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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 and Exchange Act of 1934
For the Fiscal Year Ended March 31, 2000
( ) Transition Report Under Section 13 0r 15 (d)
Of the Securities and 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 (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 here if there is not disclosure of delinquent files 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 Fiscal Year:
$3,159,395
State the aggregate market value of the voting common stock held by
non-affiliates of the registrant as of March 31, 2000 based on the closing bid
on such day of $7/32.
$622,578
Indicate the number of shares outstanding of the Registrant's class of
common stock as of March 31, 2000:
Common: 5,608,672
Common Stock Class A: 127,839
Transitional Small Business Disclosure Format:
Yes______ No X
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PART I
ITEM I 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 crushung
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 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, 2000, the Company had approximately thirty-one (31) 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 end March 31, 2000 were
$934,195, a decrease of $60,621 or (6%) from the previous fiscal year sales
of $994,816. The decrease was attributable to a fire that occurred in the
finishing department and resulted in a business interruption loss. The
company has received funds through the business interruption policy to
offset the manufacturing related losses.
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2. Eclipse Systems Division
Eclipse Systems' sales for the fiscal year ending March 31, 2000 were
$1,067,555, a decrease of $42,362 (3.8%) from the 1999 fiscal year's sales
of $1,109,917. 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 include a full line of gear reduced flange mixers,
available with air and electric drive. We are currently updating our 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 $87,057 to $447,886 compared to
sales of $360,829 for the fiscal year ended March 31, 2000 a (24%)
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 cosmetics
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.
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2. Eclipse Systems Division
Eclipse Systems blends it 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.
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. Several models of ice crushing equipment have
been listed with the National Sanitary Foundation. An N.S.F. listing is a
mandatory requirement in many states for food service equipment and is not
available on competitive models.
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Current Operating Environment
The consolidated statement of operations for the fiscal year ended
March 31, 2000 reflects a net loss of $15,915 as compared to net income of
$60,275 for the fiscal year ended March 31, 1999, a decrease of $76,190.
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 revenues were $143,122 for the current year.
The Aerosystems Division is currently leasing space at its Franklin,
New Jersey location where a Superfund project clean up restored the property.
The refurbished portion of the plant located there is presently leased by two
(2) tenants. Total revenue generated at the Aerosystems facility during the
fiscal year ended March 31, 2000 was $25,562.
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 $541,075.
Rental revenues generated for the fiscal year ended March 31, 2000 were
$709,759 a decrease of $4,326 over 1999 revenues of $714,085.
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 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 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 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.
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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, 2000, the Clawson Division had sales of $56,335
to one (1) major customer, Scruggs, Inc., which accounted for 13 percent of
the total sales of $447,886. One major customer, McMaster-Carr Supply Co.,
accounted for $243,429 or 23 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
63 percent of Precision Metalform's total sales. Sheaffer Pen represents 25
percent and Accutec Inc. represents 38 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.
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 by two (2) tenants and is expected to generate $143,000
in rental revenues for the fiscal year ended March 31, 2001.
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 clean up. 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).
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ITEM 3 LEGAL PROCEDURES
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
("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 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 renegotiation of the settlement terms.
In March of 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 severe zoning changes following the clean up phase.
As of March 31, 2000, the Company's expenditures to accommodate code changes
in order to permit re-occupancy of the premises were approximately $200,000.
At March 31, 2000, 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
("DEP") 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") whereby the DEP seeks to recover costs which it has expended and
intends to expend in the future for the clean up 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 clean up 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
At March 31, 2000, the Company has accrued $444,000, $25,000 of which is
included in accrued expenses and other current liabilities, which it
believes will be sufficient to satisfy any liabilities which may occur in
connection with the settlement of any pending litigation.
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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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.
Fiscal Year Ended March 31, 2000 Common Stock Bid
High Low
First quarter ended June 30, 1999 .25 .18
Second quarter ended September 30, 1999 .219 .17
Third quarter ended December 31, 1999 .187 .11
Fourth quarter ended March 31, 2000 .219 .11
Fiscal Year Ended March 31, 1999 Common Stock Bid
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
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, 2000 was 459. As of March 31, 2000 the number of holders of
Common Stock Class A was 16.
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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, statements regarding 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.
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, 2000 was $1,121,669 and the current ratio was
3.6 to 1. Working capital remained fairly constant with that of last year,
showing a slight decrease of $86,168.
Net cash flow used in operations for the fiscal year ended March 31, 2000
amounted to $17,615 a decrease of $241,798 from that of March 31, 1999.
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Results of Operations (consolidated)
The following table sets for the statement of operations for the Company on
a consolidated basis for the years ended March 31, 2000 and March 31, 1999.
This information should be read in conjunction with the consolidated
financial statements and notes appearing elsewhere herein.
2000 1999
Revenue
Product Sales 2,449,636 $2,465,562
Rental Income 709,759 714,085
3,159,395 3,179,647
Costs and Expenses
Cost of Product Sales 1,399,498 1,490,603
Cost of Rentals 369,662 357,787
Selling, General, Administrative 1,675,475 1,335,224
3,444,635 3,183,614
Loss from Operations (285,240) (3,967)
Other Income 257,325 138,242
Income (loss) before Income
Tax Expense (benefit) (27,915) 134,275
Income Tax Expense (benefit) (12,000) 74,000
Net Income (loss) (15,915) 60,275
Net Income (loss) Applicable to
Common Shareholders 0.00 .01
Current Ratio 3.63 3.30
Weighted Average Number of Common
Shares Outstanding Used in Computing
Basic and Diluted Earnings (loss)
PerCommon Share 5,785,243 5,738,350
YEAR ENDED MARCH 31, 2000 COMPARED TO YEAR ENDED MARCH 31, 1999
(see description of business discussion of dividends)
Technology General Corporation generated consolidated revenues of $3,159,395
and $3,179,647 for the fiscal years ended March 31, 2000 and 1999
respectively. The manufacturing division's sales for 2000 were $2,449,636 a
decrease of $20,711 when compared to 1999 product sales of $2,465,562. The
Clawson Machine Division sales increased 24% amounting to $87,057 from
$360,829 in 1999 to $447,886 for 2000. The Precision Metalform Division
also had a decrease in sales of $60,621 to $934,195 for 2000 compared to
$994,816 in 1999. Eclipse Systems Division's sales decreased a total of
$42,362 to $1,067,555 for the fiscal year ended March 31, 2000 from
$1,109,917 recorded the previous fiscal year.
Rental revenues recorded a decrease of $4,326 to $709,759 for the current
fiscal year compared to the previous fiscal year of $714,085. The
Aerosystems Division recorded a decrease of $16,950 in rental revenues to
$25,562 in 2000 compared to $42,512 in 1999. Technology General Corp. had
an increase in rental revenue of $7,728 while the Transbanc subsidiary
increased rental revenue by $4,896.
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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 $34,057 before provision for income taxes. In 1999, the
manufacturing divisions had a combined net income of $108,543.
The current fiscal year's net loss from the Company's rental entities after
management fees but before income taxes totaled $61,972, a decrease of
$87,704 compared to the previous fiscal year's net income of $25,732.
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
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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 received an annual fee of $200.00 payable
in stock at the option of the Board of Directors.
Charles J. Fletcher (age 77) 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 USNR (retired) and former Navy
aviator. He has been associated with several companies in the Aerospace
field as an engineer and holds several US patents. In 1993, he was inducted
into the Inventors Hall of fame and declared the original inventor of the
Hovercraft. On May 11, 2000, Mr. Fletcher was inducted into the Aviation
Hall of Fame for his contribution as the original inventor of the Hovercraft
and other space patents.
Jeffrey C. Fletcher (age 46)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 71) 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 1957, 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.
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, 2000 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
Compensation
Name of Individual or Group Capacity in Which Served
Charles J. Fletcher President/Chairman of the Board
Cash Compensation
$181,232
No other executive officer received compensation in excess of $100,000.
1. The Company owns automobiles for three executive officers. The cars were
used primarily for business purposes.
2. None of the executive officers have employment agreements with the Company.
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ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 2000 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 No. of Shares No. of Shares Percentage
Beneficial Owner/ Common Stock Class A Stock Beneficial
Identity of Group Beneficially Owned Ownership
Charles J. Fletcher(1) 1,357,500 25,000 24.4
15 Seminole Ct
Newton NJ 07860
Jeffrey C. Fletcher(2) 422,439 20,000 7.4
7 Seminole Ct
Newton NJ 07860
Helen S. Fletcher(3) 1,065,500 20.3
15 Seminole Ct
Newton NJ 07860
Evelyn Padalino 383,916 5.8
35 Gall Road
Morris Plains NJ 07950
All officers and directors as a group total three and own 2,845,439 Common
shares and 45,000 Class A shares.
(1) Charles J. Fletcher is also a Trustee of voting trusts covering an
additional 144,000 shares of Common stock (25%)
(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 of the Company.
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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 anum. 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:
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.
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 and F-6)
Notes to Consolidated Financial Statements (F-7 through F-15)
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 8-K
None
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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 14th day of July, 2000.
TECHNOLOGY GENERAL CORPORATION
/s/Charles J. Fletcher
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
/s/Charles J. Fletcher
Charles J. Fletcher President/Chairman of the Board 7/14/00
/s/ Jeffery C. Fletcher
Jeffrey C. Fletcher Executive Vice President/Director 7/14/00
/s/ Helen S. Fletcher
Helen S. Fletcher Secretary/Treasurer 7/14/00
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TECHNOLOGY GENERAL CORPORATION
/s/Charles J. Fletcher
Charles J. Fletcher
President/Chief Executive Officer
Chairman of the Board
/s/Helen S. Fletcher
Helen S. Fletcher
Secretary/Treasurer
Date: 7/14/00
14
<PAGE>
TECHNOLOGY GENERAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
MARCH 31, 2000
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUSIDIARY
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 F5-F6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F7-F15
15
<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, 2000, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended March 31, 2000 and 1999. These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion of 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 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, 2000, and the
results of their operations and their cash flows for the years ended
March 31, 2000 and 1999, in conformity with generally accepted accounting
principles.
/s/Rothstein, Kass & Co., P.C.
Roseland, New Jersey
June 13, 2000
F-1
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 453,400
Accounts receivable, net of allowance
for doubtful accounts of $3,000 441,487
Inventories 396,249
Deferred tax asset 12,000
Prepaid expenses and other current assets 245,551
Total current assets $ 1,548,687
PROPERTY, PLANT AND EQUIPMENT, net 2,116,590
OTHER ASSETS:
Goodwill, less accumulated amortization
of $64,229 28,263
Deferred tax asset 281,000
Other 59,135
368,398
$ 4,033,675
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Long-term debt, current portion $ 74,281
Accounts payable 226,941
Accrued expenses and
other current liabilities $ 125,796
Total current liabilities $ 427,018
LONG-TERM LIABILITIES:
Long-term debt, less current portion 1,532,710
Lawsuit reserve 419,000
Security deposits 70,490
2,022,200
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER,S EQUITY:
Common stock, $.001 par value, 1 vote per
share, authorized 30,000,000 shares, issued
5,611,228 shares, outstanding 5,608,672 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 2,401,872
Accumulated deficit (820,978)
1,586,633
Less treasury stock, at cost, 2,556 shares (2,176)
Total stockholders' equity 1,584,457
$ 4,033,675
See accompanying notes to consolidated financial statements
F-2
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended March 31, 2000 and 1999
2000 1999
REVENUES:
Product sales $ 2,449,636 $ 2,465,562
Rentals 709,759 714,085
3,159,395 3,179,647
COSTS AND EXPENSES:
Cost of product sales 1,399,498 1,490,603
Cost of rentals, including interest
expense of $130,287 and $133,154
in 2000 and 1999, respectively 369,662 357,787
Selling, general and administrative
Expenses 1,675,475 1,335,224
3,444,635 3,183,614
LOSS FROM OPERATIONS (285,240) (3,967)
OTHER INCOME (EXPENSE):
Interest income 29,000 35,250
Interest expense (15,359) (5,460)
Other 44,458 3,612
Insurance recoveries 199,226 104,840
257,325 138,242
INCOME (LOSS) BEFORE INCOME TAXES (27,915) 134,275
INCOME TAXES (12,000) 74,000
NET INCOME (LOSS) $ (15,915) $ 60,275
BASIC AND DILUTED INCOME (LOSS)
PER COMMON SHARE $ (0.00) $ 0.01
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
USED IN COMPUTING BASIC AND DILUTED
INCOME (LOSS) PER COMMON SHARE 5,785,243 5,738,350
See accompanying notes to consolidated financial statements
F-3
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years Ended March 31, 2000 and 1999
<TABLE>
<CAPTION> Class A Capital in
Common Stock Common Stock Excess of Accumulated Treasury Stock
Shares Amount Shares Amount Par Value Deficit Shares Amount Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, March 31, 1998 5,572,228 $ 5,572 166,839 $ 167 $ 2,399,082 $ (865,338) 780 $ (240) $ 1,539,243
PURCHASE OF TREASURY
STOCK 1,600 (1,600) (1,600)
CONVERSION OF CLASS A
TO COMMON STOCK 39,000 39 (39,000) (39)
NET INCOME ________ ______ ________ _____ __________ 60,275 ______ ______ __ 60,275
BALANCES, March 31, 1999 5,611,228 5,611 127,839 128 2,399,082 (805,063) 2,380 (1,840) 1,597,918
COMMON STOCK TO BE
ISSUED AS COMPENSATION
(277,000 SHARES) 2,790 2790
PURCHASE OF TREASURY STOCK 176 (336) (336)
NET LOSS _________ _______ ________ _____ __________ (15,915)______ ______ __ (15,915)
BALANCES, March 31, 2000 5,611,228 $5,611 127,839 128 $ 2,401,872 $ (820,978) 2,556 $(2,176) $ 1,584,457
</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, 2000 and 1999
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (15,915) $ 60,275
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 226,089 195,192
Provision for doubtful accounts 2,000
Deferred income taxes (12,000) 74,000
Common stock to be issued for services 2,790
Increase (decrease) in cash attributable to
changes in operating assets and liabilities:
Accounts receivable (63,473) (26,402)
Inventories (31,357) 3,607
Prepaid expenses and other current assets (153,046) (11,488)
Other assets (557) (3,753)
Accounts payable 69,386 (74,241)
Accrued expenses and
other current liabilities (37,706) 6,993
Security deposits (3,826)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (17,615) 224,183
NBT CASH USED IN INVESTING ACTIVITIES,
Purchase of property, plant and equipment (169,595) (189,316)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 6,685 102,000
Principal payments on long-term debt (252,684) (52,412)
Purchase of treasury stock (336) (1,600)
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (246,335) 47,988
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (433,545) 82,855
CASH AND CASH EQUIVALENTS, beginning of year 886,945 804,090
CASH AND CASH EQUIVALENTS, end of year $453,400 $886,945
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, 2000 and 1999
2000 1999
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION, cash paid during the year for interest $ 145,896 $ 140,303
SUPPLEMENTAL DISCLOSURE OF NONCASH OPERATING
AND FINANCING ACTIVITES, 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-debt.
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:
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 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.
NOTE 3 - INVENTORIES:
Inventories consist of the following at March 31, 2000:
Purchased parts and raw material $ 235,187
Work-in-progress 12,662
Finished goods 148,400
$ 396,249
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of the following at March 31, 2000:
Land $ 365,314
Building and improvements 3,882,184
Land improvements 245,414
Machinery and equipment 1,510,936
Furniture and fixtures 51,576
Office equipment 145,690
Transportation equipment 113,325
6,314,439
Less accumulated depreciation and amortization 4,197,849
$ 2,116,590
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 (see
Note 10).
F-8
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - LONG-TERM DEBT:
The following is a summary of long-term debt at March 31, 2000:
Line of credit, due on demand or June 30,
2001 if no demand is made, providing for
maximum borrowing of $15,000 with interest
due quarterly at the base rate (9.5% at
March 31, 2000), as defined in the agreement,
plus 1.25% $ 6,685
Note payable, bank, in monthly installments of
$1,010 including interest at 8.5% per anum through
June 2001 14,337
Note payable, bank, in monthly installments of
$1,420 including interest at 8% per anum through
March 2004 58,149
Mortgage note payable in monthly installments
Of $13,855, including interest at 8.47% per anum,
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 1,521,007
Equipment loan payable in monthly installments
of $401, including interest at 7.5% per anum,
through September 2001 and collateralized by
certain transportation equipment 6,813
1,606,991
Less current portion 74,281
$1,532,710
Future aggregate principal maturities by year are as follows:
Year ending March 31:
2001 $ 74,281
2002 61,603
2003 61,147
2004 66,414
2005 54,007
Thereafter 1,289,539
$ 1,606,991
F-9
<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, 2000:
Payroll and related $ 26,068
Interest 10,736
Deferred rental income 27,445
Professional fees 30,000
Lawsuit reserve 25,000
Other 6,547
$ 125,796
NOTE 7 - LEASES:
The Company is the lessor under operating leases that expire in various
years through 2004.
Aggregate future minimum rentals to be received under noncancelable leases
as of March 31, 2000 are as follows:
Year ending March 31:
2001 $ 680,000
2002 526,000
2003 199,000
2004 3,000
$ 1,408,000
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, 2000 and 1999:
2000 1999
Deferred:
Federal $ (11,000) $ 56,000
State (1,000) 18,000
$ (12,000) $ 74,000
The components of the Company's deferred tax assets and liabilities are as
follows:
March 31, 2000
Federal State Total
Tax benefit attributable to:
Net operating loss $ 160,000 $ 8,000 $ 168,000
Litigation contingency reserve 137,000 40,000 177,000
Depreciation (50,000) (14,000) (64,000)
Inventories and other 9,000 3,000 12,000
$ 256,000 $ 37,000 $ 293,000
At March 31, 2000, the Company had net operating loss carryforwards for
federal and state tax purposes of approximately $515,000 and $88,000,
respectively, which expire beginning in 2007.
NOTE 9 - SEGMENT INFORMATION:
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:
Years Ended March 31,
2000 1999
Revenues:
Deep-drawn metal-formed products $ 934,195 $ 994,816
Spray coating and industrial mixer systems 1,076,555 1,109,917
Ice crushing and shaving equipment 447,886 360,829
Rental 709,759 714,085
$3,159,395 $3,179,647
Years Ended March 31,
2000 1999
Operating profit (loss):
Deep-drawn metal-formed products $ 105,404 $ 114,903
Spray coating and industrial mixer systems 220,786 257,098
Ice crushing and shaving equipment 93,049 26,719
Rental 97,877 216,935
517,116 615,655
802,356 619,622
$ (285,240) $ (3,967)
March 31,
2000
Identifiable assets:
Deep-drawn metal-formed products $ 718,341
Spray coating and industrial mixer systems 357,452
Ice crushing and shaving equipment 148,666
Rental 1,442,713
General corporate 1,366,503
$4,033,675
F-12
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - SEGMENT INFORMATION (CONTINUED):
Years Ended March 31,
2000 1999
Depreciation and amortization:
Deep-drawn metal-formed products $ 58,711 $ 44,461
Spray coating and industrial mixer systems 27,008 22,620
Ice crushing and shaving equipment 2,964 2,357
Rental 58,208 57,251
General Corporate 79,198 68,503
$ 226,089 $ 195,192
Years Ended March 31,
2000 1999
Capital additions:
Deep-drawn metal-formed products $ 48,449 $ 1,890
Spray coating and industrial mixer systems 300 53,460
Ice crushing and shaving equipment 7,745
Rental 95,972 58,743
General corporate 24,844 67,478
$ 169,595 $ 189,316
The Company's deep-drawn metal-formed products segment had sales to two
major customers in 2000 and 1999 of approximately $593,000 and $587,000,
respectively. The ice crushing machines segment had sales to one and two
major customers of approximately $56,000 and $87,000 in 2000 and 1999,
respectively. The spray coating and industrial mixer systems segment had
sales to one major customer of approximately $243,000 and $437,000 in 2000
and 1999, respectively. In addition, at March 31, 2000, accounts receivable
from these customers were approximately $197,000.
The Company's deep-drawn metal-formed products segment had purchases from
two major suppliers in 2000 and 1999 of approximately $127,000 and $99,000,
respectively. The ice crushing machines segment had purchases from one major
supplier in 2000, of approximately $71,000. The spray coating and industrial
mixer systems segment had purchases from two major suppliers of approximately
$218,000 and $260,000 in 2000 and 1999, 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, 2000, the Company's
expenditures to accommodate code changes in order to permit re-occupancy of
the premises were approximately $200,000. At March 31, 2000, 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 attemping 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, 2000, the Company has accrued $444,000, $25,000 of which is
included in accrued expenses and other current liabilities, which management
believes will be sufficient to satisfy any liabilities which may result in
connection with the settlement of the above mentioned matters.
NOTE 11 - OTHER INCOME:
Included in prepaid expenses and other current assets is approximately
$186,000 that represents insurance claims resulting from damages and
production losses from a fire at the Company's deep-drawn metal-formed
products division.
Included in other income and prepaid expenses is approximately $14,000
representing net proceeds from a legal settlement.
F-14
<PAGE>
TECHNOLOGY GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - STOCK COMPENSATION:
In November 1999 the Company authorized the issuance of 275,000 shares of
restricted common stock and 2,000 shares of class A restricted common stock
to various employees and consultants to the Company. These restricted shares
are convertible to marketable common stock two years subsequent to the issue
date provided the employees and consultants continue to provide services to
the Company. The value of the shares on the date of authorization of
approximately $22,000, is being expensed over a two-year period. These
restricted shares were issued in May 2000.
NOTE 13 - RELATED PARTY TRANSACTIONS:
During the year ended March 31, 2000 the Company purchased a patent from a
stockholder and executive officer of the Company. The purchase price of
approximately $82,000 was advanced to the stockholder throughout the year as
testing of the product was being performed. As the underlying products for
this patent are currently not marketable, and the Company will incur
additional costs to develop and market the products, the entire purchase
price has been charged to operations and is included in general and
administrative expenses in the accompanying consolidated financial statements.
F-15
<PAGE>
[DESCRIPTION] Exhibit 27
[ARTICLE] 5
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS FOUND ON PAGES F-2 AND F-3
OF THE COMPANY'S FORM 10-KSB FOR THE TWELVE-MONTHS ENDED MARCH 31, 2000
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
[/LEGEND]
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] MAR-31-2000
[PERIOD-START] APR-01-1999
[PERIOD-END] MAR-31-2000
[CASH] 453,400
[SECURITIES] 0
[RECEIVABLES] 444,487
[ALLOWANCES] 3,000
[INVENTORY] 396,249
[CURRENT-ASSETS] 1,548,687
[PP&E] 6,314,439
[DEPRECIATION] 4,197,849
[TOTAL-ASSETS] 4,033,675
[CURRENT-LIABILITIES] 427,018
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 5,739
[OTHER-SE] 1,578,718
[TOTAL-LIABILITY-AND-EQUITY] 4,033,675
[SALES] 2,449,636
[TOTAL-REVENUES] 3,159,395
[CGS] 1,399,498
[TOTAL-COSTS] 3,444,635
[OTHER-EXPENSES] (272,684)
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 15,359
[INCOME-PRETAX] (27,915)
[INCOME-TAX] (12,000)
[INCOME-CONTINUING] (15,915)
[DISCONTINUED] -
[EXTRAORDINARY] -
[CHANGES] -
[NET-INCOME] (15,915)
[EPS-BASIC] 0
[EPS-DILUTED] 0
</TABLE>
