UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 2005
Commission File No. 0-1738
GENERAL KINETICS INCORPORATED
(Exact Name of Registrant as specified in its Charter)
Virginia 54-0594435
(State of Incorporation) (IRS Employer Identification No)
110 Sunray Drive, Johnstown, PA 15905
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (814) 255-6891
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, $0.25 par value per share
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 the 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 [ ].
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2)
YES NO X
---
Indicate by check mark whether the registrant is a shell company (as
defined in Exchange Act Rule 12b-2).
YES NO X
---
The aggregate market value of the voting stock held by non-affiliates
of the Registrant, based upon the closing sale price of Common Stock on
November 30, 2004, the last business day of the registrant's most
recently completed second fiscal quarter, as reported on the NASD OTC
Bulletin Board, was approximately $196,766. Shares of Common Stock held
by the executive officers, directors and under the Registrant's ESOP
have been excluded in that such persons may be deemed affiliates. This
determination of affiliate status is not necessarily a conclusive
determination for other purposes.
The number of shares outstanding of the Registrant's Common Stock,
$0.25 par value, as of August 16, 2005 was 7,118,925.
Documents Incorporated by Reference
-----------------------------------
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of the Company
Name Age Director since
---- --- --------------
Larry M. Heimendinger (Chairman of the Board) 60 March, 1994
Thomas M. Hacala 60 February, 1998
Marc E. Cotnoir 56 March, 1994
Richard J. McConnell 44 March, 1994
Larry M. Heimendinger has served as the Chairman of the Board of Directors
of the Company since he was elected to that position in March 1994. In addition,
since March 1994, in accordance with the Amended and Restated Bylaws of the
Company, Mr. Heimendinger has been performing the duties of President and Chief
Executive Officer through his position as Chairman of the Board and will
continue to do so until a replacement for President and Chief Executive Officer
is elected and qualified. Mr. Heimendinger is also a founder of Link2It
Corporation. Mr. Heimendinger previously served as President and Chief Operating
Officer of Nantucket Corp., a privately held software company, and, after that
company's acquisition by Computer Associates International, was associated with
Computer Associates, most recently as its Director of Product Strategy. Before
joining Nantucket, Mr. Heimendinger was the President and Chief Executive
Officer of Origin, Inc., a company that produced and marketed personal computer
software for the banking industry. Mr. Heimendinger is the author of Advanced
dBase IV and Advanced Clipper, books published by Brady Books, and has spoken at
computer industry conferences and seminars worldwide. Mr. Heimendinger is a
member of Class I of the Board of Directors.
Thomas M. Hacala has been the President of Seating Technology, a marketing
and consulting company specializing in the Asian/European office furniture
industry, since 1991. Mr. Hacala is a member of Class I of the Board of
Directors.
Marc E. Cotnoir has been an independent consultant, providing business and
strategic planning support and systems engineering consulting, for a wide range
of clients since 1988. Mr. Cotnoir also served as Vice President for Marketing,
Sales, and Service for VideoSite Incorporated from September 1997 to July 1998.
Prior to 1988, Mr. Cotnoir worked extensively, both within private industry and
in the U.S. Air Force, with computer and communications technology. Mr. Cotnoir
is a member of Class II of the Board of Directors.
Richard J. McConnell has been the President of Square Systems, Corp., a
research and development firm specializing in advanced software systems, since
1986. Mr. McConnell is also a founder of Link2It Corporation. Mr. McConnell has
been involved in research and development in the computer software industry
since 1981. Mr. McConnell is a member of Class III of the Board of Directors.
All directors hold office until the next annual meeting of shareholders
and until their successors have been duly elected and qualified or until their
earlier death, resignation or removal.
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Executive Officers and Certain Significant Employees of the Company
The names, ages, and positions of the executive officers of the Company
are listed below.
Name Age Position
---- --- --------
Larry M. Heimendinger 60 Chairman of the Board (performing
duties of President and Chief
Executive Officer)
Richard E. Munczenski 63 Vice President and General Manager
Franco DeBlasio 35 Chief Financial Officer
Larry M. Heimendinger has served as the Chairman of the Board of Directors
since March 1994. Also since March 1994, through his position as Chairman of the
Board, in accordance with the Amended and Restated Bylaws of the Company, Mr.
Heimendinger has been performing the duties of President and Chief Executive
Officer. He will continue to perform such duties until a replacement for
President and Chief Executive Officer is elected and qualified.
Richard E. Munczenski joined the Company in August 1969, and has served as
Vice President and General Manager since April 1995.
Franco DeBlasio has served as the Chief Financial Officer of the Company
since July 1, 2005, when he replaced Sandy B. Sewitch, who had served as the
Company's Chief Financial Officer from April 1993 until his resignation on May
11, 2005. Prior to assuming his position as Chief Financial Officer, Mr.
DeBlasio served as a consultant to the Company from May 30, 2005 through June
30, 2005. Prior to such service, from 1995 through 2000, and again from 2003 to
June 2005, Mr. DeBlasio served as a consultant/accountant at DeBlasio & DeBlasio
Associates, a consulting and accounting firm based in Pittsburgh, Pennsylvania.
From January 2001 through November 2003, he served as the Chief Financial
Officer of Smart Parts, Inc., a high volume consumer goods manufacturer. Prior
to joining Smart Parts, beginning in January 2000, Mr. DeBlasio served as a team
leader in the international acquisitions division of Crown Castle
Communications, a provider of technologically advanced shared wireless
infrastructure. He holds a B.S.B.A in accounting from Robert Morris College and
an M.B.A. with an emphasis in finance and MIS from Duquesne University.
The officers of the Company hold office at the discretion of the Board of
Directors of the Company.
There are no family relationships among the executive officers or
directors of the Company, and there is no arrangement or understanding between
any director or executive officer and any other person pursuant to which such
director or executive officer was elected.
Audit Committee:
The audit committee of the Board of Directors reviews the various
accounting, financial reporting and internal control functions and makes
recommendations to the Board of Directors for the selection of independent
public accountants. In addition, the committee will monitor the independence of
the independent accountants. The members of the audit committee are Mr. Hacala
and Mr. Cotnoir.
The Company's Board of Directors does not have an "audit committee
financial expert," within the meaning of such phrase under applicable
regulations of the Securities and Exchange Commission (the "SEC"), serving on
its audit committee. The Board of Directors believes that all members of its
audit committee are financially literate and experienced in business matters,
and that one or more members of the audit committee are capable of (i)
understanding generally accepted accounting principles ("GAAP") and financial
statements, (ii) assessing the general application of GAAP principles in
connection with the Company's accounting for estimates, accruals and reserves,
(iii) analyzing and evaluating the Company's financial statements, (iv)
understanding the Company's internal controls and procedures for financial
reporting; and (v) understanding audit committee
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functions, all of which are attributes of an audit committee financial expert.
However, the Board of Directors believes that there are no audit committee
members who have obtained these attributes through the experience specified in
the SEC's definition of "audit committee financial expert." Further, like many
small companies, it is difficult for the Company to attract and retain board
members who qualify as "audit committee financial experts," and competition for
these individuals is significant. The board believes that its current audit
committee is able to fulfill its role under SEC regulations despite not having a
designated "audit committee financial expert."
Code of Ethics:
The Company's Board of Directors has adopted a Code of Ethics for Senior
Financial Officers to promote honest and ethical conduct, proper disclosure of
information in the Company's periodic reports, and compliance with applicable
governmental laws, rules, and regulations by the Company's senior officers who
have financial responsibilities. A copy of the Code of Ethics for Senior
Financial Officers may be obtained free of charge by submitting a request to
General Kinetics Incorporated, 110 Sunray Drive, Johnstown, PA 15905, Attn:
Secretary.
Section 16(a) Beneficial Ownership Reporting Compliance
To the Company's knowledge, based solely on a review of such reports
furnished to the Company, during the fiscal year ended May 31, 2005, all Section
16(a) filing requirements applicable to its officers, directors and greater than
10% beneficial shareholders were complied with, except that, Rabo Investment
Management Ltd., formerly a greater than 10% beneficial shareholder, failed to
timely file a Form 4 during the fiscal year ended May 31, 2005. Additionally,
due to administrative oversight, the directors did not timely report on Form 4
their annual receipt of options automatically granted to them during the fiscal
year ended May 31, 2004 under the Company's 1994 Non-employee and Directors
Stock Option Plan. The Form 4s reflecting such grants are being amended to
correct the number of options granted as follows: Mr. Heimendinger (5,147
options), Messrs. Cotnoir and McConnell (each, 4,118 options) and Mr. Hacala
(4,117 options).
ITEM 11. EXECUTIVE COMPENSATION
The information under this heading relates to the chief executive officer,
the chief financial officer, and the vice president and general manager of the
Company for the fiscal year ended May 31, 2005. The information is presented in
compliance with the rules and regulations of the Securities and Exchange
Commission applicable to those companies, such as General Kinetics Incorporated,
that meet the definition of a "small business issuer."
Executive officers are appointed by the Board of Directors at its annual
meeting following the annual meeting of shareholders and serve for one year or
until their successors are chosen and qualify in their stead. There are no
family relationships among the executive officers, and there is no arrangement
or understanding between any officer and any other person pursuant to which such
officer was selected as an officer.
Summary Compensation Table
Annual Compensation Long-Term Compensation
-------------------------------------------------------- -----------------------------
Securities
Name and Principal Other Annual Underlying All Other
Position Year Salary Bonus Compensation Options Compensation
------------------ ---- ------ ----- ------------ ---------- ------------
Larry M. Heimendinger(1) 2005 $ 0 $ 0 $ 0 0 $ 0
Chairman of the Board 2004 0 0 0 5,147 0
2003 0 0 0 12,500 0
Sandy B. Sewitch(2) 2005 $113,700 $ 0 $ 4,600 0 $ 0
2004 107,800 10,000 4,800 0 0
2003 101,400 0 4,800 0 0
Richard E. Munczenski(3) 2005 $125,100 $ 60,000 $ 4,800 0 $ 0
VP and General Manager 2004 112,600 20,000 4,800 0 0
2003 106,200 30,000 4,800 0 0
Franco DeBlasio(4) 2005 (4) $ 0 $ 0 0 $ 0
Chief Financial Officer
4
(1) Larry Heimendinger serves as the Company's Chairman of the Board, for
which he has received no salary compensation since being elected to that
position in March 1994. Since the resignation of the Company's former President
in March 1994, the Company has not had a President. In accordance with the
Company's Amended and Restated Bylaws, until a new President is elected and
qualified, the Company's Chairman performs the duties of that office.
(2) The "Other Annual Compensation" for Sandy Sewitch includes a car
allowance of $4,600 for fiscal 2005 and $4,800 for fiscal 2004 and 2003. Mr.
Sewitch served as the Chief Financial Officer of the Company from April 1993,
when he joined the Company until May 11, 2005 when he resigned.
(3) The "Other Annual Compensation" for Richard Munczenski includes a car
allowance of $4,800 for fiscal 2005, 2004, and 2003.
(4) Franco DeBlasio served as a consultant to the Company from May 30,
2005 to June 30, 2005; he assumed the position of Chief Financial Officer of the
Company on July 1, 2005. He accepted $1,200 as compensation for the two days in
the fiscal year ended May 31, 2005 for his services as a consultant. If
annualized this consulting compensation would have been equal to compensation of
$156,000.
Options and Stock Appreciation Rights
OPTION GRANTS IN FISCAL YEAR 2005
Percent of
Total Options Potential of Realizable Value at
Number of Securities Granted to assumed annual rate of stock price
Name of Executive Underlying Options Employees Exercice Expiration appreciation for options term (1)
Officer Granted in FY 2005 Price Date 5% 10%
----------------- ------------------ ------------- -------- ---------- -----------------------------------
Larry M 0 0 0 0 0 0
Heimendinger
Sandy B. Sewitch 0 0 0 0 0 0
Richard E 0 0 0 0 0 0
Munczenski
Franco DeBlasio 0 0 0 0 0 0
(1) The dollar amounts under these columns are based upon calculations
using assumed rates of appreciation set by the SEC and are not intended to
forecast future appreciation of the Company's stock price.
Option Exercises and Holdings
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2005 AND YEAR-END OPTION VALUES
Number of Securities Underlying Value of Unexercised In-the-
Unexercised Options Money Options
Number of At End-FY 2005 At End-FY 2005
Name of Executive Shares Acquired Value -------------- --------------
Officer on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------------- --------------- -------- ----------- ------------- ----------- -------------
Larry M
Heimendinger 0 0 105,147 2,574 $5,129 $ 129
Sandy B
Sewitch 0 0 0 0 0 0
Richard E 0 0 0 0 0 0
Munczenski
Franco
DeBlasio 0 0 0 0 0 0
5
Pension and Long Term Incentive Plan Awards
None
Compensation of Directors
Each non-employee director of the Company other than Mr. Heimendinger has
received a monthly retainer of $1,500 since November 1994. There are no other
arrangements pursuant to which any director of the Company was compensated
during the Company's last completed fiscal year for any service provided as a
director.
Employment Contracts and Termination of Employment and Change of Control
Agreements
None
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareholders
The following table sets forth certain information as of August 31, 2005
as to the security ownership of those persons known to the Company to be the
beneficial owners of more than five percent of the outstanding shares of the
Company's Common Stock and of each of the Company's directors and named
executive officers and all of the Company's directors and named executive
officers as a group:
Shares of Common Stock Percentage of Outstanding
Name and Address Beneficially Owned (1) Common Stock
---------------- ---------------------- -------------------------
Marc E. Cotnoir (2)
c/o General Kinetics Incorporated
110 Sunray Drive, Johnstown, PA 15905 82,059 1.2
Richard J. McConnell (3)
c/o General Kinetics Incorporated
110 Sunray Drive, Johnstown, PA 15905 82,059 1.2
Thomas M. Hacala (4)
c/o General Kinetics Incorporated
110 Sunray Drive, Johnstown, PA 15905 87,058 1.2
Larry M. Heimendinger (5)
c/o General Kinetics Incorporated
110 Sunray Drive, Johnstown, PA 15905 102,573 1.4
Sandy B. Sewitch
c/o General Kinetics Incorporated
110 Sunray Drive, Johnstown, PA 15905 0 *
Richard E. Munczenski
c/o General Kinetics Incorporated
110 Sunray Drive, Johnstown, PA 15905 14,735 *
Franco DeBlasio
c/o General Kinetics Incorporated
110 Sunray Drive, Johnstown, PA 15905 0 *
All Directors and executive
officers as a group (seven persons) 368,484 5.2%
* Indicates less than one percent of the outstanding shares of the Company's
Common Stock
(1) Beneficial ownership as reported in the above table has been determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, and includes shares of the Company's Common Stock which may be
acquired within 60 days of August 31, 2005 through the exercise of
warrants, options, or other convertible securities.
(2) Consists of 82,059 shares issuable upon exercise of stock options.
(3) Consists of 82,059 shares issuable upon exercise of stock options.
(4) Consists of 87,058 shares issuable upon exercise of stock options.
(5) Consists of 102,573 shares issuable upon exercise of stock options.
Manassas Partners LLC, a Delaware limited liability company of which Mr.
Heimendinger is the managing member, holds a portion of the Company's
outstanding convertible debentures in an aggregate principal amount of
$5,800,000 (see "Certain Relationships and Related Transactions"). By
their terms, such debentures provide for conversion through June
14, 2004, in whole or in part, into an aggregate of up to 11,600,000
shares of Common Stock.
6
Equity Compensation Plan Information
The following table provides information as of May 31, 2005 with respect
to the shares of the Company's Common Stock that may be issued under the
Company's existing equity compensation plans.
Number of securities remaining
Number of securities to be available for future issuance
issued upon exercise of Weighted-average exercise under equity compensation plans
outstanding options, price of outstanding (excluding securities reflected in
Plan category warrants and rights options, warrants and rights column (a))
------------- ------------------------- ---------------------------- -------------------------------
(a) (b) (c)
Equity compensation plans
approved by security holders (1) 362,500 $ 0.37 --
Equity compensation plans
not approved by security holders -- -- --
------- -------- -----
Total 362,500 $ 0.37 --
======= ======== =====
(1) Consists of the Company's 1994 Stock Option Plan and the Company's
1994 Nonemployee and Directors Stock Option Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 12, 2003, Manassas Partners LLC, a Delaware limited liability
company of which Larry Heimendinger, Chairman of the Board of Directors of the
Company, is the managing member, purchased from third parties, at a significant
discount, a portion of the Company's outstanding convertible debentures in an
aggregate principal amount of $5,800,000. By their terms, such debentures
provide for conversion through June 14, 2004, in whole or in part, into an
aggregate of up to 11,600,000 shares of Common Stock.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees Paid to Independent Accountants for 2004 and 2005
The total fees and related expenses for professional services provided by
the Company's independent registered public accounting firm, BDO Seidman LLP,
for the fiscal years ended May 31, 2004 and 2005 are presented in the table
below.
------------------------------------------------------------------------------
Year ended May 31,
------------------------------------------------------------------------------
2005 2004
------------------------------------------------------------------------------
Audit Fees $ 97,616 $ 93,100
------------------------------------------------------------------------------
Audit Related Fees $ 4,220 $ 1,500
------------------------------------------------------------------------------
Tax Fees $ 4,555 $ 9,500
------------------------------------------------------------------------------
All Other Fees -0- -0-
------------------------------------------------------------------------------
The Audit Fees listed above were billed in connection with the audit of
the Company's financial statements for the fiscal year and the review of the
financial statements included in the Company's quarterly reports on Forms 10-Q
for the fiscal year. The Audit Related Fees listed above were billed for the
audit of the Company's ESOP Plan. The Tax Fees listed above were billed for tax
compliance, planning and advice.
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ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
--------------------------------------------------------------------------------
Exhibit Note
Number Description No.
--------------------------------------------------------------------------------
31.3 Certification of the Chief Executive Officer of the Company
pursuant to Rule 13a-14(a) under the Securities Exchange Act of
1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
31.4 Certification of the Chief Financial Officer of the Company
pursuant to Rule 13a-14(a) under the Securities Exchange Act of
1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GENERAL KINETICS INCORPORATED
By: /s/ Larry M. Heimendinger
--------------------------------------------
Larry M. Heimendinger, Chairman of the Board
(Principal Executive Officer)
Date: September 28, 2005
------------------
9