UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 Commission File
December 31, 1996 Number 0-3125
GENERAL DEVICES, INC.
(Exact Name of Registrant as
specified in its charter
New Jersey 21-0661726
(State of Incorporation) (I.R.S. Employer I.D. Number)
215 West Church Road
King of Prussia, PA 19406
(Address of Principal Executive Office)
Registrant's telephone number, including area code:
(610) 992-1455
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
Common Stock, Par Value $ .01 Over the Counter Market
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether registrant (1) has filed all
annual, quarterly and other reports to be filed with the
Commission and (2) has been subject to the filing requirements
for the past 90 days.
Yes x No
As of March 4, 1997, 4,076,623 shares of common stock were
outstanding and the aggreate market value of such shares (based
on the average bid and asked prices of such stock) held by non-
affiliates was approximately $6,396.
Table of Contents
PART I
Page
Item 1. Business 1
Item 2. Properties 4
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security
Holders 5
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 5
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 8. Financial Statements and Supplementary Data 9
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 30
PART III
Item 10. Directors and Executive Officers of the Registrant 30
Item 11. Executive Compensation 30
Item 12. Security Ownership of Certain Beneficial Owners
and Management 30
Item 13. Certain Relationships and Related Transactions 31
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 32
PART I
Item 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
General Devices, Inc. (the Company), a New Jersey Corporation
organized in 1953, has been engaged in the business of providing
contract technical services and executive recruiting. The
Company has been supplying contract technical services consisting
of experienced engineering, scientific and other technical
personnel to a wide variety of businesses in the Eastern United
States and Western Europe directly, or through a predecessor
Company since 1956.
Effective April 14, 1990, the Company sold most of its
technical services business, and certain operation assets to TAD
Technical Services Corporation. On June 1, 1990, the Company
sold its 100% owned British subsidiary, GDI Euroforce Ltd. to TAD
Technical Services Corporation. The Company continues to operate
in the technical services business from its King of Prussia,
Pennsylvania location on a much smaller scale. It is presently
inactive however, and did file a Petition of Reorganization
under Chapter 11 of the Federal Bankruptcy Code on August 23,
1996.
The Company maintained a presence in Western Europe through its
wholly owned German subsidiary, General Devices, GmbH which was
organized in 1975. German operations have been dormant for
several years as a result of continuing litigation and were
written off during 1991. The Company is completely inactive at
this date.
At December 31, 1991, the Company owned 51% of the capital
shares of MRG Search and Placement, Inc. of New Haven,
Connecticut, an executive recruiting firm specializing in the
recruitment of middle to senior management personnel for high
technology and financial positions. MRG had the largest industry
segment sales volume in the continuing operations of General
Devices. The Company sold its remaining 51% share of MRG on
March 27, 1992 to MRG employees.
In 1986, the Company sold all of the stock of Worldwide
Computer Services, Inc. in a public offering.
In 1982, the Company acquired 100% of the capital shares of
Timesavers Inc., Sunnyvale, California, which is engaged
primarily in the business of providing temporary personnel, both
technical and clerical, to a number of businesses in Northern and
Southern California. Timesavers, Inc. was sold in August 1989 to
CDI Corporation.
1
As of March 4, 1997, the Company's remaining operations consist
of one administrative office, which since January 1, 1993 has had
no active clients or revenues and there are no active employees.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company's business had been separated in two segments:
contract technical services and executive recruiting. After the
1990 sale of the services business, the Company's remaining
operations consisted of one technical service office, a dormant
operation in Germany (which was written off in 1991) and the
executive recruiting business (which was sold in 1992). The
sales and operating results of the Company by business segment
and identifiable assets for the three years ending December 31,
1996 are set forth in Notes 10 to the Consolidated Financial
Statements, which note is incorporated herein by reference.
The Company was primarily engaged in the temporary placement of
technical, clerical and computer personnel prior to the sale of
most of its technical services division. For 1992, operations
consisted of one inactive technical service office. In 1989, the
Company employed an average of approximately 1,000 persons. In
1990, after the sale of most of the technical services business,
the Company employed approximately 35 persons as it did in 1991.
In 1992, the Company employed an average of only 6 persons
throughout the year and employed no one in 1993, 1994, 1995 or
1996. The Company had no sales or revenues in 1996.
EXECUTIVE RECRUITING
On August 20, 1981, the Company acquired in an exchange of
stock 80% of the common stock of New England Recruiters, Inc.
(MRG). During 1991, the Company reduced its ownership to 51%.
On March 27, 1992, two employees of MRG purchased the Company's
and the other stockholder, Mr. Polak's stock.
TECHNICAL SERVICES
Effective April 14, 1990, the Company sold most of its
technical services business, and certain operating assests to TAD
Technical Services Corporation. The Company continued to operate
in the technical services business from King of Prussia,
Pennsylvania on a much smaller scale as it had a 3 year non-
compete agreement with TAD that covered most of the United
States.
In the contract technical services industry, the Company
provided temporary, experienced engineering, scientific and other
technical personnel to a wide variety of business in the Eastern
United States. Total domestic and foreign technical services
revenues on an historical basis amounted to (NONE), (NONE),
(NONE) and (NONE) in 1996, 1995, 1994 and 1993 respectively.
2
During 1992 and 1991, the defense and aerospace (aircraft,
missiles, weapons systems), electronics, communications and
computer industries were among the more important industries
utilizing the Company's contract technical personnel. We
supplied no one in 1993, 1994, 1995 or 1996.
Technical personnel supplied to domestic customers were
employed by the Company, which undertakes all ordinary
administrative functions of an employee. The Company employed
individuals to fill specific requirements of its clients.
Clients were billed for the services of the Company's technical
employees, and those employees were paid on an hourly basis. The
Company derived its profit from the differential between the
hourly rates charged and those paid.
The duration of assignments varied from a few months to several
years for major defense, aerospace and energy projects.
Employees worked at the client's facilities. Technical employees
were either selected by the client on the basis of resumes and
other background information supplied by the Company, or the
client relied on the Company to select the particular individual.
In all cases, the Company's technical employees worked under
the client's direction and supervision. The Company understands
that the contract technical service industry generally takes the
position that any liability for the quality of the employee's
performance rests with the client and is not aware that this
position has ever been challenged.
During 1996, 1995, 1994 and 1993, the Company had no sales. In
1992, the Company had sales to one customer, the Boeing Company,
which constituted 46% of technical service sales.
The Technical services industry operated in a highly
competitive environment dominated by large manufacturing
customers. A majority of technical service business is obtained
by competitive bidding. There are about a dozen national
suppliers of technical personnel with revenues in excess of $500
million and a large number of suppliers and the low cost of entry
has led to very competitive bidding on most contracts. The new
year does look promising to the industry, mainly because of
extensive cutbacks and down sizing in not just the defense sector
but all industries that have used our type of service. They now
encourage using "Temporary Help" or "outplacing" when new hiring
is needed.
3
FOREIGN OPERATIONS
The Company operated its contract technical services business
in Europe through General Devices GmbH (GDIG) (no revenues since
1986) and in later years through GDI Euroforce, LTD, a 100% owned
British subsidiary. GDI Euroforce was sold June 1, 1990. The
Company has no sales overseas in 1996, 1995, 1994 or 1993. The
primary difference between the Company's method of operations in
Europe and the United States was that the basic relationship
between the European Subsidiaries and their technical personnel
was not generally and employer-employee relationship. Technical
personnel generally find the independent contract relationship
advantageous, which is also attractive to the European
subsidiaries because of the scope of "social payments"
obligations mandated for, and employment termination requirements
applicable to, employees under labor laws of Germany and most of
the rest of Europe. The independent contractor relationship with
technical personnel enables the European subsidiaries to supply
contract technical services at substantially less than the cost
of its clients of equivalent employee services. However, the
independent contractor relationship came under question for the
German tax authorities. The Company has been unable to recover
its German assets as a result of restrictions by the German
Government. The protracted nature of the situation and the
Company's financial status have limited its ability to continue
litigation. During 1991, the Company ceased funding its German
representative, the investment in GDIG was written off and GDIG
was removed from the Consolidated Financial Statements. Our
German attorneys have stopped pursuing our case since we have
been unable to pay them.
Item 2. PROPERTIES
The Company owned the building housing its corporate
headquarters and technical services division in Norristown,
Pennsylvania. On December 30, 1992 the Company signed an
agreement with its mortgagee to give them the deed "in lieu of
foreclosure". The Company had become 6 months overdue in its
mortgage payment. The Company has written off the asset of the
building and also the liability of the mortgage as of December
31, 1992. The actual sale of the building happened December 30,
1993. The Company owns no real property at this time.
Item 3. LEGAL PROCEEDINGS
All legal proceedings of the past have been litigated and
settled. At present, the Company has no ongoing legal
proceedings except Chapter 11 proceedings which are not final or
approved at this date. All other legal problems have been
settled or abandoned.
4
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
Item 5. MARKET FOR THE COMPANY'S STOCK AND RELATED SECURITY
MATTERS
(a) PRINCIPAL MARKET: LISTED ON THE OVER THE COUNTER
"BULLETIN BOARD"
(b) STOCK PRICE INFORMATION
The following table sets for the range of the high and low bid
quotations of the Common Stock for the past two years in the
over-the-counter market, as reported by the over the counter
"Bulletin Board" and in the pink sheets.
1995 1996
High Low High Low
1st Quarter .0025 .0025 .0025 .0025
2nd Quarter .0025 .0025 .0025 .0025
3rd Quarter .0025 .0025 .0025 .0025
4th Quarter .0025 .0025 .0025 .0025
(c) As of March 5, 1997, the Company has approximately
3,500 stockholders of which approximately 1,500 were in the name
of nominee (street name).
5
Item 6. SELECTED FINANCIAL INFORMATION (UNAUDITED)
DOLLARS IN THOUSANDS YEARS ENDED DECEMBER 31,
(Except per share amounts) 1996 1995 1994 1993 1992
RESULTS OF OPERATIONS
Revenues - total operations 0 0 0 0 0
Revenues - discontinued operations 0 0 0 0 0
Revenues - continuing operations 0 0 0 0 0
Earnings (loss) from continuing
operations $ (105) 65 (140) (172) (647)
Earnings (loss) from discontinued
operations - - - - ( 23)
Gain (loss) on disposal of
discontinued operations - - - - (145)
Gain (loss) before extraordinary
credits - - - - (815)
Gain from repurchase of
subordinated debentures - - - - 4
Net Earnings (loss) (105) 65 (140) (172) (811)
Gain (loss) per share from
continuing operations (.03) .01 (.03) (.04) (.16)
Loss per share before
extraordinary credits - - - - (.21)
Extraordinary credits per share - - - - .01
Net earnings (loss) per share (.03) .01 (.03) (.04) (.20)
FINANCIAL CONDITION
Working capital (deficit) (2180) (1705) (1778) (1656) (1449)
Total assets - - - - 37
Short-term and current portion
of long term debt 2179 928 926 924 923
Long-term debt - - - - -
Stockholders equity (deficit) (2180) (2631 (2696) (2563) (1828)
No dividends have been paid
6
Item 7. MANAGEMENT DISCUSSION ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Results of Operations
1996 vs. 1995
General Devices, Inc. was again an inactive operation in 1996.
Not only were there no sales, no revenues and no profits, the
Company ahd no field or staff employees. The President and the
Treasurer again donated their time to keep an ongoing continuity
to keep the Company alive, administering legal, tax or S.E.C.
inquiries.
Operating expense was still minimal without employees.
Interest expense remained approximately the same in 1996 as in
1995, consisting primarily of the accrued unpaid interest on the
convertible debentures. We did adjust the accrued interest on
the defaulted debentures by the additional amount of $90,951 for
the period from December 1, 1995 up to the petition filing date
of August 23, 1996.
Results of Operations
1995 vs. 1994
General Devices, Inc. was again an inactive operation in 1995.
Not only were there no sales, no revenues and no profits, the
Company had no field or staff employees. The President and the
Treasurer again donated their time to keep an ongoing continuity
to keep the Company alive, administering legal, tax or S.E.C.
inquiries.
Operating expense was still minimal without employees.
Interest expense remained approximately the same in 1995 as in
1994, consisting primarily of the accrued unpaid interest on the
convertible debentures.
The 1995 net profit resulted from a settlement with the U. S.
Labor Department, reduction of old accounts payable and a refund
of an overpayment of an old insurance premium.
7
Liquidity and Capital Resources
The Company's working capital and current ratio at December 31,
in each of the past three years were:
1996 1995 1994
Working capital (deficit)
(in thousands) ($2,180) ($1,705) ($1,778)
Current ratio .001 to 1.0 .001 to 1.0 .001 to 1.0
The $475,000 decrease in working capital from 1995 to 1996
resulted from the use of any small working capital we had to fund
operating losses and the reclassification of all pre-petition
liabilities as current liabilities.
The reclassification of the remaining General Devices, Inc.
debentures as a current liability at December 31, 1990 resulted
from a default by the Company on payment of interest due at
December 1, 1990. In accordance with the debenture agreement for
the General Devices, Inc. 13 1/2% subordinated debentures, the
principal amount of the debentures was due and payable on
december 31, 1995. The Trustee made demand for payment on
December 6, 1995. Payment was not made. The trustee and
debenture holders have elected not to pursue any action against
the Company for payment as of this date. As noted above since
filing the Chapter 11 petition on August 23, 1996 libilities are
classified as current liabilities
There were no capital expenditures in 1996 or 1995.
In early 1989, the Company began selling accounts receivable to
a single investment bank. This arrangement replaced the
$3,000,000 line of credit the Company had with a bank. As a
result of this transaction short term borrowing was eliminated.
As described further below this arrangement was terminated in
April 1990. A similar factoring arrangement was made with a
Company controlled by an officer in October 1991 and continued
during 1992. This arrangement was available in 1996 and 1995 but
is rarely used since there has been no accounts receivable to
finance.
During April 1990, our accounts receivable factor lost backing
from the consortium of banks which funded it and financing to the
Company was terminated with only a few days notice. The Company
searched for similar alternative financing, but was unable to
locate suitable arrangements in the short time available.
Negotiations were initiated with a competitor to sell portions of
the assets of its technical services business. As of April 14,
1990 future operations of eight of the Company's nine offices
were transferred to TAD Technical Services Corporation pursuant
to an asset sales agreement.
8
The Company was engaged in a highly competitive business which
was very labor intensive and its services generally were priced
in a close relationship to direct labor costs. To the extent
permitted by the competitive nature of the business, increases in
direct labor, costs are passed on to clients by increasing fees
for our services. Inflation would not have a material effect on
1995 or 1996 net revenues and income from continuing operations
and we do not expect that inflation will have a significant
adverse effect to any business done in 1997.
On March 27, 1992, the Company sold its 51% interest in MRG
Search and Placement (MRG) to MRG employees. The sale of this
operation left the Company with only its main division at its
corporate headquarters.
The Company has continued on as an inactive entity, closing
down operations in an orderly fashion. Operating costs have been
cut and there is no staff. Cash expenditures have been deferred.
In light of the present condition of the operations of the
Company, it was doubtful that the Company could continue as a
going concern much longer without some outside help or
reorganization. This is why the Company filed a petition for
Chapter 11 on August 23, 1996.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements and Financial
Statement Schedules:
1. Financial Statements Page
Consolidated Balance Sheets - December 31, 1996
and 1995 11
Consolidated Statements of Operations - years ended
December 31, 1996, 1995 and 1994 12
Consolidated Statements of Stockholder's Equity
(Deficit) - years ended December 31, 1996, 1995
and 1994 13
Consolidated Statements of Cash Flows - years ended
December 31, 1996, 1995 and 1994 14
2. Financial Statement Schedules
Schedule V - Property, Plant and Equipment 27
Schedule VI - Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment 28
Schedule Viii - Valuation and Qualifying Accounts 29
9
All other schedules are omitted because they are not applicable
or not required or because the required information is included
in the consolidated financial statements or notes thereto.
10
GENERAL DEVICES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996 AND 1995
1996 1995
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash 15 20
Accounts Receivable - -
Total current assets 15 20
Total assets 15 20
LIABILITIES & SHAREHOLDERS EQUITY
Pre-petition liabilities 2,179,210 -
Current liabilities:
Current portion of long term debt - 928,000
Accounts payable - 88,341
Other accrued liabilities 670 689,040
Total current liabilities 670 1,705,381
Long term debt:
Other liabilities - 370,465
Total liabilities 2,179,880 2,075,846
Stockholders equity:
Common stock $.01 par value: authorized
10,000,000 shares, issued 4,096,923 40,969 40,969
Capital in excess of par value 1,998,255 1,998,255
Retained earnings (4,157,610) (4,053,571)
(2,118,386) (2,014,347)
Less:
Treasury stock at cost, 20,300 shares ( 61,479) ( 61,479)
Total shareholders equity (deficit) (2,179,865) (2,075,826)
Total liabilities and shareholders
equity (deficit) 15 20
11
GENERAL DEVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
Net sales - - -
Operating expenses
Cost of sales - - -
General and administrative 13,903 16,708 7,342
Operating profit (loss) (13,903) ( 16,708) ( 7,342)
Other expenses
Interest (90,957) (139,100) (135,482)
Miscellaneous income 352 220,924 2,672
Profit (loss) (104,508) 81,824 (132,810)
Profit (loss) from continuing
operations before income taxes (104,508) 65,116 (140,152)
Income taxes - - -
Profit (loss) from continuing
operations (104,508) 65,116 (140,152)
Profit (loss) before extraordinary
items (104,508) 65,116 (140,152)
Extraordinary items - - -
Net profit (loss) (104,508) 65,116 (140.152)
Profit (loss) per share from
continuing operations (0.03) 0.02 (0.03)
Profit (loss) per share before
extraordinary items (0.03) 0.02 (0.03)
Net profit (loss) per share (0.03) 0.02 (0.03)
12
GENERAL DEVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
DECEMBER 31, 1996, 1995, AND 1994
(IN THOUSANDS, EXCEPT FOR SHARES)
Capital in
Common Stock
Excess of Accum Treasury
Shares Amount Par Value Deficit
Stock Total
Balance - Dec 31, 1993 4,096,923 41 1,998 (3,988) (61) (2,010)
Net loss ( 140) ( 140)
Balance - Dec 31, 1994 4,096,923 41 1,998 (4,128) (61) (2,150)
Net profit 65 65
Balance - Dec 31, 1995 4.096,923 41 1,998 (4,063) (61) (2,085)
Net loss (105) (105)
Balance - Dec 31, 1996 4,096,923 41 1,998 (4,168) (61) (2,190)
13
GENERAL DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED, IN THOUSANDS)
1996 1995 1994
Cash flows from operating activities
Net income (loss) (105) 65 (140)
Adjustments to reconcile net income
(loss) to net cash flows provided
from operating activities
Depreciation and amortization - - -
Changes in assets and liabilities:
Decrease (increase) in accounts
receivable - - 1
Decrease in other assets - 9 8
Increase (decrease) in accounts
payable - (199) 6
Increase (decrease) in other
liabilities 105 125 126
Net cash provided (used) by
operations (.004) (.002) (.551)
Net increase (decrease) in cash
and cash equivalents (.004) (.002) (.551)
Cash and cash equivalents - beginning .019 .021 .572
Cash and cash equivalents - ending .015 .019 .021
Supplemental disclosures of cash flow
information
Cash paid during the year for:
Interest None None None
Income taxes None None None
Supplemental schedule of non-cash
investing and financing activities
None
See notes to Consolidated Financial Statements
14
GENERAL DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations
General Devices (the Company) was engaged in the business of
providing contract technical services, principally in the areas
of experienced engineering, scientific and other technical
personnel, to a variety of businesses in the Eastern United
States. Prior to 1991, the Company also had operations in
various other parts of the United States, Britain and Germany.
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and all majority-owned subsidiaries after elimination
of inter-company balances and transactions. Operations disposed
of during 1990 are considered discontinued operations in 1990.
The Company's German Subsidiary was consolidated in 1990 but not
in 1991 since the Company's investment was written off. Goodwill
which represents the excess of cost over fair value of net assets
acquired was reflected in the consolidated balance sheets at
December 31, 1990 because it was considered to have continuing
value and was amortized on a straight-line basis over a period of
forty years. No goodwill remained after December 31, 1991. (See
also Note 2 for write-off of goodwill on disposition of
investments.)
Land, Building and Equipment
The cost of building and equipment was depreciated on a
straight-line basis over their estimated lives. Annual
depreciation rates were 4% for building and building improvements
and ranged from 10% to 20% on equipment. Leasehold improvements
were amortized over the terms of the respective leases.
Bond Issue Costs
Bond issue costs were deferred and amortized to income on the
straight-line method over the term of bonds outstanding. Cost
attributable to repurchases and converted bonds were reduced
proportionally in the year of repurchase and conversion. Such
costs reduced gains arising from repurchase and conversion.
Revenue Recognition
Revenue from technical services was recognized when technical
personnel provided by Company performed services for customers.
15
GENERAL DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
Revenue from executive recruiting was recognized when clients
hired individuals provided by the Company.
Income Taxes
Foreign tax credits, investment tax credits and jobs tax
credits were reflected as a reduction of the provisions for
federal income taxes in the year utilized, based on financial
reporting income. In December 1987, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 96 "Accounting for Income Taxes". This statement
mandates the liability method for computing deferred income
taxes. Adoption of the statement was subsequently postponed
until 1992. In 1992, the FASB issued statement No. 109,
"Accounting for Income Taxes", which replaces Statement No. 96
and incorporates deferred tax assets and liabilities when
realization is "more likely than not". Management has not
adopted the provisions of either statement and believes adoption
of either statement would not have significant effect on the
Company's position or results of operations.
Per Share Data
Per share data is calculated on the weighted average number of
common and common equivalent shares outstanding during the
periods. The weighted average number of shares for 1996, 1995
and 1994 were 4,076,623, 4,076,623 and 4,076,623 shares,
respectively.
Cash Equivalents
The Company considered all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
NOTE 2 - SIGNIFICANT MATTERS
Loss on Disposal of Investments
During 1991, the Company incurred a loss on the disposition of
several investments which it had previously included in its
financial statements. The largest of these was the Company's
investment in its previously consolidated German subsidiary,
General Devices, GmbH (GDIG), as a result of the Company's
inability to recover any of its property in Germany resulting in
a loss of $286,781 noted in the 1991 financial report.
16
GENERAL DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
On March 27, 1992, the Company sold its remaining 51%
investment in MRG to two MRG employees. The remaining goodwill
of $127,399 was not recovered in the sale and, consequently, has
been removed from the Company's accounts.
The Company estimated its loss on the March 27, 1992 sale of
MRG stock at approximately $30,000 after elimination of its
investment, minority interest and intercompany balances. The
actual amount of the loss depended on the contingencies within
the sales agreement. (The Company has recognized the loss in the
1992 financial statements.)
Following is summary of the 1992 losses on disposal of assets:
Loss on sale of MRG $145,190
Loss on transfer of building 63,803
Loss in land value 167,178
Total $376,171
Discontinued Operations
In 1990, the Company sold its Service Division, including
certain operating assets, and entered into an agreement not to
compete with the buyer for three years in selected geographic
areas for total consideration of $750,000. The Company
recognized a gain from this transaction of approximately
$263,000. As part of the agreement, the Company also sold its
wholly-owned English subsidiary, GDI Euroforce, LTD. (Note 12),
including certain operating assets, and entered into an agreement
not to compete with the buyer for three months in selected
geographic areas for total consideration of approximately
$95,000. the Company recognized a loss from this transaction of
approximately $54,000. The operating results of the Service
Division and of GDI Euroforce, LTD. sold in 1990 and of
Timesavers, Inc. sold in 1989 (Note 12)
have been classified as "Discontinued Operations" in the
accompaning Consolidated Statements of Operations. The Company
used the proceeds from the sales to finance operations and reduce
long-term borrowings. After the 1990 dispositions, the Company's
remaining operations consisted of one technical service office
and the executive recruiting business until the March 27, 1992
sale of MRG.
Financial Status
The Company has suffered recurring losses from continuing
operations and, as described further in Note 9, had consolidated
17
GENERAL DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
assets in 1990 which were restricted pending continuing
litigation in Germany. These assets were written off during 1991
as a result of the Company's inability to resolve the German
litigation. Furthermore, the Company failed to make the required
interest payments on its subordinated debentures due in December
1990 and thereafter. The principal due December 1, 1995 was not
paid, therefore in default due. Consequently, the debentures are
in default and the holders could have demanded payment of
principal (Note 5). In addition, the Company's remaining
operations and capital resources may be insufficient to fund
future operations. These matters raised substantial doubt about
the entity's ability to continue as a going concern. After the
sale of MRG (see above) only the technical service office at the
Company's headquarters remained in operation.
NOTE 3 - ACCOUNTS RECEIVABLE
During 1989, The Company began selling up to 100% of qualified
insured accounts receivable to a single financial institution
(the factor) as an alternative financing arrangement to its
line-of-credit which expired during 1989. These receivables were
sold
with recourse at a discount rate ranging from 1.1% to 1.5%.
Proceeds from the sale of accounts receivable during 1990
approximated $3,762,000. On April 12, 1990, the Company was
informed by the factor that due to the factor's financial
difficulties, it would not be able to continue this financing
arrangement. Starting October 1991, the Company commenced
selling accounts receivable with recourse to a corporation owned
by an officer of the Company. Proceeds from the sale of accounts
receivable during 1992 were approximately $302,000. These
receivables were sold at a discount rate of 2.5%. At December
31, 1996 none of the receivables sold remained outstanding. The
discount and insurance costs were reflected as "Accounts
Receivable Discounting Costs" in the Consolidated Statement of
Operations. At the Chapter 11 filing date, August 23, 1996, the
Company had a balance owed under the financing agreement of
$51,580, a pre-petition secured debt. At December 31, 1996 there
is a post petition amount owed of $470 to the creditor.
NOTE 4 - LAND, BUILDING AND EQUIPMENT
The following is a summary of land, building, equipment and
leashold improvements:
December 31, 1996, 1995 and 1994 - None
18
GENERAL DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
Depreciation and amortization expense amounted to $None, $None
and $None for 1996, 1995 and 1994 respectively.
See Note 9 for matters relating to land formerly held for
investment.
NOTE 5 - LONG TERM DEBT
The following is a summary of long term debt:
December 31,
1996 1995
Long term debt:
Convertible subordinated
debentures, 13.5% due
December 1, 1995 - $ 928,000
Current portion - 928,000
Long term debt - -
On August 23, 1996 the date of the filing of Chapter 11 all
liabilities are classified as current liabilities:
Principal and defaulted interest - $1,707,997
The subordinated debentures were convertible into common stock
at the option of the holder at a conversion price of $5.50 per
share. Commencing December 1, 1986 through December 1, 1994, the
debentures were subject to an annual mandatory sinking fund
requirement of $360,000. The debentures were redeemable, in
whole or in part, at the option of the Company, at a current
price of 100% in 1995. During 1991, 1990 and 1989, the Company
repurchased an aggregate of $1,905,000 which along with $741,000
in debentures converted in 1989, $177,000 converted in 1991,
$6,000 converted in 1992 and purchases in prior periods have
satisfied the total sinking fund requirements. No sinking fund
obligation existed at December 1, 1995 when the whole principal
became due.
In April 1989, the Company offered the holders of the
subordinated debentures a reduced conversion price of $.75 per
share through June 1990. Approximately $741,000 in debentures
were converted into 987,983 shares of common stock. In
accordance with Statement of Financial Accounting Standards No.
84, "Induced Conversions of Convertible Debt", the Company
recognized approximately $313,000 in expense to induce this
conversion.
19
GENERAL DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
During 1990, the Company offered to repurchase its subordinated
debentures from holders of the same for prices substantially less
than their face value. The Company repurchased approximately
$1,284,000 of the debentures during 1990 and recognized an
extraordinary gain of approximately $865,000.
During 1991, the Company repurchased $76,000 of its
subordinated debentures at prices less than their face value.
The Company also converted $177,000 of its subordinated
debentures into 354,000 shares of stock at the prevailing market
values at the time of converson. The Company recognized an
extraordinary gain of approximately $210,000 on the repurchases
and conversions. At the beginning of 1992 another $6,000 of the
debentures were exchanged for 12,000 shares of stock.
The Company failed to make its convertible subordinated
debenture interest payments due since December 1990 and the
principal was due as of December 1, 1995. As a result, the
trustee declared the principal immediately payable. The
debenture holders however did not request the trustee after
notice to enter judgement against the Company so consequently the
trustee has stated that the indenture has "expired" and they, the
trustee, no longer are involved in its administration. The
obligation is classified as a current liability in accordance
with the remedies of the debenture agreement. Unpaid interest
totalling $779,997 is included in pre-petition liabilities at
December 31, 1996.
Amounts due and in default at December 31, 1996 are as follows:
Debentures Accrued Interest Total Due
1996 $ 928,000 $ 779,997 $ 1,707,997
NOTE 6 - STOCKHOLDERS EQUITY
At November 22, 1991, exercisable warrents were outstatnding
for the purchase of 20,000 and 89,920 shares of common stock at
prices of $4.65 and $5.50 respectively, per share. Both series
of warrants expired on November 22, 1991. No warrents were
exercised since 1989.
On May 1, 1990 all options granted under the 1981 non-qualified
stock option plan (The 1981 Plan) expired.
20
GENERAL DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
On September 12, 1990, the Board of Directors approved a new
Non-Qualified Stock Option Plan (The 1990 Plan) authorizing the
grant to directors, officers and other key employees Non-Qualified
stock options to purchase 250,000 shares of stock at
100% of fair market value at the date of grant (which was $0.1406
per share). The 1990 Plan provides for the grant of exercisable
options expiring September 12, 2000. A total of 200,000 options
were granted under the 1990 Plan.
The status of the options is summarized below:
Weighted average option price
Number of
Shares Per share Total
Options outstanding
December 31, 1996 85,000 $ 0.14 $ 28,120
Options which became
exercisable:
1990 (1990 Plan) 200,000 0.14 28,120
1989 (1981 Plan),
expired May 1, 1990 141,150 1.06 149,541
At December 31, 1996, there were 115,000 shares of common stock
under the 1990 Plan available to be granted.
NOTE 7 - INCOME TAXES
Income taxes consists of the following:
Years ended December 31,
1996 1995 1994
Charge in lieu of federal
income taxes - - -
Currently Payable
Federal - - -
State - - -
Income taxes allocated in the Consolidated Statements of
Operations is not applicable,
For financial reporting purposes, certain items, including bad
debts, vacation expense and liability reserve have been accrued
and charged to expense currently while they will be deducted for
tax purposes when written off or paid. Depreciation is computed
using the straight-line method for financial purposes and by
using primarily accelerated methods for income tax purposes.
21
GENERAL DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
State taxes are based on earnings of specific subsidiaries.
At December 31, 1996, the Company had net operating
carryforwards for federal income tax purposes of approximately
$2,200,000 and general business credit carryforwards of
approximately $100,000. These losses and credits are available
to reduce future income taxes, and will expire in various years
through 2006.
Income (loss) before income taxes includes domestic operating
results of $(105,000), $65,000 and $(140,000) in 1996, 1995 and
1994 respectively.
Effective income tax rates that differed from the statutory
U. S. income tax rates for 1996, 1995 and 1994 are not
applicable.
NOTE 8 - LEASES
The Company has no outstanding leases at this time.
Aggregate rental expense for the years 1996, 1995 and 1994 were
$2,010, $2,010 and $2,010 respectively however.
NOTE 9 - CONTINGENCIES
Environmental Protection Agency Proceeding
During 1982, the Company was advised by the Office of the
United States Environmental Protection Agency (EPA) that land
owned by it in Montgomery County, Pennsylvania, contained several
large lagoons releasing chemical contents into the air, surface
water and ground water both on and off site. During 1984, a suit
was brought by the United States of America on behalf of the EPA
against the Company and five other defendants seeking the clean-up
costs of the property.
On August 21, 1986, the court held that the Company and five
other defendants were responsible parties under the law and later
found all the defendants jointly and severally liable. A consent
decree was entered for the entire clean-up costs of the site,
under which four other defendants agreed to finance the entire
clean-up costs. In December 1989, a judgement in the amount of
$16,153,683 was entered against the Company in favor of the
producers of the pollutants for contribution to pay for the
clean-up costs. The Company entered into a settlement agreement
with the producers of the pollutants which provided payments
amounting to $150,000 plus contingent payments up to $500,000
22
GENERAL DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
should the Company sell its assets and recognize certain levels
of gains or $400,000 in the event of a bankruptcy before February
1992, when the contingency expires. The Company has paid the
full $150,000 satisfying its mandatory obligation with respect to
this matter. The Company's insurance carrier contributed $35,000
toward this settlement. The net cost of $115,000 was paid by the
Company and capitalized in the cost of the land, which is
$183,568. The Company intended to sell the land upon completion
of the clean-up but the clean-up has fallen behind schedule and
per the "producer defendant" doing the clean-up it will be
several more years before completed. The Company re-evaluated
the property based on its new tax assessment, which brought the
book value to $16,390.00. In reality the property is worthless
because it is not saleable. The finance company holding the
mortgage took the deed in lieu of foreclosure since the Company
cannot pay the payment or the interest due on the property. The
Company no longer owns this property.
Proceedings with Former Employees
Former employees who we believed violated their employment
contracts and their counter claims against the Company have both
been dismissed by the Texas court.
U. S. Labor Department "Fine"
On September 14, 1994, the United States Attorney for the
Eastern District of Pennsylvania filed a civil action on behalf
of the U. S. Department of Labor seeking payment of the $50,000
fine plus penalty and interest. The fine was imposed for not
filing an audited Annual Report on our 401(k) Plan properly.
Prior to trial, the Company entered into a stipulation approved
by the court for a Consent Judgement of $66,512.50 with the
stipulation that such Judgement would be removed and the case
settled and discontinued provided a payment of $6,750 be made to
the U.S.A. on or before November 1, 1995. Payment of $6,750 was
made on October 18, 1995. The Judgement was satisfied on
December 28, 1995.
23
GENERAL DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 10 - SEGMENT INFORMATION
The following sets forth disaggregated information with respect
to the Company's identifiable industry segments:
Years ended December 31,
1996 1995 1994
Revenue:
Service Division $ - $ - $ -
Corporate - - -
$ - $ - $ -
Operating income (loss)
Service Division $ - $ - $ -
Corporate - - -
$ - $ - $ -
Identifiable assets
Service Division $ - $ - $ -
Corporate 15 20 9,137
$ 15 $ 20 $9,137
Capital expenitures
Service Division $ - $ - $ -
Corporate - - -
$ - $ - $ -
Depreciation and amortization
Service Division $ - $ - $ -
Corporate - - -
$ - $ - $ -
24
GENERAL DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 11 - EXECUTIVE COMPENSATION
In 1983, the Board of Directors of the Company approved a
compensation arrangement with the Chief Executive Officer. Under
this arrangement, originally expiring May 1, 1989, this officer
would receive compensation of $141,750 increased by 5% annually,
and an incentive bonus based on profits in excess of $100,000.
This arrangement was renewed annually for a five year term. In
the event of a change in the basic control or ownership of the
Company, the officer had the option to demand, upon resignation,
five times the highest annual salary and bonus received during
his employment.
The Company has a deferred compensation agreement with its
Chief Executive Officer requiring payments of $15,000 annually
for 10 years commencing when he reached 64 or retirement,
whichever was later. Prior to 1991, this agreement was partly
funded by insurance. At December 31, 1991 a $150,000 liability
is included in compensation and benefits due to a related party
on the Consolidated Balance Sheet and in operating expenses in
the Consolidated Statements of Operations. As of December 31,
1996, the deferred compensation is due.
Under an agreement executed in 1991, the Company recorded a
$53,196 liability for accrued vacation pay to its Chief Executive
Officer, representing foregone vacation pay for certain years.
This liability has been included in operation expenses in the
Consolidated Statement of Operations.
The Chief Executive Officer deferred receipt of salary of
$45,000 and $68,000 during 1991 and 1990 respectively. The
amounts due at December 31, 1995 appear with the amounts in the
two preceding paragraphs as compensation and benefits due to
related party which was classified as a long-term liability since
the Company does not anticipate payments during 1997. Relative
to the Chapter 11 filing this debt is classified as current.
The Chief Executive Officer became an inactive employee in June
of 1992 (no longer an employee). However, he has remained as an
unpaid officer and director for organizational and administrative
purposes.
25
GENERAL DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 12 - DISCONTINUED OPERATIONS
In August 1989, the Company sold its wholly-owned subsidiary,
Timesavers, Inc. for $2,132,000 and recognized a gain of
approximately $240,000. In April 1990, the Company sold most of
the assets of its Services Division for $750,000 and recognized a
gain of approximately $263,000. As part of the Services Division
Sale Agreement, the Company sold its wholly-owned English
subsidiary, GDI Euroforce, LTD for approximately $95,000 and
recognized a loss of approximately $54,000.
NOTE 14 - SIGNIFICANT CUSTOMERS
In 1996 as in 1995, 1994 and 1993, the Company had no sales at
all, but in 1992, the Company had sales to one customer which
comprised 45% of total sales.
NOTE 15 - SUBSEQUENT EVENT
As discussed in Note 2, in 1993 the Company conveyed to its
mortgagee the deed to its investment in ground in King of
Prusssia. There was a gain of $6,921.00
26
GENERAL DEVICES, INC.
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996:
Land None
Building & Improvements None
Machinery, Fixtures & Equipment None
1995:
Land None
Building & Improvements None
Machinery, Fixtures & Equipment None
1994:
Land None
Building & Improvements None
Machinery, Fixtures & Equipment None
27
GENERAL DEVICES, INC.
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996:
Accumulated Depreciation None
1995:
Accumulated Depreciation None
1994:
Accumulated Depreciation None
28
GENERAL DEVICES, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996:
Deducted from notes & accounts receivable:
Allowance for doubtful accounts None
1995:
Deducted from notes & accounts receivable
Allowance for doubtful accounts None
1994:
Deducted from notes & accounts receivable
Allowance for doubtful accounts None
29
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICER OF THE COMPANY
INFORMATION CONCERNING DIRECTORS
James E. Meneses, age 74, had been a Director since 1975.
Until recently, he was Vice President - Legal, since 1976, was
General Counsel and Secretary since 1967. During the last six
years he has been president of Meneses and Dean P.C. The firm
later changed its name to James E. Meneses and was legal counsel
to the Company until January 1, 1990. Mr. Meneses resigned April
24, 1996 for personal reasons (retirement).
Theodore A. Raymond, age 69, has been a Director since 1976.
He has been President and Chief Executive Officer since 1976. He
is a control person.
INFORMATION CONCERNING EXECUTIVE OFFICERS
G. William Raum, age 57, was named Assistant Treasurer in 1989.
In 1990 he was named Secretary/Treasurer and in 1991 Vice
President. He was with the Accounting Department since 1974. He
owns 500 shares of the common stock of the Company. He is the
recipient of currently exercisable option for 10,000 shares.
Item 11. EXECUTIVE COMPENSATION
REMUNERATION OF EXECUTIVE OFFICERS
There was no remuneration paid to any officer or director in
1996, 1995, 1994 or 1993. In 1992, none of the five most highly
compensated executive officers exceeded $60,000 in remuneration.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth at March 3, 1996, the Company's
common stock beneficially owned by Theodore A. Raymond, the only
person known to be the beneficial owner of more than 5% of the
outstanding shares of common stock together with his address.
The table also shows the number of shares of common stock owned
beneficially by each director and by all officers and directors
as a group.
30
Percentage of
Name Number of Shares Common Stock
of common stock Outstanding
Theodore A. Raymond (1)(2) 1,463,575 36.0
James E. Meneses 43,850 *
All officers and Directors
as a group 1,517,925 37.0
(3 persons)
* Less than 1%
(1) Includes shares subject to currently exercisable options in
the case of T. A. Raymond (75,000).
(2) Includes 300,000 currently exercisable non-qualified options
not part of the approved non-qualified plan.
To the Company's knowledge, the stockholders listed above do
not share voting or investment power with respect to any
shares of common stock owned by them.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Starting October 1991, the Company commenced selling accounts
receivable with recourse to a corporation owned by Mr. Raymond.
There was no proceeds from the sales of such accounts receivable
during 1996, 1995 or 1994. When receivables were sold it was at
a discount rate of 2.5%. At December 31, 1996 there were no
receivables outstanding.
On January 13, 1992, T. A. Raymond, Inc., owned by Mr. Raymond,
advanced $25,000 to the Company and received a one year 10%
mortgage on which the Company's undeveloped land was the
collateral. In March of 1993, T. A. Raymond, Inc. called the
note and took over the deed of the land in lieu of foreclosure.
31
PART IV
Item 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following financial statements are included in Part
II, Item 8:
Page
Financial Statements:
Consolidated Balance Sheets, December 31, 1996 and 1995 11
Consolidated Statements of Operations - years ended
December 31, 1996, 1995 and 1994 12
Consolidated Statements of Stockholders Equity (deficit)
years ended December 31, 1996, 1995 and 1994 13
Consolidated Statements of Cash Flows - years ended
December 31, 1996, 1995 and 1994 14
All other schedules are omitted because they are not applicable
or the required information is shown in the financial statements
or the notes thereto.
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, General Devices, Inc. has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GENERAL DEVICES, INC.
By: By:
G. William Raum Theodore A. Raymond
Secretary/Treasurer President
Date: March 4, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
of the Registrant and in the capacities and on the dates
indicated.
By: By:
Theodore A. Raymond G. William Raum
Director, March 4, 1997 Secretary/Treasurer
33
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Registrants form 10-K for the year ended December
31, 1996.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 15
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 15
<CURRENT-LIABILITIES> 670
<BONDS> 0
0
0
<COMMON> 4,076,623
<OTHER-SE> (2,117,594)
<TOTAL-LIABILITY-AND-EQUITY> 15
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 13,903
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (104,508)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (104,508)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> 0
</TABLE>
