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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended August 31, 2002 Commission File Number 0-1738
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GENERAL KINETICS INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Virginia 54-0594435
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(State or Other Jurisdiction of (I.R.S. Employer Identification .)
Incorporation or Organization)
10688-D Crestwood Drive, Manassas, VA 20109
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(Address of Principal Executive Offices) (Zip Code)
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Registrant's Telephone Number, including Area Code 703-331-8033
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Indicate by checkmark 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 ___
---
The number of shares of Registrant's Common Stock
outstanding as of October 11, 2002 6,718,925 Shares
1
INDEX
Page No.
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Cautionary Statement Under the Private Securities
Litigation Reform Act of 1995 3
Part I - Financial Information
Item 1 - Financial Statements
Condensed Balance Sheets -
August 31, 2002 and May 31, 2002 5
Condensed Statements of Operations -
Three Months Ended August 31, 2002 and August 31, 2001 6
Condensed Statements of Cash Flows -
Three Months Ended August 31, 2002 and
August 31, 2001 7
Notes to Condensed Financial Statements 8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 15
Item 4 - Controls and Procedures 15
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K 16
2
CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements contained in this Quarterly Report on Form 10-Q, including, without
limitation, as set forth under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations", as well as oral statements
that may be made by the Company or by officers, directors or employees of the
Company acting on the Company's behalf, that are not historical fact may contain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve risks and
uncertainties. They are not historical facts or guarantees of future performance
or events. They are based on current expectations, estimates, beliefs,
assumptions, goals and objectives, and are subject to uncertainties that are
difficult to predict. In particular, certain risks and uncertainties may
include, but are not limited to, the risk that the Company may not be able to
maintain its present financing facility or obtain additional financing, if
necessary; the risk that the Company may not be able to continue the necessary
development of its operations, including maintaining or increasing sales and
production levels, on a profitable basis; the risk the Company may in the future
have to comply with more stringent environmental laws or regulations or more
vigorous enforcement policies of regulatory agencies, and that such compliance
could require substantial expenditures by the Company; the risk that U.S.
defense spending may be substantially reduced; and the risk that the Company's
Common Stock will not continue to be quoted on the NASD OTC Bulletin Board
services. Forward-looking statements included in this report are based on
information known to GKI as of the date of this report and GKI accepts no
obligation (and expressly disclaims any obligations) to update these
forward-looking statements and does not intend to do so. Certain of these risks
and uncertainties are described in the Company's reports and statements filed
from time to time with the Securities and Exchange Commission, including this
report.
PART I FINANCIAL INFORMATION
Item 1 - Financial Statements
The unaudited financial statements of General Kinetics Incorporated ("GKI" or
the "Company") set forth below have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
note disclosures normally included in the annual financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or
3
omitted pursuant to those rules and regulations. Revenues, expenses, assets and
liabilities vary during the year and generally accepted accounting principles
require the Company to make estimates and assumptions in preparing the interim
financial statements. The Company has made their best effort in establishing
good faith estimates and assumptions. However, actual results may differ. The
Company believes that the disclosures made are adequate to make the information
presented not misleading.
In the opinion of management of the Company, the accompanying financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) that are necessary for a fair presentation of results for the
periods presented. These financial statements should be read in conjunction with
the audited financial statements for the fiscal years ended May 31, 2002 and
2001 set forth in the Company's annual report on Form 10-K, as amended, for the
fiscal year ended May 31, 2002.
4
General Kenetics Incorporated
Balance Sheets
August 31, 2002 and
May 31, 2002
August 31, May 31,
2002 2002
---- ----
(Unaudited) (Audited)
----------- ---------
Assets
------
Current Assets:
Cash and cash equivalents $ 105,300 $ 185,100
Marketable securities 32,800 37,400
Accounts receivable, net of allowance of $71,500 and $70,900 1,161,800 872,100
Inventories 678,100 906,300
Prepaid expenses and other 12,500 56,800
------------ ------------
Total Current Assets 1,990,500 2,057,700
------------ ------------
Property, Plant and Equipment 2,935,000 2,925,100
Less: Accumulated Depreciation (2,163,400) (2,124,700)
------------ ------------
771,600 800,400
Other Assets 62,100 59,400
------------ ------------
Total Assets $ 2,824,200 $ 2,917,500
============ ============
Liablilities and Stockholders' Deficit
--------------------------------------
Current Liabilities:
Advances from Factor $ 129,000 $ -
Current maturities of long-term debt 90,000 90,000
Current maturities of capital lease 18,500 18,500
Accounts payable, trade 526,200 765,900
Accrued expenses and other payables 459,100 577,500
------------ ------------
Total Current Liabilities 1,222,800 1,451,900
------------ ------------
Long-Term Debt - less current maturities (including
$8,871,300 and $8,855,800 of convertible debentures) 9,250,200 9,256,700
Capital lease - less current maturities 77,400 82,000
Other long-term liabilities 248,800 258,400
------------ ------------
Total Long-Term Liabilities 9,576,400 9,597,100
------------ ------------
Total Liabilities 10,799,200 11,049,000
------------ ------------
Stockholders' Deficit:
Common Stock, $0.25 par value, 50,000,000 1,811,500 1,811,500
shares authorized, 7,245,557 shares issued, 6,718,925
shares outstanding
Additional Contributed Capital 7,239,400 7,239,400
Accumulated Deficit (16,575,700) (16,732,200)
------------ ------------
(7,524,800) (7,681,300)
Less: Treasury Stock, at cost (526,632 shares) (450,200) (450,200)
------------ ------------
Total Stockholders' Deficit (7,975,000) (8,131,500)
------------ ------------
Total Liabilities and Stockholders' Deficit $ 2,824,200 $ 2,917,500
============ ============
The accompanying notes are an integral part of the financial statements.
Page 5
General Kenetics Incorporated
Statements of Operations
(Unaudited)
Three Months Ended
August 31, August 31,
2002 2001
---- ----
Net Sales $ 2,271,800 $ 2,068,500
Cost of Sales 1,685,900 1,604,300
------------ ------------
Gross Profit 585,900 464,200
------------ ------------
Selling, General & Administrative 376,200 395,200
Product Research, Development & Improvement 1,700 -
------------ ------------
Total Operating Expenses 377,900 395,200
------------ ------------
Operating Income 208,000 69,000
Interest Expense (51,500) (55,600)
------------ ------------
Net Income 156,500 13,400
============ ============
Basic Earnings per Share:
Basic Earnings per Share $ 0.023 $ 0.002
Weighted Average Number of Common Shares
Outstanding 6,718,925 6,718,925
Diluted Earnings per Share:
Diluted Earnings per share $ 0.007 $ 0.002
Weighted Average Number of Common Shares
and Dilutive Equivalents Outstanding 24,708,925 24,708,925
The accompanying notes are an integral part of the financial statements.
Page 6
General Kinetics Incorporated
Statements of Cash Flows
(Unaudited)
Three Months Ended
August 31, August 31,
2002 2001
---- ----
Cash Flows From Operating Activities:
Net Income $ 156,500 $ 13,400
Adjustments to reconcile net income
to net cash used in operating activities:
Unealized loss on marketable securities 4,600 -
Depreciation and amortization 38,700 35,600
Amortization of bond discount 15,500 15,500
(Increase) Decrease in Assets:
Accounts Receivable (289,700) (269,500)
Inventories 228,200 (324,700)
Prepaid Expenses 44,300 3,800
Other assets (2,700) (13,200)
Increase (Decrease) in Liabilities:
Accounts Payable - Trade (239,700) 213,500
Accrued Expenses (118,400) (10,000)
Other Long Term Liabilities (9,600) (9,600)
--------- ---------
Net cash used in Operating Activites (172,300) (345,200)
--------- ---------
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment (9,900) (2,200)
--------- ---------
Net cash used in Investing Activities (9,900) (2,200)
--------- ---------
Cash Flows from Financing Activities:
Advances from Factor/Borrowings
on Demand Notes Payable 346,300 219,800
Repayments of advances from Factor/
Demand Notes Payable (217,300) (62,400)
Principal payments under capital lease (4,600) -
Repayments on Long Term Debt (22,000) (17,900)
--------- ---------
Net cash provided by Financing Activities 102,400 139,500
--------- ---------
Net decrease in cash and cash equivalents (79,800) (207,900)
Cash and Cash Equivalents: Beginning of Period 185,100 388,300
--------- ---------
Cash and Cash Equivalents: End of Period $ 105,300 $ 180,400
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 98,500 $ 16,900
The accompanying notes are an integral part of the financial statements.
Page 7
GENERAL KINETICS INCORPORATED AND SUBSIDIARIES
Notes to Condensed Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
The unaudited condensed financial statements at August 31, 2002, and for the
three months ended August 31, 2002 and August 31, 2001, respectively, include
the accounts of General Kinetics Incorporated ("GKI").
The financial information included herein is unaudited. In addition, the
financial information does not include all disclosures required under generally
accepted accounting principles in that certain note information included in the
Company's Annual Report has been omitted; however, such information reflects all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of management, necessary to a fair presentation of the results of
the interim periods.
The results of operations for the three-month period ended August 31, 2002, are
not necessarily indicative of the results to be expected for the full year.
Note 2 - Earnings Per Share
Earnings per share is based on the weighted average number of shares of common
stock and dilutive common stock equivalents outstanding. Basic earnings per
share includes no dilution and is computed by dividing net income available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings. The following table presents a
reconciliation between the weighted average shares outstanding for basic and
diluted earnings per share for the three months ended August 31, 2002:
Income Shares Per Share Amount
------ ------ ----------------
Basic earnings per share
Net Income available to common shareholders $156,500 6,718,925 $0.023
Effect of assumed conversion of
convertible debentures, net of tax 23,684 17,990,000 0.001
-------- ---------- ------
Dilutive earnings per share $180,184 24,708,925 $0.007
8
Note 3 - Notes Payable
At August 31, 2002 and May 31, 2002, convertible debentures initially issued to
clients of Gutzwiller & Partner, AG ("Gutzwiller"), now known as Rabo Investment
Management Ltd. (the "Manager"), are outstanding in an aggregate principal
amount of approximately $9.0 million, mature in August 2004, are convertible
into common stock at a conversion price of $0.50 per share, and bear interest at
1% per annum, which is payable annually. Shares issuable upon conversion are
also subject to certain registration rights under the Securities Act of 1933, as
amended.
Note 4 - Related Party Transactions
In August 2001, Link2It Corporation ("Link2It"), a company formed by Larry
Heimendinger and Richard McConnell, both GKI board members, entered into a
factoring agreement with the Company, intended to supplement or replace the
Company's prior agreement with Reservoir Capital Corporation ("Reservoir"). The
new agreement, which was negotiated at arms length and approved by unanimous
vote of the Company's Board or Directors, is on terms substantially similar to
those of the Reservoir facility, but more favorable to the Company in certain
respects. A new factoring agreement with Link2It, on similar terms, was entered
into in April 2002. There was $129,000 in outstanding advances under the
factoring agreement at August 31, 2002. At some point during fiscal 2003 the
factoring of accounts receivable may no longer be available from Link2It. The
Company believes that a facility similar to that previously provided by
Reservoir should be available from commercial factors, however, there can be no
assurance whether, or on what terms, the Company can obtain such a facility in
the future.
Note 5 - Income Taxes
The Company's estimated effective tax rate for fiscal 2003 is 0%. This estimated
effective tax rate is lower than the statutory rate due to the existence of net
operating loss carryforwards.
9
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended August 31, 2002, Compared to Three Months Ended August 31,
2001
Net sales for the quarter ended August 31, 2002 were approximately $2.3 million
compared to net sales of approximately $2.1 million for the quarter ended August
31, 2001. The increase in sales was due primarily to what are believed to be
normal fluctuations in demand for the Company's products and services. The
increase in sales is not necessarily indicative of the results that can be
expected for the remainder of the fiscal year.
The gross margin percentage increased from 22.4% for the quarter ended August
31, 2001 to 25.8% for the quarter ended August 31, 2002. The primary reasons for
the increase in the gross profit percentage were the mix of jobs for the current
fiscal quarter as compared to the same quarter of the prior fiscal year, along
with improved scheduling and planning procedures implemented during the prior
fiscal year. The Company continues to address production issues through plant
supervision and regular updating of scheduling and planning procedures. The
Company is trying to stabilize the level of shipments at a profitable level
through these changes and a focused sales effort.
Selling, General & Administrative costs were approximately $376,200 for the
quarter ended August 31, 2002 as compared to approximately $395,200 for the
quarter ended August 31, 2001. The small decrease was principally due to cost
controls implemented by management during the prior fiscal year.
For the quarter ended August 31, 2002, the Company had operating income of
$208,000 compared to operating income of $69,000 for the comparable quarter of
the prior year. The improved operating results were due principally to the
increase in net sales and gross margins discussed above.
Interest expense decreased from $55,600 in the first quarter of fiscal 2002 to
$51,500 in the first quarter of fiscal 2003.
The Company's estimated effective tax rate for fiscal 2003 is 0%. This estimated
effective tax rate is lower than the statutory rate due to the existence of net
operating loss carryforwards.
10
Liquidity and Capital Resources
The Company relies upon internally generated funds and accounts receivable
financing to finance its operations. Although the Company had net income of
$156,500 during the first quarter of fiscal 2003, during fiscal years 2002 and
2001, the Company showed a net loss of approximately $835,400 and $129,800,
respectively. In order to generate the working capital required for operations,
the Company must continue to generate orders, increase its gross margins, and
effectively manage operating expenses during the remainder of fiscal 2003.
The Company must continue to market electronic enclosure products to government
and commercial markets, enter into contracts which the Company can complete with
favorable profit margins, ship the orders in a timely manner, and control its
operating costs in order to recover from its liquidity problems and seek to
operate profitably for the remainder of fiscal 2003.
The backlog at August 31, 2002 was $2.1 million, as compared to $4.4 million at
August 31, 2001. The decrease in backlog is primarily due to a decrease in
orders under a large blanket contract with a prime contractor to the US Navy.
The Company must increase its level of sales under other contracts in order to
make up for the reduction in orders under this contract, and to maintain the
first quarter level of sales for the remainder of the fiscal year. However,
there is no assurance the Company will be successful in its efforts to obtain an
adequate level of new contracts to maintain profitable operations.
As of August 31, 2002, the Company had cash and marketable securities totaling
$138,100. The Company has faced production issues that have contributed to
losses from operations in the last three fiscal years. The Company has taken and
is continuing to take steps to address these production issues through changes
and additions to plant supervision, regularly updating scheduling and planning
procedures, and adding new production machinery. The Company is trying to
stabilize the level of shipments at a profitable level through these changes.
Management believes that cash on hand, borrowings from the factoring of accounts
receivable, and careful management of operating costs and cash disbursements can
enable the Company to meet its cash requirements through the next twelve months.
The Company may also seek additional funding sources to provide a cushion to
handle variances in cash requirements if sales, gross profits and shipment
levels fluctuate throughout the fiscal year, or if the Company purchases capital
equipment to increase production capacity due to any possible increased sales
opportunities. However, there is no assurance the Company will be successful in
pursuing its plans or in obtaining additional financing to meet those cash
requirements. The Company must continue to maintain or increase its level of
sales, consistently make timely shipments and produce its products at adequate
11
profit margins, or the Company will continue to face liquidity problems and may
be left without sufficient cash to meet its ongoing requirements.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company sustained operating losses
in fiscal years 2002, 2001 and 2000, and in addition, the Company has
significant short-term cash commitments, the funding of which is limited to cash
flow from operations and the factoring of certain accounts receivable. These
factors raise significant doubt about the Company's ability to continue as a
going concern. The financial statements do not contain any adjustment that might
result from the outcome of these uncertainties.
In recent years, the Company had been party to a factoring agreement with
Reservoir Capital Corporation ("Reservoir") that provides for advances (or
loans) of up to 80% of specified accounts receivable. In August 2001, Link2It
Corporation, a company formed by Larry Heimendinger and Richard McConnell, both
directors of the Company, entered into a new factoring agreement with the
Company on terms substantially similar to those of the Reservoir facility, but
more favorable to the Company in certain respects, including provision for
advances at a rate of up to 85% of specified accounts receivable. A new
factoring agreement with Link2It Corporation, on similar terms, was entered into
in April 2002. The Company expects to draw on this facility, or a similar
facility, throughout fiscal 2003 as necessary to help alleviate liquidity
problems, although, as discussed above, the Company will also need to control
expenses, maintain the sales backlog at appropriate levels, and keep shipment
levels in line with booked orders in order to meet these requirements. At August
31, 2002, there was $129,000 in outstanding advances due to Link2It Corporation.
At some point during fiscal 2003 the factoring of accounts receivable may no
longer be available from Link2It Corporation. The Company believes that a
facility similar to that previously provided by Reservoir should be available
from commercial factors; however, there can be no assurance whether, or on what
terms, the Company can obtain such a facility in the future.
The Company had significant amounts payable to trade creditors at August 31,
2002. Current maturities of long-term debt and capital lease obligations amount
to $108,500 in fiscal 2003.
The Company has outstanding debentures originally issued to clients of
Gutzwiller & Partner, now known as Rabo Investment Management Ltd. (the
"Manager"), totaling approximately $9.0 million. The debentures mature in August
2004, are convertible into common stock at a conversion price of $0.50 per
share, and bear interest at 1% per annum payable annually. In a filing with the
SEC dated November 9, 2001, the Manager indicated that it may be deemed to be
the beneficial owner of debentures having an aggregate principal amount of
$7,885,000, including debentures in the principal amount of $585,000 which were
purchased by the Manager as to which the
12
Manager is the economic beneficial owner of and holds sole voting and
dispositive power, and debentures in a principal amount of $7,300,000 held in
client accounts managed by the Manager on behalf of various clients who hold
beneficial economic ownership thereof for which the Manager holds voting and
dispositive power.
Analysis of Cash Flows
Operating activities used $172,300 in cash in the first quarter of fiscal 2003.
This reflects net income of $156,500 plus $54,200 in non-cash expenses, offset
by $383,000 in cash to fund changes in working capital items. The cash used to
fund changes in working capital items includes a decrease in inventories of
$228,200 and a decrease in accounts payable of $239,700, partially offset by an
increase in accounts receivable of $289,700.
Investing activities used $9,900 in the first quarter of fiscal 2003. These
activities consisted of acquired property, plant and equipment.
Financing activities provided $102,400 in the first quarter of fiscal 2003.
These activities consisted primarily of factoring accounts receivable netting to
$129,000, offset by the repayment of certain long-term debt.
Management believes that inflation did not have a material effect on the
operations of the Company during the first quarter of fiscal 2003.
Contractual Obligations and Commercial Commitments
The Company's commitments through May 31, 2007 are comprised of the following at
August 31, 2002 (in thousands):
Through May 31,
--------------------------------------------
2003 2004 2005 2006 2007 Total
---- ---- ---- ---- ----- -----
Convertible debentures $ 0 $ 0 $8,995 $ 0 $ 0 $ 8,995
Other notes payable 0 0 40 0 0 40
Real estate mortgage 68 96 101 108 56 429
Capital leases 19 26 26 26 15 112
Operating leases 18 2 2 2 1 125
Total $105 $124 $9,164 $136 72 $9,601
=====================================================
13
Inflation
The Company believes the effects of inflation currently do not have a material
impact on its operations, financial position, or cash flows.
Critical Accounting Policies
The Company's significant accounting policies are more fully described in the
notes to the financial statements. The preparation of financial statements in
conformity with accounting principles generally accepted within the United
States requires management to make estimates and assumptions in certain
circumstances that affect amounts reported in the accompanying financial
statements and related notes. In preparing these financial statements,
management has made its best estimates and judgments of certain amounts included
in the financial statements, giving due consideration to materiality. The
Company does not believe there is a great likelihood that materially different
amounts would be reported related to the accounting policies described below;
however, application of these accounting policies involves the exercise of
judgment and the use of assumptions as to future uncertainties and, as a result,
actual results could differ from these estimates.
Work in process inventory represents actual production costs, including
manufacturing overhead incurred to date, reduced by amounts identified with
revenue recognized on units delivered. The costs attributable to units delivered
are based on the estimated average costs of all units expected to be produced
under multi-unit orders. Estimated costs to complete are based on historical
experience and knowledge of building similar products. On an on-going basis, the
Company evaluates the estimates of total costs to complete a multi-unit order.
Work in process is reduced by charging any amounts in excess of estimated net
realizable value to cost of sales as soon as they become known. Interim
inventories are determined by application of estimated gross profit margins to
sales.
The Company provides an allowance for uncollectible receivables based on
experience with customers and individual review of any past due accounts.
Although it is reasonably possible that that management's estimate could change
in the near future, management is not aware of any events that would result in a
change to its estimate which would be material to the Company's financial
position or its results of operations. At August 31, 2002, the Company had an
allowance for doubtful accounts of $71,500.
Accounting Pronouncements
In July 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with
Exit or Disposal Activities." SFAS No. 146 provides
14
guidance on the timing of the recognition of costs associated with exit or
disposal activities. The new guidance requires costs associated with exit or
disposal activities be recognized when incurred. Previous guidance required
recognition of costs at the date of commitment to an exit or disposal plan. The
provisions of the statement are to be adopted prospectively after December 31,
2002. Although SFAS No. 146 may impact the accounting for costs related to exit
or disposal activities the Company may enter into in the future, particularly
the timing of the recognition of these costs, the adoption of the statement will
not have an impact on the Company's present financial condition or results of
operations.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Market Risk - The Company is exposed to market risk from adverse changes in
interest rates.
Interest Rate Risks - The Company is exposed to risk from changes in interest
rates as a result of its borrowing activities. At August 31, 2002, the Company
had total debt of $9.44 million, of which $0.43 million represents borrowing for
its real estate mortgage, which is at a variable interest rate. Interest on that
portion of the Company's debt is directly affected by changes in the prime
interest rate, and therefore fluctuations may have an impact on the Company's
financial results.
Item 4 - Controls and Procedures
Within the 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's acting Chief Executive Officer and the
Company's Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures are effective in timely alerting them to material
information relating to the Company required to be included in the Company's
periodic SEC filings.
15
PART II OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Certification of the Chief Executive Officer of the Company pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
99.2 Certification of the Chief Financial Officer of the Company pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
(b) Reports on Form 8-K
None
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL KINETICS INCORPORATED
Date: October 15, 2002 /s/ Larry M. Heimendinger
------------------------- -------------------------
Chairman of the Board
(Principal Executive Officer)
Date: October 15, 2002 /s/ Sandy B. Sewitch
-------------------------- --------------------
Chief Financial Officer
(Principal Accounting Officer and
Principal Financial Officer)
17
CERTIFICATIONS
I, Larry M. Heimendinger, certify that:
1. I have reviewed this quarterly report on Form 10-Q of General Kinetics
ncorporated;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant is made known to us, particularly during
the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: October 15, 2002
/s/ Larry M. Heimendinger
Chief Executive Officer
18
I, Sandy B. Sewitch, certify that:
1. I have reviewed this quarterly report on Form 10-Q of General Kinetics
Incorporated;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant is made known to us, particularly during
the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: October 15, 2002
/s/ Sandy B. Sewitch
Chief Financial Officer
19
INDEX TO EXHIBITS
Exhibit Number Description
99.1 Certification of the Chief Executive Officer of the Company
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of the Chief Financial Officer of the Company
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.