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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, 1997
[ ] Transition Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition Period From _____________to _____________
Commission File No. 2-97732
TECHNOLOGY GENERAL CORPORATION
New Jersey 22-1694294
State of Incorporation I.R.S. Employer Identification No.
12 Cork Hill Road, Franklin, New Jersey 07416
Address of Principal Executive Office Zip Code
Registrant's Telephone No.: (973) 827-4143
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
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:
$2,966,832
State the aggregate market value of the voting common stock held by
non-affiliates of the registrant as of March 31, 1997, based on the closing bid
on such day of $3/16:
$509,503
Indicate the number of shares outstanding of the Registrant's class of
common stock as of March 31, 1997:
Common: 5,489,448
Common Stock Class A: 158,839
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.
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.
The Precision Metalform 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 manufactures
numerous products, including spray coating systems and industrial air-driven
mixers. Their spray coating systems are used mainly for coating industrial
products, and the 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 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 a real estate holding company which leases its 107,000 square
foot industrial building.
Division Operations
The three (3) manufacturing divisions (Precision Metalform, 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, 1997, 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. Precision Metalform Division:
Sales for the current fiscal year ended March 31, 1997 decreased
significantly down to $1,022,710, a decrease of $391,814 in revenues from the
$1,414,524 recorded the previous year. For the second year in a row, the
Division lost production time through no fault of its own. This year a fire
inadvertently started by a roofing company resulted in extensive damage to the
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building, manufacturing equipment, and inventory used in the production
process. As a consequence of this catastrophe, production was limited which
resulted in canceled sales.
Technology General Corporation is presently contemplating initiating a law
suit against the roofing contractor and their insurance carrier for profits lost
due to business interruption during the time it took to replace and repair
damage caused by the fire.
2. Eclipse Systems Division:
Eclipse Systems's sales increased 5.4 percent during the past fiscal year
from $1,026,476 for the fiscal year-end March 31, 1996 to $1,081,493 for the
fiscal year-end March 31, 1997. This $55,017 sales increase is a direct result
of continued growth in their core mixer business which more than offsets a
$25,000 decline in other minor product lines. 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 will include the introduction of a new line of electric
industrial mixers. Over the past two years, specialized "air-driven"
explosion-proof industrial mixers have become a primary source of Eclipse
Systems's sales, and the division anticipates continued growth in this product
line. Eclipse has recently designed and developed a special line of sanitary
mixers, which is expected to expand sales in the food and pharmaceutical 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 a distributor for
high volume low pressure ("HVLP") spray systems designed to meet current U. S.
Environmental Protection Agency ("E.P.A.") standards for spray coating
operations. These imported guns will provide a solution to customers currently
being forced to switch from conventional spray coating guns.
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 year and will include a number of
redesigned products having greater marketing potential where ice shavers are
concerned.
Clawson's overall sales decreased $67,071 to $294,774 for the fiscal year
ended March 31, 1997 compared to the fiscal year ended March 31, 1996 sales of
$361,845. The resultant 18.5 percent decrease in sales occurred primarily as a
result of the loss by our distributor, Scotsman of Los Angeles, of a key
customer due to problems associated with Scotsman Ice Systems' new
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product used with our in-line crusher.
Management is confident that our aggressive marketing campaign coupled with
contracts to buying groups and the introduction of new products will improve
sales in the coming fiscal year.
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.
This product is listed by the National Sanitation Foundation ("N.S.F.") and
Underwriters Laboratories ("U.L."). In addition, Clawson has had the Hail Queen
listed with N.S.F. and is currently getting a listing for the Princess Chipper
thereby having the entire line of ice crushers N.S.F. listed. 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 is continuing to develop a new dry ice shaving 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 CO(2) gas,
resulting in less pollution, dust, and general environmental improvements.
Currently, a prototype system is in use with a major tire manufacturer.
Division Marketing
1. Precision Metalform Division:
The Precision Metalform Division provides its products primarily to
domestic companies engaged in the manufacture of writing instruments and/or
cosmetic closures. Precision Metalform'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.
Precision Metalform 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.
Precision Metalform's facilities include special operations which create
unique designs on both writing instrument components and cosmetic closures,
which generally are made to customer specifications.
Precision Metalform engages two agents, on a commission selling basis, who
represent the division in specified areas throughout the United States.
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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 continues to expand 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 an increase in sales.
Eclipse has hired distributors to export sales in Singapore, Korea and
Canada. The Division is currently negotiating sales agreements for coverage in
several other Asian countries.
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 making
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.
Clawson is looking to expand sales with agreements to buying groups within the
food service industry and franchise establishments.
Competition
The Precision Metalform 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 Precision
Metalform and its competitor enjoy supplying common customers depending on their
needs, lead time, and selected specifications. Precision Metalform 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. Consequently 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
line of industrial air-driven mixers, which is used primarily where explosive
atmospheres are prevalent. Many of these mixers
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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 current fiscal year ended
March 31, 1997 reflects net income of $89,980 after income tax expense amounting
to $64,000. A net loss from operations of $139,282 was offset by other income
of $293,262 which consisted mainly of an insurance recovery gain.
The loss from operations is partially attributable to the Precision
Metalform Division's sales decrease of $391,814 and resultant gross profit
decrease of $88,247 down from the previous fiscal year.
Technology General has just recently leased unused space in its Precision
Metalform Division building to an industrial tenant; the Company projects rental
revenues of about $115,000 this coming fiscal year with insignificant additional
expenses.
Transbanc International Investors Corporation, a 100 percent owned real
estate operation, has established a substantial rental income base developed
from five (5) industrial tenants, and is expected to maintain rental revenues of
approximately $485,000 through March 31, 1998. The earnings potential of
Transbanc is expected to remain strong due to the commitment by management in
maintaining and improving this facility; during the fiscal year ended March 31,
1997, over $75,000 (exclusive of repairs) was spent on improvements to the
building.
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.
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
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divisions which have recently been developed to increase sales.
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, 1997, the Clawson Division had sales of
$53,602 to two (2) major customers which accounted for 18 percent of the total
sales of $294,774.
One major customer accounted for $376,474 or 35 percent of Eclipse Systems
Division's sales. The balance of sales were widely distributed among the
Division's varied customers.
The Precision Metalform Division has two customers which together represent
59 percent of Precision Metalform's total sales. Sheaffer Pen represents 26
percent, and Accutec, Inc. represents 33 percent. The balance of customers are
drawn from a wide range of industries, none of which account for more than 10
percent of Precision Metalform's total sales.
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ITEM 2. DESCRIPTION OF PROPERTY
The Company occupies approximately 34,100 square feet in its own industrial
park, which houses the administrative offices of all related entities and the
manufacturing facilities for the Precision Metalform, Clawson Machine and
Eclipse Systems Divisions. The remaining space of about 28,000 square feet is
presently leased to two (2) tenants and is expected to generate $115,000 in
rental revenues for the fiscal year ended March 31, 1998.
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 were 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 September 1, 1994, the Company received a memorandum from the United
States Justice Department outlining proposed settlement terms relating to toxic
chemical contamination at a site formerly occupied by a subsidiary of the
Company. Subsequent Company investigations revealed a former occupant was
responsible. Consequently, the attorney for the Company has requested a
renegotiation of the settlement terms.
In March, 1997 the Company made a counter-proposal to the U.S. Government
seeking reduction in the proposed terms for restoration expenditures incurred by
the Company resulting from severe zoning changes following the cleanup phase.
As of March 31, 1997, the Company expenditures to accommodate code changes in
order to permit re-occupancy of the premises were approximately $200,000. At
March 31, 1997 this counter-proposal was being evaluated. Additionally, through
March 31, 1997, $356,000 has been accrued for this loss contingency, which
management believes will be sufficient to satisfy a settlement with the U. S.
Government.
Recently the Company searched its insurance files for possible coverage of
the Company's environmental liability. 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
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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.
The Company is a party to a litigation in which a judgment was awarded
against a predecessor of the Company for approximately $170,000 plus continuing
fines and penalties as permitted by the Rhode Island Court. Management believes
that this judgment is non-recoverable since the predecessor corporation is no
longer in existence and intends to vigorously defend itself in this matter. In
addition, the Company has asserted a claim for indemnification against the
Company's former accounting firm alleging that a corporate restructuring
orchestrated by the accounting firm may expose the Company to some obligation
under this judgment. 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 a 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.
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.
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Common Stock
Bid
Fiscal Year Ended March 31, 1997 High Low
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
Bid
Fiscal Year Ended March 31, 1996 High Low
First Quarter 3/16 1/16
Second Quarter 1/2 1/16
Third Quarter 5/16 1/16
Fourth Quarter 3/16 1/8
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, 1997 was 459. As of March 31, 1997, the number of
holders of Common Stock Class A was 16.
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.
Forward Looking Statements
The statements contained in this report on Form 10-KSB that are not purely
historical are forward looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of
1934, including statements regarding the Company's expectations, hopes,
intentions or strategies regarding the future. Forward looking statements
include: statements regarding future products or product development;
statements regarding future research and development spending and the Company's
product development strategy; and statements regarding the levels of increased
sales. All forward looking statements included in this document are based on
information available to the Company on the date hereof, and the Company assumes
no obligation to update any such forward looking statements. It is important to
note that the Company's actual
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results could differ materially from those in such forward looking statements.
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 at March 31, 1997 was $828,421 and the current ratio was
2.38 to 1. The increase in working capital of $87,424 over that of the previous
year is due to a net increase in current assets of $52,298 and a net decrease in
current liabilities of $35,126.
Net cash flow from operations for the fiscal year ended March 31, 1997
amounted to $549,331, a $419,624 increase above the $129,707 reported for the
fiscal year ended March 31, 1996. Net income of $89,980 and depreciation of
$274,544 accounted for the major portion of this year's cash flow from
operations while depreciation of $308,771 which was offset by the March 31, 1996
net loss of $147,730, accounted for the major portion of last year's figure of
$129,707
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, 1997 and March 31, 1996.
This information should be read in conjunction with the consolidated financial
statements and notes appearing elsewhere herein.
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1997 1996
---- ----
Revenue:
Product Sales $2,398,977 $2,802,845
Rental Income 567,855 500,411
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2,966,832 3,303,256
Costs and Expenses:
Cost of Product Sales 1,545,966 1,816,095
Cost of Rentals 328,201 302,646
Selling, General, and Administrative 1,231,947 1,251,886
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3,106,114 3,370,627
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Loss From Operations 139,282 67,371
Other Income (Expense) 293,262 (92,359)
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Income (Loss) Before Income Tax
Expense (Credit) 153,980 (159,730)
Income Tax (Credit) 64,000 (12,000)
-------- --------
Net Income (Loss) $ 89,980 $ (147,730)
Net Income (Loss) per Common Share $ .02 $ (.03)
Current Ratio 2.4 2.2
Weighted Average Number of Shares
Outstanding Used in Computing
Earnings Per Share 5,702,350 5,683,350
Year Ended March 31, 1997 Compared to Year Ended March 31, 1996 (See Description
of Business - Discussion of Divisions)
Technology General Corporation generated revenues of $2,966,832 and
$3,303,256 for the years ended March 31, 1997 and 1996, respectively. Product
manufacturing revenues were $2,398,977 and $2,802,845 in 1997 and 1996,
respectively, while rental income was $567,855 and $500,411 in 1997 and 1996,
respectively. The manufacturing division lost a combined $403,868 in sales from
that of the preceding fiscal year with Precision Metalform experiencing a
decrease in sales of $391,814 and the Clawson Machine division's sales off
$67,071. The Eclipse Systems division increased their sales $55,017 to
$1,081,493 from the $1,026,476 of the previous year.
During the year, the Precision Metalform 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.
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After the allocation of management and other expenses from Technology
General Corporation, the three (3) manufacturing divisions had combined net
income before taxes of $134,764, a complete turnaround from the previous year's
loss before taxes of $114,449. This almost $250,000 change is mainly the result
of insurance proceeds received as the result of losses sustained in a fire
exceeding the cost of replacements, repairs, and renovation to the damaged or
destroyed assets. The Company prudently utilized its own personnel to make
necessary repairs and, in general, kept costs down as a result of competitive
bidding by the construction trades in this area.
Rental revenues increased $67,444 (13.5%) to $567,855 compared to $500,411
for the fiscal year ended March 31, 1996. All entities leasing space to tenants
shared in this $67,444 increase with Aerosystems' rentals accounting for
$26,719; Technology General, $25,393; and Transbanc's amounting to $15,332.
The current fiscal year's net income from the Company's rental activities
before taxes amounted to $19,216 as compared to a net loss the previous fiscal
year amounting to $45,281, an increase of $64,497.
Transbanc International Investors Corporation (wholly-owned subsidiary) had
net income before taxes of $9,974 subsequent to the allocation of management
fees and other expenses from Technology General. In addition to an anticipated
increase in rents, Transbanc is expected to save $10,000 plus in annual interest
expenses as a result of recasting its present mortgage to a lender offering more
favorable terms.
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 74) 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 the Precision Metalform
Division. He has been associated with Precision Metalform for twenty-four
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 Precision Metalform. He is the son of Charles J. Fletcher and
Helen S. Fletcher. He is also a Director of the subsidiary.
Helen S. Fletcher (age 66) 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 Secretary
and Treasurer.
Darren Elg (age 44) is President of the Eclipse Systems and Clawson Machine
Divisions 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.
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, 1997, to each of the named executive officers of the Registrant.
Executive Capacity
Name Position
- ---- --------
Charles J. Fletcher President, Chairman of the Board
Jeffrey C. Fletcher Executive Vice President, Director
Helen S. Fletcher Secretary/Treasurer, Director
Darren Elg Director
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Compensation
Name of Individual Cash
or Group Capacity in Which Served Compensation
- ------------------ ------------------------ ------------
Charles J. Fletcher President/Chrm. of Board $144,790
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, 1997, 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.
Name & 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
Darren Elg(4) 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 four and own 2,855,939 Common shares
and 75,000 Class A shares.
<PAGE>
____________________
(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 Precision Metalform Division.
(3) Helen S. Fletcher is a co-founder and Secretary/Treasurer and Director of
the Company.
(4) 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:
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 may 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)
<PAGE>
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
<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, 1997.
TECHNOLOGY GENERAL CORPORATION
By: 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
Charles J. Fletcher President/Chairman of 7/10/97
- ------------------- the Board
Charles J. Fletcher
Jeffrey C. Fletcher Executive Vice President/ 7/10/97
- ------------------- Director
Jeffrey C. Fletcher
Helen S. Fletcher Secretary/Treasurer 7/10/97
- ------------------- Director
Helen S. Fletcher
Darren A. Elg Director 7/10/97
- -------------------
Darren A. Elg
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
Charles J. Fletcher
----------------------------------
Charles J. Fletcher,
President, Chief Executive Officer,
Chairman of the Board
Helen S. Fletcher
----------------------------------
Helen S. Fletcher
Secretary/Treasurer
Date: July 12, 1997
<PAGE>
TECHNOLOGY GENERAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
MARCH 31, 1997
<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>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Technology General Corporation
We have audited the accompanying consolidated balance sheet of Technology
General Corporation and Subsidiary as of March 31, 1997 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended March 31, 1997 and 1996. 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 audit 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, 1997, and the results
of their operations and their cash flows for the years ended March 31, 1997 and
1996 in conformity with generally accepted accounting principles.
Roseland, New Jersey
June 16, 1997
F-1
<PAGE>
<TABLE>
<CAPTION>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31, 1997
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 282,491
Cash collateral account for letters of credit (NOTE 11) 165,000
Accounts receivable, net of allowance for
doubtful accounts of $1,000 345,495
Inventories (NOTE 3) 511,991
Deferred tax asset (NOTE 9) 12,000
Prepaid expenses and other current assets 109,673
--------------
Total current assets $ 1,426,650
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization of $3,996,197 (NOTE 4) 2,115,144
OTHER ASSETS:
Goodwill, less accumulated amortization of $51,131 41,361
Deferred tax asset (NOTE 9) 124,000
Other 47,357
--------------
212,718
$ 3,754,512
==============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Long-term debt, current portion (NOTE 5) $ 123,023
Accounts payable 315,146
Accrued expenses and other (NOTE 6) 160,060
--------------
Total current liabilities $ 598,229
LONG-TERM LIABILITIES:
Long-term debt, less current portion (NOTE 5) 1,127,121
Accrual for loss contingency (NOTE 11) 331,000
Security deposits 57,154
--------------
1,515,275
<CAPTION>
COMMITMENTS AND CONTINGENCIES
<S> <C> <C>
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 158,839 shares 159
Additional paid-in capital 2,376,672
Accumulated deficit (741,073)
--------------
1,641,248
Less treasury stock, at cost, 780 shares (240)
--------------
Total stockholders' equity 1,641,008
--------------
$ 3,754,512
==============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-2
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
-------------- -----------
<S> <C> <C>
REVENUES:
Product sales $ 2,398,977 $ 2,802,845
Rentals 567,855 500,411
-------------- --------------
2,966,832 3,303,256
COSTS AND EXPENSES:
Cost of product sales 1,545,966 1,816,095
Cost of rentals 328,201 302,646
Selling, general and administrative expenses 1,231,947 1,251,886
-------------- --------------
3,106,114 3,370,627
LOSS FROM OPERATIONS (139,282) (67,371)
-------------- --------------
OTHER INCOME (EXPENSE):
Interest income 13,183 9,027
Interest expense (15,945) (72,233)
Other 904 20,847
Insurance recovery (NOTE 12) 295,120
Provision for loss contingency (NOTE 11) (50,000)
-------------- --------------
293,262 (92,359)
-------------- --------------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (CREDIT) 153,980 (159,730)
INCOME TAX EXPENSE (CREDIT) 64,000 (12,000)
-------------- --------------
NET INCOME (LOSS) $ 89,980 $ (147,730)
============== ==============
NET INCOME (LOSS) PER COMMON SHARE $ .02 $ (.03)
============== ==============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
USED IN COMPUTING EARNINGS (LOSS) PER SHARE 5,702,350 5,683,350
============== ==============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
<TABLE>
<CAPTION>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended March 31, 1997 and 1996
CLASS A ADDITIONAL
COMMON STOCK COMMON STOCK PAID-IN ACCUMULATED
---------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
------------- ----------- ------------ -------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, March 31, 1995 5,490,228 $ 5,490 157,839 $ 158 $ 2,376,486 $ (683,323)
NET LOSS (147,730)
------------- ----------- ----------- ------ -------------- -------------
BALANCES, March 31, 1996 5,490,228 5,490 157,839 158 2,376,486 (831,053)
ISSUANCE OF CLASS A
COMMON STOCK (NOTE 7) 1,000 1 186
NET INCOME 89,980
------------- ----------- ----------- ------ -------------- -------------
BALANCES, March 31, 1997 5,490,228 $ 5,490 158,839 $ 159 $ 2,376,672 $ (741,073)
============= =========== =========== ====== ============== =============
<CAPTION>
TREASURY STOCK
------------------------
SHARES AMOUNT TOTAL
---------- ---------- ------------
<S> <C> <C> <C>
BALANCES, March 31, 1995 780 $ (240) $ 1,698,571
NET LOSS (147,730)
------ -------- --------------
BALANCES, March 31, 1996 780 (240) 1,550,841
ISSUANCE OF CLASS A
COMMON STOCK (NOTE 7) 187
NET INCOME 89,980
------ -------- --------------
BALANCES, March 31, 1997 780 $ (240) $ 1,641,008
====== ======== ==============
</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, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 89,980 $ (147,730)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 274,544 308,771
Recovery of doubtful accounts (4,304)
Deferred income tax expense (credit) 64,000 (12,000)
Issuance of Class A common stock for services 187
Changes in operating assets and liabilities:
Decrease in accounts receivable 59,558 25,908
(Increase) decrease in inventories (6,362) 50,309
(Increase) decrease in prepaid expenses and other
current assets 40,660 (81,377)
Increase in other assets (5,299) (20,925)
Increase in accounts payable 26,699 10,102
Decrease in accrued expenses and other (7,945) (52,302)
Increase in accrual for loss contingency 50,000
Increase in security deposits 13,309 3,255
--------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 549,331 129,707
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (272,263) (213,208)
Proceeds from mortgage receivable 102,708
Deposits to cash collateral account for letters of credit (78,765)
--------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (272,263) (189,265)
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 14,360 1,260,256
Principal payments on long-term debt (125,554) (1,201,561)
--------------- --------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (111,194) 58,695
--------------- --------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 165,874 (863)
CASH AND CASH EQUIVALENTS, beginning of year 116,617 117,480
--------------- --------------
CASH AND CASH EQUIVALENTS, end of year $ 282,491 $ 116,617
=============== ==============
</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, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------- --------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION, cash paid during the year for interest $ 134,950 $ 133,330
============= ==============
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Asset recorded pursuant to obligation under capital lease $ - $ 23,824
============= ==============
Debt issuance for equipment purchase $ 20,030 $ -
============= ==============
</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 is a manufacturer of deep-drawn metal-formed
products, a manufacturer of ice crushing and shaving equipment and a
manufacturer and distributor of spray coating and industrial mixer systems,
and sells its products to a wide variety of users primarily throughout the
United States. The subsidiary (Transbanc International Investors
Corporation) owns and rents a 107,000 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.
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.
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.
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.
IMPAIRMENT OF LONG-LIVED ASSETS - The Company periodically assesses the
recoverability of the carrying amount of long-lived assets. A loss is
recognized when expected future cash flows (undiscounted and without
interest) are less than the carrying amount of the asset. The amount of
the impairment loss is determined as the difference by which the carrying
amount of the asset exceeds the fair value of the asset.
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.
USE OF ESTIMATES - The preparation of consolidated 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 consolidated 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 1996 to
conform with the 1997 presentation.
F-8
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
NEWLY ISSUED ACCOUNTING STANDARD - In October 1995, the Financial
Accounting Standards Board released Statement No. 123 (SFAS No. 123),
"Accounting for Stock-Based Compensation", which became effective for
fiscal years beginning after December 15, 1995 and required that the fair
value of stock options be measured on the date of grant. This fair value
is then recognized as compensation expense over the service period. SFAS
No. 123 allows companies to continue with the Accounting Principles Board
(APB) No. 25 approach, provided that disclosure of pro forma net income and
earnings per share information is disclosed "as if" the new fair value
approach had been adopted. This Statement is effective for all awards
granted after December 15, 1994. The Company has not granted any awards
after this date and, therefore, pro forma information is not provided (NOTE
7).
In March 1997, the Financial Accounting Standards Board released Statement
No. 128 (SFAS No. 128), "Earnings Per Share". SFAS No. 128 requires dual
presentation of basic and diluted earnings per share on the face of the
income statement for all periods presented. Basic earnings per share
excludes dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution
that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance
of common stock that then shared in the earnings of the entity. Diluted
earnings per share is computed similarly to fully diluted earnings per
share pursuant to APB No. 15. SFAS No. 128 is effective for fiscal years
ending after December 15, 1997, and when adopted, it will require
restatement of prior years' earnings per share.
Management does not believe that SFAS No. 128 will have a material impact
upon historical net income (loss) per share as reported.
NOTE 3 - INVENTORIES:
Inventories consist of the following at March 31, 1997:
Purchased parts and raw materials $ 319,050
Work-in-process 35,423
Finished goods 157,518
--------------
$ 511,991
==============
F-9
<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,
1997:
<TABLE>
<S> <C>
Building and improvements $ 3,583,292
Land improvements 140,412
Machinery and equipment 1,741,490
Furniture and fixtures 48,369
Office equipment 119,139
Transportation equipment 113,325
Land 365,314
--------------
6,111,341
Less accumulated depreciation and amortization 3,996,197
--------------
$ 2,115,144
==============
</TABLE>
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, 1997, property, plant and equipment includes $23,824
and accumulated amortization includes $9,665 related to assets
recorded under capital leases (NOTE 5).
NOTE 5 - LONG-TERM DEBT:
The following is a summary of long-term debt at March 31, 1997:
<TABLE>
<S> <C>
Line of credit, due on demand or January 31, 1998 if no
demand is made, providing for maximum borrowing of
$15,000 with interest due quarterly at the base rate (9%
at March 31, 1997), as defined in the agreement,
plus 1% $ 8,360
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 collateralized by first mortgages on the
Company's real estate holdings, an assignment of leases
and rents from its rental operations,
and all other assets of the Company 1,124,662
</TABLE>
F-10
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - LONG-TERM DEBT (CONTINUED):
<TABLE>
<S> <C>
Note payable, bank, in monthly installments of
$2,908 including interest at 9% per annum through
November 1997 19,760
Obligation under capital lease, payable in monthly
installments of $598 through September 1999 (NOTE 4) 15,535
Equipment loan payable in monthly installments of $401,
including interest at 7.5% per annum, through September
2001 and collateralized by certain transportation equipment 18,348
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 63,479
--------------
1,250,144
Less current portion 123,023
--------------
$ 1,127,121
==============
</TABLE>
Future aggregate principal maturities by year are as follows:
<TABLE>
<S>
<C>
Year ending March 31:
1998 $ 123,023
1999 34,652
2000 34,538
2001 1,055,574
2002 2,357
--------------
$ 1,250,144
==============
</TABLE>
At March 31, 1997, the Company was not in compliance with a covenant of its
mortgage note, but obtained a waiver from its bank.
F-11
<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, 1997:
Payroll and related $ 37,060
Interest 13,652
Real estate taxes 7,464
Insurance 35,349
Loss reserve 25,000
Professional fees 29,500
Other 12,035
--------------
$ 160,060
NOTE 7 - STOCKHOLDERS' EQUITY:
The Company has granted options to purchase 50,000 shares of its
common stock and 40,000 shares of its Class A common stock, with an
exercise price 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, 1997, 54,000 shares are vested to employees
covered by this plan (NOTE 2).
During the year ended March 31, 1997, the Company issued 1,000 shares
of its Class A common stock to an employee.
NOTE 8 - LEASES:
The Company is the lessor under operating leases which expire in
various years through 2002.
Aggregate future minimum rentals under noncancelable leases as of
March 31, 1997 are approximately as follows:
Year ending March 31:
1998 $ 464,000
1999 284,000
2000 158,000
2001 73,000
2002 17,000
--------------
$ 996,000
==============
F-12
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - INCOME TAX EXPENSE (CREDIT):
The provision for income tax expense (credit) in the
accompanying consolidated statements of operations consists of
the following deferred federal and state income taxes (credits)
for the years ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
----------------- ---------------
<S> <C> <C>
Deferred:
Federal $ 50,000 $ (11,000)
State 14,000 (1,000)
-------------- ---------------
$ 64,000 $ (12,000)
============== ===============
</TABLE>
The following reconciles the computed income tax expense
(credit) at the Federal statutory rate to the actual provision
for income tax expense (credit) for the years ended March 31,
1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------------------ ---------------
<S> <C> <C>
Computed tax at Federal statutory rate $ 54,000 $ (25,000)
Depreciation 14,000 17,000
Nondeductible expenses and other 25,000 2,000
State provision, net of Federal tax 11,000 (4,000)
Utilization of net operating loss carryforwards (40,000)
Bad debt expense (2,000)
-------------- ---------------
$ 64,000 $ (12,000)
============== ===============
</TABLE>
The components of the Company's deferred tax assets and liabilities at
March 31, 1997 are as follows:
<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
------------ ----------- -------------
<S> <C> <C> <C>
Tax benefit attributable to:
Net operating loss carryforward $ 143,000 $ - $ 143,000
Accrual for loss contingency 109,000 30,000 139,000
Depreciation (46,000) (13,000) (59,000)
Inventories and other 8,000 5,000 13,000
------------ ------------ ------------
214,000 22,000 236,000
Less valuation allowance 91,000 9,000 100,000
------------ ------------ ------------
$ 123,000 $ 13,000 136,000
============ ============
Less current portion 12,000
------------
Long-term portion $ 124,000
============
</TABLE>
F-13
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - INCOME TAX EXPENSE (CREDIT) (CONTINUED):
At March 31, 1997, the Company had net operating loss carryforwards
for federal and state tax purposes of approximately $436,000 and
$4,000, respectively, which expire in fiscal years 1998 through 2011.
NOTE 10 - SEGMENT INFORMATION:
Information relative to the Company's business segments is as follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
--------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Product sales:
Deep-drawn metal-formed products $ 1,022,710 $ 1,414,524
Spray coating and industrial mixer systems 1,081,493 1,026,476
Ice crushing and shaving equipment 294,774 361,845
Rental 567,855 500,411
-------------- --------------
$ 2,966,832 $ 3,303,256
============== ==============
<CAPTION>
YEARS ENDED MARCH 31,
--------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Operating profit:
Deep-drawn metal-formed products $ 166,296 $ 222,133
Spray coating and industrial mixer systems 162,119 149,791
Ice crushing and shaving equipment 25,289 61,061
Rental 103,394 220,263
-------------- --------------
457,098 653,248
Less unallocated general corporate charges 596,380 720,619
-------------- --------------
$ (139,282) $ (67,371)
============== ==============
<CAPTION>
MARCH 31,
--------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Identifiable assets:
Deep-drawn metal-formed products $ 592,750 $ 699,448
Spray coating and industrial mixer systems 430,416 412,127
Ice crushing and shaving equipment 116,917 132,381
Rental 1,088,861 848,568
General corporate 1,525,568 1,630,922
-------------- --------------
$ 3,754,512 $ 3,723,446
============== ==============
</TABLE>
F-14
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - SEGMENT INFORMATION (CONTINUED):
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------------
1997 1996
---------------- ---------------
<S> <C> <C>
Depreciation and amortization:
Deep-drawn metal-formed products $ 82,791 $ 112,414
Spray coating and industrial mixer systems 9,579 3,737
Ice crushing and shaving equipment 882 40
Rental 112,656 115,610
General corporate 68,636 76,970
-------------- --------------
$ 274,544 $ 308,771
============== ==============
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------------
1997 1996
---------------- ---------------
<S> <C> <C>
Capital additions:
Deep-drawn metal-formed products $ 47,804 $ 90,046
Spray coating and industrial mixer systems 32,926 13,250
Rental 105,320 93,348
General corporate 106,243 40,388
-------------- --------------
$ 292,293 $ 237,032
============== ==============
</TABLE>
The Company's deep-drawn metal-formed products segment had sales
to two major customers in 1997 and 1996 of approximately $606,000
and $1,015,000, respectively. The ice crushing machines segment
had sales to one major customer in 1996, of approximately
$60,000. The spray coating and industrial mixer systems segment
had sales to one major customer of approximately $376,000 and
$284,000 in 1997 and 1996, respectively. In addition, at March
31, 1997, accounts receivable from these customers were
approximately $176,000. The Company also had rental income from
three major tenants aggregating approximately $374,000 and
$353,000 in 1997 and 1996, respectively.
The Company's deep-drawn metal-formed products segment had
purchases from two major suppliers in 1997 and 1996 of
approximately $274,000 and $432,000, respectively. The ice
crushing machines segment had purchases from two major suppliers
in 1997 and 1996, of approximately $58,000 and $76,000,
respectively. The spray coating and industrial mixer systems
segment had purchases from three major suppliers of approximately
$414,000 and $348,000 in 1997 and 1996, respectively.
NOTE 11 - COMMITMENTS AND CONTINGENCIES:
Under the terms of the line of credit facility, the Company's
bank agrees to issue letters of credit and bankers acceptances,
which in the aggregate cannot exceed the lesser of $165,000 or
the amount on deposit in a cash collateral account. At March 31,
1997, the balance in the cash collateral account was $165,000.
F-15
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - COMMITMENTS AND CONTINGENCIES (CONTINUED):
The Company's sales and use tax returns for the years 1991
through 1996 are currently being audited by the State of New
Jersey. Although the ultimate outcome cannot be determined at
present, it is management's opinion that any liability resulting
from this audit would not be material.
On September 1, 1994, the Company received a memorandum from the
United States Justice Department outlining proposed settlement
terms relating to toxic chemical contamination at a site formerly
occupied by a subsidiary of the Company. Subsequent Company
investigations revealed a former occupant was responsible.
Consequently, the attorney for the Company has requested a
renegotiation of the settlement terms. In March 1997, the Company
made a counter-proposal to the U.S. Government seeking reduction
in the proposed terms for restoration expenditures incurred by
the Company resulting from severe zoning changes following the
cleanup phase. As of March 31, 1997, the Company expenditures to
accommodate code changes in order to permit re-occupancy of the
premises were approximately $200,000. At March 31, 1997, this
counter-proposal was being evaluated. Additionally, through March
31, 1997, $356,000 has been accrued for this loss contingency,
which management believes will be sufficient to satisfy a
settlement with the U.S. Government.
The Company is a party to a litigation in which a judgement was
awarded against a predecessor of the Company for approximately
$170,000, plus continuing fines and penalties as permitted by the
Rhode Island Court. Management believes that this judgement is
non-recoverable, since the predecessor corporation is no longer
in existence, and intends to vigorously defend itself in this
matter. Accordingly, no provision for loss has been provided 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 the present time, 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.
NOTE 12 - INSURANCE RECOVERY:
During the year ended March 31, 1997, there was a fire at the
Company's deep-drawn metal-formed products division, which was
accidentally started by a roofing contractor, resulting in fire,
smoke and water damage to both the building and inventories. The
Company received proceeds of approximately $424,000 for
reimbursement of building damage, machinery and equipment,
inventories and emergency cleanup resulting in a gain of
approximately $295,000. The Company has filed a claim with its
insurer for production losses resulting from this fire. As of
March 31, 1997, this claim is still pending and no provision for
this claim has been provided in the accompanying consolidated
financial statements.
F-16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statement of operations found
on pages F-2 and F-3 of the Company's Form 10-KSB for the year ended March
31, 1997 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 282,491
<SECURITIES> 165,000
<RECEIVABLES> 346,495
<ALLOWANCES> 1,000
<INVENTORY> 511,991
<CURRENT-ASSETS> 1,426,650
<PP&E> 6,111,341
<DEPRECIATION> 3,996,197
<TOTAL-ASSETS> 3,754,512
<CURRENT-LIABILITIES> 598,229
<BONDS> 1,515,275
0
0
<COMMON> 5,649
<OTHER-SE> 1,635,359
<TOTAL-LIABILITY-AND-EQUITY> 3,754,512
<SALES> 2,398,977
<TOTAL-REVENUES> 3,276,039
<CGS> 1,545,966
<TOTAL-COSTS> 3,106,114
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,945
<INCOME-PRETAX> 153,980
<INCOME-TAX> 64,000
<INCOME-CONTINUING> 89,980
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 89,980
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
