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, 1996
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
- ---
Commission File No. 2-97732
TECHNOLOGY GENERAL CORPORATION
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(Exact name of Small Business Issuer in its charter)
New Jersey 22-1694294
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12 Cork Hill Road, Franklin, New Jersey 07416
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (201) 827-4143
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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
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As of September 30, 1996, the Registrant had 5,093,278 shares of Common Stock
outstanding and 157,839 shares of Class A Common Stock outstanding.
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TECHNOLOGY GENERAL CORPORATION
INDEX
PAGE NO.
Part I. Financial Information
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheet - September 30, 1996 3
Consolidated Statement of Operations
and for the six months ended
September 30, 1996 and 1995 4
Consolidated Statement of Cash Flows
for the six months ended
September 30, 1996 and 1995 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
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TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30, 1996
ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $ 254,527
Cash collateral account for letters of credit 165,000
Accounts receivable, net of allowance for doubtful
accounts of $1,000 466,883
Inventories 534,672
Deferred tax asset 27,000
Prepaid expenses and other current assets 50,670
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Total current assets 1,498,752
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization of $4,225,374. 2,105,974
OTHER ASSETS:
Deferred tax asset 173,000
Other 84,144
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Total other assets 257,144
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$3,861,869
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LIABILITIES AND STOCKHOLDER'S EQUITY
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CURRENT LIABILITIES:
Current maturities of long-term debt $ 39,737
Accounts payable and accrued expenses 348,274
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Total current liabilities 388,011
LONG-TERM DEBT:
Long-term obligations, net of current maturities 1,243,084
Reserve for contingency 356,000
Security deposits 43,845
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Total long-term debt 1,642,929
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 1 vote per share,
authorized 30,000,000 shares, issued 5,490,228 shares,
outstanding 5,489,448 shares 5,490
Class A common stock, $.001 par value, .1 vote per share,
authorized 15,000,000 shares, issued and outstanding
157,839 shares 158
Additional paid-in-capital 2,376,487
Accumulated deficit (550,966)
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Less treasury stock, at cost, 780 shares (240)
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Total stockholders' equity 1,830,929
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$3,861,869
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See accompanying notes to consolidated financial statements
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TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
September 30, September 30,
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1996 1995 1996 1995
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REVENUES:
Product sales $675,650 $694,014 $1,347,227 $1,472,556
Rentals 135,830 126,937 271,655 230,824
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811,480 820,951 1,618,882 1,703,380
COSTS AND EXPENSES:
Cost of product sales 435,399 409,673 869,095 911,783
Cost of rentals 79,556 51,300 141,386 85,981
Selling,general and administrative
expenses 315,759 333,808 650,314 668,994
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830,714 794,781 1,660,795 1,666,758
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INCOME FROM OPERATIONS (19,234) 26,170 (41,913) 36,622
OTHER INCOME (EXPENSE):
Interest expense (5,399) (14,135) (10,913) (30,459)
Insurance recovery 285,064 351,772
EPA Contingency Reserve (12,500) (25,000)
Other 5,053 (507) 6,141 6,235
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272,218 (14,642) 322,000 (24,224)
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NET INCOME $252,984 $11,528 $280,087 $12,398
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See accompanying notes to consolidated financial statements.
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TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended September 30, 1996 and 1995
Increase (Decrease) in Cash and Cash Equivalents
(UNAUDITED)
Six Months Ended
September 30,
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1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 280,087 $(1,175,364)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 152,629 143,267
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (61,042) (54,725)
(Increase) decrease in inventories (29,043) (50,135)
(Increase) decrease in prepaid assets and other current assets 103,595 42,791
(Increase) decrease in other assets 5,889 (28,747)
Increase (decrease) in accounts payable and accrued expenses (108,178) (4,670)
Increase (decrease) in accrual for loss contingency 25,000
Increase (decrease) in security deposits 3,116
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 368,937 63,295
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (172,540) (129,982)
Decrease in mortgage receivable 78,617
Deposits to cash collateral for letter of credit (78,790)
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (172,540) (130,155)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage payable 1,150,694
Principal payments on long-term debt (119,199) (1,175,364)
Proceeds from issuance of notes payable 60,712 57,824
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NET CASH (USED IN) FINANCING ACTIVITIES (58,487) 33,154
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NET (DECREASE) IN CASH AND CASH EQUIVALENTS 137,910 (33,706)
CASH AND CASH EQUIVALENTS, beginning of period 116,617 117,480
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CASH AND CASH EQUIVALENTS, end of period $ 254,527 $ 83,774
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See accompanying notes to consolidated financial statements
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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
Department of Justice outlining the terms of a contemplated settlement relating
to a toxic chemical contamination at a former operational site of the Company.
The memorandum stipulated that the United States Government ("USG") would
receive $25,000 upon execution of the settlement, $206,000 payable over five
years and a balloon payment of $150,000 payable in five years. In addition, the
USG would receive 60 percent of the net rental income derived from the formerly
contaminated property and 60 percent of the net proceeds from the sale of the
property. At September 30, 1996, the Company established an accrual for this
loss contingency of $356,000.
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 present, 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, 1996, Technology General
Corporation and subsidiary had consolidated revenues of $1,618,882 and a net
income of $280,087. 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 a tenant.
The Company received $91,182 from its insurer during the current
six-month period as reimbursement for water damage to its physical inventory and
buildings as a result of a partial roof collapse due to an ice storm which
occurred on January 14, 1996. Of this amount, $48,708 is reflected as part of
"Other Income" in the Consolidated Statement of Operations for the current
period, and $42,474 was offset against "Cost of Product Sales" on the fiscal
year-end financial statements of March 31, 1996.
Additionally, a fire accidentally started by a roofing contractor on
May 7, 1996 resulted in extensive damage to machinery, equipment, and inventory
kept at Precision Metalform, the division which manufactures a variety of
deep-drawn metal components. The fire destroyed a portion of the building
(which is owned by Technology General Corporation), which necessitated
operations of this division to be curtailed, resulting in loss of income.
Insurance coverage is adequate to cover the loss and repairs. The Company has
received $303,064 through September 30, 1996 as partial reimbursement so that
the Consolidated Statement of Operations" reflects an aggregate of $351,772
under "Other Income". Recovery from the insurer for business interruption loss
is anticipated to approximate $75,000.
The Precision Metalform Division reported sales for the six months
ended September 30, 1996 of $581,350 compared to $740,219 for the six month
period ended September 30, 1995, a decrease of $158,869. As stated above, this
loss of sales was largely as a result of a fire in the building which partially
destroyed the Finishing Department, interrupted production and caused delays in
shipping.
The Eclipse and Clawson Divisions operate in combination with each
other, and total sales for the six-month period amounted to $575,744 and
$190,132, respectively, for a total of $765,876.
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 is currently in negotiations with a dry ice blasting
company to develop an integrated dry ice shaving and blasting system which, when
completed, is expected to generate significant sales and further diversify its
product line. This division has recently submitted a design for a
manually-operated ice crusher to the National Sanitation Foundation for listing.
This will allow expansion of the crusher line into national restaurant chains.
Eclipse Systems's sales for the six months ended September 30, 1996
increased $69,716 or 14 percent over the comparable period for 1995. Management
expects sales to gradually increase as a result of the introduction of a new
line of industrial mixers and continued growth in its new EnviroFlo industrial
line of "inplant" pollution-control systems. 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.
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Transbanc International Investors Corporation, a wholly-owned
subsidiary, is a real estate holding company which leases its 107,000 square
foot building to six (6) industrial tenants. Total rental revenue for the six
months ended September 30, 1996 amounted to $243,742, an increase of $17,868
over $225,874 for the comparable six month period in 1995. The subsidiary
corporation reported a modest profit of approximately $13,000 after allocation
of parent company management charges and has remained a constant source of
positive cash flow.
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, 1996,
totaled $12,744. Since the building was not available for leasing prior to
September 30, 1995, there was no comparable rental income. The Division has
recently leased space to a new tenant, which will provide $15,000 in additional
revenue per annum.
LIQUIDITY:
As at September 30, 1996, current assets amounted to $1,498,752 and
current liabilities totaled $388,011, reflecting a working capital of $1,110,741
and a current ratio of 3.86 to 1. Net cash flow showed a significant increase
of $170,753 to $254,527 when compared to that for the six month period ended
September 30, 1995 of $83,774.
RESULTS OF OPERATIONS
PRODUCT SALES. Technology General Corporation's manufacturing segment
generated sales of $1,347,227 for the six-month period ended September 30, 1996.
RENTAL SALES. Total consolidated rental billings for the six-month
period ended September 30, 1996 amounted to $271,655, a $41,000 increase over
the same period for 1995.
GROSS MARGIN. The consolidated gross profit margin for the six months
ended September 30, 1996, was 38 percent.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. These expenses as a
percent of net sales were approximately 40 percent for the six months ended
September 30, 1996.
INTEREST. Total Interest expense for the six months ended September
30, 1996 amounted to $66,715, of which $56,843 is reflected under "Cost of
Rentals" and the remainder of $9,872 is shown as a separate line item within
"Other Income (Expense)".
NET INCOME/LOSS. Net income for the six months ended September 30,
1996, amounted to $280,087, an increase of $267,689 over the comparable
six-month period in 1995.
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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: November 22, 1996 TECHNOLOGY GENERAL CORPORATION
By:
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Charles J. Fletcher
President, Chief Executive Officer,
Chairman of the Board
By:
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Athalyn M. Hopler
Secretary/Treasurer
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