<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB Quarterly or Transitional Report
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
- ----- 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
- ----- 1934
Commission File No. 2-97732
TECHNOLOGY GENERAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Small Business Issuer in its charter)
New Jersey 22-1694294
- ------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12 Cork Hill Road, Franklin, New Jersey 07416
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (973) 827-4143
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----
As of June 30, 1997, the Registrant had 5,489,448 shares of Common Stock
outstanding and 158,839 shares of Class A Common Stock outstanding.
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TECHNOLOGY GENERAL CORPORATION
INDEX
PAGE NO.
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Part I. Financial Information
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheet - June 30, 1997 3
Consolidated Statement of Operations
and for the three months ended
June 30, 1997 and 1996 4
Consolidated Statement of Cash Flows
for the three months ended
June 30, 1997 and 1996 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)
JUNE 30, 1997
ASSETS
- ----------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $190,052
Cash collateral account for letters of credit 165,000
Accounts receivable, net of allowance for doubtful
accounts of $1,000 436,943
Inventories 477,170
Deferred tax asset 12,000
Prepaid expenses and other current assets 85,848
----------
Total current assets 1,367,013
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization of $4,042,142 2,188,365
OTHER ASSETS:
Deferred tax asset 124,000
Other 77,858
----------
Total other assets 201,858
----------
$3,757,236
----------
----------
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $152,806
Accounts payable and accrued expenses 430,758
----------
Total current liabilities 583,564
LONG - TERM DEBT:
Long-term obligations, net of current maturities 1,112,741
Reserve for contingency 331,000
Security deposits 59,527
----------
Total long - term debt 1,503,268
STOCKHOLDERS' EQUITY:
Common stock,$.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, 1/10 vote per share,
authorized 15,000,000 shares, issued and outstanding 157,839
shares 158
Additional paid-in-capital 2,376,673
Accumulated deficit (711,677)
----------
1,670,644
Less treasury stock, at cost, 780 shares (240)
----------
Total stockholders' equity 1,670,404
----------
$3,757,236
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----------
See accompanying notes to consolidated financial statements
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TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended
June 30,
-------------------------
1997 1996
---------- ----------
REVENUES:
Product sales $669,656 $671,577
Rentals 151,296 135,825
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820,952 807,402
COSTS AND EXPENSES:
Cost of product sales 406,960 433,696
Cost of rentals 96,318 61,830
Selling,general and administrative expenses 287,568 334,555
---------- ----------
790,846 830,081
INCOME (LOSS) FROM OPERATIONS 30,106 (22,679)
OTHER INCOME (EXPENSE):
Interest expense (2,540) (5,514)
Insurance recovery 66,708
EPA Contingency Reserve (12,500)
Other 1,830 1,088
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(710) 49,782
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NET INCOME $29,396 $27,103
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---------- ----------
See accompanying notes to consolidated financial statements
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<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended June 30, 1997 and 1996
Increase (Decrease) in Cash and Cash Equivalents
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
------------------------
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $29,396 $27,103
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 48,778 76,315
Changes in operating assets and liabilities:
Increase in accounts receivable (91,448) (88,371)
(Increase) decrease in inventories 34,821 (12,426)
Decrease in prepaid assets and other current assets 23,825 76,450
Decrease in other assets 10,860 3,056
Decrease in accounts payable and accrued expenses (44,448) (27,775)
Decrease in accrual for loss contingency 12,500
Increase in security deposits 2,373
--------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 14,157 66,852
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (119,166) (68,117)
--------- --------
NET CASH USED IN INVESTING ACTIVITIES (119,166) (68,117)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (14,380) (36,811)
Proceeds from issuance of notes payable 26,950 7,350
--------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 12,570 (29,461)
--------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (92,439) (30,726)
CASH AND CASH EQUIVALENTS, beginning of period 282,491 116,617
--------- --------
CASH AND CASH EQUIVALENTS, end of period $190,052 $85,891
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</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:
In 1994, the Company, following negotiations with the U. S. Justice Department,
received a Memorandum of Settlement relating to an "innocent landowner defense"
regarding toxic chemical contamination at a division's former site. Also, the
New Jersey D.E.P. has objectively entered the negotiations to account for their
portion of the Superfund expenditures. To date, the Memorandum stipulates that
the United States Government ("USG") would receive $25,000 upon execution of the
settlement, $206,000 payable over five years, and a balloon payment of $150,000
payable in five years. In addition, the USG would receive 60 percent of the net
rental income derived from the formerly contaminated property and 60 percent of
the net proceeds from the sale of the property. At June 30, 1997, the Company
has established an accrual for this loss contingency in the amount of $331,000.
The Company is party to various lawsuits and claims arising in the ordinary
course of business. While the ultimate effects of such litigation cannot be
determined at present, it is Management's opinion, based on the advice of legal
counsel, that any liabilities which may result from these actions would not have
a material effect on the Company's ability to operate.
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<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For the three-month period ended June 30, 1997, Technology General
Corporation and subsidiary had consolidated revenues of $820,952 and a net
income of $29,396. 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 Eclipse and Clawson Divisions operate in combination with each
other, and total sales for the three-month period amounted to $280,893 and
$71,730, respectively, for a total of $352,623.
Clawson Machine's ice crushing products featuring the patented "Plus
Crusher" are used in conjunction with major ice cube machines, primarily
Scotsman, Manitowoc, Crystal Tips, and Ice-O-Matic. This system provides an
in-line means to intercept the flow of ice cubes in order to process them into
crushed ice during each ice cube harvest cycle. This device, which is installed
as an integral part of each ice cube machine, is used predominantly by hotels
and restaurants where large volumes of crushed ice are required.
Clawson Machine has received recognition from the National Sanitation
Foundation (N.S.F.) for improvements of its various machines used primarily for
crushing ice applicable to hotels and restaurants. N.S.F. approval is becoming
a mandatory requirement throughout various parts of the country for machines
used in the processing of foods and liquids to assure maintenance of sanitary
conditions. Clawson is one of a few manufacturers in its category who has been
awarded this distinction.
Eclipse Systems's sales for the three months ended June 30, 1997,
increased $812 over the comparable period for 1996. Management expects sales to
gradually increase as a result of the introduction of a new line of industrial
mixers and continued growth in its new EnviroFlo industrial line of "inplant"
pollution-control systems. The division has recently designed and developed a
special line of chemical mixers, which are expected to generate increased sales
in the air-driven mixer market.
The Precision Metalform Division reported sales for the three months
ended June 30, 1997 and 1996 of $317,033 and $295,952, respectively. Management
anticipates that sales for the balance of the year are expected to increase in
the writing instruments field whereas cosmetic sales are expected to remain
stable. Precision Metalform, along with the Company's other operating
divisions, has taken positive steps to reduce its general and administration
overhead, including efforts to reduce inventories to conserve cash flow.
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 three
months ended June 30, 1997 amounted to $109,241, a decrease of $12,234 compared
to the quarter ended June 30, 1996. Management anticipates a modest increase in
revenue from this facility resulting from modified leases for an extended period
of time.
The Company's Aerosystems Technology Division owns a 24,000 square
foot industrially-zoned building situated on 22 acres located in Franklin, New
Jersey, of which 3.5 acres were the subject of an E.P.A. Superfund cleanup.
This property has been fully restored and is presently occupied by two (2)
tenants. Rental revenue for the three month period ended June 30, 1997, totaled
$12,100 compared to $6,765 for the comparable 1996 period, a slight increase of
$5,335.
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<PAGE>
LIQUIDITY:
As at June 30, 1997, current assets amounted to $1,367,013 and current
liabilities totaled $578,202, reflecting a working capital of $788,811 and a
current ratio of 2.36 to 1. Net cash flow from operations for the current
quarter amounted to $14,157, a decrease of $52,695 from the $66,852 reported for
the three months ended June 30, 1996. The decrease was due primarily as a
result of less depreciation and amortization.
RESULTS OF OPERATIONS
PRODUCT SALES. Technology General Corporation's manufacturing segment
generated sales of $669,656 for the three-month period ended June 30, 1997.
RENTAL SALES. Total consolidated rental billings for the three-month
period ended June 30, 1997 amounted to $151,296, a slight increase of $15,471
over the same period for 1996.
GROSS MARGIN. The consolidated gross profit margin for the three
months ended June 30, 1997, was 39 percent.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. These expenses as a
percent of net sales were approximately 35 percent for the three months ended
June 30, 1997.
INTEREST. Total Interest expense for the quarter ended June 30, 1997
amounted to $30,010, of which $27,649 is reflected under "Cost of Rentals" and
the remainder of $2,361 is shown as a separate line item within "Other Income
(Expense)".
NET INCOME/LOSS. Net income for the three months ended June 30, 1997
amounted to $29,396, an increase of $2,293 over the comparable three-month
period in 1996.
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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: September 10, 1997 TECHNOLOGY GENERAL CORPORATION
By: /s/ Charles J. Fletcher
-----------------------------------
Charles J. Fletcher
President, Chief Executive Officer,
Chairman of the Board
By: /s/ Helen S. Fletcher
-----------------------------------
Helen S. Fletcher
Secretary/Treasurer
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<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial informtation extracted from the
Consolidated Statement of Operations found on pages 3 and 4 of the Company's
Form 10-QSB for the three months ended June 30, 1997, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 190,052
<SECURITIES> 165,000
<RECEIVABLES> 437,943
<ALLOWANCES> 1,000
<INVENTORY> 477,170
<CURRENT-ASSETS> 1,367,013
<PP&E> 6,230,507
<DEPRECIATION> 4,042,142
<TOTAL-ASSETS> 3,757,236
<CURRENT-LIABILITIES> 583,564
<BONDS> 1,503,268
0
0
<COMMON> 5,648
<OTHER-SE> 1,664,756
<TOTAL-LIABILITY-AND-EQUITY> 3,757,236
<SALES> 669,656
<TOTAL-REVENUES> 820,952
<CGS> 406,960
<TOTAL-COSTS> 790,846
<OTHER-EXPENSES> (1,830)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,540
<INCOME-PRETAX> 29,396
<INCOME-TAX> 0
<INCOME-CONTINUING> 29,396
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,396
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
