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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-KSB
[X] Annual Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended March 31, 1996
[ ] Transition Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition Period From to
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Commission File No. 2-97732
TECHNOLOGY GENERAL CORPORATION
New Jersey 22-1694294
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State of Incorporation I.R.S. Employer Identification No.
12 Cork Hill Road, Franklin, New Jersey 07416
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Address of Principal Executive Office Zip Code
Registrant's Telephone No.: (201) 827-4143
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Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Title of Each Class: Common Stock
------------------- Common Stock Class A
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 (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
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State Registrant's Revenues for Most Recent Fiscal Year:
$3,303,256
State the aggregate market value of the voting common stock held by non-
affiliates of the registrant as of March 31, 1996, based on the closing bid on
such day of $3/16:
$433,721
Indicate the number of shares outstanding of the Registrant's class of
common stock as of March 31, 1996:
Common: 5,093,278
Common Stock Class A: 157,839
Transitional Small Business Disclosure Format:
Yes No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
THE COMPANY
Technology General Corporation ("Tech Gen") is the parent company and
successor to Aerosystems Technology Corporation incorporated in the State of New
Jersey in 1957 that operates four (4) divisions and one (1) subsidiary.
The Metaltec Division is engaged in the manufacture of a variety of deep
drawn metal components used primarily in the writing instruments industry and
cosmetic industry. The Eclipse Systems Division is engaged in the manufacture
of numerous products, primarily spray coating systems and industrial air-driven
mixers. Their spray coating systems are used primarily for coating industrial
products. Their industrial air-driven mixers are used primarily in the chemical
and food processing industries. The Clawson Machine Division is engaged in the
manufacture of a line of ice crushing equipment that is used primarily by hotels
and restaurants. The Aerosystems Division is the lessor of a 24,000 square foot
industrially-zoned building which presently has two tenants.
Transbanc International Investors Corporation ("Transbanc"), a wholly-owned
subsidiary, is primarily a real estate holding company engaged in leasing its
107,000 square foot industrial building. In addition, Tech Gen is the owner of
a planned substantial industrial park approved and known as the Franklin
Corporate Campus and other local properties suitable for industrial development,
all of which are currently in the undeveloped planning stage.
DIVISION OPERATIONS
The three (3) manufacturing divisions (Metaltec, Eclipse Systems, and
Clawson Machine) all operate from Tech Gen's industrial complex located in
Franklin, New Jersey. The corporate offices of Transbanc also are located at
the administrative facilities of Tech Gen.
EMPLOYEES
As of March 31, 1996, the Company had approximately forty-one (41) full-
time employees. The Company does not have a union, and Management considers its
employee relations to be satisfactory.
DISCUSSION OF DIVISIONS
1. METALTEC DIVISION:
During the past year, Metaltec's sales decreased by $131,278 or 8.5
percent, some of which may be attributable to production time lost as a result
of inclement weather. The Division is attempting to expand its customer base in
the writing instruments and advertising/specialty markets. Continued efforts to
reduce costs have been successful, and operating income as a percentage
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of net sales has increased slightly in spite of higher raw material costs.
Management anticipates reasonable stability in the general economy, which should
result in a modest sales increase during the coming fiscal year. Metaltec
manufactures a line of deep drawn metal components applicable to the cosmetic
and writing instruments industries. Other fields include automotive, medical,
and, on occasion, military components.
Throughout the past fiscal year, Management concentrated heavily on seeking
out an expanded customer base, primarily to increase sales and to develop a
wider base product line with increased capability. In this regard, marketing
was instrumental in acquiring several new customers in a variety of product
lines, including an expansion of production for jumbo refill writing instrument
tubes and a wide range of new cosmetic metal closures.
2. ECLIPSE SYSTEMS DIVISION:
Eclipse Systems's sales decreased 20.2 percent during the past fiscal year
from $1,286,534 for the fiscal year-end March 31, 1995 to $1,026,476 for the
fiscal year-end March 31, 1996. This $260,058 sales decline is viewed by
Management as temporary and primarily due to the Division's termination of a
specialized line of industrial mixers used by one customer. Management is
confident that current research and development expenditures and Eclipse's
aggressive ongoing marketing programs will result in increased sales and
profitability. The marketing program includes the introduction of a new line of
industrial mixers and continued growth in its new EnviroFlo industrial line of
"inplant" pollution control systems. Over the past two years, specialized "air-
driven" explosion-proof industrial mixers have become a primary source of
Eclipse Systems's sales, and future contemplated business is expected to grow.
Eclipse has recently designed and developed a special line of chemical mixers,
which is expected to expand sales in the air-driven mixer market. Military
sales are anticipated to continue to be soft due to the improvement of
international relations and simultaneous reduction in military budgets.
Eclipse Systems manufactures spray guns and related items and supplies a
variety of industrial and automotive components. Eclipse is presently a
distributor for the high performance Sicmo turbine high volume low pressure
("HVLP") spray systems designed to meet current U. S. Environmental Protection
Agency ("E.P.A.") standards for spray coating operations. The French Sicmo
turbine systems provide tried and proven solutions to the commercial and
automotive industries. In addition, a variety of handgun models are also being
made available with the Sicmo line.
3. CLAWSON MACHINE DIVISION:
Clawson Machine Division manufactures a line of ice crushing machines used
primarily in the restaurant/hotel field. Throughout this past year, Clawson
redesigned several of its products to meet the stringent National Sanitation
Foundation (N.S.F.) specifications required by the food handling industry. In
this regard, several design modifications have been finalized at the close of
the past fiscal year. It is anticipated that these changes will improve sales
distribution during the current fiscal
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year and will include a number of redesigned products having greater marketing
potential where ice shavers are concerned.
Clawson's overall sales increased $66,058 to $361,845 for the fiscal year
ended March 31, 1996 compared to the fiscal year ended March 31, 1995 sales of
$295,787. The resultant 22.3 percent increase in sales occurred primarily in
the Division's ice crushing line, which Management attributes to product
improvement, name recognition through increased national advertising and trade
show attendance, and sales incentives to distributors. Operating income
basically remained the same due to the increased advertising budget which
ultimately should result in long-term financial benefits.
Clawson's Plus Crusher is a new product which is used in conjunction with
leading ice cube makers; i.e., Scotsman, Manitowoc, Ice-O-Matic, and others.
Sales for this new U. S. patented product were slightly higher this fiscal year.
This product is listed by the National Sanitation Foundation ("N.S.F.") and
Underwriters Laboratories ("U.L."). Management believes that Clawson is the
only entity that has obtained the N.S.F. listing for its ice crushing products,
which are of major interest to all ice cube machine manufacturers, hotels
owners, and restaurants.
Clawson has also developed a new dry ice system which integrates into a
high velocity dry ice blasting machine. This concept is unique in that it
provides a means to accomplish what is generally known as sandblasting without
the use of sand. This system permits the blasting of dry ice which, after
impact, dissipates into the air as residual CO2 gas, resulting in less
pollution, dust, and general environmental improvements. To date, six (6)
systems have been ordered for trial applications.
DIVISION MARKETING
1. METALTEC DIVISIONS:
The Metaltec Division provides its products primarily to domestic companies
engaged in the manufacture of writing instruments and/or cosmetic closures.
Metaltec's marketing strategies include the placement of selected ads in
technical journals and/or The Thomas Register and is generally known through
information provided by the Writing Instruments Association.
Metaltec is considered one of two major manufacturers of writing instrument
components in the United States. Their primary products consist of caps,
barrels, and refill tubes, which make up the primary components of writing
instrument assemblies. Cosmetic closures are directly provided to the cosmetic
companies that manufacture a variety of products requiring metal closures.
Metaltec's facilities include special operations which create unique
designs on both writing instrument components and cosmetic closures, which
generally are made to customer specifications.
Metaltec engages two individuals who represent the Company in specified
areas throughout the United States. These representatives function on a
commission selling basis.
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2. ECLIPSE SYSTEMS DIVISION:
Eclipse Systems's marketing is also done through a variety of industrial
publications with advertisements highlighting its variety of products. Ads are
primarily focused on reaching industrial consumers for filtration systems, spray
equipment and accessories, and a variety of industrial air-driven mixers.
The Division has recently expended its marketing program through attendance
at selected trade shows held at various locations throughout the United States.
Results have thus far been quite favorable with increased interest being shown
by prospective customers which will ultimately lead to expanded sales.
Eclipse also provides a number of selected distributors located throughout
the United States that represent its specified products. Eclipse recently
acquired distributorship rights for high performance Sicmo turbine HVLP spray
systems that are designed to meet current E.P.A. standards for spray coating
operational use. The French Sicmo turbine systems provide tried and proven
solutions to the commercial and automotive industries. This market is currently
being established and is expected to increase throughout the coming year.
3. CLAWSON MACHINE DIVISION:
Clawson's ice crushers are also marketed through a number of industrial
magazines primarily geared to the hotel/motel industry. Clawson's ice crushers
are designed to integrate with a number of conventional ice cube maker machines;
i.e., Scotsman, Manitowoc, Ice-O-Matic, and Crystal Tips.
Clawson's Plus Crusher is a relatively new patented product which is
gaining worldwide acceptance. This product is also listed in National
Sanitation Foundation and carries its authorized seal (N.S.F.).
Marketing of Clawson's crushers are also done through United States
distributors who provide equipment to the hotel and restaurant industries.
COMPETITION
The Metaltec Division is believed to be one of two companies within the
United States who supply in excess of 80 percent of the major components for
domestic writing instrument manufacturers. Both Metaltec and its competitor
enjoy supplying common customers depending on their needs, lead time, and
selected specifications. Metaltec is a direct competitor with several firms
engaged in the manufacture of cosmetic closure caps and, in this regard, has
found competition to be keen and subject to special fabrication capabilities and
pricing strategies.
The Eclipse Systems Division is one of several companies in the United
States and abroad engaged in the manufacture of spray coating systems and
equipment. Subsequently all of Eclipse Systems's equipment is proprietary in
nature and is often custom- made to the customer's own specifications. In
addition, Eclipse Systems has developed over the past several years an extensive
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line of industrial air-driven mixers, which is used primarily where explosive
atmospheres are prevalent. Many of these mixers are currently sold through
various distributors throughout the United States. Because the bulk of Eclipse
Systems's mixers are custom-made, Eclipse enjoys a market that is not subject to
strong competition.
The Clawson Machine Division is one of several small companies throughout
the United States that is engaged in ice crushing equipment for both the hotel
and restaurant industries. Several of Clawson's machines are proprietary in
nature and design, one of which is a unit referred to as the "Plus Crusher",
which is protected by a United States patent. Because Clawson's products are
largely proprietary in nature, it is not subject to severe competition.
CURRENT OPERATING ENVIRONMENT:
The consolidated statement of operations for the fiscal year-end March 31,
1996 indicates a net loss of $147,730. Management is confident that improved
operating results will be forthcoming due to their commitment of increasing
revenues through aggressive and innovative marketing techniques and their
continued efforts to decrease costs while maintaining product quality.
Transbanc International Investors Corporation, a 100 percent owned real
estate operation, has established a substantial rental income base developed
from six (6) industrial rental tenants, which is expected to maintain rental
income of approximately $486,000 through March 31, 1997. These industrial
rental tenants are believed to be the result of a substantial improvement from
the weakened economic conditions that existed through the early 1990's.
Although the Company still has not completely settled its environmental
claims (see Item 3 for further details), the Company has been able to informally
reach a proposed settlement, which is now being reviewed for final acceptance.
This settlement is being structured to allow the Company to meet the cashflow
requirements to liquidate this claim on an orderly basis. In conjunction with
this effort, the Company is reviewing the possibilities of engaging an
environmental law firm for the purpose of entering into litigation with its
catastrophic insurance carriers to recover its prior losses.
During the fiscal year ended March 31, 1996, the Company restructured its
primary source of long-term debt. Terms of the new debt are more financially
favorable to the Company with the result that interest expense will decrease.
The following summarizes Management's plans which, if successful and if
implemented on a timely basis, could give the Company the ability to
substantially improve its operating income base:
1. Continue to aggressively market several new products in all divisions which
have recently been developed to increase sales.
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2. Increase the sales of its core product lines by identifying and marketing
to new customers and increasing sales to existing customers.
3. Aggressively pursue the necessary environmental legal permits to market the
availability of 15 new industrial sites at the Company's Franklin Corporate
Campus in order to maximize income and cash flows.
4. Continue to aggressively monitor and control operating costs in an attempt
to reduce such costs to their lowest possible level.
5. Continue to evaluate various underwriting concepts in order to acquire
public financing for acquisition purposes and development of plant sites
located at the Company's industrial complex.
6. Continue to liquidate non-business related land and/or buildings that no
longer relate to the Company's future business growth plans. (See
Environmental Matters.)
7. Continue to develop and/or acquire new divisional products which will form
the basis for continued growth and sales for years to come.
REGISTRATION
Tech Gen (the Company) is a publicly traded holding company that is listed
currently in the pink sheets and subject to the rules and regulations governed
by the Securities and Exchange Commission. It is required periodically to
submit detailed operating and financial reports to the S.E.C. and to furnish any
other information that the authority may require. The Company's stock is traded
over the counter, and its transfers are handled through The Registrar and
Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016.
SIGNIFICANT CUSTOMERS
For the year ended March 31, 1996, the Clawson Division had sales of
$59,958 to one (1) major customer which accounted for 17 percent of the total
sales of $361,845.
One major customer accounted for 28 percent of Eclipse Systems Division's
sales. The balance of sales were widely distributed among the Division's varied
customers.
The Metaltec Division has two customers which together represent 72 percent
of Metaltec's total sales. Sheaffer Pen represents 45 percent, and Accutec,
Inc. represents 27 percent. The balance of customers are drawn from a wide
range of industries, none of which account for more than 10 percent of
Metaltec's total sales.
ITEM 2. DESCRIPTION OF PROPERTY
The Company occupies approximately 71,000 square feet in its own industrial
park, which houses its various administrative
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offices and manufacturing facilities, including Metaltec Division, Eclipse
Systems Division, Clawson Machine Division, Aerosystems Technology, and
Transbanc International Investors Corporation.
The Company also owns an industrial site in Franklin, New Jersey comprising
106 acres, which has been approved for 15 planned plant sites. This site
includes a 86,000 gallon per day sewer allocation and has a main water line
installed through the property.
Adjoining this acreage is a 107,000 square foot industrial building located
on Munsonhurst Road owned by the Company's subsidiary, Transbanc. The majority
of this facility is leased to various business interests.
The Company's Aerosystems Technology Division owns a 24,000 square foot
industrial building located on 22 acres in Franklin, New Jersey, of which 3.5
acres are the subject of an E.P.A. Superfund cleanup. This property has been
restored and is presently partially occupied by two (2) tenants. The Division
is currently seeking to sell or lease this building. (See Environmental
Matters.)
ITEM 3. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
On December 6, 1990, the Company received a memorandum from the United
States Department of Justice outlining the contemplated settlement of a claim
between the Company and the Environmental Protection Agency (E.P.A.).
Management questions the terms of settlement as being unrealistic with respect
to the Company's ability to meet the payment conditions of the subject plan.
The settlement agreement, which is currently under review by Management,
would initially require the Company to pay $25,000 cash upon execution of the
Consent Decree and issue a $206,000 note to the E.P.A. payable over five (5)
years. Additionally, a balloon payment in the amount of $150,000 would be
payable five (5) years from the date of approval of the agreement. Other
stipulations state the U. S. Government would receive 60 percent of the net
rental income derived from the property and 60 percent of the net proceeds upon
sale of the property. As of March 31, 1996, the Company has a $331,000
liability on its Consolidated Balance Sheet relative to the above proposal.
As of March 31, 1996, the Company received assurances from the U. S.
Department of Justice that they are still prepared to recommend to the
appropriate government officials that the United States Government accept a
modified offer made by the Company. A Consent Decree has been drafted by the
United States Government and is being circulated within the government
preparatory to be forwarded to the Company's legal counsel for final
consideration. Modifications and revisions to the Consent Decree are being
reviewed that both legal counsel and the Company believe will result in an
equitable settlement agreement for both the Company and the E.P.A.
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Recently the Company searched its insurance files for possible coverage of
the Company's environmental liability coverage. This search revealed a minimum
of four (4) carriers that may be required to support the Company's losses under
its catastrophic coverage. Legal counsel is currently reviewing the case matter
for potential litigation.
OTHER LEGAL MATTERS
The Company has filed a lawsuit against E.L.F. Lubricants, N.A. for damages
of $63,120 caused by the delivery of special lubricants improperly identified by
E.L.F.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION
The Corporation's Common Stock is traded in the over-the-counter market.
The Company has three security firms to represent the Company.
Since the Company's merger with its subsidiary, Aerosystems Technology
Corporation, the Company (Technology General Corporation) has experienced
limited trading in the over-the-counter market. The following tables show for
the calendar periods indicated the representative high and low bid prices as
reported by the National Quotation Bureau, Inc. of the Corporation's Common
Stock for its past two fiscal years. Such prices represent quotations between
dealers without adjustments for retail mark-up, mark-down, or commissions and do
not necessarily represent actual transactions.
Common Stock
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Bid
---
Fiscal Year Ended March 31, 1996 High Low
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First Quarter 3/16 1/16
Second Quarter 1/2 1/16
Third Quarter 5/16 1/16
Fourth Quarter 3/16 1/8
Common Stock
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Bid
---
Fiscal Year Ended March 31, 1995 High Low
- -------------------------------- ---- ---
First Quarter 13/32 5/32
Second Quarter 13/32 5/32
Third Quarter 13/32 5/32
Fourth Quarter 13/23 5/32
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STOCK QUOTATIONS
The above quotations as reported by the Electronic Bulletin Board for over-
the-counter stocks do not necessarily reflect the true value of the Company's
stock because of the considerable disparity resulting from the Company's real
estate holdings, which are undervalued based on current appraised values.
HOLDERS
The approximate number of holders of Common Stock of record of the
Corporation on March 31, 1996 was 471. As of March 31, 1996, the number of
holders of Common Stock Class A was 15.
DIVIDENDS
The Company has not paid any cash dividends since its inception, and the
Board of Directors does not contemplate doing so in the near future. Any
decision as to the future payment of dividends will depend on the earnings and
financial position of the Company and such other factors as the Board of
Directors deems relevant.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This analysis of the Company's financial condition, capital resources, and
results of operations should be viewed in conjunction with the accompanying
financial statements, including notes thereto.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $740,997 at March 31, 1996, and the current ratio was
2.17 to 1. The decrease in working capital of $83,520 was primarily
attributable to the collection of a mortgage receivable with the proceeds being
used to purchase capital assets.
Net cash flow from operations was approximately $130,000 for the year ended
March 31, 1996, which was primarily attributable to depreciation and
amortization of $308,771 which was offset by the net loss amounting to $147,730.
For the year ended March 31, 1995, net cash flow from operations was
approximately $530,000, which was primarily attributable to net income and
depreciation and amortization aggregating approximately $724,000 reduced by
deferred income taxes of approximately $188,000.
During the current fiscal year, the Company restructured its term notes A
and B payable to a bank. The Company converted the outstanding balances of
these notes and borrowed an additional $65,000 to be used as collateral for its
letter of credit facility. The note is payable in monthly installments of
principal and interest at a fixed rate of prime plus 1 percent per annum through
August 1, 2000, at which time the remaining unpaid principal balance will be
due. The note is secured by first mort-
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gages on the Company's real estate holdings as well as an assignment of leases
and rents from its rental operations and all other assets of the Company.
RESULTS OF OPERATIONS (CONSOLIDATED)
The following table sets forth the statement of operations for the Company
on a consolidated basis for the years ended March 31, 1996 and March 31, 1995.
This information should be read in conjunction with the consolidated financial
statements and notes appearing elsewhere herein.
1996 1995
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Revenue:
Product Sales $2,802,845 $3,128,123
Rental Income 500,411 524,915
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3,303,256 3,653,038
Costs and Expenses:
Cost of Product Sales 1,816,095 2,013,516
Cost of Rentals 200,214 176,828
Selling, General, and Administrative 1,354,318 1,252,547
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3,370,627 3,442,891
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Income (Loss) From Operations (67,371) 210,147
Other Income (Expense) (92,359) 25,974
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Income (Loss) Before Income Tax
Expense (Credit) (159,730) 236,121
Income Tax (Credit) (12,000) 188,000)
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Net Income (Loss) $ (147,730) $ 424,121
Net Income (Loss) per Common Share $ (.03) $ .07
Current Ratio 2.2 2.3
Weighted Average Number of Shares
Outstanding Used in Computing
Earnings Per Share 5,683,350 5,665,350
YEAR ENDED MARCH 31, 1996 COMPARED TO YEAR ENDED MARCH 31, 1995
(SEE DESCRIPTION OF BUSINESS - DISCUSSION OF DIVISIONS)
Technology General Corporation generated revenues of $3,303,256 and
$3,653,038 for the years ended March 31, 1996 and 1995, respectively. Product
manufacturing revenues were $2,802,845 and $3,128,123 in 1996 and 1995,
respectively, while rental income was $500,411 and $524,915 in 1996 and 1995,
respectively. Combined sales of the Eclipse Division and the Metaltec Division
declined approximately $391,000 whereas the Clawson Division's sales modestly
increased about $66,000. Transbanc's rental revenue basically remained
unchanged with the slight decrease due mainly to financial reporting
differences. The property and building owned by Transbanc continues to increase
in
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value as a result of improvements and renovations made by the Company. This
investment will ultimately provide greater rental income.
During the year, the Metaltec Division moved to replace some of its
cosmetic product business with a diversified line of deep drawn products by
targeting specialty items that generate volume orders. In this category is
included writing instrument refill tubes and specialty writing instrument tubes.
Also greater attention is being placed on the higher priced components used by
major writing instrument manufacturers which are fabricated from 24 karat gold
and pure silver.
The Eclipse Systems Division continued to expand its air-driven mixer line
of products that are used primarily in the food and chemical industry
businesses. Over the past several years, Eclipse Systems has added a variety of
new designs custom-made to meet special industry requirements and has further
expanded the line by offering for the first time a number of electrical-driven
mixers to broaden its competitive base.
The combined net loss for the manufacturing divisions amounted to $114,449
after the allocation of Technology General Corporation's administration expense.
When compared to the combined net income of $89,840 for the fiscal year-end
March 31, 1995, the resultant negative turnaround of $204,289 is primarily
attributable to the decrease in sales and reduction in other income, mainly an
insurance recovery of $71,000. Transbanc International Investors Corporation
(wholly-owned subsidiary) sustained a net loss of $40,532 for the current fiscal
year compared to net income of $123,693 the previous fiscal year. The $164,225
loss in net income is due to the corporation's absorption of a greater
percentage of administrative expenses and the absence of any insurance recovery,
which amounted to $32,416 in fiscal year ended March 31, 1995.
ITEM 7. FINANCIAL STATEMENTS
See Index to Financial Statements attached hereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
COUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have qualified.
Directors do not receive remuneration for their services as such, but may be
reimbursed for expenses incurred in connection therewith, such as the cost of
travel to Board meetings. All Directors may receive an annual fee of $200.00
payable in stock at the option of the Board of Directors.
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CHARLES J. FLETCHER (age 73) was the founder of Aerosystems Technology
Corporation prior to its merger with the Company and has been its President and
a Director since its reorganization in 1987. He has been the President and
Chairman of the Board of Directors of Technology General Corporation and
subsidiary. He is a Lt. Commander of the U.S.N.R. (retired) and former Navy
aviator. He has been associated with several companies in the Aerospace field
as an engineer and holds several patents.
JEFFREY C. FLETCHER (age 43) is President of Metaltec Division. He has
been associated with Metaltec for eleven years, starting in Sales and
Administration. Mr. Fletcher attended Husson College in Bangor, Maine and
County College of Morris in New Jersey prior to his employment by Metaltec. He
is the son of Charles J. Fletcher and Helen S. Fletcher. He is also a Director
of the subsidiary.
ATHALYN M. HOPLER (age 46) joined Aerosystems in 1983. She is currently
Executive Secretary and Assistant to the President of Technology General
Corporation. Prior to joining Aerosystems, she served as Administrative
Secretary for RCA Records in Rockaway, New Jersey for six years. She graduated
with an Associates of Arts Degree in Business Administration from Rider College
in June of 1969, where she achieved honors and Dean's List.
HELEN S. FLETCHER (age 65) served from 1947 to 1951 as a cashier and
bookkeeper for the Bank of Sussex County, Franklin, New Jersey and Seaboard
National Bank, Norfolk, Virginia. From 1952 to 1953, she was cashier of Sussex
and Merchants National Bank, Sparta, New Jersey. She is the wife of Charles J.
Fletcher. She was a co-founder of the Company and currently serves as Assistant
Secretary and Assistant Treasurer.
DARREN ELG (age 43) is President of Eclipse Systems Division
and is an Engineering graduate holding a B.S.C.E. from Georgia Institute of
Technology. He came to Eclipse Systems with a diversified background in
Engineering, Management, and Sales. He was formerly employed by Interpace
Corporation with engineering responsibilities. He managed a staff of project
engineers as well as coordinated procurement of materials and manufacturing for
highly technical systems and projects.
DONALD T. SIENKIEWICZ (age 61) is Corporate Controller with full financial
responsibilities, including all accounting functions. A certified public
accountant, he is a member of the New Jersey State C.P.A.'s and the American
Institute of C.P.A.'s. Prior to his present employment with the Company, he was
Controller of a medium-sized catalog and showroom sales retailer/wholesaler and
had been employed in public accounting by a large (Big 6) international
accounting firm.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following provides certain information concerning all compensation
awarded to, earned by, paid or accrued by the Registrant for the year ended
March 31, 1996, to each of the named executive officers of the Registrant.
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EXECUTIVE CAPACITY
Name Position
- ---- --------
Charles J. Fletcher President, Chairman of the Board
Jeffrey C. Fletcher Executive Vice President, Director
Athalyn M. Hopler Secretary/Treasurer, Director
Helen S. Fletcher Asst. Treasurer/Asst. Secretary, Director
Darren Elg Director
Donald T. Sienkiewicz Director
COMPENSATION
Name of Individual Cash
or Group Capacity in Which Served Compensation
- ------------------ ------------------------ ------------
Charles J. Fletcher President/Chrm. of Board $137,689
No other executive officer receives compensation in excess of $100,000.
(1) The Company owns automobiles for four Executive officers. The cars were
used primarily for business purposes.
(2) None of the Executive officers have employment agreements with the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of March 31, 1996, certain information
with respect to all those known by the Company to be beneficial owners of more
than 5 percent of its outstanding voting stock, each director owning shares of
voting stock and all directors and executive officers as a group. Each
stockholder has sole voting and investment power with respect to the shares
beneficially owned unless otherwise indicated in the footnotes below.
15
<PAGE>
Name and Address Number of Shares Number of Shares Percentage of
Beneficial Owner of Common Stock of Class A Stock Beneficial
or Identity of Beneficially Beneficially Ownership
Group Owned Owned
- ---------------- ---------------- ---------------- -------------
Charles J. Fletcher(1) 1,357,500 25,000 24.4%
7 Valley Road
Sparta, NJ 07871
Jeffrey C. Fletcher(2) 422,439 20,000 7.8%
82 Birch Parkway
Sparta, NJ 07871
Helen S. Fletcher((3) 1,065,500 20.3%
7 Valley Road
Sparta, NJ 07871
Athalyn M. Hopler(4) 7,000 0%
309 Wantage Avenue
Branchville, NJ 07826
Darren Elg(5) 10,500 30,000 0%
11 Tudor Hill Drive
Sussex, NJ 07461
Evelyn Padalino 382,916 5.8%
35 Gail Road
Morris Plains, NJ 07950
All officers and directors as a group total six and own 2,855,939 Common shares
and 82,000 Class A shares.
- ---------------------
(1) Charles J. Fletcher is also a Trustee of voting trusts covering an
additional 144,000 shares of Common Stock (2.5%).
(2) Jeffrey C. Fletcher is Executive Vice President and Director of the Company
and President of Metaltec Division.
(3) Helen S. Fletcher is a co-founder and Director of the Company.
(4) Athalyn M. Hopler is Secretary/Treasurer and Director of the Company.
(5) Darren Elg is a Director of the Company, President of Eclipse Systems
Division and Clawson Machine Division.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 1, 1993, the Board of Directors voted to award a grant of shares
of Common Stock and Class A Common Stock to certain individuals. The shares are
to be issued only upon the completion of five (5) years of uninterrupted service
commencing April 1, 1993. Shares are earned at the rate of 20 percent per
annum. Shares issued prior to the 5-year period would only be issued on a pro
rata basis subject to termination of the employee by Management. Grants for
Common Stock and Class A Common Stock have been awarded to the following Key
Employees:
16
<PAGE>
Athalyn M. Hopler 10,000 shares of Class A Common
Lois Elg 10,000 shares of Class A Common
Darren Elg 20,000 shares of Class A Common
Jeffrey C. Fletcher 20,000 shares of Common
Charles J. Fletcher 30,000 shares of Common
Upon issuance of the above-stated Class A Common Shares, such shares ay be
converted on a one-for-one basis into shares of the Company's Common Stock at
the option of the shareholder. Such conversion is restricted until two years
after the issuance of the Class A Common Stock.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8K
(a) The following documents are filed or part of this report:
1. FINANCIAL STATEMENTS
Independent Auditors Report (F-1)
Consolidated Balance Sheet (F-2)
Consolidated Statements of Operations (F-3)
Consolidated Statements of Stockholders' Equity (F-4)
Consolidated Statements of Cash Flows (F-5-6)
Notes to Consolidated Financial Statements (F-7-16)
2. EXHIBITS
Description Incorporation by reference -
Previous Designation
----------- ----------------------------
Certificate of Incorporation *
Voting Trust Agreement *
By-Laws *
Specimen of Stock Certificate
(Common) *
Specimen of Stock Certificate
(Class A Common) *
Statement Regarding Computation
of Per Share Earnings **
*Incorporated herein by reference to Registrant's Registration
Statement on S-14 effective on April 23, 1987 (SEC File No. 2-97732).
**See Consolidated Financial Statements.
(b) Reports on Form 8K - None
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized in the Borough of
Franklin, State of New Jersey, on the 12th day of July, 1996.
TECHNOLOGY GENERAL CORPORATION
By: /s/ Charles J. Fletcher
------------------------------
Charles J. Fletcher, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Charles J. Fletcher President/Chairman of 7/12/96
- ------------------------- the Board
Charles J. Fletcher
/s/ Jeffrey C. Fletcher Executive Vice President/ 7/12/96
- ------------------------- Director
Jeffrey C. Fletcher
/s/ Athalyn M. Hopler Secretary/Treasurer/ 7/12/96
- ------------------------- Director
Athalyn M. Hopler
/s/ Helen S. Fletcher Asst. Secretary/Asst. 7/12/96
- ------------------------- Treasurer/Director
Helen S. Fletcher
/s/ Darren A. Elg Director 7/12/96
- -------------------------
Darren A. Elg
/s/ Donald T. Sienkiewicz Director 7/12/96
- -------------------------
Donald T. Sienkiewicz
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TECHNOLOGY GENERAL CORPORATION
/s/ Charles J. Fletcher
------------------------------------
Charles J. Fletcher,
President, Chief Executive Officer,
Chairman of the Board
/s/ Athalyn M. Hopler
------------------------------------
Athalyn M. Hopler
Secretary/Treasurer
Date: July 12, 1996
19
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONTENTS
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEET F-2
CONSOLIDATED STATEMENTS OF OPERATIONS F-3
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS F-5 - F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7 - F-16
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Technology General Corporation and Subsidiary
We have audited the accompanying consolidated balance sheet of Technology
General Corporation and Subsidiary as of March 31, 1996 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended March 31, 1996 and 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Technology General Corporation and Subsidiary at March 31, 1996, and the
consolidated results of their operations and their cash flows for the years
ended March 31, 1996 and 1995 in conformity with generally accepted accounting
principles.
/s/ Rothstein, Kass & Company, P.C.
Roseland, New Jersey
June 20, 1996
F-1
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31, 1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 116,617
Cash collateral account for letters of credit
(NOTE 11) 165,000
Accounts receivable, net of allowance for
doubtful accounts of $1,000 405,841
Inventories (NOTE 3) 505,629
Deferred tax asset (NOTE 9) 27,000
Prepaid expenses and other current assets 154,265
----------
Total current assets $ 1,374,352
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization of $4,116,553 (NOTE 4) 2,086,061
OTHER ASSETS:
Goodwill, less accumulated amortization of $46,765 45,727
Deferred tax asset (NOTE 9) 173,000
Other 44,306
----------
263,033
-----------
$ 3,723,446
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Long-term debt, current portion (NOTE 5) $ 176,903
Accounts payable 287,654
Accrued expenses and other (NOTE 6) 168,798
----------
Total current liabilities $ 633,355
LONG-TERM LIABILITIES:
Long-term debt, less current portion (NOTE 5) 1,164,405
Accrual for loss contingency (NOTE 11) 331,000
Security deposits 43,845
----------
Total long-term liabilities 1,539,250
COMMITMENTS AND CONTINGENCIES
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 (831,053)
----------
1,551,081
Less treasury stock, at cost, 780 shares (240)
----------
Total stockholders' equity 1,550,841
-----------
$ 3,723,446
-----------
-----------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-2
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended March 31, 1996 and 1995
1996 1995
------------ ------------
REVENUES:
Product sales $ 2,802,845 $ 3,128,123
Rentals 500,411 524,915
------------ ------------
3,303,256 3,653,038
------------ ------------
COSTS AND EXPENSES:
Cost of product sales 1,816,095 2,013,516
Cost of rentals 200,214 176,828
Selling, general and administrative expenses 1,354,318 1,252,547
------------ ------------
3,370,627 3,442,891
------------ ------------
INCOME (LOSS) FROM OPERATIONS (67,371) 210,147
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (net of interest income of
$9,027 in 1996 and $10,886 in 1995) (63,206) (64,394)
Other 20,847 33,252
Insurance recovery 107,116
Provision for loss contingency (NOTE 11) (50,000) (50,000)
------------ ------------
(92,359) 25,974
------------ ------------
NET INCOME (LOSS) BEFORE INCOME TAX CREDIT (159,730) 236,121
INCOME TAX CREDIT (12,000) (188,000)
------------ ------------
NET INCOME (LOSS) $ (147,730) $ 424,121
------------ ------------
------------ ------------
NET INCOME (LOSS) PER COMMON SHARE $ (.03) $ .07
------------ ------------
------------ ------------
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
USED IN COMPUTING EARNINGS (LOSS) PER SHARE 5,683,350 5,665,350
------------ ------------
------------ ------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
Class A
Common Stock Common Stock Additional Treasury Stock
------------------- --------------- Paid-in Accumulated ---------------
Shares Amount Shares Amount Capital Deficit Shares Amount Total
--------- ------ ------- ------ ---------- ----------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, March 31, 1994 5,490,228 $5,490 157,839 $158 $2,376,486 $(1,107,444) 500 $(100) $1,274,590
STOCK ACQUIRED FOR
TREASURY (NOTE 7) 280 (140) (140)
NET INCOME 424,121 424,121
--------- ------ ------- ---- ---------- ----------- --- ----- ----------
BALANCES, March 31, 1995 5,490,228 5,490 157,839 158 2,376,486 (683,323) 780 (240) 1,698,571
NET LOSS (147,730) (147,730)
--------- ------ ------- ---- ---------- ----------- --- ----- ----------
BALANCES, March 31, 1996 5,490,228 $5,490 157,839 $158 $2,376,486 $ (831,053) 780 $(240) $1,550,841
--------- ------ ------- ---- ---------- ----------- --- ----- ----------
--------- ------ ------- ---- ---------- ----------- --- ----- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 31, 1996 and 1995
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (147,730) $ 424,121
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 308,771 300,743
Recovery of doubtful accounts (4,304) (24,929)
Deferred income tax credit (12,000) (188,000)
Changes in operating assets and liabilities:
Decrease in accounts receivable 25,908 22,773
(Increase) decrease in inventories 50,309 (21,512)
(Increase) decrease in prepaid expenses and other
current assets (81,377) 9,572
(Increase) decrease in other assets (20,925) 2,234
Increase in accounts payable 10,102 3,712
Decrease in accrued expenses and other (52,302) (45,693)
Increase (decrease) in security deposits 3,255 (2,924)
Increase in accrual for loss contingency 50,000 50,000
----------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 129,707 530,097
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (213,208) (182,475)
Proceeds from (payments for) mortgage receivable 102,708 (7,462)
Deposits to cash collateral account for letters of credit (78,765)
Proceeds from cash collateral account for letters of credit 2,483
----------- ---------
NET CASH USED IN INVESTING ACTIVITIES (189,265) (187,454)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 1,260,256 4,190
Principal payments on long-term debt (1,201,561) (323,811)
Purchase of common stock for treasury 140
----------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 58,695 (319,481)
----------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (863) 23,162
CASH AND CASH EQUIVALENTS, beginning of year 117,480 94,318
----------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 116,617 $ 117,480
----------- ---------
----------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended March 31, 1996 and 1995
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION, cash paid during the year for interest $ 133,330 $ 145,518
----------- ---------
----------- ---------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES, asset recorded pursuant to
obligation under capital lease $ 23,824 $ -
----------- ---------
----------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS:
Technology General Corporation operates in the following industries:
manufacture of deep-drawn metal-formed products, manufacture of ice
crushing and shaving equipment and distribution of spray coating and
industrial mixer systems. The Company sells its products to a wide variety
of users primarily throughout the United States. The Company's subsidiary
(Transbanc International Investors Corporation) owns and rents a 109,000
square foot commercial building in Franklin, New Jersey.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of Technology General Corporation and its wholly-owned
subsidiary Transbanc International Investors Corporation (the "Company").
All intercompany balances and transactions have been eliminated in
consolidation.
INVENTORIES - Inventories, which include material, labor and overhead
costs, are stated at the lower of cost or market, with cost determined on a
first-in, first-out (FIFO) basis.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment, including
labor costs capitalized for tooling of machine parts and the renovation of
certain buildings, are stated at cost less accumulated depreciation and
amortization. Expenditures for maintenance and repairs are charged to
expense as incurred. The Company provides for depreciation and
amortization primarily using the straight-line method over the estimated
useful lives of the various assets as follows:
ASSET ESTIMATED USEFUL LIVES
--------- -----------------------
Buildings and improvements 25-40 Years
Land improvements 10 Years
Machinery and equipment 5-10 Years
Furniture and fixtures 5-10 Years
Office equipment 5-10 Years
Transportation equipment 3-5 Years
GOODWILL - Goodwill is being amortized on the straight-line basis over its
estimated useful life of 20 years.
CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, cash and
cash equivalents include cash on hand and interest bearing time deposits
with an initial maturity of less than 90 days.
NET INCOME (LOSS) PER COMMON SHARE - Net income (loss) per common share is
computed based on the weighted average number of common and common
equivalent shares outstanding during the year. Common stock equivalents
include shares issuable upon exercise of outstanding stock options when
dilutive.
F-7
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
INCOME TAXES - The Company complies with Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes", which requires
an asset and liability approach to financial accounting and reporting for
income taxes. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or deductible amounts in
the future, based on enacted tax laws and rates applicable to the periods
in which the differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax assets
to the amount expected to be realized.
ADVERTISING COSTS - The Company expenses advertising costs the first time
the advertisement takes place.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The fair value of the Company's
assets and liabilities which qualify as financial instruments under SFAS
No. 107 approximate the carrying amounts presented in the balance sheet.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
RECLASSIFICATIONS - Certain items have been reclassified in 1995 to
conform with the 1996 presentation.
NOTE 3 - INVENTORIES:
Inventories consist of the following at March 31, 1996:
Purchased parts and raw materials $337,851
Work-in-process 29,405
Finished goods 138,373
--------
$505,629
--------
--------
F-8
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of the following at March 31, 1996:
Building and improvements $3,420,041
Land improvements 136,075
Machinery and equipment 1,810,023
Furniture and fixtures 87,191
Office equipment 230,420
Transportation equipment 153,550
Land 365,314
----------
6,202,614
Less accumulated depreciation and amortization 4,116,553
----------
$2,086,061
----------
----------
A parcel of land containing a building, which is being used for rental to a
third party, is subject to claims of the United States Department of
Justice (NOTE 11).
At March 31, 1996, property, plant and equipment includes $23,824 and
accumulated depreciation includes $4,765 related to an asset recorded under
a capital lease (NOTE 5).
NOTE 5 - LONG-TERM DEBT:
The following is a summary of long-term debt at March 31, 1996:
Line of credit, due on demand or January 31,
1997 if no demand is made, providing for
maximum borrowing of $15,000 with interest
due quarterly at the base rate (9% at
March 31, 1996) as defined in the agreement
plus 1% $7,000
Revolving loan note payable, bank, bearing
interest at 3% above the banks prime rate
(8.25% at March 31, 1996) per annum. Advances
shall be repaid, together with all accrued
interest, at the earlier of 60 days from the
date on which the advance was made or August 1,
1996 (NOTE 11) 45,905
F-9
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - LONG-TERM DEBT (CONTINUED):
Mortgage note payable, in monthly installments
of $10,915 including interest at 9.75% per annum
through October 1, 2000, at which time the
remaining principal balance is due, and secured
by first mortgages on the Company's real estate
holdings as well as an assignment of leases and
rents from its rental operations and all other
assets of the Company 1,143,366
Loan payable, bank, in monthly installments of
$2,908 including interest at 9% per annum through
November 1997 53,815
Obligation under capital lease, payable in monthly
installments of $598 including interest at 11.50%
per annum through September 1999 (NOTE 4) 20,608
Various notes and loans payable to banks and individuals,
bearing interest at rates between 9% and 14%, due in
monthly installments of principal and interest through
February 1998 70,614
----------
1,341,308
Less current portion 176,903
----------
$1,164,405
----------
----------
Future aggregate principal maturities by year are as follows:
Year ending March 31:
1997 $176,903
1998 53,490
1999 30,814
2000 30,404
2001 1,049,697
----------
$1,341,308
----------
----------
The revolving loan and mortgage note payable have a provision which
provides for interest at 2% per annum in excess of such rate that would
otherwise be payable if the notes are not repaid at maturity.
F-10
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - ACCRUED EXPENSES AND OTHER:
Accrued expenses and other are comprised of the following at March 31,
1996:
Payroll and related $ 24,697
Interest 19,803
Real estate taxes 25,599
Insurance 33,398
Loss reserve 25,000
Professional fees 26,105
Commissions 11,722
Other 2,474
-----------
$ 168,798
-----------
-----------
NOTE 7 - STOCKHOLDERS' EQUITY:
During the year ended March 31, 1995, the Company purchased from a
shareholder 280 shares of its common stock for $140.
The Company has granted 50,000 shares of its common stock and 50,000
shares of its Class A common stock with exercise prices of Nil to
various key employees pursuant to a non-qualified employee stock option
plan. These shares are earned by the employees at the rate of 20% per
year beginning April 1, 1993. At March 31, 1996, 36,000 shares are
vested to employees covered by this plan.
F-11
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - LEASES:
The Company is the lessor under operating leases which expire in
various years through 2001.
Minimum future rentals under noncancelable leases as of March 31, 1996
are as follows:
Year ending March 31:
1997 $ 323,718
1998 57,701
1999 23,148
2000 22,948
2001 13,384
-----------
$ 440,899
-----------
-----------
NOTE 9 - INCOME TAX CREDIT:
The provision for income tax credit in the accompanying consolidated
statements of operations consists of the following deferred federal and
state tax credits for the year ended March 31, 1996:
Deferred:
Federal $ (11,000)
State (1,000)
----------
$ (12,000)
----------
----------
The following reconciles the computed income tax benefit at the Federal
statutory rate to the actual provision for income taxes for the year
ended March 31, 1996:
Deferred Federal and State income tax credit:
Computed tax credit at Federal statutory rate $ (25,000)
Depreciation of property, plant and equipment 17,000
Non deductible expenses 2,000
State provision, net of Federal tax (4,000)
Bad debt expense (2,000)
----------
$ (12,000)
----------
----------
F-12
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - INCOME TAX CREDIT (CONTINUED):
The components of the Company's deferred tax assets and liabilities at
March 31, 1996 under SFAS 109 are as follows:
Federal State Total
--------- ------- ------
Deferred Assets:
Tax benefit attributable to:
Net operating loss carryforward $ 198,000 $ 17,000 $ 215,000
Accrual for loss contingency 109,000 30,000 139,000
Depreciation (50,000) (14,000) (64,000)
Other (inventory and other) 4,000 6,000 10,000
--------- -------- ---------
261,000 39,000 300,000
Less valuation allowance 87,000 13,000 100,000
--------- -------- ---------
$ 174,000 $ 26,000 200,000
--------- --------
--------- --------
Less current portion 27,000
---------
Long-term portion $ 173,000
---------
---------
At March 31, 1996, the Company had net operating loss carryforwards for
federal and state tax purposes of approximately $594,000 and $184,000,
respectively, which expire in fiscal years 1998 through 2011.
F-13
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - SEGMENT INFORMATION:
Information relative to the Company's business segments are as
follows:
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Product Sales:
Deep-drawn metal-formed products $ 1,414,524 $ 1,545,802
Spray coating and industrial mixer systems 1,026,476 1,286,534
Ice crushing machines 361,845 295,787
Rental 500,411 524,915
------------- -------------
$ 3,303,256 $ 3,653,038
------------- -------------
------------- -------------
Year Ended March 31,
--------------------------------
1996 1995
------------- -------------
Operating Profit:
Deep-drawn metal-formed products $ 222,133 $ 242,410
Spray coating and industrial mixer systems 149,791 297,421
Ice crushing machines 61,061 64,237
Rental 220,263 348,088
------------- -------------
653,248 952,156
Less unallocated general corporate charges 720,619 742,009
------------- -------------
$ (67,371) $ 210,147
------------- -------------
------------- -------------
March 31,
--------------------------------
1996 1995
------------- -------------
Identifiable Assets:
Deep-drawn metal-formed products $ 699,448 $ 749,178
Spray coating and industrial mixer systems 412,127 431,814
Ice crushing machines 132,381 129,351
Rental properties 848,568 865,407
General corporate 1,630,922 1,601,852
------------- -------------
$ 3,723,446 $ 3,777,602
------------- -------------
------------- -------------
</TABLE>
F-14
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - SEGMENT INFORMATION (CONTINUED):
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Depreciation and Amortization:
Deep-drawn metal-formed products $ 112,414 $ 109,773
Spray coating and industrial mixer systems 3,737 1,547
Ice crushing machines 40 251
Rental properties 106,927 97,190
General corporate 85,653 91,982
------------- -------------
$ 308,771 $ 300,743
------------- -------------
------------- -------------
Year Ended March 31,
--------------------------------
1996 1995
------------- -------------
Capital additions:
Deep-drawn metal-formed products $ 90,046 $ 92,455
Spray coating and industrial mixer systems 13,250 695
Rental properties 59,814 76,054
General corporate 73,922 13,271
------------- -------------
$ 237,032 $ 182,475
------------- -------------
------------- -------------
</TABLE>
The Company's deep-drawn metal-formed products segment had sales to
two major customers in 1996 and 1995 amounting to approximately
$1,015,000 and $1,004,000, respectively. The ice crushing machines
segment had sales to one major customer in 1996 and 1995, amounting to
approximately $60,000 and $92,000, respectively. The spray coating
and industrial mixer systems segment had sales to one major customer
amounting to approximately $284,000 and $331,000 in 1996 and 1995,
respectively. In addition, at March 31, 1996 accounts receivable from
these customers were approximately $218,000.
NOTE 11 - COMMITMENTS AND CONTINGENCIES:
The Company was liable to its bank for certain outstanding irrevocable
letters of credit of $45,905 as of March 31, 1996. Under the terms of
the credit facility the Company's bank agrees to issue letters of
credit and bankers acceptances at the request of the Company which in
the aggregate cannot exceed the lesser of $165,000 or the amount on
deposit in a cash collateral account. At March 31, 1996, the balance
in the cash collateral account was $165,000 (NOTE 5).
F-15
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - COMMITMENTS AND CONTINGENCIES (CONTINUED):
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% of the net rental income derived from the
property and 60% of the net proceeds from the sale of the property.
At March 31, 1996, the Company has established an accrual for this
loss contingency of $331,000.
During the year ended March 31, 1996, a judgement was awarded against
a predecessor of the Company for approximately $77,000 plus interest
in the State of Rhode Island. Management believes that this judgement
is non-recoverable since the predecessor corporation is no longer in
existence, accordingly no provision for loss has been provided for in
the accompanying consolidated financial statements.
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 present, it is
managements 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.
NOTE 12 - INSURANCE RECOVERY:
During the year ended March 31, 1996, the Company suffered water
damage to its physical inventory and buildings as a result of a
partial roof collapse. The Company expects to receive from its
insurer approximately $42,000 for inventory and production losses as
well as additional monies for roof repairs. As of June 20, 1996, the
Company has received approximately $79,000, of which $30,000
represented reimbursement of the inventory and production losses. The
financial statements at March 31, 1996 give effect to the inventory
and production losses.
NOTE 13 - SUBSEQUENT EVENT:
On May 7, 1996, there was a fire in the finishing department of the
Company's deep-drawn metal-formed products division, which was started
accidentally by a roofing contractor, resulting in fire, smoke and
water damage to both the building and the inventory. The Company has
filed a claim with its insurer for approximately $581,000 for these
losses. No settlement has been reached on this claim.
F-16
