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 DECEMBER 31, 1996
OR
____ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
Commission File No. 2-97732
TECHNOLOGY GENERAL CORPORATION
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(Exact name of Small Business Issuer in its charter)
New Jersey 22-1694294
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12 Cork Hill Road, Franklin, New Jersey 07416
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (201) 827-4143
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ____
As of December 31, 1996, the Registrant had 5,093,278 shares of Common Stock
outstanding and 157,839 shares of Class A Common Stock outstanding.
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<PAGE>
TECHNOLOGY GENERAL CORPORATION
INDEX
Page No.
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Part I. Financial Information
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheet - December 31, 1996 3
Consolidated Statement of Operations
and for the nine months ended
December 31, 1996 and 1995 4
Consolidated Statement of Cash Flows
for the nine months ended
December 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operation 7-8
Signatures 9
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<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
DECEMBER 31, 1996
ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $ 335,410
Cash collateral account for letters of credit 165,000
Accounts receivable, net of allowance for doubtful
accounts of $1,000 410,241
Inventories 610,169
Deferred tax asset 27,000
Prepaid expenses and other current assets 55,836
-----------
Total current assets 1,603,656
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization of $4,301,859 2,045,200
OTHER ASSETS:
Deferred tax asset 173,000
Other 81,310
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Total other assets 254,310
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$ 3,903,166
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LIABILITIES AND STOCKHOLDER'S EQUITY
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CURRENT LIABILITIES:
Current maturities of long-term debt $ 68,015
Accounts payable and accrued expenses 389,183
-----------
Total current liabilities 457,198
LONG - TERM DEBT:
Long-term obligations, net of current maturities 1,201,050
Reserve for contingency 368,500
Security deposits 44,111
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Total long - term debt 1,613,661
STOCKHOLDERS' EQUITY:
Common stock,$.001 par value, 1 vote per share,
authorized 30,000,000 shares,issued 5,490,228 shares,
outstanding 5,489,448 shares 5,490
Class A common stock,$.001 par value, .1 vote per share,
authorized 15,000,000 shares, issued and outstanding
157,839 shares 158
Additional paid-in-capital 2,376,487
Accumulated deficit (549,588)
-----------
1,832,547
Less treasury stock, at cost, 780 shares (240)
-----------
Total stockholders' equity 1,832,307
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$ 3,903,166
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See accompanying notes to consolidated financial statements
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<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------------- -----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Product sales $ 554,939 $ 683,167 $ 1,902,166 $ 2,155,723
Rentals 142,786 131,881 414,441 362,705
----------- ----------- ----------- -----------
697,725 815,048 2,316,608 2,518,428
COSTS AND EXPENSES:
Cost of product sales 359,466 427,291 1,228,561 1,339,074
Cost of rentals 61,700 71,170 203,086 157,151
Selling,general and administrative expenses 376,915 317,116 1,027,229 986,110
----------- ----------- ----------- -----------
798,081 815,577 2,458,876 2,482,335
INCOME (LOSS) FROM OPERATIONS (100,356) (529) (142,268) 36,093
OTHER INCOME (EXPENSE):
Interest expense (2,389) (7,744) (13,302) (38,203)
Insurance recovery 116,391 468,163
EPA Contingency Reserve (12,500) (37,500)
Other 231 5,738 6,372 11,973
----------- ----------- ----------- -----------
101,734 (2,006) 423,734 (26,230)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 1,378 ($ 2,535) $ 281,466 $ 9,863
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
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<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended December 31, 1996 and 1995
Increase (Decrease) in Cash and Cash Equivalents
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
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1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 281,466 $ 9,863
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 227,335 198,483
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (4,400) (74,344)
(Increase) decrease in inventories (104,540) (23,220)
(Increase) decrease in prepaid assets and other current assets 98,429 (5,384)
(Increase) decrease in other assets 8,723 (8,161)
Increase (decrease) in accounts payable and accrued expenses (67,269) (31,423)
Increase( decrease) in accrual for loss contingency 37,500
Increase (decrease) in security deposits 266 6,116
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 477,510 71,930
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (186,474) (168,751)
Decrease in mortgage receivable 78,617
Deposits to cash collateral for letter of credit (81,252)
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (186,474) (171,386)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage payable 1,150,694
Principal payments on long-term debt (148,575) (1,250,663)
Proceeds from issuance of notes payable 76,332 185,068
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NET CASH (USED IN) FINANCING ACTIVITIES (72,243) 85,099
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NET (DECREASE) IN CASH AND CASH EQUIVALENTS 218,793 (14,357)
CASH AND CASH EQUIVALENTS, beginning of period 116,617 117,480
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CASH AND CASH EQUIVALENTS, end of period $ 335,410 $ 103,123
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
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<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
Depart ment 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 settle ment, $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 December 31, 1996, the Company
established an accrual for this loss contingen cy of $368,500.
The Company is party to various lawsuits and claims arising in the ordinary
course of busi ness. While the ultimate effects of such litigation cannot
be determined at present, it is Management's opinion, based on the advice
of legal counsel, that any liabilities which may result from these actions
would not have a material effect on the Company's ability to operate.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
For the nine-month period ended December 31, 1996, Technology General
Corporation and subsidiary had consolidated revenues of $2,316,608 and a net
income of $281,466. Technology General Corporation, operating individually
as a holding company managing the various operating segments, does not
generate significant revenue other than allocating management expenses to
the operating entities and leasing space to a tenant.
The Company received $91,182 from its insurer during the current nine-month
period as reimbursement for water damage to its physical inventory and buildings
as a result of a partial roof collapse due to an ice storm which occurred on
January 14, 1996. Of this amount, $48,708 is reflected as part of "Other Income"
in the Consolidated Statement of Operations for the current period, and $42,474
was offset against "Cost of Product Sales" on the fiscal year-end financial
statements of March 31, 1996.
Additionally, a fire accidentally started by a roofing contractor on May 7,
1996 resulted in extensive damage to machinery, equipment, and inventory kept at
Precision Metal form, the division which manufactures a variety of deep-drawn
metal components. The fire destroyed a portion of the building (which is owned
by Technology General Corporation), which necessitated operations of this
division to be curtailed, resulting in loss of income. Insurance coverage is
adequate to cover the loss and repairs. The Company has received $419,455
through December 31, 1996 as partial reimbursement so that the Consolidated
Statement of Operations" reflects an aggregate of $468,163 under "Other Income".
Recovery from the insurer for business interruption loss is anticipated to
approximate $75,000.
The Precision Metalform Division reported sales for the nine months ended
December 3, 1996 of $810,595 compared to $1,114,453 for the nine month period
ended December 31, 1995, a decrease of $303,858. As stated above, this loss of
sales was largely as a result of a fire in the building which partially
destroyed the Finishing Department, interrupt ed production and caused delays in
shipping.
The Eclipse and Clawson Divisions operate in combination with each other,
and total sales for the nine-month period amounted to $842,588 and $248,983,
respectively, for a total of $1,091,571.
Clawson Machine's ice crushing products featuring the patented "Plus
Crusher" are used in conjunction with major ice cube machines, primarily
Scotsman, Manitowoc, Crys tal Tips, and Ice-O-Matic. This system provides an
in-line means to intercept the flow of ice cubes in order to process them into
crushed ice during each ice cube harvest cycle. This device, which is installed
as an integral part of each ice cube machine, is used predominantly by hotels
and restaurants where large volumes of crushed ice are required.
Clawson Machine is currently in negotiations with a dry ice blasting
company to develop an integrated dry ice shaving and blasting system which, when
completed, is expected to generate significant sales and further diversify its
product line. This division has recently submitted a design for a
manually-operated ice crusher to the National Sanitation Foundation for listing.
This will allow expansion of the crusher line into national restaurant chains.
Eclipse Systems's sales for the nine months ended December 31, 1996
increased $84,691 or 11 percent over the comparable period for 1995. Management
expects sales to gradually increase as a result of the introduction of a new
line of industrial mixers and con tinued growth in its new EnviroFlo industrial
line of "inplant" pollution-control systems. The division has recently designed
and developed a special line of chemical mixers, which are expected to generate
increased sales in the air-driven mixer market.
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<PAGE>
Transbanc International Investors Corporation, a wholly-owned subsidiary,
is a real estate holding company which leases its 107,000 square foot building
to six (6) industrial tenants. Total rental revenue for the nine months ended
December 31, 1996 amounted to $366,773, an increase of $19,424 over $347,349 for
the comparable nine month period in 1995. The subsidiary corporation reported a
modest profit of approximately $9,600 after allo cation of parent company
management charges and has remained a constant source of positive cash flow.
The Company's rosystems Technology Division owns a 24,000 square foot
industrially-zoned building situated on 22 acres located in Franklin, New
Jersey, of which 3.5 acres were the subject of an E.P.A. Superfund cleanup. This
property has been fully restored and is presently occupied by two (2) tenants.
Rental revenue for the nine month period ended December 31, 1996, totaled
$25,167. Since the building was not available for leasing prior to September 30,
1995, there was no comparable rental income. The Division has recently leased
space to a new tenant, which will provide $15,000 in additional revenue per
annum.
Liquidity:
As at December 31, 1996, current assets amounted to $1,603,656 and current
liabilities totaled $457,198, reflecting a working capital of $1,146,458 and a
current ratio of 3.51 to 1. Net cash flow showed a significant increase of
$233,150 to $218,793 when com pared to that for the nine month period ended
December 31, 1995 of ($14,357).
Results of Operations
Product Sales. Technology General Corporation's manufacturing segment
generated sales of $1,902,166 for the nine-month period ended December 31, 1996.
Rental Sales. Total consolidated rental billings for the nine-month period
ended December 31, 1996 amounted to $414,441, a $51,736 increase over the same
period for 1995.
Gross Margin. The consolidated gross profit margin for the nine months
ended December31, 1996, was 38 percent.
Selling, General, and Administrative Expenses. These expenses as a percent
of net sales were approximately 44 percent for the nine months ended December
31, 1996.
Interest. Total Interest expense for the nine months ended December 31,
1996 amounted to $98,060, of which $84,758 is reflected under "Cost of Rentals"
and the remainder of $13,302 is shown as a separate line item within "Other
Income (Expense)".
Net Income/Loss. Net income for the nine months ended December 31, 1996,
amounted to $281,466, an increase of $271,603 over the comparable nine-month
period in 1995.
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<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: February 13, 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
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consoli dated Balance Sheet and Consolidated Statement of Operations found
on pages 3 and 4 of the Company`s Form 10-QSB for the nine months ended
December 31, 1996, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000768914
<NAME> TECHNOLOGY GENERAL CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> DEC-31-1996
<CASH> 335,410
<SECURITIES> 165,000
<RECEIVABLES> 411,241
<ALLOWANCES> 1,000
<INVENTORY> 610,169
<CURRENT-ASSETS> 1,603,656
<PP&E> 6,347,059
<DEPRECIATION> 4,301,859
<TOTAL-ASSETS> 3,903,166
<CURRENT-LIABILITIES> 457,198
<BONDS> 0
0
0
<COMMON> 5,648
<OTHER-SE> 1,826,659
<TOTAL-LIABILITY-AND-EQUITY> 3,903,166
<SALES> 1,902,166
<TOTAL-REVENUES> 2,316,608
<CGS> 1,228,561
<TOTAL-COSTS> 2,458,876
<OTHER-EXPENSES> (423,734)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,302
<INCOME-PRETAX> 281,466
<INCOME-TAX> 0
<INCOME-CONTINUING> 281,466
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 281,466
<EPS-PRIMARY> .005
<EPS-DILUTED> .005
</TABLE>
