| TECHNOLOGY GENERAL CORPORATION |
| (Exact name of Small Business Issuer in its charter) |
| New Jersey | 22-1694294 |
| (State or jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 12 Cork Hill Road, Franklin, New Jersey | 07416 |
| (Address of principal executive offices) | (Zip Code) |
Yes X | No |
| PAGE NO. | |
| Part 1. Financial Information | |
| Item 1. Consolidated Financial Statement (unaudited) | |
| Consolidated Balance Sheet - September 30, 2005 | 3 |
| Consolidated Statement of Operations For the six months ended September 30, 2005, and 2004 | 4 |
| Consolidated Statement of Cash Flows For the six months ended September 30, 2005 and 2004 | 5 |
| Notes to Consolidated Financial Statements | 6 |
| Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation | 7-9 |
| Signatures | 10 |
| ASSETS | |
| CURRENT ASSETS: | |
| Cash and cash equivalents | $122,259 |
| Accounts receivable, net of allowance for doubtful accounts of $5,700 | 298,938 |
| Inventories | 304,355 |
| Prepaid expenses and other current assets | 4,119 |
| Total current assets | 709,671 |
| PROPERTY, PLANT AND EQUIPMENT, net | 1,600,093 |
| OTHER ASSETS, NET | 22,353 |
| $2,352,117 | |
| LIABILITIES AND STOCKHOLDER'S EQUITY | |
| CURRENT LIABILITIES: | |
| Current maturities of long-term debt | $ 159,957 |
| Accounts payable and accrued expenses | 231,589 |
| Total current liabilities | 391,546 |
| LONG - TERM DEBT: | |
| Long-term obligations, net of current maturities | 1,818,746 |
| Security deposits | 59,644 |
| Total long - term debt | 1,878,390 |
| STOCKHOLDERS' EQUITY: | |
| Common stock, $.001 par value, authorized 30,000,000 shares, issued 5,886,228 shares, outstanding 5,811,912 shares | 5,886 |
| Class A common stock, $.001 par value, 1/10th vote per share, authorized 15,000,000 shares, issued and outstanding 131,839 shares | 132 |
| Capital in excess of par value | 2,421,124 |
| Accumulated deficit | (2,335,130) |
| 92,012 | |
| Less treasury stock, at cost, 74,316 shares | (9,831) |
| Total stockholders' equity | 82,181 |
| $2,352,117 |
Three Months Ended September 30 | Six Months Ended September 30 | ||||
| 2005 | 2004 | 2005 | 2004 | ||
| REVENUES: | |||||
| Product sales | $321,683 | $212,908 | $621,896 | $491,724 | |
| Rentals | 219,248 | 236,966 | 438,250 | 462,847 | |
| 540,931 | 449,874 | 1,060,146 | 954,571 | ||
| COSTS AND EXPENSES: | |||||
| Cost of product sales | 175,822 | 136,354 | 341,138 | 317,362 | |
| Cost of rentals | 85,083 | 94,683 | 181,199 | 191,585 | |
| Selling, general and administrative expenses | 253,491 | 262,476 | 498,713 | 536,563 | |
| 514,396 | 493,513 | 1,021,050 | 1,045,510 | ||
| INCOME (LOSS) FROM OPERATIONS | 26,535 | (43,639) | 39,096 | (90,939) | |
| OTHER INCOME (EXPENSE): | |||||
| Interest expense | (107) | (152) | (243) | (588) | |
| Interest and Dividend Income | 139 | 240 | 200 | 319 | |
| Miscellaneous income (expense) | 5,621 | 513 | (2,699) | 804 | |
| EPA and DEP settlement | - | - | (154,422) | - | |
| 5,653 | 601 | (157,164) | 535 | ||
| NET INCOME (LOSS) BEFORE INCOME TAXES | 32,188 | (43,038) | (118,068) | (90,404) | |
| INCOME TAXES | - | 250 | - | 250 | |
| NET INCOME (LOSS) | $ 32,188 | $ (43,288) | (118,068) | $ (90,654) | |
Six Months Ended September 30 | ||
| 2005 | 2004 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||
| Net income (loss) | $ (118,068) | $ (90,654) |
| Adjustment to reconcile net loss to net cash provided by (used in) operating activities: | ||
| Depreciation and amortization | 40,370 | 49,298 |
| Increase (decrease) in cash attributable to changes in operating assets and liabilities: | ||
| Accounts receivable | (22,450) | 22,609 |
| Inventories | (62,823) | 15,223 |
| Prepaid expenses and other current assets | 6,497 | 11,200 |
| Other assets | 4,027 | 4,171 |
| Accounts payable and accrued expenses | (25,817) | 53,117 |
| Security deposits | (3,582) | (5,000) |
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: | (181,846) | 59,964 |
| NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES: | ||
| Underapreciated cost of property sold | 154,422 | - |
| Purchase of equipment | (175) | (121,897) |
| 154,247 | (121,897) | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||
| Principal payments on long-term debt | (29,048) | (57,067) |
| Increase in long-term debt | 20,000 | 46,500 |
| NET CASH USED IN FINANCING ACTIVITIES | (9,048) | (10,567) |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (36,647) | (72,500) |
| CASH AND CASH EQUIVALENTS, beginning of period | 158,906 | 215,528 |
| CASH AND CASH EQUIVALENTS, end of period | $122,259 | $143,028 |
| The Company (in March 2003) has settled a complaint brought by the USEPA and NJDEP relating to toxic chemical contamination at a former manufacturing site. Under terms of the Consent Decree, the Company agreed to pay the EPA and NJDEP a combined total of $600,000. The Company has previously disbursed $320,000, leaving a balance of $280,000 comprised of $246,087 principal and $33,913 interest. These amounts will be paid in three annual installments; two at $100,000 each due March 2006 and March 2007 and the final installment of $80,000 is due March 2008. The $280,000 is reflected on the Balance Sheet as short-term debt of $100,000 and long-term obligations $180,000. |
| The Consent Decree also stipulated that the EPA and NJDEP would receive the net proceeds from the sale of the company’s three Superfund site properties. As of September 30, 2005, one site consisting of 8.33 acres of land was sold in November 2004 for the contract sales price of $90,000 and a second parcel consisting of land and building was sold for a contract sales price of $400,000 in April 2005, leaving one property remaining consisting of 8+ acres. |
Item 2 | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
| For the six-month period ended September 30, 2005, Technology General Corporation and subsidiary had consolidated revenues of $1,060,145 and net loss of $118,068. Technology General Corporation, operating individually as a holding company managing the various operating segments, does not generate significant revenue other than allocating management expenses to the operating entities and leasing space to four tenants. |
| Clawson Machine manufactures a full line of ice crushing and ice shaving equipment for the food service and related industries. The popular Hail Queen and Princess Chipper ice crushers are specified as "standard equipment" in many major restaurant chains. The patented In-line crusher that inserts between a commercial ice cuber and storage bin, maximizes the functionality of the standard cuber without increasing floor space usage. The In-Line crusher will crush cubes to one side of a storage bin or bypass cubes to the other side depending on demand. All three units are NSF (National Sanitary Foundation) listed, a requirement for food handling equipment in most states. The In-line crusher is also UL recognized. |
| Clawson also manufactures ice shaving equipment for block cubes including several models specifically designed for snow cones used in the amusement industries. These models include shaved ice storage areas, cup and syrup dispensers. |
| Sales are direct to end use customers and through an extensive network of restaurant equipment distributors. An aggressive advertising, trade show and internet program has historically proven successful. The continuation of this program along with new innovative product design projects additional growth. |
| Eclipse Systems carries a diversified product line. The paint spray products are the oldest of the Eclipse lines. In addition to the heavy duty industrial Gat spray gun, Eclipse carries a complete line of siphon, pressure and gravity feed guns in both standard and HVLP models. |
| Additionally, Eclipse manufactures a full line of portable and fixed position mixers for all industries. Standard models are available in air or electric drive with gear reduction models in the larger sizes. With an extensive parts inventory, Eclipse is able to produce made-to-order mixers at a cost and turn-around time of the standard models. Specialty alloys, elastomers and coatings are available to meet any demanding application. Typical uses are found in the chemical, plating, paint, printing, food and pharmaceutical industries. |
| Eclipse has recently expanded its' capabilities to include the ancillary equipment associated with the mixing and spraying industries. Current capabilities include the design and manufacturing of instrumentation and control systems available in stand alone and integrated designs. |
Item 2 | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUIED) |
| The Eclipse and Clawson Divisions operate in combination with each other, and total sales for the current six-month period amounted to $137,754 and $175,982 respectively, for a total of $313,736. The comparable sales for the six-month period ending September 30, 2004 were $122,520 for Eclipse and $130,516 for Clawson for a total of $253,036. The 2005 six-month combined sales increased $60,700 compared to the 2004 six-month total. |
| The Precision Metalform Division reported sales for the six-months ended September 30, 2005 and 2004 of $308,159 and $238,687, an increase of $69,472. Management anticipates that sales for the balance of the year are expected to remain stable in the writing instruments and cosmetic fields. Precision Metalform, along with the Company's other operating divisions, has taken positive steps to reduce its general and administration overhead, including efforts to reduce inventories to conserve cash flow. |
| Technology General currently is leasing space at its corporate office complex to two (2) industrial tenants and is leasing residential property to another tenant. Total revenues for the current six-month period were $76,093 and for the same period in 2004 were $75,943 resulting in virtually no change. |
| Transbanc International Investors Corporation, a wholly-owned subsidiary, is a real estate holding company which leases its 115,000 square foot building to three (3) industrial tenants and three (3) commercial tenants. Total rental revenue for the six-months ended September 30, 2005 amounted to $362,156 an increase of $8,701 compared to the six-months ended September 30, 2004. Management anticipates a modest increase in revenue from this facility resulting from modified leases for an extended period of time. |
| The consolidated net loss of $118,068 for the six months ended September 30, 2005 was a result of the Company settlement with the EPA and NJDEP. A portion of the Consent Decree stipulated that a parcel of property be sold, the net proceeds accruing to the Federal and State governments. This transaction resulted in a net loss to the Company of $154,422, the undepreciated cost of the property (net book value). With the exception of this extraordinary item which is unrelated to operating activities, the Company would have shown a modest earnings figure of $36,000. |
| LIQUIDITY |
| As of September 30, 2005, current assets amounted to $729,671 and current liabilities totaled $391,546, reflecting a working capital of $338,125 and a current ratio of 1.86 to 1. There was a negative cash flow of $36,647 for the current six-month period due to the net loss of $118,068. See net income/loss below. |
| RESULTS OF OPERATIONS |
| PRODUCT SALES. Technology General Corporation's manufacturing segment generated sales of $621,896 for the six-month period ended September 30, 2005. This compares favorably with the six month September 30, 2004 product sales figure of $491,724, a $130,172 across the board increase. |
| RENTAL SALES. Total consolidated rental billings for the six-month period ended September 30, 2005 amounted to $438,250 a decrease of $24,597 over the same period for September 30, 2004. |
| GROSS MARGIN. The consolidated gross profit margin for the six-months ended September 30, 2005, was 49 percent. |
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. These expenses as a percent of net sales were approximately 47 percent for the six-months ended September 30, 2005. |
| INTEREST. Total interest expense for the six-months ended September 30, 2005 amounted to $54,324 of which $54,081 is reflected under "Cost of Rentals" and the remainder of $243 is shown as a separate line item within "Other Income (Expense)". |
| NET INCOME/LOSS. The net loss for the six-months ended September 30, 2005 amounted to $118,068 which was due mainly to the settlement with the EPA and NJDEP wherein land and building with an original cost plus improvements totaling $465,000 were sold for $400,000, all proceeds going to the Federal and New Jersey governments. The net loss for the comparable 2004 six month period was $90,654. |
| Date: March 20, 2006 | TECHNOLOGY GENERAL CORPORATION |
| BY: /s/Charles J. Fletcher | |
| Charles J. Fletcher President, Chief Executive Officer Chairman of the Board | |
| BY: /s/Helen S. Fletcher | |
| Helen S. Fletcher Secretary/Treasurer |
