
    
    
    
    275Alternative minimum tax credits
    
    
    
    
    
    
    134Net operating losses
    
    
    86
    
    
    
    196State tax net operating losses
    
    
    
    
    
    
    112Depreciation
    
    
    335
    
    
    
    432Accrued expenses
    
    
    461
    
    
    
    242Other
    
    
    202
    
    
    
    132Total Deferred Tax Assets
    
    
    1,852
    
    
    
    1,948Valuation Allowance
    
    
    (48
    )
    
    
    (47
    )Deferred Tax Liabilities:Goodwill
    
    
    (189
    )
    
    
    (177
    )Asset retirement obligation
    
    
    (79
    )
    
    
    (189
    )Foreign
    
    
    (51
    )
    
    
    (3
    )Net Deferred Tax Assets
    
    $
    1,485
    
    
    $
    1,532
 F-17




---



##### 



VERSAR, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
      Years EndedJune 26,
    
    
    June 27,
    
    
    June 29,2009
    
    
    2008
    
    
    2007(In thousands)Expected provision at federal
statutory rate
    
    $
    1,782
    
    
    $
    1,923
    
    
    $
    1,447Change in valuation allowance
    
    
    1
    
    
    
    47
    
    
    
    (2,954
    )State income tax expense
    
    
    204
    
    
    
    221
    
    
    
    183Permanent items
    
    
    35
    
    
    
    27
    
    
    
    40Change in tax rates
    
    
    42
    
    
    
    
    
    
    
    NOL adjustments and other
    
    
    7
    
    
    
    55
    
    
    
    179$
    2,071
    
    
    $
    2,273
    
    
    $
    (1,105
    )
  NOTE K EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
   F-18




---



##### 



VERSAR, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
    NOTE L COMMITMENTS AND CONTINGENCIES
   TotalYears Ending June 30,
    
    Amount(In thousands)2010
    
    $
    2,7772011
    
    
    2,1292012
    
    
    1,9372013
    
    
    1,9552014
    
    
    1,6332015 and thereafter
    
    
    2,354$
    12,785
   F-19




---



##### 



VERSAR, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
   Legal Proceedings
  NOTE M SUBSEQUENT EVENTS
   F-20




---



##### 



VERSAR, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 NOTE N QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
  Fiscal Year 2009
    
    
    Fiscal Year 2008Quarter Ending
    
    June 26
    
    
    Mar 27
    
    
    Dec 26
    
    
    Sep 26
    
    
    Jun 27
    
    
    Mar 28
    
    
    Dec 28
    
    
    Sep 28Gross Revenue
    
    $
    27,380
    
    
    $
    31,851
    
    
    $
    27,967
    
    
    $
    24,998
    
    
    $
    28,491
    
    
    $
    28,874
    
    
    $
    29,355
    
    
    $
    28,882Gross Profit
    
    
    3,742
    
    
    
    4,355
    
    
    
    3,205
    
    
    
    3,178
    
    
    
    3,426
    
    
    
    3,796
    
    
    
    3,067
    
    
    
    3,499Operating income
    
    
    1,625
    
    
    
    1,830
    
    
    
    1,007
    
    
    
    1,142
    
    
    
    1,011
    
    
    
    1,546
    
    
    
    1,211
    
    
    
    1,723Net income
    
    $
    954
    
    
    $
    1,125
    
    
    $
    565
    
    
    $
    525
    
    
    $
    716
    
    
    $
    913
    
    
    $
    745
    
    
    $
    1,017Net income per
share  diluted
    
    $
    0.10
    
    
    $
    0.12
    
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.08
    
    
    $
    0.10
    
    
    $
    0.08
    
    
    $
    0.11Weighted average
number of shares
outstanding  diluted
    
    
    9,307
    
    
    
    9,199
    
    
    
    9,112
    
    
    
    9,198
    
    
    
    9,406
    
    
    
    9,257
    
    
    
    9,231
    
    
    
    9,268
  F-21




---



##### 



Schedule II
 VERSAR, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
 ADDITIONSBALANCE
    
    CHARGEDAT
    
    TO COSTS
    
    
    
    
    
    BALANCEBEGINNING
    
    AND
    
    CHARGE
    
    AT END OFOF YEAR
    
    EXPENSES
    
    OFF
    
    YEARALLOWANCE FOR
DOUBTFUL ACCOUNTS2007
    
    
    348,501
    
    
    
    335,518
    
    
    
    (310,043
    )
    
    
    373,9762008
    
    
    373,976
    
    
    
    1,479
    
    
    
    (32,492
    )
    
    
    342,9632009
    
    
    342,963
    
    
    
    154,477
    
    
    
    (28,297
    )
    
    
    469,143DEFERRED TAX
VALUATION ALLOWANCE2007
    
    
    2,954,000
    
    
    
    
    
    
    
    (2,954,000
    )
    
    
    2008
    
    
    
    
    
    
    47,000
    
    
    
    
    
    
    
    47,0002009
    
    
    47,000
    
    
    
    1,000
    
    
    
    
    
    
    
    48,000
 F-22