Mail Stop 7010
February 10, 2006
Via U.S. mail and facsimile
Larry M. Heimendinger
Chairman of the Board
General Kinetics Incorporated
110 Sunray Drive
Johnstown, PA 15905
RE: General Kinetics Incorporated
Form 10-K for the Fiscal Year Ended May 31, 2005
Form 10-Q for the Fiscal Quarters Ended November 30, 2005 and
August
31, 2005
File No. 1-10914
Dear Mr. Heimendinger:
We have reviewed these filings and have the following
comments. Where indicated, we think you should revise your
document
in response to these comments. If you disagree, we will consider
your explanation as to why our comment is inapplicable or a
revision
is unnecessary. Please be as detailed as necessary in your
explanation. In some of our comments, we may ask you to provide
us
with information so we may better understand your disclosure.
After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the Fiscal Year Ended May 31, 2005
Comments applicable to your overall filing
1. Where a comment below requests additional disclosures or other
revisions, please show us what the revisions will look like in
your
supplemental response. With the exception of the comments below
that
specifically request an amendment, all other revisions may be
included in your future filings. Where applicable, please address
our comments in your interim filings as well.
2. Based on our records, you were assigned a 1934 Act file number
of
1-10914. It is unclear why your Form 10-K for the fiscal year
ended
May 31, 2005 and your Forms 10-Q for the fiscal quarters ended
November 30, 2005 and August 31, 2005 include a different file
number. Please revise or advise.
Notes to Financial Statements
Note 8. Demand Notes Payable and Long-term Debt, page 35
3. You disclose that in October 2004, you purchased approximately
$1.4 million in aggregate principal debentures from certain
debenture
holders equal to three percent of the principal, which resulted in
a
gain on the settlement of approximately $1.3 million. You further
disclose that in March 2003, Manassas Partners, LLC, of which
Larry
Heimendinger is the managing member, acquired approximately $5.8
million in aggregate principal in convertible debentures at a
significant discount from third parties. If applicable, please
disclose the amount of convertible debentures you purchased from
Manassas Partners, LLC or other related parties and the related
gain
recognized in your statements of operations.
Item 9A - Controls and Procedures, page 42
4. Your disclosure states that you concluded your disclosure
controls
and procedures were not effective as of the end of your fourth
quarter. You further state material weaknesses existed related to
your internal control structure. Please expand your disclosure to
include a more detailed discussion of the material weaknesses you
identified. Please also include changes you have made or intend
to
make to remediate your disclosure controls and procedures and
internal controls over financial reporting.
Form 10-K/A for the Fiscal Year Ended May 31, 2005, filed on
September 28, 2005
5. Please amend your Form 10-K/A filed on September 28, 2005 to
include under Exhibit 32 current Section 1350 certifications for
each
of your principal executive and principal financial officers.
Refer
to Item 601 of Regulation S-K. In doing so, please ensure that
you
refile the filing in its entirety; signatures and Exhibit 31
certifications should also be updated.
Form 10-Q for the Fiscal Quarter Ended November 30, 2005
Financial Statements
Statements of Operations, page 5
6. Please revise your statements of operations to present diluted
EPS
data. In doing so, please include a note to the financial
statements
which includes a reconciliation of the numerators and denominators
of
the basic and diluted per-share information. Please also ensure
you
disclose the securities that were excluded from the calculation of
diluted EPS because their effects would have been antidilutive.
Refer to paragraphs 38 and 40 of SFAS 128.
Statements of Cash Flows, page 7
7. Please revise your statements of cash flows to present
separately
your cash flows from financing derived from factoring your
accounts
receivable and those derived from your revolving credit facility.
Please also present the liabilities associated with these
separately
on your balance sheet.
Notes to Financial Statements
8. Please expand your disclosures to include notes to the
financial
statements regarding your stock options, pursuant to APB 25 and
SFAS
123, amended by SFAS 148 and inventory.
* * * *
As appropriate, please amend your filing and respond to
these
comments within 10 business days, or tell us when you will provide
us
with a response. Please furnish a cover letter with your
amendment
that keys your responses to our comments and provides any
additional
information. Detailed letters greatly facilitate our review.
Please
file your letter on EDGAR as a correspondence file. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in their filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
If you have any questions regarding these comments, please
direct them to Meagan Caldwell, Staff Accountant, at (202) 551-
3754
or, in her absence, Scott Watkinson at (202) 551-3741.
Sincerely,
John Hartz
Senior Assistant Chief
Accountant
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Larry M. Heimendinger
General Kinetics Incorporated
February 10, 2006
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE