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, 1996
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 other 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: (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
----- -----
As of June 30, 1996, the Registrant had 5,093,278 shares of Common Stock
outstanding and 157,839 shares of Class A Common Stock outstanding.
-1-
<PAGE>
TECHNOLOGY GENERAL CORPORATION
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheet - June 30, 1996 3
Consolidated Statements of Operations
and for the three months ended
June 30, 1996 and 1995 4
Consolidated Statement of Cash Flows
for the three months ended
June 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
-2-
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
JUNE 30, 1996
ASSETS
- ---------------------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $85,891
Cash collateral account for letters of credit 165,000
Accounts receivable, net of allowance for doubtful
accounts of $1,000 494,212
Inventories 518,055
Deferred tax asset 27,000
Prepaid expenses and other current assets 77,815
-----------
Total current assets 1,367,973
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization of $4,166,520 2,077,864
OTHER ASSETS:
Deferred tax asset 173,000
Other 86,977
-----------
Total other assets 259,977
-----------
$3,705,814
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
- --------------------------------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $188,673
Accounts payable and accrued expenses 428,677
-----------
Total current liabilities 617,350
LONG - TERM DEBT:
Long-term obligations, net of current maturities 1,123,175
Reserve for contingency 343,500
Security deposits 43,845
-----------
Total long - term debt 1,510,520
STOCKHOLDERS' EQUITY:
Common stock,$.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 2,376,486
Accumulated deficit (803,950)
-----------
1,578,184
Less treasury stock, at cost, 780 shares (240)
-----------
Total stockholders' equity 1,577,944
-----------
$3,705,814
===========
See accompanying notes to consolidated financial statements
-3-
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30,
-----------------------
1996 1995
---------- ------------
REVENUES:
Product sales $671,577 $778,542
Rentals 135,825 103,887
---------- ------------
807,402 882,429
COSTS AND EXPENSES:
Cost of product sales 433,696 502,110
Cost of rentals 61,830 34,681
Selling,general and administrative expenses 334,555 335,186
---------- ------------
830,081 871,977
INCOME (LOSS) FROM OPERATIONS (22,679) 10,452
OTHER INCOME (EXPENSE):
Interest expense (5,514) (14,342)
Insurance recovery 66,708
Other 1,088 4,760
Provision for loss contingency (12,500)
---------- ------------
49,782 (9,582)
---------- ------------
NET INCOME $27,103 $870
========== ============
See accompanying notes to consolidated financial statements
-4-
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $27,103 $870
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 76,315 71,581
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (88,371) (90,939)
(Increase) decrease in inventories (12,426) 36,345
(Increase) decrease in prepaid assets and other current assets 76,450 2,380
(Increase) decrease in other assets 3,056 2,092
Increase (decrease) in accounts payable and accrued expenses (27,775) (24,287)
(Increase) decrease in accrual for loss contingency 12,500
---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 66,852 (1,958)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (68,117) (37,403)
Decrease in mortgage receivable 78,029
Deposits to cash collateral for letter of credit (34,624)
---------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (68,117) 6,002
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (36,811) (62,064)
Proceeds from issuance of notes payable 7,350 35,000
---------- ----------
NET CASH (USED IN) FINANCING ACTIVITIES (29,461) (27,064)
---------- ----------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (30,726) (23,020)
CASH AND CASH EQUIVALENTS, beginning of period 116,617 117,480
---------- ----------
CASH AND CASH EQUIVALENTS, end of period $85,891 $94,460
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
-5-
<PAGE>
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 June 30, 1996, the Company established an accrual for this loss
contingency of $343,500.
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.
-6-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
For the three-month period ended June 30, 1996, Technology General Corpora-
tion and subsidiary had consolidated revenues of $807,402 and a net income of
$27,103. Technology General Corporation, operating individually as a holding
company managing the various operating segments, does not generate revenue other
than allocating management expenses to the operating entities and leasing space
to a tenant.
The Eclipse and Clawson Divisions operate in combination with each other,
and total sales for the three-month period amounted to $280,081 and $95,544,
respectively, for a total of $375,625.
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 predominently by hotels
and restaurants where large volumes of crushed ice are required.
Clawson has also developed a new dry ice system which integrates into a
high velocity dry ice blasting machine. To date, six (6) systems have been
ordered for trial applications.
Eclipse Systems's sales for the three months ended June 30, 1996 increased
$3,652 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.
Technology General's Metal Forming Segment reported sales for the three
months ended June 30, 1996 and 1995 of $295,952 and $405,168, 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. Metaltec Division, 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 107,000 square foot building
to six (6) industrial tenants. Total rental income for the current quarter
ended June 30, 1996 amounted to $121,475, an increase of $20,063 over the
quarter ended June 30, 1995.
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 income for the three (3) months ended June 30, 1996 amounted to
$6,765 compared to zero for the comparable 1995 period.
Liquidity:
- ----------
As at June 30, 1996, current assets amounted to $1,367,973 and current
liabilities totalled $617,350, reflecting a working capital of $750,623 and a
current ratio of 2.22 to 1. Net cash flow remained fairly constant, amounting
to $85,891 and $94,460 for the three-month periods ended June 30, 1996 and 1995,
respectively.
-7-
<PAGE>
Results of Operations
---------------------
Product Sales. Technology General Corporation's manufacturing segment
--------------
generated sales of $671,577 for the three-month period ended June 30, 1996.
Rental Sales. Total consolidated rental billings for the quarter period
-------------
ended June 30, 1996 amounted to $135,825, a slight increase over the same period
for 1995.
Gross Margin. The consolidated gross profit margin for the three months
-------------
ended June 30, 1996, was 39 percent.
Selling, General, and Administrative Expenses. These expenses as a percent
----------------------------------------------
of net sales were approximately 41 percent for the three months ended June 30,
1996.
Interest. Total Interest expense for the quarter ended June 30, 1996
---------
amounted to $33,979, of which $28,465 is reflected under "Cost of Rentals" and
the remainder of $5,514 is shown as a separate line item within "Other Income
(Expense)".
Net Income/Loss. Net income for the three months ended June 30, 1996,
----------------
amounted to $27,103, an increase of $26,233 over the comparable three-month
period in 1995.
-8-
<PAGE>
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 11, 1996 TECHNOLOGY GENERAL CORPORATION
By: /s/ Charles J. Fletcher
___________________________________
Charles J. Fletcher
President, Chief Executive Officer,
Chairman of the Board
By: /s/ Athalyn M. Hopler
___________________________________
Athalyn M. Hopler
Secretary/Treasurer
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statement of operations found on pages 3 and 4 of the Company's
Form 10-QSB for the three months ended June 30, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 85,891
<SECURITIES> 165,000
<RECEIVABLES> 495,212
<ALLOWANCES> 1,000
<INVENTORY> 518,055
<CURRENT-ASSETS> 1,367,973
<PP&E> 6,244,384
<DEPRECIATION> 4,166,520
<TOTAL-ASSETS> 3,705,814
<CURRENT-LIABILITIES> 617,350
<BONDS> 1,311,848
0
0
<COMMON> 5,648
<OTHER-SE> 1,572,296
<TOTAL-LIABILITY-AND-EQUITY> 3,705,814
<SALES> 671,577
<TOTAL-REVENUES> 807,402
<CGS> 433,696
<TOTAL-COSTS> 830,081
<OTHER-EXPENSES> (55,296)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,514
<INCOME-PRETAX> 27,103
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,103
<EPS-PRIMARY> .004
<EPS-DILUTED> .004
</TABLE>
