SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K Amended Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1995 Commission file number: 0-2677 GAP INSTRUMENT CORP. ------------------------------------------------------ (Exact Name of Registrant as Specified in its Charter) _____New York_____ ____________11-1781357_________ (State of Incorporation) (IRS Employer Identification Number) 100 Horse Block Rd, Yaphank, New York __11980__ (Address of principal executive office) (Zip Code) _______(516) 924-1700______ (Registrant's telephone number) Securities registered pursuant to Section 12 (b) of the Act: None Securities registered pursuant to Section 12 (g) of the Act: Common Stock, par value $.00001 per share - Traded: Over the Counter Market Aggregate market value of voting stock held by non-affiliates: No Value Common stock outstanding: 98,678,423 Exhibit index: 20 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, Yes XX No --------- ---------- (2) has been subject to such filing requirements for the past 90 days, Yes XX No --------- ---------- (3) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No XX ---------- ---------- <Page 1> =============================================================================== CONTENTS Page(s) Part I Item 1. Business ................................................. 3 2. Properties ................................................ 4 3. Legal Proceedings ......................................... 4 4. Submission of Matters to a Vote of Security Holders ....... 4 Part II Item 5. Market for the Registrant's Common Stock and Related Security Holders' Matters ................... 5 6. Five-Year Selected Financial Data ......................... 6 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ..................... 7 8. Financial Statements and Supplementary Data ............... 8 9. Disagreements on Accounting and Financial Disclosure ...... 16 Part III Item 10. Directors and Executive Officers of the Registrant ........ 16 11. Management Remuneration and Transactions .................. 16 12. Security Ownership of Certain Beneficial Owners and Management ........................ 17 13. Certain Relationships and Related Transactions ............ 17 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ..................................... 18 SIGNATURES ................................................. 20 <Page 2> =============================================================================== Part 1 Item 1 - Business (a) GAP Instrument Corp., organized in 1953, is a systems engineering oriented manufacturing organization, producing electromechanical/solid state systems to satisfy specific military and commercial requirements for application on board ships, in aircraft, and at ground-based installations. These various systems are primarily servo mechanisms (gear trains run by motors, synchros and resolvers) and state-of-the-art signal data-conversion equipment employed in load actuation, information readout display, and operation control. While utilizing the same disciplines to continue its efforts in the areas of test equipment and simulation equipment, GAP is attempting to find appropriate areas of diversification to convert form a military market to a commercial market. GAP Instrument Corp. is fully aware that its military business over the next decade will continue to decline. GAP Instrument Corp has found appropriate areas of diversification to convert from a military manufacturing market. GAP Instrument Corp has entered the tele communications market as a Value Added Network connecting Federal contractors to the Department of Defense and Federal Agencies. The United States Government has been in the process of changing from a paper based system to an electronic system since 1985. This culminated in an executive memo (Federal Register Vol. 58 #207) and by legislation, the Federal Acquisition Streamlining Act of 1994 (Public Law 103-355). These two documents set the ground rules for the Federal conversion to Electronic Data Interchange (EDI). The only means of communicating with the Government is via a licensed and certified Value Added Network. GAP Instrument Corp is one of the 26 licensed and certified Value Added Networks. Procurement is the first area that the Government is converting to EDI. (b) GAP Instrument Corp.'s operations are no longer classified as a single industry segment. (1) (I) The principal market for GAP Instrument Corp.'s equipment has been the Department of Defense for military requirements. GAP Instrument Corp. deals with the Department of Defense directly in open competitive bidding and as a subcontractor to other major defense contractors on larger programs. The defense procurement business is very competitive, however, due to the decline of this industry in general, GAP has become the sole-source provider of a number of parts. (II) Not applicable (III) The materials utilized in the equipment produced by GAP Instrument Corp. are obtained from standard sources within the United States. These standard sources include foundries, sheet metal shops, machine shops, component manufacturers, etc. (IV) None of the equipment or processes utilized by GAP Instrument Corp. are covered by patents, licenses, franchises, etc. (V) Not applicable. (VI) Manufacturing operations are scheduled to fulfill specific product orders under firm contracts primarily from the Department of Defense. GAP Instrument Corp. does not carry significant amounts of stock inventory. (VII) GAP Instrument Corp.'s present overall business is dependent on a single customer, the Department of Defense, which presently purchases, either directly or indirectly, approximately 80 percent in value of its products. (VIII) The dollar backlog of orders of GAP Instrument Corp. at December 31, 1995 was $116,000, compared to $48,000 in 1994. All of the 1995 year-end backlog is expected to be shipped in fiscal year 1996. (IX) A significant amount of the business is subject to termination of contracts at the election of the Department of Defense. However, such termination procedures usually provide for the recovery of incurred costs and related profit. (X) Item (c)(1)(I). (XII) Compliance with environmental regulations has not had a material effect on capital expenditures. (2) (I) Research and development expenses of $50,628 were recorded as prepaid expenses during 1994 for diversification into the telecommunications market. These were expensed during 1995. (II) Department of Defense. (III) None. (IV) The total number of personnel employed by GAP Instrument Corp. as of the end of fiscal year 1995 was 4. (d) GAP Instrument Corp. does not engage in material operations in foreign countries, nor is its business dependent on a domestic geographic location. Item 2- Properties (a) On October 20, 1993 GAP Instrument Corp. moved into space at 100 Horse Block Rd., Yaphank. The rent is currently $1,000 per month on a month to month basis. Rent expense for 1995 was $28,600 for the Yaphank facility. Item 3 - Legal Proceedings (a) On September 24, 1993, GAP Instrument Corp. the Debtor filed partitions for relief under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the. Eastern District of New York. Under Chapter 11, certain claims against the Debtor in existence prior to the filing of the petitions for relief under the federal bankruptcy laws are stayed while the Debtor continues business operations as "Debtor-in-Possession". These claims are reflected in the December 31, 1994 balance sheet as "Liabilities subject to Compromise." Additional claims (liabilities subject to compromise) may arise subsequent to the filing date resulting from rejection of executory contracts, including leases, and from the determination by the court (or agreed to by parties in interest) of allowed claims for contingencies and other disputed amounts. On October 2, 1995, the Company's Plan of Reorganization was approved by the United States Bankruptcy Court. Payments under the approved plan are reflected on the Balance Sheet as of December 31, 1995 as "Liabilities under a Plan of Reorganization." Under the terms of the plan of reorganization payments to the Internal Revenue Service and New York State Department of Labor provide for full payment of amounts due over five years. Claims of two prior officers are payable at a reduced amount over the same five years. All unsecured creditors will be paid fifty percent of their claim in five equal installments upon the first, second, third, fourth and fifth anniversaries of approval of the Plan. (b) Amendment to the by-laws approved by New York State changed authorized shares from 4,000,000 to 104,000,000 shares, per approval by stockholders at a special meeting of stockholders December 28, 1993. Item 4 - Submission of Matters to a Vote of Security Holders On 28 December 1993 a Special Meeting of Stockholders was held. resolutions were passed to authorize and empower the Board of directors to amend, alter, change, add to, repeal, or rescind any and all of the Bylaws, and that the authorized common stock of GAP Instrument Corporation be increased from its present amount thereof, to One Hundred Four Million (104,000,000) shares of par value of One Thousandth of a cent per share ($0.00001). (THIS SPACE INTENTIONALLY LEFT BLANK) PART II Item 5- Market for the Registrant's Common Stock and Related Security Holders' Matters At December 31, 1995, GAP Instrument Corp. had issued and outstanding 98,678,423 shares of common stock held by 1,087 stockholders of record. 2,000 shares are claimed by two former officers which are not recognized by GAP Instrument Corp.. Market prices listed in the following tabulation were obtained from the National Quotation Bureau, Inc., and represent prices between dealers and do not include retail markup, markdown, or commission, and may not necessarily represent actual transactions. 				 1995 1994 			 Bid Asked Bid Asked First Quarter 		 N o Q u o t e N o Q u o t e Second Quarter 		 N o Q u o t e N o Q u o t e Third Quarter 			 N o Q u o t e N o Q u o t e Fourth Quarter			 N o Q u o t e N o Q u o t e (THIS SPACE INTENTIONALLY LEFT BLANK) Item 6- FIVE YEAR SELECTED FINANCIAL DATA FOR THE PERIODS ENDED DECEMBER 31 	 		 1995 1994 1993 1992 1991 Net Sales $258,548 $332,312 $203,354 $881,991 $1,328,031 Income (loss) from continuing operations (98,016) (154,677) (415,457) (154,083) 82,292 Provision for income taxes - - - - (26,521) Net income (loss) before extraordinary credit and reorganization expense (98,016) (154,677) (415,457) (154,083) 55,771 Extraordinary credit - gain from restructuring debt, including tax benefits net operating loss carry-forwards - - - - 113,598 Extraordinary gain -gain from adoption of plan of Reorganization under Chapter 11 293,870 Reorganization items: Professional fees 4,000 7,525 23,000 - - Net Income (Loss) $191,855 ($162,202) ($438,457) ($154,083) $169,369 Earnings Per Share Net income (loss) share before extraordinary credit (.00) (.00) (.11) ($.08) $.03 Extraordinary credit .00 - - $.05 Earnings (loss) per share $.00 ($.00) ($.11) ($.08) $.08 Total Assets $81,332 $184,009 $118,378 $208,750 $390,731 Note Payable $-(1) $ - (1) $ 88,289 $ 99,414 - <FN> (1) Note Payable expunged during the Chapter 11 Proceeding Item 7- Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources GAP Instrument Corp. has primarily relied on its results from operations to provide working capital. Due to lack of working capital on September 23, 1993, GAP Instrument Corp. the Debtor filed partitions for relief under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the Eastern District of New York. In order to continue operations, and pay post petition expenses, GAP Instrument Corp. issued, on July 29, 1994, 93,000,000 shares of common stock, and on October 31, 1995, 1,744,070 shares of common stock, to suppliers and key personnel. On October 2, 1995 GAP Instrument Corp. emerged from Chapter 11 and is operating under a plan approved by the United States Bankruptcy Court for the Eastern District of New York and the creditors. GAP Instrument Corp. has the ability to generate sufficient cash flows to support its operations for the twelve month period. RESULTS OF OPERATIONS Operating income (loss) for the years 1995 and 1994, were ($98,016) and ($154,677). Sales volume for the respective years were $258,197 and $332,312. Operating income (loss) for 1993 was ($415,457) and sales volume was $203,354. Sales volume for the years 1993, 1994 and 1995 were substantially less than prior years as the Department of Defense is now only buying parts to replace and repair as the part is needed. General and administrative costs are reviewed continually to keep expenses as low as possible. GAP Instrument Corp. is fully aware that its military business over the next decade will continue to decline. Thus, GAP Instrument Corp. entered the tele communications market as a Value Added Network for the Federal Government and as an Internet Service Provider (ISP) for Federal contractors. Federal tax loss carry forwards at December 31, 1995 are ($704,710) which will provide for future tax benefits relief in future years. The dollar backlog of sales at December 31, 1995, 1994 and 1993 were $116,000, $48,500, and $123,885. All of the 1995 backlog will be shipped in 1996. (THIS SPACE INTENTIONALLY LEFT BLANK) Item 8 - Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS Page Balance Sheets as of December 31, 1995 and 1994. . . . . . 9 Statements of Income (Loss) and Accumulated Deficit for the Years Ended December 31, 1995, 1994 and 1993. . . . . . . . . . . . . . . . . . . . 10 Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993 . . . . . . . . . 11 Notes to Financial Statements . . . . . . . . . . . . . . . 12 Independent Auditors Report, December 31, 1995 .. . . . . . 15 Independent Auditors Report, December 31, 1994 and 1993 . . 16 GAP INSTRUMENT CORP. BALANCE SHEETS December 31, 1995 and 1994 ASSETS 		 	 December 31, Current Assets: 		 1995 		 1994 Cash 		 $ 0		$ 14,078 Accounts receivable ( Note 3) 	 	 61,777	 13,491 Inventories, at lower of cost or market (Note 4) - 		 40,118 ---------- ----------- Total current assets 		 61,777 67,687 Fixed assets, at cost less accumulated depreciation(Note 5) 			 12,998 3,761 Other assets 			 8,110 112,561 ----------- ----------- Total assets 		 $ 82,885 	$ 184,009 ========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Liabilities subject to compromise(Note 2) 		 $ - 	 $ 554,705 Current Liabilities: Accounts payable 		 29,860 16,216 Cash overdraft 1,553 - Liabilities resulting from Plan of Reorganization (Note 3 ) 47,194 - Accrued liabilities 			 - 22,136 Accrued payroll and taxes 		 347 670 Due to officers(Note 3) 		 56,000 24,000 ----------- ----------- Total current liabilities 		 134,954 617,727 ----------- ----------- Long-term debt Liabilities resulting from Plan of Reorganization (Note 3) 189,795 - ----------- ----------- Total long-term liabilities 		 189,795 - ----------- ----------- Total liabilities 			 324,749 617,727 ----------- ----------- Stockholders' Deficit: Common stock $ .00001 par value 1995 104,000,000 shares authorized; 98,678,423 shares outstanding 1995 987 96,934,353 shares outstanding 1994 969 Capital in excess of par value 		 3,341,815 3,341,833 Accumulated deficit 			 (3,584,666)	 (3,776,520) ------------ ----------- Total stockholders' deficit 		 (241,864) (433,718) ------------ ----------- 			 $ 82,885 $ 184,009 ============ =========== See Independent Auditor's Report and Notes to Financial Statements. GAP INSTRUMENT CORP. STATEMENTS OF INCOME (LOSS) AND ACCUMULATED DEFICIT For the years ended December 31, 1995, 1994 and 1993 Years ended December 31, 1995 1994 1993 ---------------------------------------------- Net Sales 258,548 332,312 $ 205,354 Cost of sales 199,851 206,750 287,563 Selling, general and administrative 156,713 280,239 323,156 Interest, net - - 10,092 ----------- ---------- ------------ Income (loss) from continuing operations (98,016) (154,677) (415,457) Provision for income taxes - - - ----------- ----------- ------------- Net income (loss) before extraordinary gain and reorganization items (98,016) (154,677) (415,457) Extraordinary Gain from adoption of plan of reorganization 293,870 - - Reorganization items: Professional fees 4,000 7,525 23,000 ---------- ----------- ------------ Net Income (Loss) $ 191,855 ($ 162,202) ($ 438,457) Accumulated deficit: Beginning of year (3,776,520) (3,614,318) (3,175,862) ------------ ----------- ------------ End of year ($3,584,666) ($3,776,520) ($3,614,318) ============ ============ ============ Earnings Per Share Net income (loss) per share ($.00) ($.00) ($.11) ------------ ------------ ------------ Earnings Per Share ($.00) ($.00) ($.11) ============ ============ ============ See Independent Auditor's Report and Notes to Financial Statements. GAP INSTRUMENT CORP. STATEMENTS OF CASH FLOWS Years ended December 31,1995, 1994 and 1993 1995 1994 1993 Cash Flows from Operating Activities: Net income (Loss) ($102,016) ($162,202) ($438,457) Add (deduct) non-cash items: Depreciation and amortization 4,675 1,905 1,903 Gain from adoption of plan of reorganization 293,870 Add (deduct) other changes: Accounts receivable (48,286) 4,518 13,603 Inventories 40,118 4,072 83,248 Prepaid expenses - 2,217 8,161 Accounts payable 13,644 (16,888) 33,104 Cash Overdraft 1,553 Accrued liabilities (22,136) 22,136 32,996 Accrued payroll and taxes (323) (32,326) 166,730 Net Cash Provided (Used) ------------ ------------ ---------- from Operating Activities 181,098 (176,658) (112,517) Cash Flows from Financing Activities: Shareholder loans 32,000 18,000 6,000 Issuance of Stock for Post-Petition Debt 236,910 - Payment of Long-term debt 94,950 Cash Provided (Used) ------------ ------------ ---------- from Financing Activities 32,000 254,910 100,950 Cash Flows from Investing Activities: Purchase of equipment and leasehold improvements (13,849) (1,348) - Increase in Other Assets 104,451 (68,615) - Decrease in Liabilities Subject to Compromise (317,778) Abandonment of leasehold improvements 8,954 ------------ ------------ --------- Cash Provided (Used) from Investing Activities (227,176) (69,963) 8,954 Net Increase (Decrease) in Cash (14,078) 8,289 (2,613) Beginning Cash 14,078 5,789 8,402 ------------ ------------ --------- Ending Cash $ 0 $ 14,078 $ 5,789 ============ ============ ========== Income Taxes 404 - - See Independent Auditor's Report and Notes to Financial Statements NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 AND 1994 NOTE1 -BUSINESS DESCRIPTION GAP Instrument Corp., organized in 1953, is a systems engineering oriented manufacturing organization, producing electromechanical/solidstate systems to satisfy specific military and commercial requirements for application on board ships, in aircraft, and at ground-based installations. These various systems are primarily servo mechanisms and state-of-the-art signal data-conversion equipment employed in load actuation, information readout display, and operation control. While utilizing the same disciplines to continue its efforts in the areas of test equipment and simulation equipment, GAP is attempting to find appropriate areas of diversification to convert form a military market to a commercial market. NOTE 2 -PETITION FOR RELIEF UNDER CHAPTER 11 On September 24, 1993, GAP Instrument Corp. the Debtor filed petitions for relief under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the Eastern District of New York. Under Chapter 11, certain claims against the Debtor in existence prior to the filing of the petitions for relief under the federal bankruptcy laws are stayed while the Debtor continues business operations as Debtor-in-Possession. These claims are reflected in the December 31, 1994 and 1993 balance sheets as "Liabilities subject to Compromise". Additional claims ( liabilities subject to compromise) may come to light subsequent to the filing date resulting from rejection of executory contracts, including leases, and from the determination by the court or agreement by parties in interest. A plan of reorganization was approved on October 2, 1995. This plan calls for payments over the next five years in settlement of the compromised liabilities. These payments are reflected in the December 31,1995 Balance Sheet as "Liabilities Resulting from Plan of Reorganization." The composition of the Liabilities Resulting from the Plan or Reorganization and the aggregate payments due in each of the next five years are: 1996 1997 1998 1999 2000 ------------------------------------------------- Internal Revenue Service 15328 15328 15328 15328 15328 NYS Department of Labor 622 622 622 622 622 Prior Officers		 7344 8109 5661 5661 5661 Prior Landlord 19238 19238 19238 1923 19238 Unsecured Creditors 12530 12530 12530 12530 12530 ------------------------------------------------- Total Payments Due 55062 55827 53379 53379 53379 ================================================= The Extraordinary Gain reflected on the income statement is the difference between the Liabilities Subject to Compromise on the December 31, 1994 and 1993 balance sheets and the Liabilities Resulting from the Plan or Reorganization on the December 31, 1995 balance sheet. Prior years Form 10Ks had identified long term debt agreements all of which were expunged during the Bankruptcy proceedings. NOTE 3 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of the significant accounting policies of GAP Instrument Corp. Assets and liabilities, revenues and expenses, are recognized on the accrual basis of accounting. GAP Instrument Corp. considers all highly liquid debt instruments with a maturity of three months or less to be cash equivalents. Accounts receivable are recorded when goods are shipped or when customer is registered(VAN service). Doubtful accounts are written-off when receivable is determined to be uncollectible - e.i, contract terminated. Inventories are stated at the lower of cost (first in-first out) or market. Machinery and leasehold improvements are stated at cost less accumulated depreciation and are removed from the asset and accumulated depreciation accounts when fully depreciated. Ordinary repairs and maintenance are charged directly to expense as incurred. Losses were recognized in 1993 for the abandonment of leasehold improvements when GAP Instrument Corp moved. Net sales are recorded on the completed contract method of accounting. Sales orders normally require delivery dates of less than one year. The preparation of financial statements in conformity with generally accepted accounting principals requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Liabilities resulting from the adoption of the plan of reorganization under Chapter 11 of the United States Bankruptcy Court are shown as "Liabilities resulting from Plan of Reorganization." The payments under the Plan that are due with-in one year are shown in the current liabilities and those due later than one year are grouped with the long term liabilities. The balance sheet caption "Liabilities Subject to Compromise" are the liabilities as of the date of the Bankruptcy filing. See Note 2 above. Officer loans are payable on demand and currently there is no interest being accrued. Income taxes: During 1995 adopted FAS 109 (Accounting for Income Taxes.) This statement requires the use of the asset and liability approach in the recognition of deferred tax assets and labilities for the expected future tax consequences of the event that have been recognized in the company's financial statements or tax return. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, the valuation allowance is realized. Financial statement, prior years, have not been restated and the cumulative effect of the accounting change will not be material. NOTE 4 -INVENTORIES: Inventories were carried on the FIFO basis. December 31, 1995 1994 1993 Raw materials and components 0 35,258 36,760 Work in process 0 4,860 7,430 -------- -------- --------- 0 $ 40,118 $ 44,190 ======== ======== ========= Inventories of raw materials and components written-off at December 31, 1995 due to obsolescence of inventories. Parts are currently purchased as needed only. NOTE 5 -FIXED ASSETS: Fixed assets at December 31 consisted of the following: 				 1995 	 1994 Production Equipment and leasehold improvements 	 $ 5,730 $ 20,331 Administrative equipment 13,849 - 19,578 20,331 Less: Accumulated depreciation and amortization (6,580) (16,570) $ 12,998 $ 3,761 Assets are depreciated over five and ten year periods using the straight line depreciation method. Leasehold improvements are amortized over the remaining life of the lease. Depreciation and amortization expense for 1995, 1994 and 1993 was $4,675, $1,905, and $1,903, respectively. Leasehold improvements were abandoned when the Company moved its facilities. Depreciation is computed on the tax basis, MACRs. The difference between straight line and MACRS is not material. NOTE 6 - INCOME TAXES: For the year ended December 31, 1995, GAP Instrument Corp. sustained, for federal income purposes, a gain of $191,855. Prior year tax carryforwards are $947,306 resulting in tax loss carryforwards at December 31, 1995 of $755,451. Prior years tax loss benefits will begin to expire December 31, 2005. The annual provision for income taxes differs from amounts computed applying the maximum US Federal income tax rate to the pre-tax income as follows: 				 1995 1994 Computed tax at maximum rate 65,230 State Income Tax, net of Federal tax effect 404 Tax benefit of operating loss carry forward (65,634) ---------- Provision for income taxes 0 === Deferred tax assets (liabilities) at December 31, 1995 and 1994 consist of the following:. 			 1995 1994 Expiration Deferred tax assets Loss carryforward - Year End 12/31/90 709 192,564 2005 - Year End 12/31/92 154,083 154,083 2006 - Year End 12/31/93 438,457 438,457 2007 - Year End 12/31/94 162,202 162,202 2008 ----------- ---------- Total Loss Carry forward 755,451 947,306 Deferred tax assets valuation allowance 755,451 947,306 ----------- ---------- Net deferred tax assets 0 0 ==== === NOTE 7 - BUSINESS SEGMENT REPORTING: Company operations are no longer a single industry segment, namely, system design and manufacture of electronic products used for data conversion and display instrumentation. Direct sales to United States Government Agencies or its prime contractors in 1995, 1994 and 1993, were $ 224,152, $246,000, and $205,354 respectively. The Company entered a new business segment, namely, telecommunications providing Value Added Network Services via the Internet for the Federal Government. 1995 sales for this business segment were $ 34,045. NOTE 8 - PER SHARE DATA: Earnings per share data are based on the average number of common shares outstanding during the year. Shares for convertible debt have been excluded in these computations since their inclusion is not material. The number of common shares outstanding for 1995 were 98,678,423, and for 1994 were 96,934,353 and for 1993 were 3,934,354. NOTE 9 - COMMITMENTS AND CONTINGENCIES: On October 20, 1993 the Company moved into facilities in Yaphank, currently rented at $3,200 per month on a month to month basics. Rent expense for 1995 was $28,600. NOTE 10 - GOING CONCERN There is substantial doubt about the ability of GAP Instrument Corp to continue as a going concern at December 31, 1995. As shown in the financial statements, the Company had net losses, before effects of extraordinary gain, of ($98,016), $(154,677), and $ (415,457) during each of the three years ended December 31, 1995, 1994 and 1993, and, as of those dates, had net equity (deficit) of $(241,864), $(433,718), and $(511,390) respectively. NOTE 11 - RELATED PARTY TRANSACTIONS GAP Instrument Corp rents its Yaphank facility from Advanced Logic Resources, Inc. At a rental of $3200 per month on a month-to-month basis. INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of GAP Instrument Corp We have audited the accompanying balance sheet of GAP Instrument Corp (a New York corporation) as of December 31, 1995, and the related statements of income (loss) and accumulated deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of GAP Instrument Corp as of December 31, 1994 and 1993, were audited by other auditors whose report dated January 31, 1995, on those statements included explanatory paragraphs that described the Company's going concern issue. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of GAP Instrument Corp as of December 31, 1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 10 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 10. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ SCHWAEBER SLOANE SCHULMAN & CO., PC Great Neck NY April 29, 1996 Deirdre C. Morrison, CPA 71 Amy Dr. Sayville, New York To the Board of Directors and Stockholders GAP Instrument Corp Yaphank, New York I have audited the financial statements and supplemental schedules of GAP Instrument Corp listed in Item 14 for the years ended December 31, 1994 and 1993. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. The financial statements and supplemental schedules as listed in Item 14 for the years ended December 31, 1992 and 1991 were audited by other auditors whose report dated April 30, 1993, expressed an unqualified opinion on those statements. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of GAP Instruments Corp as of December 31, 1994 and 1993 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that GAP Instrument Corp will continue as a going concern. There is substantial doubt about the ability of GAP Instrument Corp to continue as a going concern at December 31, 1994. As shown in the financial statements, the Company had net losses of $(162,202), $(438,457), and $ (154,083) during each of the three years ended December 31, 1994, 1993 and 1992, and, as of those dates, had net equity (deficit) of $(433,718), $(511,390), and $(167,934) respectively. As described in Note 1, the Company has filed under Chapter 11 of the Bankruptcy Code. The liabilities on the balance sheet are subject to comprise from the reorganization plan, however, since the plan has not been finalized, no adjustments have been made to the financial statements at December 31, 1994. Deirdre C. Morrison, CPA Sayville, New York January 31, 1995 Item 9 - Disagreements on Accounting and Financial Disclosure None Part III Item 10 -Directors and Executive Officers of the Registrant Common Stock Served of Company as 			 Principal Director 	Beneficially Owned on Name 		Age Occupation From December 31, 1995 _____________________________________________________________________________ James M. Edwardson 52 Chairman of Board 1993 60,656,732 shares * and Chief Executive Officer Robert Baer 54 President 1995 26,000 shares Letty A. Norjen 60 Secretary & Director 1993 61,656,732 shares * Deirdre C Morrison 35 Treasurer - 16,000 shares Michael H. Fasullo 49 Director 1993 31,036,732 shares ^ Lawrence Monahan 56 Vice President 5,007,400 shares * These shares are Beneficially owned by virtue of being a Director of Advanced Logic Resources, Inc. and Eloco, Inc. ^ These shares are Beneficially owned by virtue of being a Director of Elcoc Inc. The shares of Common Stock indicated above are the only securities of GAP Instrument Corp. owned by the directors and executive officers of the registrant. BUSINESS EXPERIENCE James Edwardson, Chairman of the Board of Directors and CEO, a former member of the Physics faculty of the State University of NY at Stony Brook, has twenty plus years experience managing high tech corporations. He currently sits on the Board of Directors of five corporations. In March of 1993 Mr Edwardson was added to the Board of Directors to help change the direction of the company and develop some new high tech products or services to take GAP Instrument Corp. into the twenty-first century. Jim put together a new management team, which was given control of the company at the annual meeting of stockholders held in June 1993. Robert Baer, President and Director, has owned and operated various businesses for the past thirty years. Bob was elected President in June 1995. He has guided GAP Instrument Corp. through its recent reorganization. Letty A. Norjen, Secretary and Director, has served as a corporate officer and director in various corporations for the past twenty years. She currently sits on the Board of Directors of four corporations. She has extensive experience in the service industry, and dealing with the public. Letty joined GAP in 1993. Deirdre Morrison, Treasurer and CFO, is a CPA with more than fifteen years experience in the areas of accounting and auditing. Deirdre joined GAP in June 1995. Michael H. Fasullo, Director, is a Senior administrator for a Government agency. He has twenty plus years experience in the internal workings of Government. Michael became a Director of GAP in 1993. Item 11 -Management Remuneration and Transactions In 1995, total remuneration for all Directors and Officers was $0 Item 12- Security Ownership of Certain Beneficial Owners and Management Name and Address Amount Beneficially Owned Percent of Class Eloco, Inc. 244 Mill Road Yaphank, NY 11980 30,036,732 shares 30.44 Advanced Logic Resources, Inc. 245 Mill Road Yaphank, NY 11980 30,620,000 shares 31.03 Alan G. Binnie 151 Leisure Glen Drive Ridge, NY 11961 21,604,055 shares 21.89 Lawrence Monahan 75 Ridge Road Hauppauge, NY 11788 5,007,400 shares 5.07 Beneficially owned securities of GAP Instrument Corp. held by all Directors and Officers of GAP Instrument Corp. as a group: Amount Beneficially Owned Percent of Class 65,664,132 66.54 Item 13- Certain Relationships and Related Transactions None PART IV Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K (1) Financial Statements: Reference is made to Part II, Item 8. (2) Exhibits Index: (3), (4) Reference is made to Form 10-K for the year ended December 31, 1980. (5), (9), (10), (11), (12), (13), (18), (19), (20), (22), (23), (24), (25), and (28) are not applicable. (3) Financial Statement Schedules for the Years Ended December 1995, 1994 and 1993: Page No. Supplementary Profit and Loss Information 19 (4) Reports on Form 8-K: The Company filed a Report on Form 8K for the last quarter covered by these financial statements. The Company filed a Report on Form 8K subsequent to year end. (THIS SPACE INTENTIONALLY LEFT BLANK) GAP INSTRUMENT CORP. SUPPLEMENTARY PROFIT AND LOSS INFORMATION 		 Charged to Profit and Loss 			 To Cost To Other 			 of Sales Accounts Total ---------------------------------------------- Year ended December 1993: Maintenance and repairs 		 $ 9,004 $ - $ 9,004 Depreciation and amortization of fixed assets 	 1,903 		 1,903 Taxes other than income taxes: Payroll 		 7,783 6,330 14,113 Property 		 - 7,799 7,799 Rents 	 60,918 26,108 87,026 --------------------------------------------- 		 $ 79,608 $40,237 $119,845 ============================================= Year ended December 31, 1994: Maintenance and repairs 	 $ 2,681 	 - $ 2,681 Depreciation and amortization of fixed assets 		 1,905 	 - 1,905 Taxes other than income taxes: Payroll 	 2,248 2,248 Rents 	 6,000 7,000 13,000 -------------------------------------------- 		 $10,586 $ 9,248 $ 19,834 ============================================ Year ended December 31, 1995: Maintenance and repairs 	 $ - $ 1,056 $ 1,056 Depreciation and amortization of fixed assets 	 	 - 4,675 4,675 Taxes other than income taxes: Payroll 		 2,312 2,312 	 28,600 28,600 -------------------------------------------- 		 $ - $ 36,643 $ 36,643 =========================================== SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. GAP INSTRUMENT CORP. By______________________________________ Date May 1, 1996 /s/ James M. Edwardson Chairman of the Board of Directors and Chief Operating Officer and President By______________________________________ Date May 1, 1996 /s/ Letty A. Norjen Secretary and Director By______________________________________ Date May 1, 1996 /s/ Deirdre C Morrison Treasurer By______________________________________ Date May 1, 1996 /s/ Michael H. Fasullo Director