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 JUNE 30, 2004
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 June 30, 2004, the Registrant had 5,811,912 shares
of Common Stock outstanding and 131,839 shares of Class A Common Stock
outstanding.
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TECHNOLOGY GENERAL CORPORATION
INDEX
PAGE NO.
Part 1. Financial Information
Item 1. Consolidated Financial Statement (unaudited)
Consolidated Balance Sheet - June 30, 2004 3
Consolidated Statement of Operations
For the three months ended
June 30, 2004, and 2003 4
Consolidated Statement of Cash Flows
For the three months ended
June 30, 2004 and 2003 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
2
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
June 30, 2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 143,461
Accounts receivable, net of allowance for doubtful
accounts of $5,700 213,810
Inventories 246,140
Prepaid expenses and other current assets 36,581
----------
Total current assets 639,992
PROPERTY, PLANT AND EQUIPMENT, net 1,707,519
OTHER ASSETS, NET 33,171
----------
$2,380,682
==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 153,356
Accounts payable and accrued expenses 202,621
----------
Total current liabilities 355,977
LONG - TERM DEBT:
Long-term obligations, net of current maturities 1,785,960
Security deposits 74,213
----------
Total long - term debt 1,860,173
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 1 vote per share,
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 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 (2,252,779)
----------
174,363
Less treasury stock, at cost, 74,316 shares (9,831)
----------
Total stockholders' equity 164,532
----------
$2,380,682
==========
See accompanying notes to consolidated financial statements
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TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED)
2004 2003
==== ====
REVENUES:
Product sales $278,816 $282,521
Rentals 225,881 215,332
-------- --------
504,697 497,853
COSTS AND EXPENSES:
Cost of product sales 181,008 168,900
Cost of rentals 96,902 109,081
Selling, general and
administrative expenses 274,087 283,321
-------- --------
551,997 561,302
-------- --------
(LOSS) FROM
OPERATIONS (47,300) (63,449)
OTHER INCOME (EXPENSE):
Interest expense (436) (1,294)
Interest and Dividend
Income 79 339
Other 291 (382)
------- -------
(66) (1,337)
-------- -------
LOSS BEFORE INCOME TAXES (47,366) (64,786)
INCOME TAXES - -
-------- -------
NET (LOSS) ($47,366) ($64,786)
========= =========
See accompanying notes to consolidated financial statements
4
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(Unaudited)
2004 2003
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($47,366) ($64,786)
Adjustment to reconcile net loss
to net cash provided by
(used in) operating activities:
Depreciation and amortization 24,649 30,195
Increase (decrease) in cash attributable to
changes in operating assets and liabilities:
Accounts receivable 7,066 36,917
Inventories 10,479 (22,707)
Prepaid expenses and other current
assets (18,786) (1,569)
Other assets 2,304 (379)
Accounts payable and accrued expenses (9,717) 12,504
------- -------
NET CASH PROVIDED BY (USED IN)OPERATING
ACTIVITIES (31,371) (9,825)
------- -------
NET CASH USED IN INVESTING ACTIVITIES:
Purchases of property, plant,
and equipment (3,150) -
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (37,546) (77,427)
Increase in long-term debt - 60,000
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (37,546) (17,427)
-------- --------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (72,067) (27,252)
CASH AND CASH EQUIVALENTS,
beginning of period 215,528 173,641
------- -------
CASH AND CASH EQUIVALENTS, end of period $143,461 $146,389
======== ========
See accompanying notes to consolidated financial statements
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TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
COMMITMENTS AND CONTINGENCIES
The Company has settled a suit brought by the United States Environmental
Protection Agency (EPA) and the New Jersey Department of Environmental
Protection (NJDEP relating to toxic chemical contamination at a site formerly
occupied by a subsidiary of the Company.
Under the terms of the Consent Decree, the EPA and the NJDEP are to receive
a combined total of $600,000; in June 2003 the Company disbursed $60,000 to the
EPA and $60,000 to the NJDEP leaving a balance of $480,000. The $480,000 is to
be paid in five annual installments as follows: commencing March 2004, $100,000;
March 2005, $100,000; March 2006, $100,000; March 2007, $100,000, and March 2008
the remaining $80,000. The first installment of $100,000 was disbursed March
2004 and of the remaining $380,000; $100,000 is shown on the balance sheet as a
current liability and $280,000 is shown as "Long-Term Debt".
The Consent Decree also stipulated that the EPA and NJDEP would receive
100% of the net proceeds from the sale of certain of the company's Superfund
site properties with the requirement that the Company first obtain a "letter of
acceptance" from the EPA prior to the transfer of property deeds and in
addition, the EPA and NJDEP would receive 60% of the net rental income derived
from the properties subject to claim from the date of execution of the
settlement (March 2003) until the properties are sold. The Company had pending
purchase agreements for three of its real-estate parcels at the above mentioned
site.
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Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the three-month period ended June 30, 2004, Technology General
Corporation and subsidiary had consolidated revenues of $504,697 and net loss of
$47,366. 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 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.
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The Eclipse and Clawson Divisions operate in combination with each other,
and total sales for the current three-month period amounted to $81,615 and
$55,021 respectively, for a total of $136,636. The comparable sales for the
three-month period ending June 30, 2003 were $81,865 for Eclipse and $69,669 for
Clawson for a total of $151,534. The 2004 three-month combined sales decreased
$14,898 compared to the 2003 three-month total.
The Precision Metalform Division reported sales for the three-months ended
June 30, 2004 and 2003 of $142,180 and $130,988 respectively. 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 three-month period were $37,972
and for the same period in 2003 were $35,354 resulting in an increase of $2,618.
Transbanc International Investors Corporation, a wholly-owned subsidiary,
is a real estate holding company which leases its 115,000 square foot building
to four (4) industrial tenants and three (3) commercial tenants. Total rental
revenue for the three-months ended June 30, 2004 amounted to $171,269, an
increase of $7,019 compared to the three-months ended June 30, 2003. Management
anticipates a modest increase in revenue from this facility resulting from
modified leases for an extended period of time.
The company's Wildcat Properties owns a 24,000 square foot industrial
building located on 22 acres in Franklin, New Jersey, of which 3.5 acres were
the subject of an E.P.A. Superfund clean up. This property had been fully
restored and is presently occupied by two (2) tenants. Total revenues generated
at this facility for the quarter ended June 30, 2004 were $16,640 compared to
$15,728 for the quarter ended June 30, 2003, an increase of $912. Sale of this
property, with net proceeds going to the EPA and NJDEP, is expected to generate
over $600,000 toward the settlement agreement before selling expenses and legal
closing costs.
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LIQUIDITY
As of June 30, 2004, current assets amounted to $639,992 and current
liabilities totaled $355,977, reflecting a working capital of $284,015 and a
current ratio of 2.25 to 1. There was a negative cash flow of $72,067 for the
current three-month period due mainly to the net loss of $47,366.
RESULTS OF OPERATIONS
PRODUCT SALES. Technology General Corporation's manufacturing Segment
generated sales of $278,816 for the three-month period ended June 30, 2004.
RENTAL SALES. Total consolidated rental billings for the three-month period
ended June 30, 2004 amounted to $225,881 an increase of $10,549 over the same
period for June 30, 2003.
GROSS MARGIN. The consolidated gross profit margin for the three-months
ended June 30, 2004, was 45 percent.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. These expenses as a percent
of net sales were approximately 54 percent for the three-months ended June 30,
2004.
INTEREST. Total interest expense for the three-months ended June 30, 2004
amounted to $28,793 of which $28,357 is reflected under "Cost of Rentals" and
the remainder of $436 is shown as a separate line item within "Other Income
Expense)".
NET INCOME/LOSS. The net loss for the three-months ended June 30, 2004
amounted to $47,366 and the net loss for the comparable 2003 three-month period
was $64,786.
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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 12, 2004 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
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