<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the nine month fiscal year ending September 30, 1996
Commission file number: 0-2677
GAP INSTRUMENT CORP.
(Exact Name of Registrant as Specified in its Charter)
_____New York_____ ____________11-1781357_________
(State of Incorporation) (IRS Employer Identification Number)
100 Horse Block Rd, Yaphank, New York __11980__
(Address of principal executive office) (Zip Code)
_______(516) 924-1700______
(Registrant's telephone number)
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act: Common
Stock, par value $.000001 per share - Traded: Over the Counter Market
Aggregate market value of voting stock held by non-affiliates: No Value
Common stock outstanding: 111,290,603
Exhibit index: 20
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, Yes XX No
(2) has been subject to such filing requirements for the past 90 days,
Yes XX No
(3) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. Yes No XX
(4)Has disclosed delinquent filers pursuant to Item 405 of Regulation SK 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 10K or any amendment to this for 10K.
Yes No XX
<PAGE> 2
CONTENTS Page(s)
<TABLE>
<CAPTION>
Part I
<S> <C> <C>
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Properties. . . . . . . . . . . . . . . . . . . . . . . . 4
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 4
4. Submission of Matters to a Vote of Security Holders . . . 4
Part II
Item 5. Maket for the Registrant's Common Stock
and Related Security Holders' Matters . . . . . . . . . 5
6. Five-Year Selected Financial Data . . . . . . . . . . . . 5
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 6
8. Financial Statements and Supplementary Data . . . . . . . 7
9. Disagreements on Accounting and Financial Disclosure. . . 20
Part III
Item 10. Directors and Executive Officers of the Registrant . . 20
11. Management Remuneration and Transactions . . . . . . . 20
12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . 20
13. Certain Relationships and Related Transactions . . . . 21
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K. . . . . . . . . . . . . . . . . . . . . 22
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE> 3
Part 1
Item 1 - Business
(a) GAP Instrument Corp., organized in 1953, is a systems engineering
oriented manufacturing organization, producing electromechanical/solid state
systems to satisfy specific military and commercial requirements for application
on board ships, in aircraft, and at ground-based installations. These various
systems are primarily servo mechanisms (gear trains run by motors, synchros and
resolvers) and state-of-the-art signal data-conversion equipment employed in
load actuation, information readout display, and operation control.
GAP Instrument Corp. is fully aware that its military manufacturing
business over the next decade will continue to decline. While utilizing the same
disciplines to continue its efforts in the areas of test equipment and
simulation equipment, GAP Instrument Corp. has found appropriate areas of
diversification to convert from a military manufacturing market. GAP Instrument
Corp. has entered the Electronic Data Interchange (EDI) market as a Value Added
Network (VAN) connecting Federal contractors to the Department of Defense and
Federal Agencies.
The United States Government has been in the process of changing from
a paper based system to an electronic system since 1985. This culminated in an
executive memo (Federal Register Vol. 58 #207) and by legislation, the Federal
Acquisition Streamlining Act of 1994 (Public Law 103-355). These two documents
set the ground rules for the Federal conversion to Electronic Data Interchange
(EDI). The only means of communicating with the Government is via a licensed and
certified Value Added Network. GAP Instrument Corp. is one of the 28 licensed
and certified Value Added Networks. Procurement is the first area that the
Government is converting to EDI.
(b) GAP Instrument Corp.'s operations are no longer classified as a single
industry segment.
(1) (I) The principal market for GAP Instrument Corp.'s equipment has
been the Department of Defense for military requirements. GAP Instrument Corp.
deals with the Department of Defense directly in open competitive bidding and as
a subcontractor to other major defense contractors on larger programs. GAP
Instrument Corp. operates a Value Added Network and is certified to carry
Federal Acquisition Network (FACNET) transmissions. GAP Instrument Corp. is
selling VAN service to contractors who do business with the Federal Government.
(II) Not applicable
(III) The materials utilized in the equipment produced by GAP
Instrument Corp. are obtained from standard sources within the United States.
These standard sources include foundries, sheet metal shops, machine shops,
component manufacturers, etc.
(IV) None of the equipment or processes utilized by GAP Instrument
Corp. are covered by patents, licenses, franchises, etc.
(V) Not applicable.
(VI) Manufacturing operations are scheduled to fulfill specific
product orders under firm contracts primarily from the Department of Defense.
GAP Instrument Corp. does not carry significant amounts of stock inventory.
(VII) GAP Instrument Corp.'s present overall business is dependent
on, the Department of Defense, which presently purchases, either directly or
indirectly, approximately 70 percent in value of its products. This is in the
process of shifting to providing VAN service to other Government contractors.
(VIII) The dollar backlog of orders of GAP Instrument Corp. at
September 30, 1996 was $196,000, compared to $116,000 at December 31, 1995. All
of the September 30, 1996 backlog is expected to be shipped in fiscal year
ending September 30, 1997.
(IX) Not applicable
<PAGE> 4
(X) Item (c)(1)(I).
(XII)Compliance with environmental regulations has not had a
material effect on capital expenditures.
(2) (I) Not applicable
(II) Department of Defense.
(III) None.
(IV) The total number of personnel employed by GAP Instrument Corp.
as of the end of fiscal year 1996 was 5.
(d) GAP Instrument Corp. does not engage in material operations in foreign
countries, nor is its business dependent on a domestic geographic location.
Item 2 - Properties
(a) On December 31, 1994 GAP Instrument Corp. leased space at 100 Horse
Block Rd., Yaphank from an affiliate company. The rent is currently $3,200 per
month on a month to month basis. Rent expense from Jan 1, 1996 to September 30,
1996 was $35,400 for the Yaphank facility.
Item 3 - Legal Proceedings
(a) On September 24, 1993, GAP Instrument Corp. the Debtor filed partitions
for relief under Chapter 11 of the federal bankruptcy laws in the United States
Bankruptcy Court for the Eastern District of New York. Under Chapter 11, certain
claims against the Debtor in existence prior to the filing of the petitions for
relief under the federal bankruptcy laws are stayed while the Debtor continues
business operations as "Debtor-in-Possession". These claims are reflected in the
December 31, 1994 balance sheet as "Liabilities subject to Compromise."
Additional claims (liabilities subject to compromise) may arise subsequent to
the filing date resulting from rejection of executory contracts, including
leases, and from the determination by the court (or agreed to by parties in
interest) of allowed claims for contingencies and other disputed amounts. On
October 2, 1995, the Company's Plan of Reorganization was approved by the United
States Bankruptcy Court. Payments under the approved plan are reflected on the
Balance Sheet as of December 31, 1995 as "Liabilities under a Plan of
Reorganization."
Under the terms of the plan of reorganization payments to the Internal
Revenue Service and New York State Department of Labor provide for full payment
of amounts due over five years.
Claims of two prior officers are payable at a reduced amount over the same
five years. All unsecured creditors will be paid fifty percent of their claim in
five equal installments upon the first, second, third, fourth and fifth
anniversaries of approval of the Plan.
A former officer of the company has commenced action against the company.
The management believes that any settlement if any will not have an material
effect on the company.
(b) Amendment to the Articles of Incorporation approved by New York State
changed authorized shares from 104,000,000 to 604,000,000 shares, per approval
by stockholders at an annual meeting of stockholders May 2, 1995.
Item 4 - Submission of Matters to a Vote of Security Holders
On 2 May 1995 an Annual Meeting of Stockholders was held. A resolutions
was passed to authorize and empower the Board of directors to amend the Articles
of Incorporation to increase the authorized common stock of GAP Instrument
Corporation from its present amount of One Hundred Four Million (104,000,000)
shares to Six Hundred Four Million (604,000,000) shares of par value of One Ten
Thousandth of a cent per share ($0.000001). The State of New York approved this
action April 1996.
<PAGE> 5
PART II
Item 5- Market for the Registrant's Common Stock and Related Security
Holders' Matters
At September 30,1996 , GAP Instrument Corp. had issued and outstanding
111,290,603 shares of common stock held by 1,087 stockholders of record. Market
prices listed in the following tabulation were obtained from the National
Quotation Bureau, Inc., and represent prices between dealers and do not include
retail markup, markdown, or commission, and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
1996 1995
Bid Asked Bid Asked
<S> <C> <C>
First Quarter N o Q u o t e N o Q u o t e
Second Quarter N o Q u o t e N o Q u o t e
Third Quarter N o Q u o t e N o Q u o t e
</TABLE>
Item 6- FIVE YEAR SELECTED FINANCIAL DATA FOR THE PERIODS ENDED
<TABLE>
<CAPTION>
Nine month September 30, ------------- December 31, --------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net Sales $188,403 $258,548 $332,312 $203,354 $881,991
Income (loss) from
continuing operations (391,715) (98,016) (154,677) (415,457) (154,083)
Provision for
income taxes - - - - -
Net income (loss) before
extraordinary credit and
reorganization expense (391,715) (98,016) (154,677) (415,457) (154,083)
Extraordinary gain -gain
from adoption of Plan of
Reorganization under
Chapter 11 - 293,870 - - -
Reorganization items:
Professional fees (6,500) (4,000) (7,525) (23,000) -
-
Net Income (Loss) $(398,215) $191,854 (162,202) (438,457) (154,083)
Earnings
Per Share
Net income (loss) per
share before
extraordinary gain $ .00 $ .00 $ .00 $ (.11) $ (.08)
Earnings (loss) per share $ .00 $ .00 $ .00 $ (.11) $ (.08)
Total Assets $140,546 $ 82,885 $184,009 $118,378 $208,750
Note Payable $ (1) $ (1) $ (1) $ (1) $ 88,289
</TABLE>
(1) Note Payable expunged during the Chapter 11 Proceeding
<PAGE> 6
Item 7- Management's Discussion and Analysis of Financial Condition and
Results of Operations Liquidity and Capital Resources
GAP Instrument Corp. has primarily relied on its results from operations to
provide working capital. Due to lack of working capital on September 23, 1993,
GAP Instrument Corp. the Debtor filed partitions for relief under Chapter 11 of
the federal bankruptcy laws in the United States Bankruptcy Court for the
Eastern District of New York.
In order to continue operations, and pay post petition expenses, GAP
Instrument Corp. issued, on July 29, 1994, 93,000,000 shares of common stock,
and on October 31, 1995, 1,744,070 shares of common stock, and on June 16, 1996
12,613,290 shares of common stock, to suppliers and key personnel.
On October 2, 1995 GAP Instrument Corp. emerged from Chapter 11 and is
operating under a plan approved by the United States Bankruptcy Court for the
Eastern District of New York and the creditors.
Management's plans and GAP Instrument Corp.'s ability to continue in
existence as a going concern is substantially dependent upon the continued
financial support of its principle shareholders, its ability to obtain equity
and/or debt financing, and/or the commercial success of its VAN operations.
There can be no assurance, however, that management's plan will be successful.
RESULTS OF OPERATIONS
Operating income (loss) for the fiscal years 1996, 1995 and 1994, were
($391,715), ($98,016) and ($154,677). Sales volume for the respective years were
$188,403, $258,548 and $332,312. Sales volume for the years 1996, 1995 and 1994
were substantially less than prior years as the Department of Defense is now
only buying parts to replace and repair as the part is needed. General and
administrative costs are reviewed continually to keep expenses as low as
possible.
GAP Instrument Corp. is fully aware that its military business over the
next decade will continue to decline. Thus, GAP Instrument Corp. entered the
telecommunications market as an Electronic Data Interchange (EDI) Value Added
Network (VAN) for the Federal Government and for Federal contractors.
Federal tax loss carry forwards at September 30, 1996 are ($801,000) which
will provide for future tax benefits relief in future years.
The dollar backlog of sales at September 30 ,1996 and December 31, 1995
and 1994 were $196,000, $116,000 and $48,500. All of the FY 1996 backlog will be
shipped in FY 1997.
<PAGE> 7
Item 8 - Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report as of September 30, 1996 and
for the Nine Month Period Ended September 30, 1996 . . . . . . . . . . . 8
Independent Auditors' Report as of December 31, 1995 and
for the Year Ended September 30, 1995 . . . . . . . . . . . . . . . . . . 9
Independent Auditors' Report as of December 31, 1994 and
for the Year Ended September 30, 1994 . . . . . . . . . . . . . . . . . . 10
Balance Sheets as of September 30, 1996 and December 31, 1995 . . . . . . . . . 11
Statements of Income (Loss) and Accumulated Deficit for the Nine
Months Ended September 30, 1996 and for the Years Ended
December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . 12
Statements of Cash Flows for the Nine Months Ended September 30,
1996 and for the Years Ended December 31, 1995 and 1994 . . . . . . . . . 13
Notes to Financial Statements September 30, 1996, December 31,
1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 8
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
GAP Instrument Corp.
We have audited the accompanying balance sheet of GAP Instrument Corp. as of
September 30, 1996, and the related statements of loss and accumulated deficit,
and cash flows for the nine months then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit. The financial
statements of the Company, as of December 31, 1995 and 1994, were audited by
other auditors whose reports, dated April 29, 1996 and January 31, 1995,
respectively, included explanatory paragraphs that described the Company's going
concern uncertainty.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of GAP Instrument Corp. as of
September 30, 1996, and the results of its operations and its cash flows for the
nine months then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has recently emerged from bankruptcy, has
suffered recurring losses from operations and has a working capital and
shareholder deficiency at September 30, 1996. These matters raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ ISRAELOFF, TRATTNER & CO., CPAs, P.C.
December 3, 1996
Valley Stream, New York
<PAGE> 9
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of GAP Instrument Corp.
We have audited the accompanying balance sheet of GAP Instrument Corp. (a
New York corporation) as of December 31, 1995, and the related statements of
income (loss) and accumulated deficit, and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit. The financial statements of GAP Instrument Corp. as of December
31, 1994 and 1993 were audited by other auditors whose report dated January 31,
1995, on those statements included explanatory paragraphs that described the
Company's going concern issue.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides reasonable basis for our opinion.
In our opinion, the financial statement referred to above present fairly,
in all material respects, the financial position of GAP Instrument Corp. as of
December 31, 1995, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 10 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 10. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ SCHWAEBER SLOANE SCHULMAN & CO., PC
Great Neck NY
April 29, 1996
<PAGE> 10
Deirdre C. Morrison, CPA
71 Amy Dr.
Sayville, New York
To the Board of Directors and Stockholders
GAP Instrument Corp.
Yaphank, New York
I have audited the financial statements and supplemental schedules of GAP
Instrument Corp. listed in Item 14 for the years ended December 31, 1994 and
1993. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit. The financial statements and supplemental
schedules as listed in Item 14 for the years ended December 31, 1992 and 1991
were audited by other auditors whose report dated April 30, 1993, expressed an
unqualified opinion on those statements.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of GAP Instruments Corp. as of
December 31, 1994 and 1993 and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that GAP
Instrument Corp. will continue as a going concern. There is substantial doubt
about the ability of GAP Instrument Corp. to continue as a going concern at
December 31, 1994. As shown in the financial statements, the Company had net
losses of $(162,202), $(438,457), and $ (154,083) during each of the three years
ended December 31, 1994, 1993 and 1992, and, as of those dates, had net equity
(deficit) of $(433,718), $(511,390), and $(167,934) respectively. As described
in Note 1, the Company has filed under Chapter 11 of the Bankruptcy Code. The
liabilities on the balance sheet are subject to comprise from the reorganization
plan, however, since the plan has not been finalized, no adjustments have been
made to the financial statements at December 31, 1994.
Deirdre C. Morrison, CPA
Sayville, New York
January 31, 1995
<PAGE> 11
GAP INSTRUMENT CORP.
BALANCE SHEETS
SEPTEMBER 30, 1996 AND
DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
<S> <C> <C>
Current Assets:
Cash and cash equivalents (Note 1) $ 20,984 $ 0
Accounts receivable (Note 1) 72,135 61,777
----------- -----------
Total Current Assets 93,119 61,777
PROPERTY AND EQUIPMENT, at cost,
less accumulated depreciation (Notes 1 and 4) 44,317 12,998
Other Assets - Deposits 3,110 8,110
----------- -----------
Total Assets $ 140,546 $ 82,885
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 176,600 $ 30,207
Cash overdraft -- 1,553
Liabilities resulting from Plan of Reorganization,
current maturities (Notes 2 and 5) 49,251 47,194
Deferred revenue and customer deposits (Note 1) 33,702 --
Due to shareholders (Note 7) 101,000 56,000
----------- -----------
Total Current Liabilities $ 360,553 $ 134,954
OTHER LIABILITIES
Liabilities resulting from Plan of Reorganization,
less current maturities (Notes 2 and 5) 167,458 189,795
----------- -----------
Total Liabilities 528,011 324,749
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDERS'DEFICIT (Note 9)
Common stock $.000001 par value, 604,000,000 shares
authorized, 111,290,603 shares and 98,678,423
shares issued and outstanding in 1996 and 1995,
respectively 111 99
Additional paid-in capital 3,595,305 3,342,703
Accumulated deficit (3,982,881) (3,584,666)
----------- -----------
Total Shareholders' Deficit (387,465) (241,864)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 140,546 $ 82,885
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 12
GAP INSTRUMENT CORP.
STATEMENTS OF INCOME (LOSS) AND ACCUMULATED DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
FOR THE YEARS ENDED DECEMBER 31, 1995, AND 1994
<TABLE>
<CAPTION>
Nine Months Ended Years Ended December 31,
September 30, 1996 1995 1994
<S> <C> <C> <C>
Net sales $ 188,403 $ 258,548 $ 332,312
----------- ----------- -----------
Costs and Expenses
Cost of sales 160,054 199,851 206,750
Selling, general and
administrative expenses 420,064 156,713 280,239
----------- ----------- -----------
Total costs and expenses 580,118 356,564 486,989
----------- ----------- -----------
Loss from operations (391,715) (98,016) (154,677)
Extraordinary gain from adoption of
plan of reorganization (Note 2) -- 293,870 --
Reorganization expenses-
professional fees (6,500) (4,000) (7,525)
----------- ----------- -----------
Net Income (Loss) (398,215) 191,854 (162,202)
Accumulated deficit:
Beginning (3,584,666) (3,776,520) (3,614,318)
----------- ----------- -----------
End $(3,982,881) $(3,584,666) $(3,776,520)
=========== =========== ===========
Earnings Per Share:
Net income (loss) per share $ .00 $ .00 $ .00
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 13
GAP INSTRUMENT CORP.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Nine Months Ended Years Ended
September 30, December 31,
1996 1995 1994
--------- --------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(398,215) $ 191,854 $(162,202)
--------- --------- ---------
Adjustments to reconcile net income (loss)
to cash provided by operating activities
Depreciation 8,674 4,675 1,905
Forfeiture of deposit 5,000 -- --
Issuance of stock in exchange
for services 252,614 -- --
Issuance of stock in exchange
for post-petition debt -- -- 236,910
Changes in assets and liabilities:
Accounts receivable (10,358) (48,286) 4,518
Inventories -- 40,118 4,072
Prepaid expenses -- -- 2,127
Accounts payable and accrued
expenses 146,393 (8,815) (27,078)
Deferred revenue and customer
deposits 33,702 -- --
--------- --------- ---------
Total adjustments 436,025 (12,308) 222,454
--------- --------- ---------
Net cash provided by operating
activities 37,810 179,546 60,252
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire fixed assets (39,993) (13,849) (1,348)
Other assets -- 104,451 (68,615)
Reduction in liabilities subject to
compromise -- (317,778) --
--------- --------- ---------
Net cash used by investing
activities (39,993) (227,176) (69,963)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Shareholder loans 45,000 32,000 18,000
Cash overdraft (1,553) 1,553 --
Repayment of reorganization debt (20,280) -- --
--------- --------- ---------
Net cash provided by financing
activities 23,167 33,553 18,000
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH 20,984 (14,077) 8,289
CASH - beginning -- 14,077 5,788
--------- --------- ---------
CASH - end $ 20,984 $ -- $ 14,077
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 14
GAP INSTRUMENT CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
LINE OF BUSINESS
GAP Instrument Corp. (the Company), organized in 1953, is a systems
engineering oriented manufacturing organization, producing electronic products
used for data conversion and display instrumentation on board ships, in
aircraft, and at ground-based installations.
While utilizing the same disciplines to continue its efforts in the areas of
test and simulation equipment, the Company has commenced operations of a Value
Added Network (VAN) connecting Federal contractors via the Internet to the
Department of Defense and Federal Agencies.
CHANGE IN FISCAL YEAR
The Company has changed its fiscal year from December 31 to September 30.
The accompanying financial statements include audited financial statements for
the nine months ended September 30, 1996 and for the years ended December 31,
1995 and 1994. Unaudited financial information for the nine months ended
September 30, 1995 is presented for comparative purposes only.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant
estimates include those related to the valuation of receivables and litigation.
It is at least reasonably possible that the significant estimates used will
change within the next year.
FINANCIAL INSTRUMENTS
The Company's financial instruments include cash, and trade receivables and
payables for which carrying amounts approximate fair value. It is not
practicable to estimate the fair value of the Company's reorganization debt or
shareholder debt.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers demand
deposits and money market funds to be cash.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment is stated at cost. Major expenditures for property
and those which substantially increase useful lives are capitalized.
<PAGE> 15
GAP INSTRUMENT CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, EQUIPMENT AND DEPRECIATION (CONTINUED)
Maintenance, repairs and minor renewals are expensed as incurred. When assets
are retired or otherwise disposed of, their costs and related accumulated
depreciation are removed from the accounts and resulting gains or losses are
included in income. Depreciation is provided by straight-line and accelerated
methods over the estimated useful lives of the assets.
DEFERRED REVENUE AND CUSTOMER DEPOSITS
The Company sells annual subscriptions to its VAN. Revenue from those
subscriptions are taken into income on a straight-line basis over the one-year
period of the subscriptions. Related costs are expenses as incurred. Customer
deposits represent amounts received on account for future product to be
provided.
MAJOR CUSTOMERS
At September 30, 1996 and December 31, 1995, the U.S. Department of Defense
accounted for 76% and 89% of the accounts receivable balance, respectively. For
the nine months ended September 30, 1996 and the years ended December 31, 1995
and 1994, these agencies accounted for 69%, 87% and 74% of sales, respectively.
PER SHARE DATA
Earnings per share data are based on the average number of common shares
outstanding during the period. The average number of common shares outstanding
for September 30, 1996 and December 31, 1995 and 1994 were 103,498,158,
98,678,423 and 96,934,353, respectively.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with the
current year presentation.
2. BASIS OF PRESENTATION AND REORGANIZATION
The accompanying financial statements have been prepared on a going concern
basis, which assumes the realization of assets and the satisfaction of
liabilities in the ordinary course of business.
On September 24, 1993, the Company filed petitions for relief under Chapter
11 of the federal bankruptcy laws in the United States Bankruptcy Court for the
Eastern District of New York. The Company operated under the Court's protection
until October 5, 1995, when the Court confirmed the Company's Plan of
Reorganization (the Plan). Pursuant to the Plan, the Company was relieved of all
long-term debt agreements. The Company's remaining liabilities were negotiated.
The Company recognized an extraordinary gain of $293,870, representing the
difference between the carrying value of the
<PAGE> 16
GAP INSTRUMENT CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
2. BASIS OF PRESENTATION AND REORGANIZATION (CONTINUED)
liabilities and the amount required to be repaid by the Company. The resulting
liabilities are reflected in the Balance Sheet as "Liabilities Resulting from
the Plan of Reorganization".
Although the Company has emerged from Chapter 11, as shown in the
accompanying financial statements, the Company has suffered recurring operating
losses and, at September 30, 1996, the Company has a working capital deficiency
of $267,434 and a shareholder's deficit of $387,465. Management's plans and the
Company's ability to continue in existence as a going concern is substantially
dependent upon the continued financial support of its principal shareholders,
its ability to obtain equity and/or debt financing, and/or the commercial
success of its VAN operations. There can be no assurance, however, that
management's plan will be successful.
3. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest in 1996 was $3,912.
Additionally, during 1996, the Company had the following non-cash financing
activities:
The Company issued common stock in exchange for services in the amount of
$252,614.
The Company forfeited a deposit for a building acquisition in the amount of
$5,000.
4. PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
<TABLE>
<CAPTION>
estimated useful September 30, December 31,
lives - years 1996 1995
---------------- ------------- ------------
<S> <C> <C> <C>
Office equipment 3 $ 5,730 $ 5,730
Computer equipment 5 53,842 13,849
------ ------
59,572 19,579
Less: Accumulated depreciation 15,255 6,581
------ ------
Net property and equipment $44,317 $12,998
====== ======
</TABLE>
The depreciation expense for the nine months ended September 30, 1996 and the
years ended December 31, 1995 and 1994 was $8,674, $4,675 and $1,905,
respectively.
<PAGE> 17
GAP INSTRUMENT CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
5. LIABILITIES RESULTING FROM PLAN OF REORGANIZATION
As discussed in Note 2, the Company's liabilities resulting from its
confirmed plan of reorganization are reflected in the balance sheet as
Liabilities Resulting from Plan of Reorganization. These liabilities consist of
the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Internal Revenue Service - payroll taxes, payable
in monthly installments of $394, included interest
at 9.8964%, through 2000. $ 15,548 $ 18,184
Internal Revenue Service - payroll taxes, payable
in monthly installments of $864, including interest
at 9.8967%, through 2000. 34,134 39,911
New York State Department of Labor - unemployment
taxes, payable in monthly installments of $52,
through 2000 without interest. 3,112 3,112
Prior landlord - rental payments, payable in
annual installments of $12,383 through 2000
without interest. 61,916 61,916
Prior landlord - post-petition rental payments,
$5,000 paid upon confirmation, with the balance
payable in monthly installments of $571 through
April 1998 without interest. 11,424 16,565
Prior officers - salary claims, $1,000 paid upon
confirmation, with the balance payable in monthly
installments of $612, through April 1997, and
thereafter payable in annual installments of
$5,661 without interest. 27,927 34,653
Unsecured creditors, payable in annual installments
of $12,530 through 2000 without interest. 62,648 62,648
------- -------
216,709 236,989
Less: Current maturities 49,251 47,194
------- -------
Long-term $167,458 $189,795
======= =======
</TABLE>
<TABLE>
<CAPTION>
As of September 30, 1996, annual maturities are as follows:
<S> <C> <C>
1997 $ 49,251
1998 47,827
1999 44,416
2000 44,591
2001 30,624
-------
$216,709
=======
</TABLE>
<PAGE> 18
GAP INSTRUMENT CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
6. INCOME TAXES
The annual provision for income taxes differs from amounts computed applying
the maximum federal income tax rate to the pre-tax income as follows:
<TABLE>
<CAPTION>
September 30, December 31, December 31,
1996 1995 1994
------------ ------------ -----------
<S> <C> <C> <C>
Computed tax at maximum rate $ - $ 65,230 $ -
State, net of federal tax effect - 404 -
Tax benefit of net operating
loss carryforward - (65,634) -
------- ------- -------
Total income taxes $ - $ - $ -
======= ======= =======
</TABLE>
Unused operating losses for federal and state income tax purposes of
approximately $801,000, are available for carry forward against future years'
taxable income and expire through the year 2009.
Deferred tax benefits for the carryforward losses have been fully offset by
valuation allowances since it has not been established that realization of these
benefits is more likely than not.
7. RELATED PARTY TRANSACTIONS
The Company rents its facility from a principal shareholder on a month to
month basis for $3,200 per month. Rent expense was $35,400 in 1996. Rent expense
to the prior unrelated landlord was $28,000 in 1995 and $14,000 in 1994 (Note
5).
Two principal shareholders provide the Company with electromechanical
assembly and network services. The total expense was $84,369 and $58,300 in 1996
and 1995, respectively. There were no charges in 1994. Additionally, included in
accounts payable at September 30, 1996 and December 31, 1995 are $111,769 and
$10,000, respectively, payable to these shareholders.
The balance due to shareholders represents non-interest bearing advances
with no definite due date.
8. TRANSITIONAL REPORTING (Unaudited)
The following unaudited information, for the nine months ended September 30,
1995, is presented for comparative purposes:
<TABLE>
<CAPTION>
<S> <C>
Revenues $ 233,679
Loss from continuing operations $ (61,924)
Income taxes $ -
Net loss before reorganization items $ (61,924)
Reorganization items $ (6,500)
Loss per share $ -
Net loss $ (68,424)
</TABLE>
<PAGE> 19
GAP INSTRUMENT CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
9. SHAREHOLDERS' DEFICIT
Stock Exchanged for Services
During 1996, the Company issued 12,630,700 shares of common stock in
exchange for consulting services rendered. The value of the services has been
charged to operations, and additional paid-in capital has been increased by
$252,601 representing the excess value of the services over the par value of the
common stock issued.
Recapitalization
During 1996, the Company authorized an additional 500,000,000 shares of
common stock, bringing the number of shares authorized to 604,000,000. The
par value of the stock was reduced to $.000001.
10. COMMITMENTS AND CONTINGENCIES
Litigation
The Company is a party to litigation involving a former officer of the
Company. Management believes that the settlement of the claim will not have a
material adverse effect on the Company's financial position or results of
operations.
<PAGE> 20
Item 9 - Disagreements on Accounting and Financial Disclosure
None
Part III
Item 10 - Directors and Executive Officers of the Registrant
<TABLE>
<CAPTION>
Common Stock
Served of Company as
Principal Director Beneficially Owned on
Name Age Occupation From September 30, 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
James M. Edwardson 53 Chairman of Board 1993 0 shares
and CEO
Robert Baer 55 President 1995 1,026,000 shares
Letty A. Norjen 61 Secretary & Director 1993 2,000,000 shares
Deirdre C. Morrison 36 Treasurer - 66,000 shares
Michael H. Fasullo 50 Director 1993 2,000,000 shares
</TABLE>
The shares of Common Stock indicated above are the only securities of GAP
Instrument Corp. owned by the directors and executive officers of the
registrant.
BUSINESS EXPERIENCE
James Edwardson, Chairman of the Board of Directors and CEO has twenty plus
years experience managing high tech corporations. In March of 1993 Mr. Edwardson
was added to the Board of Directors to help change the direction of the company
and develop some new high tech products or services to take GAP Instrument Corp.
into the twenty-first century.
Robert Baer, President and Director, has owned and operated various
businesses for the past thirty years. Bob was elected President in June 1995. He
has guided GAP Instrument Corp. through its recent reorganization.
Letty A. Norjen, Secretary and Director, has served as a corporate officer
and director in various corporations for the past twenty years. She currently
sits on the Board of Directors of four corporations. She has extensive
experience in the service industry, and dealing with the public.
Letty joined GAP in 1993.
Deirdre Morrison, Treasurer and CFO, is a CPA with more than fifteen years
experience in the areas of accounting and auditing. Deirdre joined GAP in June
1995.
Michael H. Fasullo, Director, is a Senior administrator for a Government
agency. He has twenty plus years experience in the internal workings of
Government. Michael became a Director of GAP in 1993.
Item 11 - Management Remuneration and Transactions
In 1996, total remuneration for all Directors and Officers was $0.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
<TABLE>
<CAPTION>
Name and Address Amount Beneficially Owned Percent of Class
<S> <C> <C>
Eloco, Inc. 30,996,732 28
244 Mill Road
Yaphank, NY 11980
Advanced Logic Resources, Inc. 31,306,950 28
245 Mill Road
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
<S> <C> <C>
Yaphank, NY 11980
Allen Binnie 21,594,055 19
151 Leisure Glen Drive
Ridge, NY 11961
Advanced Logic Resources of WV Inc. 65,803,682(1) 59
244 Mill Road
Yaphank, NY 11980
Eloco Inc. 65,803,682(1) 59
244 Mill Road
Yaphank, NY 11980
Edwardson Kennels Inc. 62,303,682(1) 55
244 Mill Road
Yaphank, NY 11980
</TABLE>
(1) Amount includes the 30,996,732 shares owned by Eloco Inc. and the
31,306,950 shares owned by Advanced Logic Resources, Inc. by virtue of owning
25% stock interest in the aforementioned companies.
Beneficially owned securities of GAP Instrument Corp. held by all Directors
and Officers of GAP Instrument Corp. as a group:
<TABLE>
<CAPTION>
Amount Beneficially Owned Percent of Class
<S> <C>
5,092,000 4
</TABLE>
(2) Late reports of transactions not reported in a timely basis.
1. Advanced Logic Resources Inc., amended Form 3
2. Advanced Logic Resources Inc., Form 4: 15 transactions
3. Eloco Inc., amended Form 3
4. Eloco Inc., Form 4: 15 transactions
5. James Edwardson, amended Form 3
6. James Edwardson, Form 4: 1 transaction
7. Michael Fasullo, amended Form 3
8. Michael Fasullo, Form 4: 2 transactions
9. Letty Norjen, amended Form 3
10. Letty Norjen, Form 4: 2 transactions
11. Deirdre Morrison, Form 3
12. Deirdre Morrison, Form 4: 2 transactions
13. Robert Baer, Form 3
14. Robert Baer, Form 4: 2 transactions
15. Eloco Inc., ALR of West Virginia, Inc. and Edwardson Kennels Inc.
(Filing jointly/group); Form 3
16. Eloco Inc., ALR of West Virginia, Inc. And Edwardson Kennels Inc.
(Filing jointly/group); Form 4: 15 transactions.
Item 13- Certain Relationships and Related Transactions
None
<PAGE> 22
PART IV
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(1) Financial Statements: Reference is made to Part II, Item 8.
(2) Exhibits Index:
(3), (4) Reference is made to Form 10-K for the year ended December 31, 1980.
(5), (9), (10), (11), (12), (13), (18), (19), (20), (22), (23), (24), (25),
and (28) are not applicable.
(3) Financial Statement Schedules for the Years Ended December 1996, 1995
and 1994:
None.
(4) Reports on Form 8-K: The Company filed a Report on Form 8K for the last
quarter covered by these financial statements.
The Company filed a Report on Form 8K subsequent to year end.
(THIS SPACE INTENTIONALLY LEFT BLANK)
<PAGE> 23
SIGNATURES
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.
GAP INSTRUMENT CORP.
<TABLE>
<CAPTION>
<S> <C> <C>
By /s/ James M. Edwardson Date JAN 13, 1997
-----------------------------------------
James M. Edwardson
Chairman of the Board of Directors
and Chief Operating Officer and President
By /s/ Robert Baer Date JAN 13, 1997
-----------------------------------------
Robert Baer
President
By /s/ Letty A. Norjen Date JAN 13, 1997
-----------------------------------------
Letty A. Norjen
Secretary and Director
By /s/ Deirdre C Morrison Date JAN 13, 1997
-----------------------------------------
Deirdre C Morrison
Treasurer
By /s/ Michael H. Fasullo Date JAN 13, 1997
-----------------------------------------
Michael H. Fasullo
Director
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 20,984
<SECURITIES> 0
<RECEIVABLES> 72,135
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 93,119
<PP&E> 59,572
<DEPRECIATION> 15,255
<TOTAL-ASSETS> 140,546
<CURRENT-LIABILITIES> 360,553
<BONDS> 0
0
0
<COMMON> 111
<OTHER-SE> (387,576)
<TOTAL-LIABILITY-AND-EQUITY> 140,546
<SALES> 188,403
<TOTAL-REVENUES> 188,403
<CGS> 160,054
<TOTAL-COSTS> 580,118
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,912
<INCOME-PRETAX> (391,715)
<INCOME-TAX> 0
<INCOME-CONTINUING> (391,715)
<DISCONTINUED> 0
<EXTRAORDINARY> (6,500)
<CHANGES> 0
<NET-INCOME> (398,215)
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
