SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB Quarterly or Transitional Report
_X_ QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30,2000
OR
__ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
Commission File No. 2-97732
TECHNOLOGY GENERAL CORPORATION
......................................................................
(Exact name of Small Business Issuer in its charter)
New Jersey 22-1694294
.............................. ...........................
(State or jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12 Cork Hill Road, Franklin, New Jersey 07416
.....................................................................
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (973) 827-4143
Indicated 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
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
...... ......
As of September 30, 2000, the Registrant had 5,608,672 shares
of Common Stock outstanding and 127,839 shares of Class A Common Stock
outstanding.
1
TECHNOLOGY GENERAL CORPORATION
INDEX
PAGE NO.
Part 1. Financial Information
Item 1. Consolidated Financial Statement (unaudited)
Consolidated Balance Sheet - September 30,2000 3
Consolidated Statement of Operations
For the six months ended
September 30, 2000 and 1999 4
Consolidated Statement of Cash Flows
For the six months ended
September 30,2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 7-8
Signatures 9
2
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
September 30, 2000
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $485,362
Accounts receivable, net of allowance for doubtful
accounts of $3,000 342,567
Inventories 439,373
Deferred tax asset 12,000
Prepaid expenses and other current assets 31,085
..........
Total current assets 1,310,387
PROPERTY, PLANT AND EQUIPMENT, net
2,192,244
OTHER ASSETS:
Deferred tax asset 281,000
Other 76,710
..........
Total other assets 357,710
..........
$3,860,341
::::::::::
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $103,951
Accounts payable and accrued expenses 287,743
..........
Total current liabilities 391,694
LONG - TERM DEBT:
Long-term obligations, net of current maturities 1,494,119
Reserve for contingency 419,000
Security deposits 86,338
..........
Total long - term debt 1,999,457
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 1 vote per share,
authorized 30,000,000 shares, issued 5,611,228 shares,
outstanding 5,608,672 shares 5,611
Class A common stock, $.001 par value, .1 vote per share,
authorized 15,000,000 shares, issued and
outstanding 127,839 shares 128
Additional paid-in-capital 2,401,872
Accumulated deficit (936,245)
..........
1,471,366
Less treasury stock, at cost, 2,556 shares (2,176)
..........
Total stockholders' equity 1,469,190
..........
$3,860,341
:::::::::::
See accompanying notes to consolidated financial statements
3
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
September 30 September 30
................ ...............
2000 1999 2000 1999
REVENUES:
Product sales $454,557 $630,372 $978,017 $1,239,591
Rentals 201,225 179,630 386,635 360,461
........ ........ ........ ........
655,782 810,002 1,364,652 1,600,052
COSTS AND EXPENSES:
Cost of product sales 277,964 379,915 569,077 748,092
Cost of rentals 91,863 82,899 192,620 181,850
Selling, general and
administrative expenses 374,974 381,339 757,069 704,943
........ ........ ........ ........
744,801 844,153 1,518,766 1,634,885
........ ........ ........ ........
(LOSS) FROM
OPERATIONS (89,019) (34,151) (154,114) (34,833)
OTHER INCOME (EXPENSE):
Interest expense (202) (3,153) (1,927) (7,022)
Interest and Dividend
Income 11,625 9,055 12,370 15,570
Other 7,758 15,541 28,403 19,023
....... ....... ........ ........
19,181 21,443 38,846 27,571
........ ........ ........ ........
NET (LOSS) ($69,838) ($12,708) ($115,268) ($7,262)
:::::::::: ::::::::: :::::::::: :::::::::
See Accompanying notes to consolidated financial statements
4
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
Six Months Ended
September 30
2000 1999
....... ........
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($115,268) ($7,262)
Adjustment to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 109,223 94,281
Increase (decrease) in cash attributable to
changes in operating assets and liabilities:
Accounts receivable 98,920 (68,625)
Inventories (43,124) 47,158
Prepaid expenses and other current
assets 214,466 11,156
Other assets 10,688 9,021
Accounts payable and other current
liabilities (35,324) (90,193)
Security deposits 15,848 -
............ ..........
NET CASH PROVIDED BY (USED IN)OPERATING
ACTIVITIES 255,429 (4,464)
............ ..........
NET CASH USED IN INVESTING ACTIVITIES:
Purchases of property,
plant, and equipment (184,876) (158,896)
........... ..........
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes
payable - 6,850
Principal payments on long-term debt (38,591) (54,445)
........... ...........
NET CASH USED IN FINANCING ACTIVITIES: (38,591) (47,595)
......... ..........
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 31,962 (210,955)
CASH AND CASH EQUIVALENTS,
beginning of period 453,400 886,945
....... .......
CASH AND CASH EQUIVALENTS, end of period $485,362 $675,990
:::::::: ::::::::
See accompanying notes to consolidated financial statements
5
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMITMENTS AND CONTINGENCIES
On September 1, 1994, the Company received a memorandum from the
United States Justice Department outlining proposed settlement terms
relating to toxic chemical contamination at a site formerly occupied by
a subsidiary of the Company. The memorandum stipulated that the
United States Government ("U.S.G.") would receive $25,000 upon the
execution of the settlement, $206,000 payable over five years, and a
balloon payment of $150,000 payable in five years. In addition, the
U.S.G. would receive 60 percent of the net proceeds from the sale of
the property. The Company has requested a re-negotiation of the
settlement terms.
In March of 1997, the Company made a counter-proposal to the U.S.G.
seeking reduction in the proposed terms for restoration expenditures incurred
by the Company resulting from severe zoning changes following the cleanup
phase. As of September 30, 2000, the Company's expenditures to accommodate
code changes in order to permit re-occupancy of the premises were
approximately $200,000. At September 30,2000,this counter proposal was being
evaluated by the U.S.G. In the event of an unfavorable resolution to this
matter, the Company could experience a material adverse effect on its financial
position, results of operations and cash flows and may have no alternative
means by which to finance such resolution other than to sell certain of its
assets to meet its obligation resulting from the ultimate resolution.
In July of 1997, the New Jersey Department of Environmental Protection
("D.E.P.") instituted suit against the Company related to toxic chemical
contamination at the site mentioned in the preceding paragraphs. The civil
action is brought pursuant to the Spill Compensation and Control Act
("Spill Act"), whereby the D.E.P. seeks to recover costs which it has
expended and intends to expend in the future for the cleanup of the
hazardous substances.
As of July 1997, the D.E.P. had incurred costs in excess of $1,150,000
and is attempting to recover an amount equal to three times the cleanup
costs incurred, and to be incurred, in accordance with a provision in the
Spill Act. The litigation is now in the discovery process, and the ultimate
outcome of such litigation cannot be determined at the present time. In the
event of an unfavorable resolution to this matter, the Company could
experience a material adverse effect on its finanical position, results of
operations and cash flows and may have no alternative means by which to
finance such resolution other than to sell certain of its assets to meet
its obligation resulting from the ultimate resolution.
At September 30, 2000, the Company has accrued $444,000 which management
believes will be sufficient to satisfy any liabilities which may result in
connection with the settlement of the above-mentioned matters.
In addition to the above, the Company is party to various
lawsuits and claims arising in the ordinary course of business.
While the ultimate effects of such litigation cannot be determined
at the present time, it is Management's opinion, based on the advice of legal
counsel, that any liabilities which may result from these actions
would not have a material effect on the Company's ability to operate.
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Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the six-month period ended September 30, 2000, Technology
General Corporation and subsidiary had consolidated revenues of $1,364,652
and net loss of $115,268. 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 two tenants.
The Eclipse and Clawson Divisions operate in combination with
each other, and total sales for the six-month period amounted to
$325,582 and $249,942 respectively, for a total of $575,524. The comparable
sales for the six-month period ending September 30, 1999 were $514,640 for
Eclipse and $227,985 for Clawson for a total of $742,625. The 2000 six-month
combined sales decreased $167,101 compared to the 1999 six-month total.
Clawson Machine's ice crushing products featuring the patented
"Plus Crusher" are used in conjunction with major ice cube machines,
primarily Scotsman, Manitowoc, Crystal Tips, and Ice-O-Matic. This system
provides an in-line means to intercept the flow of ice cubes in order to
process them into crushed ice during each ice cube harvest cycle. This
device which is installed as an integral part of each ice cube machine, is
used predominantly by hotels and restaurants where large volumes of crushed
ice are required.
Clawson Machine has received recognition from the National Sanitation
Foundation (N.S.F.) for improvements of its various machines used primarily
for crushing ice applicable to hotels and restaurants. N.S.F. approval is
becoming a mandatory requirement throughout various parts of the country for
machines used in the processing of foods and liquids to assure maintenance
of sanitary conditions. Clawson is one of a few manufacturers in its
category who has been awarded this distinction.
Eclipse System's sales for the six-months ended
September 30, 2000, decreased $189,058 from the comparable period for 1999.
Management expects sales to increase as a result of the
introduction of a new line of industrial mixers. The division has recently
designed and developed a special line of chemical mixers, which are expected
to generate increased sales in the air-driven mixer market.
The Precision Metalform Division reported sales for the six-month
ended September 30, 2000 and 1999 of $402,494 and $496,966 respectively.
Management anticipates that sales for the balance of the year are expected
to increase in the writing instruments field whereas cosmetic sales are
expected to remain stable. 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.
Transbanc International Investors Corporation, a wholly-owned
subsidiary, is a real estate holding company which leases its 113,000
square foot building to four (4) industrial tenants. Total rental revenue
for the six-months ended September 30, 2000 amounted to $288,979, an increase
of $12,869 compared to the six-months ended September 30, 1999. Management
anticipates a modest increase in revenue from this facility resulting from
modified leases for an extended period of time.
The Company's Aerosystems Technology Division owns a 24,000
square foot industrially-zoned building situated on 22 acres located
in Franklin, New Jersey, of which 3.5 acres were the subject of an E.P.A.
Superfund cleanup. This property has been fully restored and is presently
occupied by two (2) tenants. Rental revenue for the six-month period
ended September 30, 2000, totaled $25,804 compared to $13,080 for the
comparable 1999 period, an increase of $12,724.
7
LIQUIDITY
As of September 30, 2000, current assets amounted to $1,310,387
and current liabilities totaled $391,694, reflecting a working
capital of $918,693 and a current ratio of 3.35 to 1. There
was a positive cash flow of $31,962 for the current six-month period due to
net cash provided by operating activities.
RESULTS OF OPERATIONS
PRODUCT SALES. Technology General Corporation's manufacturing segment
generated sales of $978,017 for the six-month period ended September 30, 2000.
RENTAL SALES. Total consolidated rental billings for the
six-month period ended September 30, 2000 amounted to $386,634, an increase of
$26,173 over the same period for 1999.
GROSS MARGIN. The consolidated gross profit margin for the
six-months ended September 30, 2000, was 44 percent.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. These expenses as
a percent of net sales were approximately 55 percent for the six-months
ended September 30, 2000.
INTEREST. Total interest expense for the six-months ended
September 30,2000 amounted to $66,008 of which $64,081 is reflected
under "Cost of Rentals" and the remainder of $1,927 is shown as a separate
line item within "Other Income (Expense)".
NET INCOME/LOSS. The net loss for the six-months ended
September 30, 2000 amounted to $115,268 and the net loss for the comparable
1999 six-month period was $7,262.
8
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: September 30, 2000 TECHNOLOGY GENERAL CORPORATION
/S/ Charles J. Fletcher
BY:............................................
Charles J. Fletcher
President, Chief Executive Officer
Chairman of the Board
/S/ Helen S. Fletcher
BY:.................................................
Helen S. Fletcher
Secretary/Treasurer
9