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 DECEMBER 31, 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 December 31, 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 - December 31, 2000 3
Consolidated Statement of Operations
For the nine months ended
December 31, 2000 and 1999 4
Consolidated Statement of Cash Flows
For the nine months ended
December 31, 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
2
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
December 31, 2000
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $389,198
Accounts receivable, net of allowance for doubtful
accounts of $3,000 387,281
Inventories 444,854
Deferred tax asset 12,000
Prepaid expenses and other current assets 56,462
..........
Total current assets 1,289,795
PROPERTY, PLANT AND EQUIPMENT, net
2,135,445
OTHER ASSETS:
Deferred tax asset 281,000
Other 70,667
..........
Total other assets 351,667
..........
$3,776,907
::::::::::
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 94,606
Accounts payable and accrued expenses 272,879
..........
Total current liabilities 367,485
LONG - TERM DEBT:
Long-term obligations, net of current maturities 1,484,288
Lawsuit reserve 419,000
Security deposits 72,351
..........
Total long - term debt 1,975,639
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 2,401,873
Accumulated deficit (971,653)
..........
1,435,959
Less treasury stock, at cost, 2,380 shares (2,176)
..........
Total stockholders' equity 1,433,783
..........
$3,776,907
:::::::::::
See accompanying notes to consolidated financial statements
3
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
December, 31 December, 31
................ ...............
2000 1999 2000 1999
REVENUES:
Product sales $415,663 $608,938 $1,393,680 $1,848,529
Rentals 229,255 184,600 615,890 545,061
........ ........ ........ ........
644,918 793,538 2,009,570 2,393,590
COSTS AND EXPENSES:
Cost of product sales 244,117 415,763 813,194 1,163,855
Cost of rentals 95,857 92,059 288,477 273,909
Selling, general and
administrative expenses 363,914 394,833 1,120,983 1,099,776
........ ........ ........ ........
703,888 902,655 2,222,654 2,537,540
........ ........ ........ ........
(LOSS) FROM
OPERATIONS (58,970) (109,117) (213,084) (143,950)
OTHER INCOME (EXPENSE):
Interest expense (3,269) (3,272) (5,196) (10,294)
Interest and Dividend
Income 6,701 7,995 19,071 23,565
Other 20,129 1,726 48,532 20,749
....... ....... ....... .......
23,561 6,449 62,407 34,020
........ ........ ........ ........
NET (LOSS) ($35,409) ($102,668) ($150,677) ($109,930)
:::::::::: ::::::::: :::::::::: :::::::::
See Accompanying notes to consolidated financial statements
4
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999
(Unaudited)
Nine Months Ended
December 31
2000 1999
....... ........
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($150,677) ($109,930)
Adjustment to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 158,000 148,287
Increase (decrease) in cash attributable to
changes in operating assets and liabilities:
Accounts receivable 54,206 (52,312)
Inventories (48,605) 101,921
Prepaid expenses and other current
assets 189,089 35,576
Other assets 16,731 15,031
Accounts payable and other current
liabilities (59,533) (75,162)
Security deposits 1,861 -
............ .........
NET CASH PROVIDED BY (USED IN)OPERATING
ACTIVITIES 161,072 63,411
............ ..........
NET CASH USED IN INVESTING ACTIVITIES:
Purchases of property,plant,
and equipment (176,852) (196,512)
........... ..........
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes
payable - 6,850
Principal payments on long-term debt (48,422) (170,692)
........... ...........
NET CASH USED IN FINANCING ACTIVITIES: (48,422) (163,842)
......... ..........
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (64,202) (296,943)
CASH AND CASH EQUIVALENTS,
beginning of period 453,400 886,945
....... .......
CASH AND CASH EQUIVALENTS, end of period $389,198 $590,002
:::::::: ::::::::
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 December 31, 2000, the Company's expenditures to accommodate code
changes in order to permit re-occupancy of the premises were approximately
$200,000. At December 31, 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 December 31, 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 nine-month period ended December 31, 2000, Technology
General Corporation and subsidiary had consolidated revenues of $2,009,570
and net loss of $150,677. 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.
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 and 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.
The Eclipse and Clawson Divisions operate in combination with
each other, and total sales for the nine-month period amounted to
$473,338 and $332,556 respectively, for a total of $805,894. The comparable
sales for the nine-month period ending December 31, 1999 were $798,340 for
Eclipse and $324,299 for Clawson for a total of $1,122,639. The 2000
nine-month combined sales decreased $316,745 compared to the 1999
nine-month total.
The recent decrease in sales is due to a temporarily depressed
industrial equipment market and the loss a major purchaser due to
restructuring of their product lines. Eclipse has mounted a new
advertising campaign and expansion of its' products to offset these losses.
The introduction of Eclipse products to new markets and increased sales
promotions is showing a positive growth trend. Sales are expected to
increase over the next 12 months with continuation into the following year.
The Precision Metalform Division reported sales for the nine-months
ended December 31, 2000 and 1999 of $587,786 and $725,890 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 six (6) industrial tenants and two (2) commercial
tenants. Total rental revenue for the nine-months ended December 31, 2000
amounted to $469,180, an increase of $52,162 compared to the nine-months
ended December 31, 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 nine-month period
ended December 31, 2000, totaled $38,488 compared to $19,242 for the
comparable 1999 period, an increase of $19,246.
7
LIQUIDITY
As of December 31, 2000, current assets amounted to $1,289,795
and current liabilities totaled $367,485, reflecting a working
capital of $922,310 and a current ratio of 3.50 to 1. There
was a negative cash flow of $64,202 for the nine-month period ended
December 31, 2000 due primarily to an 8,700 square foot addition to
a Transbanc building which will cost approximately $200,000.
RESULTS OF OPERATIONS
PRODUCT SALES. Technology General Corporation's manufacturing
segment generated sales of $1,393,680 for the nine-month period
ended December 31, 2000.
RENTAL SALES. Total consolidated rental billings for the
nine-month period ended December 31, 2000 amounted to $615,890 an
increase of $70,829 over the same period for 1999.
GROSS MARGIN. The consolidated gross profit margin for the
nine-months ended December 31, 2000, was 45 percent.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. These expenses
as a percent of net sales were approximately 56 percent for the
nine-months ended December 31, 2000.
INTEREST. Total interest expense for the nine-months ended
December 31, 2000 amounted to $100,943 of which $95,747 is reflected
under "Cost of Rentals" and the remainder of $5,196 is shown as a
separate line item within "Other Income (Expense)".
NET INCOME/LOSS. The net loss for the nine-months ended
December 31, 2000 amounted to $150,677 and the net loss for the
comparable 1999 nine-month period was $109,930.
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: February 2, 2000 TECHNOLOGY GENERAL CORPORATION
/s/ Jeffrey C. Fletcher
BY:............................................
Jeffrey C. Fletcher
Vice-President
/s/ Helen S. Fletcher
BY:.................................................
Helen S. Fletcher
Secretary/Treasurer
9