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, 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)
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, 2004, the Registrant had 5,811,912 shares of Common Stock
outstanding and 131,839 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, 2004 3
Consolidated Statement of Operations
For the six months ended
September 30, 2004 and 2003 4
Consolidated Statement of Cash Flows
For the six months ended
September 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)
SEPTEMBER 30, 2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $143,028
Accounts receivable, net of allowance for doubtful
accounts of $5,700 198,267
Inventories 241,396
Prepaid expenses and other current assets 6,595
----------
Total current assets 589,286
PROPERTY, PLANT AND EQUIPMENT, net 1,801,617
OTHER ASSETS, NET 31,304
----------
$2,422,207
==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $157,960
Accounts payable and accrued expenses 265,455
----------
Total current liabilities 423,415
LONG - TERM DEBT:
Long-term obligations, net of current maturities 1,808,334
Security deposits 69,213
----------
Total long - term debt 1,877,547
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 (2,296,066)
----------
131,076
Less treasury stock, at cost, 74,316 (9,831)
---------
Total stockholders' equity 121,245
---------
$2,422,207
==========
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
------------------ ------------------
2004 2003 2004 2003
REVENUES:
Product sales $212,908 $319,931 $491,724 $602,452
Rentals 236,966 217,361 462,847 432,693
--------- -------- -------- ---------
449,874 537,292 954,571 1,035,145
COSTS AND EXPENSES:
Cost of product sales 136,354 192,308 317,362 361,208
Cost of rentals 94,683 104,910 191,585 213,991
Selling, general and
administrative expenses 262,476 449,355 536,563 732,676
-------- -------- -------- --------
493,513 746,573 1,045,510 1,307,875
-------- -------- --------- ---------
INCOME (LOSS) FROM
OPERATIONS (43,639) (209,281) (90,939) (272,730)
OTHER INCOME (EXPENSE):
Interest expense (152) (377) (588) (1,671)
Interest and Dividend
Income 240 76 319 415
Other 513 2,748 804 2,366
-------- -------- ------- --------
601 2,447 535 1,110
-------- -------- ------- --------
NET INCOME (LOSS)
BEFORE INCOME TAXES (43,038) (206,834) (90,404) (271,620)
INCOME TAXES 250 - 250 -
------- ------- -------- --------
$(43,288) $(206,834) $(90,654)$(271,620)
======== ======== ======== ========
See Accompanying notes to consolidated financial statements
4
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)
Six Months Ended
September 30
2004 2003
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (90,654) $(271,620)
Adjustments to reconcile net loss
to net cash provided by
(used in) operating activities:
Depreciation and amortization 49,298 60,390
Increase (decrease) in cash attributable to
changes in operating assets and liabilities:
Accounts receivable 22,609 55,228
Inventories 15,223 (23,195)
Prepaid expenses and other current assets 11,200 (394)
Other assets 4,171 1,572
Accounts payable and accrued expenses 53,117 117,822
Security deposits (5,000) -
------- --------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 59,964 (60,197)
------- --------
NET CASH USED IN INVESTING ACTIVITIES:
Purchases of property, plant,
and equipment (121,897) 0
------- --------
(121,897) -
======== ========
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (57,067) (35,217)
Payments on lawsuit reserve - (120,000)
Obligation to Canadian bank 0 206,000
Proceeds from issuance of long-term debt 46,500 -
-------- -------
(10,567) 50,783
-------- -------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (72,500) (9,414)
CASH AND CASH EQUIVALENTS,
beginning of period 215,528 173,641
------- --------
CASH AND CASH EQUIVALENTS, end of period $143,028 $164,227
======== ========
See accompanying notes to consolidated financial statements
5
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 six-month period ended September 30, 2004, Technology General
Corporation and subsidiary had consolidated revenues of $954,571 and net loss of
$90,654. 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.
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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 $122,520 and
$130,516 respectively, for a total of $253,036. The comparable sales for the
six-month period ending September 30, 2003 were $148,881 for Eclipse and
$174,736 for Clawson for a total of $323,617. The 2004 six-month combined sales
decreased $70,581 compared to the 2003 six-month total.
The Precision Metalform Division reported sales for the six-months ended
September 30, 2004 and 2003 of $238,687 and $278,834 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 six-month period were $75,943 and
for the same period in 2003 were $70,708 resulting in an increase of $5,235.
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, 2004 amounted to
$353,455 an increase of $21,001 compared to the six-months ended Spetember 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 six-months ended September 30, 2004 were $33,449
compared to $29,531 for the six-months ended September 30, 2003, an increase of
$3,918. 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.
8
LIQUIDITY
As of September 30, 2004, current assets amounted to $589,286 and current
liabilities totaled $423,415, reflecting a working capital of $165,871 and a
current ratio of 1.4 to 1. There was a negative cash flow of $72,500 for the
current six-month period due to the net loss of $90,654.
RESULTS OF OPERATIONS
PRODUCT SALES. Technology General Corporation's manufacturing
segment generated sales of $491,724 for the six-month period
ended September 30, 2004.
RENTAL SALES. Total consolidated rental billings for the six-month period
ended September 30, 2004 amounted to $462,847, an increase of $30,154 over the
same period for September 30, 2003.
GROSS MARGIN. The consolidated gross profit margin for the six-months ended
September 30, 2004, was 46.7 percent.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. These expenses as a percent
of net sales were approximately 56.2 percent for the six-months ended September
30, 2004.
INTEREST. Total interest expense for the six-months ended September 30,
2004 amounted to $52,459 of which $51,872 is reflected under "Cost of Rentals"
and the remainder of $587 is shown as a separate line item within "Other Income
(Expense)".
NET INCOME/LOSS. The net loss for the six-months ended September 30, 2004
amounted to $90,654 and the net loss for the comparable 2003 six-month period
was $271,620.
9
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: January 6, 2005 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
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