<PAGE>
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, 1999
( ) 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 40 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. /X/
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State Registrant's Revenues for Most Recent Fiscal Year:
$3,179,647
State the aggregate market value of the voting common stock held by
non-affiliates of the registrant as of March 31, 1999, based on the closing bid
on such day of $1/4:
$701,437
Indicate the number of shares outstanding of the Registrant's class of common
stock as of March 31, 1999:
Common: 5,608,848
Common Stock Class A: 127,839
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 which operates four (4) divisions and one (1) subsidiary, collectively The
Company.
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 manufacturing 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 three 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, 1999, the Company had approximately thirty-five (35) 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:
Current sales for the fiscal year ended March 31, 1999 were $994,816, an
increase of $17,279 or (1.77%) from the previous fiscal year sales of $977,537.
2. ECLIPSE SYSTEMS DIVISION
Eclipse Systems' sales for the fiscal year ending March 31, 1999 were
$1,109,917, a decrease of $30,406 (2.7%) from the 1998 fiscal year's sales of
$1,140,323. The decrease is attributable to the economic slow down in the
industries serviced by our products. Aware of this economic situation, we have
expanded our product line to meet the needs of new untouched markets. These new
products
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include a full line of gear reduced flange mixers, available with air and
electric drive. We are currently updating our literature to include the new hand
held and pail mixers. With the core mixer line now well accepted in industry,
these new items round out our product line by tapping markets previously
unavailable. With a multi-faceted marketing approach, we are able to shift our
sales efforts to compensate for the changing economic market.
The spray division of Eclipse Systems has maintained a consistent record of
growth. This is attributable to our imported line of high volume, low-pressure
("HVLP") spray guns. With the U.S. Environmental Protection Agency ("E.P.A.")
standards for spray coating applications becoming more stringent, our HVLP spray
guns have had excellent acceptance into the industry as an approved alternative.
3. CLAWSON MACHINE DIVISION
The Clawson Machine Division manufactures and assembles ice shavers and
crushers, which are used primarily in the hotel and restaurant fields. Sales for
the current fiscal year increased $49,764 to $360,829 compared to sales of
$311,065 for the fiscal year ended March 31, 1999, a (16%) improvement in sales.
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 the major manufacturers of metal
writing instrument components in the United States. Their primary products
consist of caps, barrels and refill tubes that 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.
2. ECLIPSE SYSTEMS DIVISION
Eclipse Systems blends its marketing in various media to maximize product
exposure. Monthly industrial journals have been a great source of sales leads.
We are continuing to expand our distributor network and have our products placed
in nationally recognized industrial supply catalogs. We continue to advertise
with Thomas Register and have a web page link in our advertisements. Our web
page has been updated to show the new products and we maintain an e-mail address
for electronic communication. We will also be exhibiting the mixer line at
various trade shows throughout the year.
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3. Clawson Machine Division
The Clawson Machine Division uses a nationwide distributor network and trade
specific periodicals for generating sales leads. Numerous trade journals related
to the food, beverage and restaurant industry carry our advertisements. We are
also listed in purchasing guides related to the entertainment trade. With the
success of past marketing formats, we will continue with the current marketing
scheme. We currently have advertisements with Thomas Register including a web
link to the Clawson Machine web page. This web page includes our current product
line and an e-mail link for electronic correspondence.
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 metal
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 deep drawn metal
components. In this regard, Precision 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 manufacturing various types of mixing equipment. The industrial
mixing equipment line accounts for the majority of sales. Over the years,
Eclipse has developed an extensive line of air driven mixers that are primarily
used in potentially explosive atmospheres. With the proprietary nature of design
and the ability to custom manufacture a mixer in a timely fashion, we have been
able to capture a significant market share not accessible to other
manufacturers. In addition, our electric motor mixer line enhances our ability
to meet the customer's needs.
The Clawson Machine Division is one of several small companies in the United
States engaged in the manufacture of ice crushing and ice shaving equipment. Due
to the proprietary nature of our designs, we are not subject to any direct
competition.
CURRENT OPERATING ENVIRONMENT
The consolidated statement of operations for the fiscal year ended March 31,
1999 reflect net earnings of $60,275 as compared to the net loss of $124,265 of
March 31, 1998, an increase of $184,540.
Technology General currently is leasing space at its corporate office complex to
two (2) industrial tenants and is leasing residential property to another
tenant. Total rental revenues were $135,394 for the current year.
The Aerosystems Division is currently leasing space at its Franklin, New Jersey
location where a Superfund project cleanup restored the property. The
refurbished portion of the plant located there is presently leased by two (2)
tenants. Total rental revenue generated at the Aerosystems facility during the
fiscal year ended March 31, 1999 was $42,512.
Transbanc International Investors Corporation, a 100 percent owned real estate
operation, has established a substantial rental income base developed from seven
(7) industrial tenants. Current rental revenues were $536,179.
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The consolidated rental revenues continue to experience significant growth.
Rental revenues generated for the fiscal year ended March 31, 1999 were
$714,085, an increase of $17,969 over 1998 revenues of $696,116.
Although the Company still has not completely settled its environmental claims
stemming from a former site occupied in the early 1960's and 1970's (see Item 3
for further details), the Company has continued its settlement discussions with
the Federal Government, which includes a portion of the claim as it is
applicable to the New Jersey Department of Environmental Protection. The Company
will continue to seek a settlement that is structured in such a way as to allow
the Company to meet the cash flow requirement to liquidate this claim in an
orderly fashion. In conjunction with this effort, various Company insurance
carriers have been put on notice and Management is reviewing the possibilities
of engaging an environmental law firm which specializes in such matters for the
purpose of seeking recovery under its catastrophic portion of its prior
policies.
The following summarized 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 evaluate its marketing strategies for the sales of its products
in all divisions.
2. Aggressively pursue new sales for Eclipse's new electric mixer line to
supplement sales of its air-driven mixer line.
3. Continue to pursue legal permits necessary to pave the way for developing
15 new industrial sites known as the Company's Franklin Corporate Campus.
4. Maintain an aggressive program to monitor and control operating costs in an
effort to maintain operational overhead at its lowest possible level with
fully effective management.
5. Continue to negotiate an equitable settlement concerning its environmental
matters so that advancement of the Company's objectives can be achieved.
REGISTRATION
Tech Gen 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, 1999, the Clawson Division had sales of $87,297 to
two (2) major customers, which accounted for 24 percent of the total sales of
$360,829.
One major customer accounted for $437,015 or 39 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 21 percent
and Accutec, Inc., represents 38 percent.
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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.
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 $143,000 in
rental revenues for the fiscal year ended March 31, 2000.
The Company also owns an industrial site in Franklin, New Jersey comprising 106
acres, which has been approved for 15 planned sites. This site includes an
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. This facility is
fully 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
partially restored and is presently 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 the site formerly occupied by a subsidiary of the
Company. The memorandum stipulated that the United States Government ("U.S.G.")
would receive $25,000 upon the execution of the settlement, $206,000 payable
over five years and a balloon payment of $150,000 payable in five years. In
addition, the U.S.G. would receive 60 percent of the net rental income derived
from the property for an undetermined period of time and 60 percent of the net
proceeds from the sale of the property. The Company has requested a
re-negotiation of the settlement terms.
In March of 1997, the Company made a counter proposal to the U.S.G. 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, 1999, the Company's expenditures to accommodate code changes in order
to permit re-occupancy of the premises were approximately $200,000. At March 31,
1999, this counter proposal was being evaluated. In the event of an unfavorable
resolution to this matter, the Company could experience a material adverse
effect on its financial position, results of operations and cash flows and may
have no alternative means by which to finance such resolution other than to sell
certain of its assets to meet its obligation resulting from the ultimate
resolution.
In July of 1997, the New Jersey Department of Environmental Protection
("D.E.P.") instituted suit against the Company related to toxic chemical
contamination at the site mentioned in the preceding paragraphs. The civil
action is brought pursuant to the Spill Compensation and Control Act ("Spill
Act"),
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whereby the D.E.P. seeks to recover costs which it has expended and intends to
expend in the future for the cleanup of the hazardous substances.
As of July 1997, the D.E.P. had incurred costs in excess of $1,150,000 and is
attempting to recover an amount equal to three times the cleanup costs incurred
and to be incurred in accordance with a provision in the Spill Act. The
litigation is now in the discovery process and the ultimate outcome of such
litigation cannot be determined at the present time. In the event of an
unfavorable resolution to this matter, the Company could experience a material
adverse effect on its financial position, results of operations and cash flows
and may have no alternative means by which to finance such resolution other than
to sell certain of its assets to meet its obligation resulting from the ultimate
resolution.
OTHER LEGAL MATTERS
The Company has amicably resolved litigation in which a judgment was awarded
against a predecessor of the Company.
At March 31, 1999, the Company has accrued $444,000 which it believes will be
sufficient to satisfy any liabilities which may occur in connection with the
settlement of any pending litigation.
In addition to the above, the Company is party to various lawsuits and claims
arising in the ordinary course of business. While the ultimate effects of such
litigation cannot be determined at present, it is 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 Company'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 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 Company's Common Stock for its past two fiscal years. Such
prices represent quotations between dealers without adjustments for retail
mark-up, markdown or commissions and do not necessarily represent actual
transactions.
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Common Stock Bid
----------------
Fiscal Year Ended March 31, 1999 High Low
- --------------------------------
First quarter ended June 30, 1998 1/3 1/5
Second quarter ended September 30, 1998 1/5 3/16
Third quarter ended December 31, 1998 1/5 3/32
Fourth quarter ended March 31, 1999 1/4 3/16
Common Stock Bid
----------------
Fiscal Year Ended March 31, 1998 High Low
- --------------------------------
First quarter ended June 30, 1997 3/16 1/16
Second quarter ended September 30, 1997 5/8 1/2
Third quarter ended December 31, 1997 1/2 3/8
Fourth quarter ended March 31, 1998 5/16 3/8
STOCK QUOTATIONS
The above quotations were reported by the Electronic Bulletin Board for over the
counter stocks.
HOLDERS
The approximate number of holders of Common Stock of record of the Company on
March 31, 1999 was 459. As of March 31, 1999, 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, as amended 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 the 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 results could differ materially from those in
such forward-looking statements.
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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, 1999 was $1,207,837 and the current ratio was 3.3
to 1. Working capital remained fairly constant with that of last year, showing a
slight increase of $17,345.
Net cash flow from operations for the fiscal year ended March 31, 1999 amounted
to $224,183 a decrease of $28,920 from that of March 31, 1998.
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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, 1999 and March 31, 1998. This
information should be read in conjunction with the consolidated financial
statements and notes appearing elsewhere herein.
<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
Revenue:
Product Sales $ 2,465,562 $ 2,428,925
Rental Income 714,085 696,116
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3,179,647 3,125,041
Costs and Expenses:
Cost of Product Sales 1,490,603 1,608,972
Cost of Rentals 357,787 337,641
Selling, General and Administrative 1,335,224 1,601,165
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3,183,614 3,547,778
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Loss From Operations (3,967) (422,737)
Other Income 138,242 79,472
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Income (loss) Before Income Tax Expense (benefit) 134,275 (343,265)
Income Tax Expense (benefit) 74,000 (219,000)
Net Income (loss) $ 60,275 $ (124,265)
=========== ===========
Net Income (loss) Applicable to Common Shareholders $ .01 $ (.02)
=========== ===========
Current Ratio $ 3.30 $ 3.71
=========== ===========
Weighted Average Number of Common Shares
Outstanding Used in Computing Basic and
Diluted Earnings (loss) Per Common Share 5,738,350 5,720,350
</TABLE>
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YEAR ENDED MARCH 31, 1999 COMPARED TO YEAR ENDED MARCH 31, 1998
(SEE DESCRIPTION OF BUSINESS DISCUSSION OF DIVISIONS)
Technology General Corporation generated consolidated revenues of $3,179,647 and
$3,125,041 for the fiscal years ended March 31, 1999 and 1998 respectively. The
manufacturing division's sales for 1999 were $2,465,562, an increase of $36,637
when compared to 1999 product sales of $2,428,925. The Clawson Machine Division
sales increased 16% amounting to $49,764 from $311,065 in 1998 to $360,829 for
1999. The Precision Metalform Division also had a modest increase in sales of
$17,279 to $994,816 for 1999 compared to $977,537 in 1998. Eclipse Systems
Division's sales decreased a total of $30,405 to $1,109,917 for the fiscal year
ended March 31, 1999 from $1,140,322 recorded the previous fiscal year.
Rental revenues recorded a modest increase of $17,969 to $714,085 for the
current fiscal year compared to the previous fiscal year of $696,116. The
Aerosystems Division recorded a decrease of $6,441 in rental revenues to $42,512
in 1999 compared to $48,953 in 1998. Technology General Corp. also had a
decrease in rental revenue of $8,183 while the Transbanc subsidiary increased
rental revenue by $32,593.
During the year, the Precision Metalform Division continued to diversify its
line of deep draw products by searching out a broad range of customers utilizing
deep draw products for a variety of purposes. This effort is intended to offset
the continuing decline of the line of writing instrument components resulting
from higher levels of Asian imports. Items related to lines other than cosmetic
and writing instruments generally command high price components due to the
specialty of the items involved with comparable improvements in profitability.
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 the 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.
After the allocation of management fees and other expenses from Technology
General Corporation, the three (3) manufacturing divisions had a combined net
income of $108,543 before provision for income taxes. In 1998, the manufacturing
divisions had a combined net loss of $161,395. This $269,938 difference was
mainly the result of insurance proceeds received and operating efficiencies
achieved during the fiscal year end March 31, 1999.
The current fiscal year's net income from the Company's rental entities after
management fees but before income taxes totaled $25,732, an increase of $207,602
compared to the previous fiscal year's loss of $181,870. The increase of
$207,602 is mainly due to additional contingency reserves established in the
prior year.
YEAR 2000 COMPLIANCE
The Company anticipates the expenditure of approximately $75,000 towards the
purchase of hardware, software, installation and the training of personnel. The
new system is expected to be fully operational by October 1999.
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ITEM 7 FINANCIAL STATEMENTS
- ------ --------------------
See index to Financial Statements attached hereto.
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- ------ 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.
CHARLES J. FLETCHER (age 76) 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 U.S. patents. In 1993, he was inducted into the
New Jersey Inventors Hall of Fame and declared the original inventor of the
Hovercraft.
JEFFREY C. FLETCHER (age 45) is the President of the Deep Draw Division. He has
been associated with the Deep Draw Division since its inception, 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 70) 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 46) 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.
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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,
1999, 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
Compensation
------------
Name of Individual or Group Capacity in Which Served Cash Compensation
- --------------------------- ------------------------ -----------------
Charles J. Fletcher President/Chairman of the Board $159,476
No other executive officer received 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, 1999, 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.
<TABLE>
<CAPTION>
Name & Address Number of Shares Number of Shares Percentage
Beneficial Owner of Common Stock of Class A Stock Beneficial
Or Identity of Group Beneficially Owned Beneficially Owned Ownership
- -------------------- ------------------ ------------------ ---------
<S> <C> <C> <C>
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 7.4%
82 Birch Parkway
Sparta NJ 07871
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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
</TABLE>
All officers and directors as a group total four and own 2,855,939 Common shares
and 75,000 Class A. Shares.
(1) Charles J. Fletcher is also a Trustee of voting trusts covering an
additional 144,000 shares of Common Stock (2.5%).
(2) Jeffrey C. Fletcher is Executive Vice President and Director of the Company
and President of 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
The Class A Common shares were issued during fiscal 1998, 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.
15
<PAGE>
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 (F5 and F-6)
Notes to Consolidated Financial Statements (F-7 through F-15)
2. Exhibits
Incorporation by reference
Description 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 8-K
None
16
<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 _____day of __________,1999.
TECHNOLOGY GENERAL CORPORATION
BY:
---------------------------------
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
- --------- ----- ----
- ----------------------------- President/Chairman of the Board ___________
Charles J. Fletcher
- ----------------------------- Executive Vice President/Director ___________
Jeffrey C. Fletcher
- ----------------------------- Secretary/Treasurer ___________
Helen S. Fletcher
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
President, Chief Executive Officer
Chairman of the Board
---------------------------------------
Helen S. Fletcher
Secretary/Treasurer
Date:
17
<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, 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended March 31, 1999 and 1998. 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 financial position of Technology General
Corporation and Subsidiary at March 31, 1999, and the results of their
operations and their cash flows for the years ended March 31, 1999 and 1998, in
conformity with generally accepted accounting principles.
/s/ Rothstein Kass & Co. PC
Roseland, New Jersey
June 16, 1999
F-1
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31, 1999
<TABLE>
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 886,945
Accounts receivable, net of allowance for
doubtful accounts of $5,000 380,014
Inventories 364,892
Deferred tax asset 12,000
Prepaid expenses and other current assets 92,505
-------------
Total current assets $ 1,736,356
PROPERTY, PLANT AND EQUIPMENT, net 2,168,718
OTHER ASSETS:
Goodwill, less accumulated amortization of $59,863 32,629
Deferred tax asset 269,000
Other 58,578
-------------
360,207
--------------
$ 4,265,281
--------------
--------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Long-term debt, current portion $ 207,462
Accounts payable 157,555
Accrued expenses and other 163,502
-------------
Total current liabilities $ 528,519
LONG-TERM LIABILITIES:
Long-term debt, less current portion 1,645,528
Lawsuit reserve 419,000
Security deposits 74,316
-------------
2,138,844
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 1 vote per share, authorized 30,000,000 shares,
issued 5,611,228 shares,
outstanding 5,608,848 shares 5,611
Class A common stock, $.001 par value, .1 vote per share,
authorized 15,000,000 shares, issued and outstanding 127,839 shares 128
Capital in excess of par value 2,399,082
Accumulated deficit (805,063)
-------------
1,599,758
Less treasury stock, at cost, 2,380 shares (1,840)
-------------
Total stockholders' equity 1,597,918
--------------
$ 4,265,281
--------------
--------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------------ ------------------
<S> <C> <C>
REVENUES:
Product sales $ 2,465,562 $ 2,428,925
Rentals 714,085 696,116
------------------ ------------------
3,179,647 3,125,041
------------------ ------------------
COSTS AND EXPENSES:
Cost of product sales 1,490,603 1,608,972
Cost of rentals 357,787 337,641
Selling, general and administrative expenses 1,335,224 1,601,165
------------------ ------------------
3,183,614 3,547,778
------------------ ------------------
LOSS FROM OPERATIONS (3,967) (422,737)
------------------ ------------------
OTHER INCOME (EXPENSE):
Interest income 35,250 16,385
Interest expense (5,460) (13,006)
Other 3,612 76,093
Insurance recovery 104,840
------------------ ------------------
138,242 79,472
------------------ ------------------
INCOME (LOSS) BEFORE INCOME TAXES 134,275 (343,265)
INCOME TAXES 74,000 (219,000)
------------------ ------------------
NET INCOME (LOSS) $ 60,275 $ (124,265)
------------------ ------------------
------------------ ------------------
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE $ 0.01 $ (0.02)
------------------ ------------------
------------------ ------------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
USED IN COMPUTING BASIC AND DILUTED
INCOME (LOSS) PER COMMON SHARE 5,738,350 5,720,350
------------------ ------------------
------------------ ------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
Class A
Common Stock Common Stock Capital in
----------------------------- ---------------------------- Excess of Accumulated
Shares Amount Shares Amount Par Value Deficit
--------------- ------------- -------------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, March 31, 1997 5,490,228 $ 5,490 158,839 $ 159 $2,376,672 $ (741,073)
ISSUANCE OF CLASS A
COMMON STOCK 50,000 50 40,000 40 22,410
CONVERSION OF CLASS A
TO COMMON STOCK 32,000 32 (32,000) (32)
NET LOSS (124,265)
---------- ---------- ---------- ---------- ---------- ----------
BALANCES, March 31, 1998 5,572,228 5,572 166,839 167 2,399,082 (865,338)
PURCHASE OF TREASURY
STOCK
CONVERSION OF CLASS A
TO COMMON STOCK 39,000 39 (39,000) (39)
NET INCOME 60,275
---------- ---------- ---------- ---------- ---------- ----------
BALANCES, March 31, 1999 5,611,228 $ 5,611 127,839 $ 128 $2,399,082 $ (805,063)
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock
--------------------------
Shares Amount Total
------------ ------------ ---------------
<S> <C> <C> <C>
BALANCES, March 31, 1997 780 $ (240) $1,641,008
ISSUANCE OF CLASS A
COMMON STOCK 22,500
CONVERSION OF CLASS A
TO COMMON STOCK
NET LOSS (124,265)
---------- ---------- ----------
BALANCES, March 31, 1998 780 (240) 1,539,243
PURCHASE OF TREASURY
STOCK 1,600 (1,600) (1,600)
CONVERSION OF CLASS A
TO COMMON STOCK
NET INCOME 60,275
---------- ---------- ----------
BALANCES, March 31, 1999 2,380 $ (1,840) $1,597,918
---------- ---------- ----------
---------- ---------- ----------
</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, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 60,275 $ (124,265)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 195,192 228,803
Provision for doubtful accounts 4,000
Deferred income taxes 74,000 (219,000)
Common stock to be issued for services 22,500
Increase (decrease) in cash attributable to
changes in operating assets and liabilities:
Accounts receivable (26,402) (12,117)
Inventories 3,607 143,492
Prepaid expenses and other current assets (11,488) 26,872
Other assets (3,753) (16,443)
Accounts payable (74,241) (83,350)
Accrued expenses and other 6,993 (3,551)
Lawsuit reserve 269,000
Security deposits 17,162
------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 224,183 253,103
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (189,316) (268,762)
Receipts from cash collateral account for letters of credit 165,000
------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (189,316) (103,762)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 102,000 1,600,000
Principal payments on long-term debt (52,412) (1,227,742)
Purchase of treasury stock (1,600)
------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 47,988 372,258
------------- --------------
INCREASE IN CASH AND CASH EQUIVALENTS 82,855 521,599
CASH AND CASH EQUIVALENTS, beginning of year 804,090 282,491
------------- --------------
CASH AND CASH EQUIVALENTS, end of year $ 886,945 $ 804,090
------------- --------------
------------- --------------
</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,
1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION, cash paid during the year for interest $ 140,303 $ 136,318
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURE OF NONCASH OPERATING AND FINANCING ACTIVITIES, in March,
1999 the Company had an unfavorable lawsuit settlement which resulted in a
decrease in lawsuit reserve of $181,000 and a corresponding increase in
short-term and long-term debt.
</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. Its subsidiary
(Transbanc International Investors Corporation) owns and leases to
various tenants 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, (collectively the "Company"). All intercompany
balances and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash
on hand and a highly liquid investment account with a maturity of
90 days or less from the purchase date.
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 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:
<TABLE>
<CAPTION>
ASSET ESTIMATED USEFUL LIVES
<S> <C>
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
</TABLE>
GOODWILL - Goodwill is being amortized on a straight-line basis
over its estimated useful life of 20 years.
INCOME TAXES - The Company complies with Statement of Financial
Accounting Standards No. 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 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.
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.
F-7
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
INCOME (LOSS) PER COMMON SHARE - The Company complies with
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" (SFAS No. 128). SFAS No. 128 requires dual presentation of
basic and diluted earnings per share for all periods presented.
Basic earnings per share excludes dilution and is computed by
dividing income (loss) available to common shareholders 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 share in the earnings of
the entity.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The fair value of the
Company's assets and liabilities which qualify as financial
instruments under SFAS No. 107 approximate the carrying amounts
presented in the balance sheet.
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
RECLASSIFICATIONS - Certain 1998 amounts have been reclassified to
conform to the 1999 presentation.
NOTE 3 - INVENTORIES:
Inventories consist of the following at March 31, 1999:
<TABLE>
<S> <C>
Purchased parts and raw materials $ 277,863
Work-in-progress 12,283
Finished goods 74,746
--------------
$ 364,892
--------------
--------------
</TABLE>
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of the following at
March 31, 1999:
<TABLE>
<S> <C>
Land $ 365,314
Building and improvements 3,857,155
Land improvements 174,469
Machinery and equipment 1,462,489
Furniture and fixtures 49,798
Office equipment 122,294
Transportation equipment 113,325
--------------
6,144,844
Less accumulated depreciation and amortization 3,976,126
--------------
$ 2,168,718
--------------
--------------
</TABLE>
A parcel of land containing a building, which is being used for
rental to third parties, is subject to claims of the United States
Department of Justice and the New Jersey Department of
Environmental Protection.
F-8
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT (CONTINUED):
At March 31, 1999, property, plant and equipment includes $23,824
and accumulated amortization includes $14,399 related to an asset
recorded under a capital lease.
NOTE 5 - LONG-TERM DEBT:
The following is a summary of long-term debt at March 31, 1999:
<TABLE>
<S> <C>
Line of credit, due on demand or January 31, 2000 if no demand is made,
providing for maximum borrowing of $15,000 with interest due quarterly at the
base rate (8% at March 31, 1999), as defined in the agreement,
plus 1% $ 6,050
Note payable, bank, in monthly installments of
$1,010 including interest at 8.5% per annum through
June 2001 24,744
Note payable, bank, in monthly installments of
$1,420 including interest at 8% per annum through
March 2004 70,000
Mortgage note payable in monthly installments of $13,855, including interest at
8.47% per annum, through October 15, 2007, at which time the remaining
principal balance is due, and collateralized by first mortgages on the
Company's real estate holdings and the assignment
of leases and rents from its rental operations 1,556,773
Obligation under capital lease, payable in monthly
installments of $598 through September 1999 3,472
Equipment loan payable in monthly installments of $401, including interest at
7.5% per annum, through September 2001 and collateralized by
certain transportation equipment 10,951
Legal settlement, payable in quarterly installments
of $47,500, including imputed interest at 5%
per annum, through May 2000. 181,000
-------------------
1,852,990
Less current portion 207,462
-------------------
$ 1,645,528
-------------------
-------------------
</TABLE>
F-9
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - LONG-TERM DEBT (CONTINUED):
Future aggregate principal maturities by year are as follows:
<TABLE>
<CAPTION>
Year ending March 31:
<S> <C>
2000 $ 207,462
2001 112,818
2002 61,603
2003 61,147
2004 66,414
Thereafter 1,343,546
--------------
$ 1,852,990
--------------
--------------
</TABLE>
NOTE 6 - ACCRUED EXPENSES AND OTHER:
Accrued expenses and other are comprised of the following at March
31, 1999:
<TABLE>
<S> <C>
Payroll and related $ 36,666
Interest 10,986
Insurance 39,805
Professional fees 29,000
Lawsuit reserve 25,000
Other 22,045
--------------
$ 163,502
--------------
--------------
</TABLE>
NOTE 7 - LEASES:
The Company is the lessor under operating leases which expire in
various years through 2004.
Aggregate future minimum rentals to be received under
noncancelable leases as of March 31, 1999 are as follows:
Year ending March 31:
<TABLE>
<S> <C>
2000 $ 683,000
2001 543,000
2002 485,000
2003 168,000
2004 3,000
---------------
$ 1,882,000
---------------
---------------
</TABLE>
F-10
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES:
The provision for income taxes in the accompanying consolidated
statements of operations consists of the following deferred
federal and state income taxes for the years ended March 31, 1999
and 1998:
<TABLE>
<CAPTION>
1999 1998
------------ ---------------
<S> <C> <C>
Deferred:
Federal $ 56,000 $ (178,000)
State 18,000 (41,000)
------------ ---------------
$ 74,000 $ (219,000)
------------ ---------------
------------ ---------------
</TABLE>
The 1998 income tax expense (benefit) differs from income taxes
computed at the federal statutory rate primarily because of the
effect of changes in the valuation allowances.
The components of the Company's deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
March 31, 1999
Federal State Total
------------------ ------------------- ---------------
Tax benefit attributable to:
<S> <C> <C> <C>
Net operating loss $ 139,000 $ 2,000 $ 141,000
Litigation contingency reserve 130,000 38,000 168,000
Depreciation (31,000) (9,000) (40,000)
Inventories and other 7,000 5,000 12,000
------------------ ------------------- ---------------
$ 245,000 $ 36,000 $ 281,000
------------------ ------------------- ---------------
------------------ ------------------- ---------------
</TABLE>
At March 31, 1999, the Company had net operating loss
carryforwards for federal and state tax purposes of approximately
$450,000 and $26,000, respectively, which expire beginning in
2007.
NOTE 9 - SEGMENT INFORMATION:
The Company adopted Statement of Financial Accounting Standards
No. 131 (SFAS No. 131), "Disclosures About Segments of an
Enterprise and Related Information", effective January 1, 1998.
SFAS No. 131 requires disclosures of segment information on the
basis that is used internally for evaluating segment performance
and deciding how to allocate resources to segments.
Segment information listed below reflects the four principal
business units of the Company (as described in Note 1). Each
segment is managed according to the products or services which are
provided to the respective customers and information is reported
on the basis of reporting to the Company's Chief Operating
Decision Maker (CODM).
F-11
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - SEGMENT INFORMATION (CONTINUED):
Information relative to the Company's business segments is as
follows:
<TABLE>
<CAPTION>
Years Ended March 31,
-----------------------------------
1999 1998
---------------- ----------------
<S> <C> <C>
Revenues:
Deep-drawn metal-formed products $ 994,816 $ 977,537
Spray coating and industrial mixer systems 1,109,917 1,140,323
Ice crushing and shaving equipment 360,829 311,065
Rental 714,085 696,116
---------------- ----------------
$ 3,179,647 $ 3,125,041
---------------- ----------------
---------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
Years Ended March 31,
-----------------------------------
1999 1998
---------------- ----------------
<S> <C> <C>
Operating profit (loss)
Deep-drawn metal-formed products $ 114,903 $ 29,914
Spray coating and industrial mixer systems 257,098 184,558
Ice crushing and shaving equipment 26,719 2,417
Rental 216,935 169,720
---------------- ----------------
615,655 386,609
Less unallocated general corporate charges 619,622 809,346
---------------- ----------------
$ (3,967) $ (422,737)
---------------- ----------------
---------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
March 31,
1999
----------------
<S> <C>
Identifiable assets:
Deep-drawn metal-formed products $ 489,796
Spray coating and industrial mixer systems 369,874
Ice crushing and shaving equipment 118,085
Rental 1,797,021
General corporate 1,490,505
----------------
$ 4,265,281
----------------
----------------
</TABLE>
F-12
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - SEGMENT INFORMATION (CONTINUED):
<TABLE>
<CAPTION>
Years Ended March 31,
------------------------------------
1999 1998
---------------- -----------------
Depreciation and amortization:
<S> <C> <C>
Deep-drawn metal-formed products $ 44,461 $ 81,675
Spray coating and industrial mixer systems 22,620 13,324
Ice crushing and shaving equipment 2,357 1,011
Rental 57,251 63,255
General corporate 68,503 69,538
---------------- -----------------
$ 195,192 $ 228,803
---------------- -----------------
---------------- -----------------
</TABLE>
<TABLE>
<CAPTION>
Years Ended March 31,
-----------------------------------
1999 1998
---------------- ----------------
<S> <C> <C>
Capital additions:
Deep-drawn metal-formed products $ 1,890 $ 35,683
Spray coating and industrial mixer systems 53,460 15,105
Ice crushing and shaving equipment 7,745
Rental 58,743 113,500
General corporate 67,478 104,474
---------------- ----------------
$ 189,316 $ 268,762
---------------- ----------------
---------------- ----------------
</TABLE>
The Company's deep-drawn metal-formed products segment had sales
to one major customer in 1999 and 1998 of approximately $383,000
and $350,000, respectively. The spray coating and industrial mixer
systems segment had sales to one major customer of approximately
$437,000 and $450,000 in 1999 and 1998, respectively. In addition,
at March 31, 1999, accounts receivable from these customers were
approximately $174,000.
The Company's deep-drawn metal-formed products segment had
purchases from two major suppliers in 1999 and 1998 of
approximately $99,000 and $184,000, respectively. The ice crushing
machines segment had purchases from one major supplier in 1998, of
approximately $86,000. The spray coating and industrial mixer
systems segment had purchases from two major suppliers of
approximately $260,000 and $271,000 in 1999 and 1998,
respectively.
F-13
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - COMMITMENTS AND CONTINGENCIES:
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. The memorandum stipulated
that the United States Government (USG) would receive $25,000 upon
the execution of the settlement, $206,000 payable over five years
and a balloon payment of $150,000 payable in five years. In
addition, the USG would receive 60% of the net rental income
derived from the property for an undetermined period of time and
60% of the net proceeds from the sale of the property. The Company
has requested a renegotiation of the settlement terms. In March
1997, the Company made a counter-proposal to the USG seeking
reduction in the proposed terms for restoration expenditures
incurred by the Company resulting from zoning changes following
the cleanup phase. As of March 31, 1999, the Company's
expenditures to accommodate code changes in order to permit
re-occupancy of the premises were approximately $200,000. At March
31, 1999, this counter-proposal was being evaluated by the USG. In
the event of an unfavorable resolution to this matter, the Company
could experience a material adverse effect on its financial
position, results of operations and cash flows and may have no
alternative means by which to finance such resolution other than
to sell certain of its assets.
In July 1997, the New Jersey Department of Environmental
Protection (DEP) instituted suit against the Company related to
toxic chemical contamination at the site mentioned in the
preceding paragraph. The civil action is brought pursuant to the
Spill Compensation and Control Act ("Spill Act"), whereby the DEP
seeks to recover costs which it has expended and intends to expend
in the future for the cleanup of the hazardous substances. As of
July 1997, the DEP had incurred costs in excess of $1,150,000 and
is attempting to recover an amount equal to three times the
cleanup costs incurred, and to be incurred, in accordance with a
provision in the Spill Act. The litigation is now in the discovery
process and the ultimate outcome of such litigation cannot be
determined at the present time. In the event of an unfavorable
resolution to this matter, the Company could experience a material
adverse effect on its financial position, results of operations
and cash flows and may have no alternative means by which to
finance such resolution other than to sell certain of its assets.
At March 31, 1999, the Company has accrued $444,000 which
management believes will be sufficient to satisfy any liabilities
which may result in connection with the settlement of the above
mentioned matters.
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 11 - 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.
During the year ended March 31, 1999, the Company received
approximately $100,000 for production losses resulting from this
fire.
F-14
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - SUBSEQUENT EVENT:
The Company suffered a fire in June 1999 at the deep-drawn
metal-formed products division, which started in a dust collector
resulting in fire, smoke and water damage to both the building and
inventories. The Company has filed a claim with its insurer for
damage and production loss resulting from the fire.
F-15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets found on pages F-2 and F-3 of the Company's Form
10-KSB for the year ended March 31, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 888,945
<SECURITIES> 0
<RECEIVABLES> 385,014
<ALLOWANCES> 5,000
<INVENTORY> 364,892
<CURRENT-ASSETS> 1,736,356
<PP&E> 6,144,844
<DEPRECIATION> 3,976,126
<TOTAL-ASSETS> 4,265,281
<CURRENT-LIABILITIES> 528,519
<BONDS> 1,990,985
0
0
<COMMON> 5,739
<OTHER-SE> 1,592,179
<TOTAL-LIABILITY-AND-EQUITY> 4,265,281
<SALES> 2,485,562
<TOTAL-REVENUES> 3,179,647
<CGS> 1,490,603
<TOTAL-COSTS> 3,183,614
<OTHER-EXPENSES> (143,702)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,460
<INCOME-PRETAX> 134,274
<INCOME-TAX> 74,000
<INCOME-CONTINUING> 60,275
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,275
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
