SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 1997 Commission File No. 0-1738
GENERAL KINETICS INCORPORATED
(Exact Name of Registrant as specified in its Charter)
Virginia 54-0594435
(State of Incorporation) (IRS Employer Identification No.)
14130-A Sullyfield Circle, Chantilly, VA 20151
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (703)-802-4848
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
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Common Stock with par value of 25 cents per share
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein and will not be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [ ].
Aggregate market value of the voting stock held by $ 205,196*
non-affiliates of the Registrant as of August 15, 1997
(* Executive officers, directors, ESOP and principal
shareholder were considered affiliates, solely for purposes of this item.)
The number of shares outstanding of Registrant's Common Stock,
$.25 par value as of August 1, 1997, was 6,658,925
Documents Incorporated by Reference
None
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
DIRECTORS AT MAY 31, 1997
<TABLE>
<CAPTION>
Name and Positions Business Experience Director
With the Company Age During The Last Five Years since
- ------------------ --- -------------------------- --------
<S><C>
Larry M. Heimendinger 51 Mr. Heimendinger has acted as the Chairman of the Board of March, 1994
Chairman of the Board Directors of the Company since he was elected to that
position in March of 1994. In accordance with the Amended
and Restated Bylaws of the Company, Mr. Heimendinger has
been performing the duties of the President and chief
executive officer through his position as Chairman of the
Board and will continue to do so until such time as a
replacement for President and chief executive officer is
elected and qualified. From 1989 through 1992, Mr.
Heimendinger was President and chief operating officer of
Nantucket Corp., a privately held software company which
was purchased in 1992 by Computer Associates
International, a company also involved in software
development. After that acquisition and until
sustaining a serious accident in September, 1992, Mr.
Heimendinger was associated with Computer Associates
International, most recently as its Director of Product
Strategy. For several years through 1988, Mr. Heimendinger
was the President and CEO of Origin, Inc., a company that
produced and marketed personal computer software for the
banking industry. Mr. Heimendinger is the author of
Advanced d Base IV and Advanced Clipper, books
published by Brady Books, and is a computer industry
conference and seminar speaker worldwide.
Marc E. Cotnoir 48 Mr. Cotnoir has been an independent consultant, providing March, 1994
business and strategic planning support and systems
engineering consulting, for a wide range of clients since
1988. Prior to 1988, Mr. Cotnoir had extensive experience,
both within private industry and in the U.S. Air Force,
with computer and communications technology.
Richard J. McConnell 37 Mr. McConnell has been the President of Square Systems, March, 1994
Corp., a research and development firm specializing in
advanced software systems, since 1986. Mr. McConnell has
been involved in
</TABLE>
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research and development in the computer
software industry since 1981.
EXECUTIVE OFFICERS AND CERTAIN
SIGNIFICANT EMPLOYEES OF THE COMPANY
The names, ages, and positions of the executive officers of
the Company are listed below.
Name Age Position
- ---- --- --------
Larry M. Heimendinger 51 Chairman of the Board
(performing duties of President
and chief executive officer)
Richard E. Munczenski 55 Vice President and General Manager
Sandy B. Sewitch 40 Chief Financial Officer
Larry M. Heimendinger has acted as the Chairman of the Board
of Directors since March of 1994 and, in accordance with the Amended and
Restated Bylaws of the Company, he has been performing the duties of the
President and chief executive officer through his position as Chairman of the
Board and will continue to do so until a replacement for President and chief
executive officer is elected and qualified.
Richard E. Munczenski, Vice President and General
Manager, joined the Company in August of 1969.
Sandy B. Sewitch, Chief Financial Officer, joined the Company
in April 1993.
The officers of the Company hold office at the
discretion of the Board of Directors of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's directors and officers, and persons who
beneficially own more than 10% of its Common Stock, to file with the Securities
and Exchange Commission and the American Stock Exchange reports of ownership and
changes in ownership of the Company's equity securities. Officers, directors and
greater than 10% shareholders are also required to furnish the Company with
copies of all Section 16(a) forms they file.
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To the Company's knowledge, based solely on a review of such
reports furnished to the Company, during the fiscal year ended May 31, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% shareholders were complied with, except certain inadvertent
filing delinquencies which have been corrected as set forth below:
Under Rule 16a-3(f) every person who at any time during the
fiscal year was subject to Section 16 is required to file a Form 5 within 45
days after fiscal year end, unless all transactions otherwise required to be
reported on Form 5 have been reported before the due date of such form. During
fiscal year 1997, Messrs., Heimendinger, Cotnoir and McConnell did not timely
report the respective stock options granted to them under the Company's 1994
Nonemployee and Directors Stock Option Plan in the last fiscal year. It is the
Company's understanding that these Section 16(a) reporting delinquencies have
since been corrected.
ITEM 11. EXECUTIVE COMPENSATION
The information under this heading relates to the chief
executive officer and vice president for fiscal year 1997. The information is
presented in compliance with the rules and regulations of the Securities and
Exchange Commission applicable to those companies, such as General Kinetics
Incorporated, that meet the definition of a "small business issuer."
Executive officers are appointed each year by the Board of
Directors at its annual meeting following the annual meeting of shareholders and
serve for one year or until their successors are chosen and qualify in their
stead. There are no family relationships among the executive officers, or any
arrangement or understanding between any officer and any person pursuant to
which the officer was elected.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------------- ----------------------------------
NAME AND PRINCIPAL OTHER ANNUAL ALL OTHER
POSITION (1) YEAR SALARY BONUS COMPENSATION NUMBER OF OPTIONS COMPENSATION
- ------------------- ---- ------ ----- ------------ ----------------- ------------
<S><C>
Larry M. Heimendinger(1) 1997 $ 0 $ 0 $ 0 12,500 $ 0
Chairman of the Board 1996 0 0 0 12,500 0
1995 0 0 0 187,500 0
Richard E. Munczenski(2) 1997 $ 85,000 $ 15,906 $4,200 0 $ 0
Vice President 1996 77,597 5,200 9,359 28,277 0
1995 73,772 0 23,588 10,000 0
</TABLE>
(1) Larry Heimendinger serves as the Company's Chairman of the Board, for
which he has received no salary compensation since being elected to
that position in March 1994. Since the resignation of the Company's
former President, in March 1994, the Company has no current President.
In accordance with the Company's Bylaws, until a new President is
elected and qualified, the Company's Chairman performs the duties of
that office.
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(2) The "Other Annual Compensation" for Richard Munczenski includes a car
allowance of $4,200 for each year listed. Additional amounts in other
annual compensation in fiscal 1996 and 1995 reflect sales commissions
earned by Mr. Munczenski.
INDIVIDUAL OPTION GRANTS TO EXECUTIVE OFFICERS
DURING FISCAL YEAR 1997
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL OF REALIZABLE VALUE
TOTAL AT ASSUMED ANNUAL RATE OF
NUMBER OPTIONS STOCK PRICE APPRECIATION
OF GRANTED TO FOR OPTIONS TERM
NAME OF EXECUTIVE OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------------
OFFICER GRANTED FY 1997 PRICE DATE 5% 10%
- ----------------- ------- ------------ -------- ---------- ---- -----
<S><C>
Larry M. Heimendinger 12,500(1) 38%(2) .0625 6/01/06 $491 $1,245
Richard E. Munczenski 0 - - - - -
</TABLE>
(1) 50% of such options have vested and are currently exercisable. An
additional 25% will vest on November 30, 1997, and the remaining 25%
will vest on May 31, 1998.
(2) Mr. Heimendinger is not an employee of the Company. However, for
purposes of the calculation of the percentages, his options have been
included in the aggregate total employee options granted.
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FY-1997 OPTIONS EXERCISED AND FY-1997 YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF OPTIONS IN-THE-MONEY OPTIONS
NUMBER OF AT END-FY 1997 AT END-FY 1997
NAME OF EXECUTIVE SHARES ACQUIRED ------------------------------- ------------------------------
OFFICER ON EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- --------------- ----------- ------------- ----------- -------------
<S><C>
Larry M. Heimendinger 0 81,250 131,250 0 0
Richard E. Munczenski 0 45,277 0 0 0
</TABLE>
COMPENSATION OF DIRECTORS
Each nonemployee director other than Mr. Heimendinger has
received a monthly retainer of $1,500 since November 1994.
ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
As of September 22, 1997, approximately 47.2% percent of the
Company's outstanding Common Stock was believed to be beneficially owned by Rabo
Investment Management Ltd. ("Rabo"), formerly Gutzwiller & Partner AG. The
following table sets forth the beneficial ownership of Common Stock as of
September 22, 1997 of Rabo, the only person or entity believed by the Company to
be the beneficial owner of more than 5 percent of such class of securities.
<TABLE>
<CAPTION>
Shares of Common Stock Percent of Outstanding
Name and Address of Beneficial Owner Beneficially Owned* Common Stock
- ------------------------------------ ---------------------- ----------------------
<S><C>
Rabo Investment Management Ltd. 3,142,700 47.2%
Brandschenkestrasse 41
8035 Zurich/Switzerland
</TABLE>
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(bullet) Based on information provided by Rabo. As of September 22, 1997, Rabo
has reported that it has the power to vote, and discretionary power to
dispose of, 3,142,700 shares of Common Stock issued and outstanding as
of the record date. It is the Company's understanding that Rabo has
discretionary authority to dispose of or convert Convertible Debentures
of the Company which are convertible into 17,320,000 shares of Common
Stock, and would have the power to vote or dispose of the 17,320,000
shares of Common Stock issuable upon conversion thereof. After such a
conversion, Rabo would hold 20,462,700 shares which would represent
85.3% of the then outstanding Common Stock.
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The following table sets forth the beneficial ownership of
Common Stock as of September 15, 1997 of each of the current directors and each
of the executive officers named in the Summary Compensation Table above.
<TABLE>
<CAPTION>
Shares of Common Stock Percentage of Outstanding
Name Beneficially Owned (1) Common Stock
---- ---------------------- -------------------------
<S><C>
Marc E. Cotnoir 65,000 *
Richard J. McConnell 65,000 *
Larry M. Heimendinger 81,250 1.2
All Directors and named Executive
Officers as a group (five persons) 284,135 4.1%
</TABLE>
(1) Beneficial ownership also includes shares of Common Stock which may be
acquired within 60 days of September 22, 1997, through the exercise of
warrants, options, or otherwise, as follows: Mr. Cotnoir, 65,000
shares; Mr. Heimendinger, 81,250 shares; Mr. McConnell, 65,000 shares;
and all directors and officers as a group, 284,135 shares.
Additionally, each of Messrs. Cotnoir and McConnell were granted
options to purchase 100,000 shares, and Mr. Heimendinger was granted an
option to purchase 125,000 shares, each of which options will only vest
if the stock price reaches certain stipulated multiples of a base price
of $1.0026 (for ten consecutive trading days).
* Indicates less than 1 percent.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
During fiscal 1997, Square Systems, Corp., whose president,
Richard J. McConnell, is a director of the Company, provided consulting services
to the Company in connection with its work with respect to certain research and
development activities. During fiscal 1997, Square Systems charged $59,200 to
the Company for work attributable to a joint venture between the Company and
Link2It LLC ("Link2It"), a company formed by Larry M. Heimendinger and Mr.
McConnell.
In consideration of, among other things, the amounts advanced
by the Company in connection with Link2It through January 21, 1997, in the total
amount of approximately $205,500, the Company received a common membership
interest in Link2It representing 10% of the total membership interests, and also
received a convertible preferred membership interest in Link2It with a face
amount of $112,500, convertible into 9% of the total membership interests
(subject to adjustment under certain circumstances as described below). In
addition, the Company provided Link2It with $150,000 reflected in convertible
promissory notes due one year from the date of issuance and bearing interest at
9 1/4% per annum. An additional $100,000 (of which $25,000 has been released to
date) was provided to become available upon the satisfaction
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of certain conditions in such amounts and at such times as may be
mutually agreed in good faith. In each case, Link2It's obligation with
respect to advances from the Company is evidenced in a convertible
promissory note convertible into additional common membership interests
in Link2It at the rate of 1% of the aggregate interests for each $12,500
principal amount of the note so converted (subject to adjustment under
certain circumstances described below). In the event of further
investment in Link2It by independent third-party investors the
conversion price at which both the note and the preferred membership
interest described above are convertible into common membership
interests in Link2It shall be subject to adjustment to such lesser
percentage as the principal or face amount so converted could have then
purchased at a purchase price proportionate to the lowest price actually
paid for membership interests by such an independent third-party
investor less a discount of 15%. Prior to such an adjustment, the
Company's aggregate common membership interest in Link2It, assuming
advances in the total amount available, and conversion in full of both
the promissory notes evidencing such advances and its preferred
membership interest, would represent 39% of the total.
Link2It is engaged in the development of certain proprietary
products and services in the area of telecommunications and facsimile
transmission. Link2It has announced that it plans to introduce in the second
half of 1997 a line of products that will enable organizations to integrate
their standard fax machines into corporate network environments, Intranets, and
the Internet.
The terms of the Company's investment in Link2It were
negotiated on an arm's-length basis between Mr. Heimendinger and Marc E. Cotnoir
as an independent director and approved by Mr. Cotnoir and by the Board as a
whole. Such investment was also reviewed with and approved in principle by the
Company's principal shareholder.
In fiscal 1997, a company of which Mr. Robert K. Gardner, a
former director of the Company, was a principal received payments totaling
approximately $57,800 representing fees and expenses in connection with the
December 1996 disposition of the Company's Secure Communications Division.
The Company sold all of its stock in its Food Technology
Corporation subsidiary as of May 30, 1997 to Shirl Lakeway, Jr., the former Vice
President and general manager of FTC. In the transaction, the Company received
approximately $139,000 in cash and the right to receive royalties for a period
of ten years based on total annual revenues of FTC in excess of $300,000. The
consideration received by GKI for FTC was determined in arms-length negotiations
with the purchaser.
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