<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
The Quarter Ended September 30, 1995 Commission File Number 0-4186
CONSOLIDATED TECHNOLOGY GROUP LTD.
(Exact name of registrant as specified in its charter)
New York 13-1948169
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
160 Broadway, New York, NY 10038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 233-4500
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____
Number of common shares outstanding as of November 15, 1995: 24,724,644
----------
<PAGE> 2
CONSOLIDATED TECHNOLOGY GROUP LTD.
INDEX
Part I - Financial Information:
Page No.
Item 1. Financial Statements:
Consolidated Balance Sheets - September 30,
1995 and December 31, 1994 2-3
Consolidated Statements of Operations -
Three Month Periods Ended September 30,
1995 and October 31, 1994 4
Consolidated Statements of Operations -
Nine Month Periods Ended September 30,
1995 and July 31, 1994 5
Consolidated Statement of Shareholders'
Equity - September 30, 1995 6-9
Consolidated Statements of Cash Flows -
Nine Month Periods Ended September 30,
1995 and July 31, 1994 10-12
Notes to Consolidated Financial Statements 13-19
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 20-26
Part II - Other Information:
Item 6. Exhibits and Reports on Form 8-K 27
<PAGE> 3
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Balance Sheets
September 30,
1995 December 31,
(Unaudited) 1994
----------- -----------
Assets:
Current assets:
Cash and cash equivalents $ 1,892,009 $ 1,726,796
Receivables, net of allowances 19,731,384 16,819,356
Costs and estimated profits in
excess of interim billings 1,130,693 501,713
Inventories 4,142,402 3,466,328
Loans receivable 618,263 1,363,249
Prepaid expenses and other current assets 475,437 412,243
Investments in common stock -- 150,892
---------- ----------
Total current assets 27,990,188 24,440,577
---------- ----------
Property, plant and equipment, net 12,015,272 12,984,305
---------- ----------
Other assets:
Capitalized software development costs 878,460 1,064,418
Equipment leased to others 94,035 --
Goodwill, net 12,040,130 12,622,620
Covenants not to compete, net 2,488,925 3,450,665
Customer lists, net 12,134,994 12,770,200
Deferred offering costs 460,459 331,334
Receivables, long-term 420,800 --
Receivables, related parties 348,949 159,824
Trademark, net 385,606 --
Investments in common stock, long-term 578,204 383,345
Other assets 661,745 382,969
---------- ----------
Total other assets 30,492,307 31,165,375
---------- ----------
Total Assets $70,497,767 $68,590,257
========== ==========
See notes to consolidated financial statements.
2
<PAGE> 4
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Balance Sheets
September 30,
1995 December 31,
(Unaudited) 1994
----------- -----------
Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable and accrued expenses $ 9,406,347 $ 6,741,080
Accrued payroll and related expenses 2,471,453 1,774,160
Accrued interest 223,754 112,524
Income taxes payable 197,849 20,000
Interim billings in excess of costs and
estimated profits 1,514,365 1,156,674
Notes payable, related parties 183,496 183,496
Current portion of long-term debt 8,171,589 8,109,956
Current portion of subordinated debt 13,808,332 3,437,050
Current portion of capitalized lease
obligations 1,428,167 1,206,710
---------- ----------
Total current liabilities 37,405,352 22,741,650
---------- ----------
Long-term liabilities:
Long-term debt 8,064,946 8,541,930
Capitalized lease obligations 2,490,930 2,676,085
Subordinated debt 5,294,047 17,925,868
---------- ----------
Total long-term liabilities 15,849,923 29,143,883
---------- ----------
Minority Interest 2,769,566 --
---------- ----------
Shareholders' equity:
Preferred stock 80,675 80,675
Additional paid-in-capital, preferred stock 310,852 310,852
Common stock 237,073 175,773
Additional paid-in-capital, common stock 44,094,611 39,354,391
Accumulated deficit (28,592,981) (23,044,452)
Unrealized exchange translation 243,585 (33,200)
Deferred consulting fees (2,053,126) -
Net unrealized gain (loss) on long-term
investments in common stock 152,237 (139,315)
---------- -----------
Total shareholders' equity 14,472,926 16,704,724
---------- ----------
Total Liabilities and Shareholders' Equity $70,497,767 $68,590,257
========== ==========
See notes to consolidated financial statements.
3
<PAGE> 5
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statements of Operations
For the Three Month Periods
Ended September 30, 1995 and October 31, 1994
(Unaudited)
Three Month Periods Ended
---------------------------
September 30, October 31,
1995 1994
---------- ----------
Revenues $26,867,836 $10,705,195
Direct Costs 21,873,963 8,552,547
---------- ----------
Gross Profit 4,993,873 2,152,648
Selling, General and Administrative 5,422,232 2,480,644
---------- ----------
Loss from Operations (428,359) (327,996)
---------- ----------
Other Income (Expense):
Interest expense (933,284) (487,085)
Other income (expense) (311,817) 137,897
Losses on investment securities -- (11)
---------- ----------
Total other income (expense) (1,245,101) (349,199)
---------- ----------
Loss from Continuing Operations Before
Income Taxes and Minority Interest (1,673,460) (677,195)
Income Taxes (39,269) --
Minority Interest 272,128 7,235
---------- ----------
Net Loss ($ 1,440,601) ($ 669,960)
========== ==========
Net loss per share ($0.06) ($0.05)
==== ====
Weighted average number of common shares 23,707,264 14,205,789
========== ==========
See notes to consolidated financial statements.
4
<PAGE> 6
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statements of Operations
For the Nine Month Periods
Ended September 30, 1995 and October 31, 1994
(Unaudited)
Nine Month Periods Ended
---------------------------
September 30, October 31,
1995 1994
---------- ----------
Revenues $83,011,548 $23,964,291
Direct Costs 67,812,085 20,834,158
---------- ----------
Gross Profit 15,199,463 3,130,133
Selling, General and Administration 17,353,825 6,530,187
---------- ----------
Loss from Operations (2,154,362) (3,400,054)
---------- ----------
Other Income (Expense):
Interest expense (3,087,305) (828,420)
Other income (expense) (407,960) 504,229
Losses on investment securities (130,515) (531)
Unusual items -- (115,000)
---------- ----------
Total other income (expense) (3,625,780) (439,722)
---------- ----------
Loss from Continuing Operations Before
Income Taxes and Minority Interest (5,780,142) (3,839,776)
Income Taxes (148,497) --
Minority Interest 380,110 121,073
---------- ----------
Net Loss ($ 5,548,529) ($ 3,718,703)
========== ==========
Net loss per share ($0.26) ($0.26)
==== ====
Weighted average number of common shares 21,488,233 14,205,789
========== ==========
See notes to consolidated financial statements.
5
<PAGE> 7
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statement of Shareholders' Equity
For the Nine Month Period Ended September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Stock
Issued Unreal- Amort- Recog-
in Lieu ized ization nized
Balance of Cash Gain on of Def- Invest- Balance
at Stock for Exchange erred ment at
December Options Services Net Trans- Consult- Security September 30,
31, 1994 Exercised Rendered Loss lation ing Fees Losses 1995
-------- --------- -------- ------ -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Preferred
stock, $1.00
par value,
6% series
"A", 77,713
shares
authorized:
Shares 77,713 -- -- -- -- -- -- 77,713
======= ======= ======= ======= ======= ======= ======= =======
Amount $ 77,713 -- -- -- -- -- -- $ 77,713
======= ======= ======= ======= ======= ======= ======= =======
Preferred
stock, $3.50
and $0.10 par
value, series
"B" and "E",
8,000 shares
authorized
each:
Shares 262 -- -- -- -- -- -- 262
======= ======= ======= ======= ======= ======= ======= =======
Amount $ 262 -- -- -- -- -- -- $ 262
======= ======= ======= ======= ======= ======= ======= =======
(continued)
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 8
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statement of Shareholders' Equity
For the Nine Month Period Ended September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Stock
Issued Unreal- Amort- Recog-
in Lieu ized ization nized
Balance of Cash Gain on of Def- Invest- Balance
at Stock for Exchange erred ment at
December Options Services Net Trans- Consult- Security September 30,
31, 1994 Exercised Rendered Loss lation ing Fees Losses 1995
-------- --------- -------- ------ -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Preferred stock,
$1.00 par value,
$8.00 subordi-
nated, series
"F", 6,000 shares
authorized:
Shares 2,700 -- -- -- -- -- -- 2,700
====== ====== ======= ======= ======= ======= ======= =======
Amount $ 2,700 -- -- -- -- -- -- $ 2,700
====== ====== ======= ======= ======= ======= ======= =======
Total preferred
stock:
Shares 80,675 -- -- -- -- -- -- 80,675
======= ====== ======= ======= ======= ======= ======= =======
Amount $ 80,675 -- -- -- -- -- -- $ 80,675
======= ====== ======= ======= ======= ======= ======= =======
Additional
Paid- in
capital,
preferred
stock $ 310,852 -- -- -- -- -- -- $ 310,852
======== ======= ======= ======= ======= ======= ======= ========
(continued)
</TABLE>
See notes to consolidated financial statements.
7
<PAGE> 9
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statement of Shareholders' Equity
For the Nine Month Period Ended September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Stock
Issued Unreal- Amort- Recog-
in Lieu ized ization nized
Balance of Cash Gain on of Def- Invest- Balance
at Stock for Exchange erred ment at
December Options Services Net Trans- Consult- Security September 30,
31, 1994 Exercised Rendered Loss lation ing Fees Losses 1995
-------- --------- -------- ------ -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock,
$0.01 par
value,
50,000,000
shares
authorized:
Shares 17,577,260 6,000,000 130,004 -- -- -- -- 23,707,264
========== ========= ======== ======= ======= ======= ======= ==========
Amount $ 175,773 $ 60,000 $ 1,300 -- -- -- -- $ 237,073
======== ======= ====== ======= ======= ======= ======= ========
Additional
paid- in
capital,
common
stock $ 39,354,391 $ 4,627,500 $ 112,720 -- -- -- -- $ 44,094,611
=========== ========== ======== ======== ======= ======= ======= ============
Accumulated
deficit ($23,044,452) -- -- ($ 5,548,529) -- -- -- ($ 28,592,981)
========== ======= ======== ========== ======= ======= ======= ===========
(continued)
</TABLE>
See notes to consolidated financial statements.
8
<PAGE> 10
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statement of Shareholders' Equity
For the Nine Month Period Ended September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Stock
Issued Unreal- Amort- Recog-
in Lieu ized ization nized
Balance of Cash Gain on of Def- Invest- Balance
at Stock for Exchange erred ment at
December Options Services Net Trans- Consult- Security September 30,
31, 1994 Exercised Rendered Loss lation ing Fees Losses 1995
-------- --------- -------- ------ -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unrealized
exchange
transla-
ion ($ 33,200) -- -- -- $ 276,785 -- -- $ 243,585
======= ======= ====== ======= ======== ======= ======= ========
Deferred
consult-
ing fees -- ($2,312,500) -- -- -- $ 259,374 -- ($ 2,053,126)
======= ========= ====== ======= ======= ======= ======= ==========
Unrealized gain
(loss)on long-
term invest-
ments in
common stock ($139,315) -- -- -- -- -- $ 291,552 $152,237
======= ======= ====== ======= ======= ======= ======== =======
Total $ 16,704,724 $ 2,375,000 $ 114,020 ($5,548,529) $ 276,785 $ 259,374 $ 291,552 $ 14,472,926
=========== ========== ======== ========= ======== ======== ======== ===========
(concluded)
</TABLE>
See notes to consolidated financial statements.
9
<PAGE> 11
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Month Periods
Ended September 30, 1995 and October 31, 1994
(Unaudited)
Nine Month Periods Ended
---------------------------
September 30, October 31,
1995 1994
---------- ----------
Cash Flows from Operating Activities:
Net loss ($ 5,548,529) ($3,718,703)
---------- ---------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 5,365,696 854,370
Minority interest in loss of
consolidated subsidiaries (380,110) (121,073)
Bad debt expense 764,852 62,940
Value of stock issued in lieu of cash
payments for services rendered 114,020 --
Deferred charges on option exercise 1,409,374 135,000
Loss on common stock investments 130,515 13,044
Unrealized gain on exchange translation 276,785 --
Write-down of fixed assets to fair value -- 225,000
Change in assets and liabilities:
(Increase) decrease in assets:
Receivables (3,335,739) (963,959)
Inventories 135,429 458,849
Costs and estimated profits in
excess of interim billings (628,980) --
Prepaid expenses and other current assets 31,697 (768,504)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 1,978,635 762,560
Accrued payroll and related expenses 697,293 (1,271,873)
Income taxes payable 28,587 (5,550)
Accrued interest 177,849 (312,228)
Interim billings in excess of costs
and estimated profits 357,691 --
---------- ----------
Total adjustments 7,123,594 (931,424)
---------- ----------
Net cash provided by (used in)
operating activities 1,578,294 (4,650,127)
---------- ----------
Cash Flows from Investing Activities:
Increase in other assets (207,248) (324,234)
Capital expenditures (677,762) (318,248)
Capitalized software development costs (97,950) (375,735)
Investments in common stock (7,406) (506,453)
Proceeds from sale of common
stock investments 364,578 --
Payments for loans made (2,025,108) (1,565,339)
Collections for repayment of loans made 1,954,017 298,340
(continued)
See notes to consolidated financial statements.
<PAGE> 12 10
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Month Periods
Ended September 30, 1995 and October 31, 1994
(Unaudited)
Nine Month Periods Ended
---------------------------
September 30, October 31,
1995 1994
---------- ----------
Cash Flows from Investing Activities
(continued):
Acquisition of subsidiary -- (8,788,787)
Cash of companies acquired and merged 504,210 2,494,290
Cash of company sold -- (5,945)
Net assets of a company merged
with a subsidiary (982,822) --
Minority interest from a decrease in
ownership of consolidated subsidiaries 3,149,676 --
---------- ----------
Net cash provided by (used in)
investing activities 1,970,956 (9,092,111)
---------- ----------
Cash flows from financing activities:
Increase in deferred offering costs (129,125) (85,708)
Net advances from (payments to) a factor (172,504) 750,910
Proceeds from issuance of long-term debt 1,588,803 7,035,940
Repayment of long-term debt (2,826,683) (2,453,636)
Payments on capital lease obligations (808,989) (88,306)
Repayment of subordinated debt (2,260,539) --
Issuance of common stock -- 8,161,500
Exercise of stock options 1,225,000 2,470,000
---------- ----------
Net cash provided by (used in)
financing activities (3,384,037) 15,790,700
---------- ----------
Net Increase in Cash and Cash Equivalents 165,213 2,048,462
Cash and Cash Equivalents
at Beginning of Period 1,726,796 1,195,527
---------- ----------
Cash and Cash Equivalents
at End of Period $ 1,892,009 $ 3,243,989
========== ==========
(continued)
See notes to consolidated financial statements
11
<PAGE> 13
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Month Periods
Ended September 30, 1995 and October 31, 1994
(Unaudited)
Nine Month Periods Ended
---------------------------
September 30, October 31,
1995 1994
---------- ----------
Supplemental Disclosures of Cash
Flow Information:
Cash paid for:
Interest $ 2,976,075 $ 799,313
========== ==========
Income taxes $ 29,352 $ 5,550
========== ==========
(concluded)
During the nine month period ended September 30, 1995:
Non-Cash Investing Activities:
- acquired equipment under capital lease obligations with a net present
value of $835,774.
- received common stock in lieu of cash payments for notes and accrued
interest receivable with a book value of $217,162.
- pursuant to an acquisition of another entity by one of the Company's
subsidiaries, in a transaction accounted for as a reverse merger:
- reduced the Company's equity ownership in such subsidiary which resulted
in an increase in minority interest of $3,149,676.
- acquired net assets with a book value of $982,822
Non-Cash Financing Activities:
- - issued stock options and received exercise proceeds of $1,225,000 and
incurred non-cash deferred consulting costs of $2,197,657 and non-cash
consulting fee expenses of $1,264,843.
- - issued common stock with a value of $114,020 in lieu of cash payment for
services rendered
See notes to consolidated financial statements
12
<PAGE> 14
Consolidated Technology Group Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(1) Basis of Presentation
In the opinion of the Company, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal recurring accruals) necessary
to present fairly the financial position of the Company as of September 30, 1995
and December 31, 1994 and the results of its operations for the three and nine
months ended September 30, 1995 and October 31, 1994 and the changes in cash
flows for the nine months ended September 30, 1995 and October 31, 1994. The
December 31, 1994 balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.
(2) Periods Reported
Effective December 31, 1994, the Company changed to a calendar year. Prior to
December 31,1994 the Company utilized a fiscal year ending July 31 of each year.
The accompanying financial statements include interim period results for the
three months and nine months ended September 30, 1995 and for the three months
and nine months ended October 31, 1994. The Company's operations are not
affected by significant seasonal fluctuations that would make the periods
reported herein not comparable.
(3) Accounting Policies
The accounting policies followed by the Company are set forth in Note 1 to the
Company's financial statements in the December 31, 1994 Form 10-K transition
report and in Note 3 of the June 30, 1995 Form 10-Q quarterly report.
(4) Interim Results
The results of operations for the three and nine months ended September 30, 1995
and October 31, 1994 are not necessarily indicative of the results to be
expected for the full year.
(5) Loss Per Share
Loss per share is computed by dividing the net loss for the period by the
weighted average number of common shares outstanding. Stock options and
warrants are assumed converted to common stock, when dilutive. For the three
and nine month periods ended September 30, 1995, none of the Company's common
stock equivalents are assumed to be converted because they would be
anti-dilutive.
(6) Income Taxes
The Company's provision for income taxes for the three and nine month periods
ended September 30, 1995 is related to state income and franchise taxes.
Federal and state tax benefits have not been recognized for the current losses
for the three and nine months ended September 30, 1995 due to the fact that all
potential loss carry backs have been fully utilized and, under SFAS No. 109,
"Accounting for Income Taxes", the Company has determined that it is more likely
than not that the tax asset will not be realized.
13
<PAGE> 15
(7) Industry Segments:
The Company currently classifies its operations into eight business segments:
(i) Contract Engineering Services consists of subsidiaries that provide
engineers, designers and technical personnel on a temporary basis pursuant to
contracts with major corporations; (ii) Medical Diagnostics consists of a
subsidiary that performs magnetic resonance imaging and other medical diagnostic
services; (iii) Audio Products Manufacturing consists principally of a
subsidiary that produces, markets and sells loudspeakers; (iv) Electro-
Mechanical and Electro-Optical Products Manufacturing consists of subsidiaries
that manufacture and sell products such as devices that measure distance and
velocity, instrumentation devices, debit card vending machines and industrial
lighting products; (v) Medical Information Services consists of subsidiaries
that provide medical information database services, health care industry related
software packages and the CarteSmart medical identification cards and related
software program; (vi) Telecommunications consists of a subsidiary that, among
other things, installs telephonic network systems and buys and resells local
telephone service; (vii) Three Dimensional Products and Services consists of
subsidiaries that provide three dimensional imaging services that are used in a
variety of applications, such as proto-type building and reverse engineering;
and (viii) Business Consulting Services consists of subsidiaries that provide a
variety of financial and business related services. Corporate and Other
consists of the operating activities of the holding company entities.
Previously, the segmentation consisted of (i) Manufacturing, which is now
included in the Electro-Mechanical and Electro-Optical segment; (ii) Fees and
Services, which included the subsidiaries that are now classified in the
Contract Engineering Services, Telecommunications and Business Consulting
Services segments; and (iii) Development Stage which previously included Medical
Information Services and Three Dimensional Products and Services. Intersegment
sales and sales outside the United States are not material. Information
concerning the Company's business segments is as follows:
Three Months Nine Months
Ended Ended
------------------------- ---------------------------
September 30, October 31, September 30, October 31,
1995 1994 1995 1994
---- ---- ---- ----
Revenues:
Contract Engineering
Services $14,934,874 $ 5,220,581 $48,168,633 $15,441,701
Medical Diagnostics 6,795,225 2,354,406 20,873,826 2,354,406
Audio Products
Manufacturing 711,987 -- 1,527,338 --
Electro-Mechanical and
Electro- Optical
Products Manufacturing 994,426 905,034 3,533,944 2,632,456
Medical Information
Services 2,049,725 1,344,000 5,396,984 1,344,000
Telecommunications 1,067,835 437,200 2,165,020 1,568,171
Three Dimensional
Products and Services 247,264 437,474 1,266,303 561,074
Business Consulting
Services 66,500 6,500 79,500 62,483
---------- ---------- ---------- ----------
Total Revenues $26,867,836 $10,705,195 $83,011,548 $23,964,291
========== ========== ========== ==========
14
<PAGE> 16
(7) Industry Segments (continued)
Three Months Nine Months
Ended Ended
------------------------- ---------------------------
September 30, October 31, September 30, October 31,
1995 1994 1995 1994
---- ---- ---- ----
Gross Profit:
Contract Engineering
Services $ 1,241,168 $ 314,069 $ 3,118,926 $ 1,260,538
Medical Diagnostics 2,645,420 997,352 8,952,412 997,352
Audio Products
Manufacturing 76,176 -- 228,325 --
Electro-Mechanical and
Electro- Optical
Products Manufacturing 263,828 372,299 681,374 92,551
Medical Information
Services 464,390 81,000 1,359,106 81,000
Telecommunications 214,154 110,364 391,074 386,574
Three Dimensional
Products and Services 22,237 271,064 388,746 249,635
Business Consulting
Services 66,500 6,500 79,500 62,483
---------- ---------- ---------- ----------
Total Gross Profit $ 4,993,873 $ 2,152,648 $15,199,463 $ 3,130,133
========== ========== ========== ==========
Income (Loss) from
Operations:
Contract Engineering
Services $ 667,011 $ 75,026 $ 884,899 $ (113,085)
Medical Diagnostics 1,025,775 469,367 3,868,080 469,367
Audio Products
Manufacturing (229,468) -- (295,670) --
Electro-Mechanical and
Electro- Optical
Products Manufacturing (95,770) 102,163 (220,363) (680,454)
Medical Information
Services (263,141) (395,000) (895,740) (862,302)
Telecommunications (110,338) (24,630) (521,494) 2,309
Three Dimensional
Products and Services (634,949) (271,016) (1,462,050) (849,838)
Business Consulting
Services (23,652) (15,894) (41,696) (173,492)
Corporate and Other (763,827) (268,012) (3,470,328) (1,192,559)
---------- ---------- ---------- ----------
Total loss
from operations $ (428,359) $ (327,996) $(2,154,362) $(3,400,054)
========== ========== ========== ==========
15
<PAGE> 17
(7) Industry Segments (continued)
Three Months Nine Months
Ended Ended
------------------------- ---------------------------
September 30, October 31, September 30, October 31,
1995 1994 1995 1994
---- ---- ---- ----
Net Income (Loss):
Contract Engineering
Services $ 151,974 $ (76,392) $ (316,707) $ (174,379)
Medical Diagnostics 403,505 276,997 1,864,777 276,997
Audio Products
Manufacturing (251,450) -- (340,140) --
Electro-Mechanical and
Electro- Optical
Products Manufacturing (97,795) 90,350 (224,309) (568,830)
Medical Information
Services (348,386) (469,266) (1,124,420) (898,425)
Telecommunications (119,212) (30,736) (550,426) (3,797)
Three Dimensional
Products and Services (636,324) (276,945) (1,523,678) (888,180)
Business Consulting
Services 9,148 (19,311) (11,852) (183,736)
Corporate and Other (552,061) (164,657) (3,321,774) (1,278,353)
---------- ---------- ---------- ----------
Total net loss $(1,440,601) $ (669,960) $(5,548,529) $(3,718,703)
========== ========== ========== ==========
Depreciation and
Amortization:
Contract Engineering
Services $ 128,052 $ 46,863 $ 384,141 $ 189,107
Medical Diagnostics 1,284,514 418,038 3,774,787 418,038
Audio Products
Manufacturing 114,046 -- 189,097 --
Electro-Mechanical and
Electro- Optical
Products Manufacturing 12,229 5,625 27,524 33,907
Medical Information
Services 141,509 78,624 406,496 98,159
Telecommunications 7,502 -- 22,559 14,989
Three Dimensional
Products and Services 93,669 36,668 548,455 92,725
Business Consulting
Services 528 528 1,584 1,585
Corporate and Other 3,684 2,536 11,053 5,860
---------- ---------- ---------- ----------
Total depreciation
and amortization $ 1,785,733 $ 588,882 $ 5,365,696 $ 854,370
========== ========== ========== ==========
16
<PAGE> 18
(7) Industry Segments (continued)
Capital Expenditures (i):
Contract Engineering
Services $ 8,807 $ 7,880 $ 28,571 $ 7,880
Medical Diagnostics 71,611 10,950,122 173,863 10,950,122
Audio Products
Manufacturing 41,626 -- 471,258 --
Electro-Mechanical and
Electro- Optical
Products Manufacturing -- -- 6,473 23,191
Medical Information
Services 106,220 9,867 137,300 1,013,807
Telecommunications -- -- -- --
Three Dimensional
Products and Services 62,365 24,286 213,112 168,744
Business Consulting
Services -- -- -- 3,628
Corporate and Other -- 521 20,658 57,359
---------- ---------- ---------- ----------
Total capital
expenditures $ 290,629 $10,992,676 $ 1,051,235 $12,224,731
========== ========== ========== ==========
(i) - For the nine month period ended September 30, 1995, capital expenditures
includes $373,473 for amounts allocated to property and equipment from the
acquisition of a company. For the three and nine month periods ended October
31, 1994, capital expenditures includes $10,902,543 and $11,906,483,
respectively, for amounts allocated to property and equipment from the
acquisitions of companies.
At At
September 30, October 31,
1995 1994
------------- -----------
Identifiable Assets:
Contract Engineering
Services $10,988,517 $ 5,216,992
Medical Diagnostics 40,248,781 41,300,463
Audio Products
Manufacturing 4,144,686 --
Electro-Mechanical and
Electro- Optical
Products Manufacturing 4,213,853 5,216,137
Medical Information
Services 7,285,557 7,075,874
Telecommunications 1,402,969 1,012,649
Three Dimensional
Products and Services 1,961,947 1,702,323
Business Consulting
Services 236,363 477,777
Corporate and Other 15,094 2,419,337
---------- ----------
Total identifiable
assets $70,497,767 $64,421,552
========== ==========
17
<PAGE> 19
(8) Capital Stock Transactions
During the nine months ended September 30, 1995, the following capital stock
transactions occurred:
Stock Issued for Services Rendered:
On February 28, 1995 and April 10, 1995, the Company issued 75,000 and 25,004
common shares, respectively, pursuant to a financing agreement with a creditor
of the Company. The value of the stock ($88,520) was expensed.
On April 10, 1995, the Company issued 30,000 common shares in lieu of cash
payment for services rendered to the Company. The value of the stock ($25,500)
was expensed.
Non-Employee Directors, Consultants and Advisors Stock Plan:
On August 20, 1993, the Company authorized a stock option plan for Non- Employee
Directors, Consultants and Advisors to provide compensation for services
rendered to the Company in lieu of cash payments. At various times, the Company
has registered and granted options pursuant to the plan. During the nine months
ended September 30, 1995, options to purchase 3,500,000 shares
were granted and exercised of which 1,000,000 were exercised at $0.50 per share,
1,000,000 were exercised at $0.35 per share and 1,500,000 were exercised
at $0.25 per share. Additionally, 2,500,000 shares were granted for which no
cash consideration was received. The above transactions resulted in $3,462,500
of consulting costs, computed as follows:
Shares 6,000,000
Value of stock at date of grant
(weighted average) $ 0.9766
---------
Aggregate fair market value of stock issued 5,859,375
20% discount (1,171,875)
---------
Discounted value of stock issued 4,687,500
Exercise proceeds (1,225,000)
---------
Total consulting costs 3,462,500
Portion expensed at the time of exercise 1,150,000
---------
Portion deferred at the time of exercise $2,312,500
=========
In accordance with the agreements relating to the various parties involved,
$662,500, $137,500, and $350,000 were charged as consulting services, public
relation services and non-cash compensation, respectively, in the determination
of income from operations for the nine months ended September 30, 1995.
Additionally, amortization of the deferred portion in the amount of $144,531 and
$259,374 was charged to income from operations for the three and nine month
periods ended September 30, 1995, respectively. The unamortized deferred
consulting expense is recorded in the equity section of the balance sheet. Such
deferred charges are being amortized over four years, the term of the related
contracts. A 20% discount was utilized because the shares issued represent
large blocks of stock.
18
<PAGE> 20
(8) Pro Forma Results
The following pro forma unaudited results assume that the reverse merger with
Concept Technologies (as disclosed in the June 30, 1995 10-Q) and the
acquisitions of Creative Socio-Medics, International Magnetic Imaging, Inc., Job
Shop Technical Services and Computer Engineering Services (as disclosed in the
December 31, 1994 10-K) had occurred at the beginning of the indicated periods:
Three Months Nine Months
Ended Ended
--------------------------- ---------------------------
September 30, October 31, September 30, October 31,
1995 1994 1995 1994
---- ---- ---- ----
(in 000's except per share data))
Net revenues $26,870 $24,760 $83,675 $69,705
====== ====== ====== ======
Net loss $(1,440) $(2,780) $(5,610) $(2,125)
====== ====== ====== ======
Loss per share $ (0.06) $ (0.18) $ (0.26) $( 0.14)
====== ====== ====== ======
The pro forma information is not necessarily indicative of either the results of
operations that would have occurred had the acquisition been effective at the
beginning of the indicated periods or of the future results of operations.
. . . . . . . . . . . . . . . . . . . . . . . . . .
19
<PAGE> 21
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition:
Liquidity and Capital Resources:
During the nine months ended September 30, 1995, the Company's principal source
of cash was from the operations of the medical diagnostics segment company,
International Magnetic Imaging, ("IMI"), proceeds from the issuance of long-term
debt and proceeds from the exercise of stock options. The Company's cash and
cash equivalents were $1,892,009 at September 30, 1995 compared to $1,726,796 at
December 31, 1994. As of September 30, 1995 $1,260,568 of the cash balance
represents funds held by IMI. Certain restrictions exist with regards to the
ability of the Company to use IMI's cash for purposes other than IMI
operations, pursuant to an IMI financing arrangement with a creditor. During
the same period, the principal use of cash was to purchase capital assets and to
repay scheduled debt maturities.
Working capital at September 30, 1995 was ($9,415,164) compared to $1,698,927 at
December 31, 1994. The significant working capital deficit at September 30,
1995 occurred because approximately, $13,000,000 of subordinated debt became a
current liability based on the scheduled maturities of the subordinated debt
obligations. In 1996, subordinated debt, payable to the former owners of IMI,
require principal and interest payments of approximately $2,500,000 and balloon
payments due in September of 1996 of approximately $10,500,000. Management is
currently negotiating terms with financing sources to extend the repayment terms
on the subordinated debt prior to the due date of the balloon payments, however
it cannot be currently determined whether such negotiation efforts will be
successful. Debt service due on the subordinated debt subsequent to 1996
approximates $5,250,000 of which approximately $3,900,000, $784,000 and
$566,000, respectively, is due in 1997, 1998 and 1999. Management anticipates
that if the refinancing negotiations are successful that debt service related to
these years will also be extended over a longer time period. If the Company is
not successful in refinancing the subordinated debt, it will be in default on
the subordinated debt.
Results of Operations:
Consolidated revenues, gross profit and selling, general and administrative
expenses for the three and nine months ended September 30, 1995 compared to the
three and nine months ended October 31, 1994 increased significantly due
primarily to the acquisition of companies in various industry segments. The
percentage of relative contribution to revenues, gross profit, and selling
general and administrative expenses by industry segment is shown in the
following tables. Changes within the individual industry segments themselves is
discussed further within the respective industry segment discussions.
20
<PAGE> 22
Managements Discussion and Analysis (continued):
Percentage of Total
-------------------
Three Months Ended Nine Months Ended
------------------------- -------------------------
September 30, October 31, September 30, October 31,
Revenues: 1995 1994 1995 1994
- -------- ---- ---- ---- ----
Contract Engineering
Services 55.6% 48.8% 58.0% 64.4%
Medical Diagnostics 25.3% 22.0% 25.1% 9.8%
Audio Products
Manufacturing 2.6% -- 1.8% --
Electro-Mechanical and
Electro- Optical
Products Manufacturing 3.7% 8.5% 4.3% 11.0%
Medical Information
Services 7.6% 12.6% 6.5% 5.6%
Telecommunications 4.0% 4.0% 2.6% 6.5%
Three Dimensional
Products and Services 1.0% 4.0% 1.5% 2.3%
Business Consulting
Services 0.2% 0.1% 0.2% 0.4%
Percentage of Total
-------------------
Three Months Ended Nine Months Ended
------------------------- -------------------------
September 30, October 31, September 30, October 31,
Gross Profit: 1995 1994 1995 1994
- ------------ ---- ---- ---- ----
Contract Engineering
Services 24.9% 14.6% 20.5% 40.3%
Medical Diagnostics 53.0% 46.3% 58.9% 31.9%
Audio Products
Manufacturing 1.5% -- 1.5% --
Electro-Mechanical and
Electro- Optical
Products Manufacturing 5.3% 17.3% 4.5% 3.0%
Medical Information
Services 9.3% 3.8% 8.9% 2.5%
Telecommunications 4.3% 5.1% 2.6% 12.3%
Three Dimensional
Products and Services 0.4% 12.6% 2.6% 8.0%
Business Consulting
Services 1.3% 0.3% 0.5% 2.0%
21
<PAGE> 23
Managements Discussion and Analysis (continued):
Percentage of Total
-------------------
Three Months Ended Nine Months Ended
------------------------- -------------------------
Selling, General and September 30, October 31, September 30, October 31,
Administrative Expense: 1995 1994 1995 1994
- ----------------------- ---- ---- ---- ----
Contract Engineering
Services 10.6% 9.6% 12.9% 21.0%
Medical Diagnostics 29.9% 21.3% 29.3% 8.1%
Audio Products
Manufacturing 5.6% -- 3.0% --
Electro-Mechanical and
Electro- Optical
Products Manufacturing 6.6% 10.9% 5.2% 11.8%
Medical Information
Services 13.4% 19.2% 13.0% 14.4%
Telecommunications 6.0% 5.4% 5.3% 5.9%
Three Dimensional
Products and Services 12.1% 21.9% 10.7% 16.8%
Business Consulting
Services 1.7% 0.9% 0.6% 3.6%
Corporate and Other 14.1% 10.8% 20.0% 18.4%
Discussion of Operations by Segment:
Contract Engineering Services - This segment consists of two companies, ARC
Acquisition and Resource Management International, ("RMI"), which are a part of
Trans Global Services. Revenues and gross profit increased 186% and 295%,
respectively, when comparing the three month periods ended September 30, 1995
and October 31, 1994, and increased 212% and 147%, respectively, when comparing
the nine month periods ended September 30, 1995 and October 31, 1994. These
significant increases are attributed to the operations of RMI, which was
acquired in November 1994. Income from operations increased from $75,000 to
$667,000 when comparing the three month periods ended September 30, 1995 and
October 31, 1995 and from a loss of ($113,000) to income of $885,000 when
comparing the nine month comparable periods. These increases in profitability
are due primarily to significantly increased revenues while selling, general and
administrative expenses have increased only marginally. Interest expense has
increased significantly for both comparative periods due to the higher debt
balances at RMI. During the second quarter, the companies operating in this
segment have negotiated more favorable terms for trade receivable financing,
which has reduced interest expense. This segment operates in a highly
competitive environment with low margins; however, management anticipates that
the reduced cost of the receivable financing along with an increase in volume
will allow this segment to increase profitability for the remainder of 1995.
The ultimate long-term profitability of this segment cannot be determined.
Medical Diagnostics - This segment consists of a medical diagnostic imaging
company, which performs MRI and other diagnostic modalities, that was purchased
in September 1994 and as such there is no comparable period of operations for
this filing. During the three and nine month periods ended September 30, 1995,
22
<PAGE> 24
Managements Discussion and Analysis (continued):
this segment operated at a gross margin percent of approximately 39% and 43%,
respectively, and generated income from operations of approximately $1,026,000
and $3,868,000, respectively. Selling, general and administrative expense for
the three and nine month periods ended September 30, 1995 approximated
$1,620,000 and $5,084,000, respectively, and interest expense approximated
$629,000 and $1,954,000, for the same respective periods. Revenue in the third
quarter declined approximately $250,000 from the average revenue of the first
and second quarter. Although the volume of diagnostic procedures remained
relatively level, the mix changed from higher to lower reimbursement rates.
Additionally, one of the diagnostic centers operating in this segment ceased
operations in the third quarter. The lower reimbursement rates also accounts
for the 16% decrease in gross margin from the prior quarters. Interest expense
remained relatively level; however, additional interest expense will be incurred
during the remainder of the year due to financing of equipment upgrades for some
of the MRI equipment. The ongoing profitability of this segment will depend
heavily on the ability of management to market scans with higher reimbursement
rates than those currently experienced. The health care industry continues to
remain unpredictable and there exists a possibility of a continued decline in
reimbursement rates. Although it is anticipated that revenue and expense levels
will remain relatively level in the fourth quarter, management is currently
unable to determine the future long-term profitability of this segment.
Audio Products Manufacturing - This segment consists principally of WWR
Technology, Inc. (d/b/a Klipsch Professional), which produces, markets and sells
loudspeakers. This segment was acquired via a reverse merger in the second
quarter and as such there is no comparable period of operations for this filing.
During the second and third quarters, WWR Technology, Inc. had revenues of
approximately, $811,000 and $713,000, respectively, and gross margins of
approximately, $191,000 and $117,000, respectively. Since they were acquired,
the other entities in this segment had total revenues of only $4,000 and other
direct costs of $83,000, which consisted primarily of depreciation and
amortization of equipment leased to others. Overall, this segment had losses
from operations and net losses of approximately, $296,000 and $340,000,
respectively. The ability of this segment to become profitable on a long-term
basis would require a significant increase in sales volume and the closure of
the inactive companies, and it cannot be determined at this time whether future
profitability will, if ever, be realized.
Electro-Mechanical and Electro-Optical Products Manufacturing - This segment
consists of three companies, Sequential Electronic Systems, ("Sequential"),
S-Tech and Televend. Televend, which started in 1995, markets telephone debit
cards and products manufactured by S-Tech. Revenues increased 10% and gross
profit decreased 29%, respectively, when comparing the three month periods
ended September 30, 1995 and October 31, 1994. Revenues and gross profit
increased 34% and 636%, respectively, when comparing the nine month periods
ended September 30, 1995 and October 31, 1994. The increase in revenues is due
in large part to S-Tech which in itself accounts for approximately 62% of the
total increase for the nine months. In prior periods S-Tech was in a
development period, designing and marketing its new debit card vending machines,
and has recently started to increase sales of its telephone debit card machines
and instrumentation devices. The significant increase in gross margin for the
nine month comparable period is due to large inventory obsolescence write-offs
23
<PAGE> 25
Managements Discussion and Analysis (continued):
that occurred in the prior comparable periods, while such write-offs in the
current period were not as significant. A portion of the revenues in this
segment are generated from government sales and while there exists a possibility
that there will be reversals in government spending cutbacks, it is more likely
that defense and military spending will remain sluggish. In response,
management has placed more emphasis on sales to the private sector which has
resulted in an overall increase in revenues and a decline in operating losses.
It is anticipated that the current trend of increasing revenues and
profitability will continue in the short term, however, management is currently
unable to determine the ultimate long-term profitability of this segment.
Medical Information Services - This segment's operations are accounted for in
one group referred to as CSMC which consists of two companies, CSMC and Creative
Socio-Medics, ("CSM"), which was acquired in June 1994. This segment did not
start having revenue and gross profit activity until the three month period
ended October 31, 1994. As such there is no prior period comparability for the
nine month periods. Revenues during the three and nine months ended September
30, 1995 approximated $2,050,000 and $5,397,000, respectively, and generated
gross profits of approximately $464,000 and $1,359,000. Of such revenues, the
Smart Card generated approximately, $111,000 and $215,000 for the three and nine
months ended September 30, 1995. All other revenues and gross profits were
generated from the on-going operations of CSM. Selling, general and
administrative expenses for the three and nine month periods ended September 30,
1995 included approximately $195,000 and $529,000, respectively, of product
enhancement expenses incurred by CSM. During the nine months ended September
30, 1995, expenses also included approximately $91,000 of non-cash financing
costs and $300,000 for amortization of capitalized software development costs
and customer lists. Up until July 31, 1994, all operations in this segment
related to Carte's start-up costs which were charged to selling, general and
administrative expenses. Management anticipates that the on-going operations of
CSM will remain relatively level and in order for this segment to achieve
long-term profitability, sales of CSMC's Smart Card operations will need to
increase significantly. At this time, it remains uncertain whether the Smart
Card operations will generate sufficient revenue activity in order for this
segment to become profitable.
Telecommunications - In December of 1993 the Company acquired ARC Networks which
is the only entity operating in this segment. Comparing the three and nine
months ended September 30, 1995 to the three and nine months ended October 31,
1994, revenues increased 144% and 38%, respectively, while gross profit
increased 94% and 1%. The increased revenue activity is attributed to an
increased sales force and accordingly, selling, general and administrative
expenses, which consist primarily of salaries and commissions, increased
approximately $190,000 and $528,000 from the prior comparable periods. The
telecommunications segment operates in a highly competitive industry and
management believes that for this segment to become profitable, it will have to
distinguish itself from other telecommunications service companies in order to
significantly increase volume and revenues. Although management anticipates
that revenues and overall profitability on an annualized basis will marginally
increase during the remainder of 1995, the ultimate profitability of this
segment remains uncertain.
Three Dimensional Products and Services - This segment consists of three
companies, 3D Technology, Inc., ("3D Tech"), 3D Imaging International, Inc.,
("3DI") and Computer Design Services, ("CDS"), which was acquired in November
24
<PAGE> 26
Managements Discussion and Analysis (continued):
1994. For the three and nine months ended September 30, 1995 compared to the
three and nine months ended October 31, 1994, revenues have increased or
(decreased) (44%) and 126%, respectively, and gross profits have increased or
(decreased) (92%) and 56%, respectively. For both comparable periods, revenues
and gross profits increased from the acquisition of CDS but such increases were
offset by a decrease of approximately $183,000 in revenues and $120,0000 in
gross profit during the third quarter for 3D Tech and 3DI. Losses from
operations approximated $635,000 and $1,462,000, respectively for the three and
nine months ended September 30, 1995. Although this segment has significantly
increased revenues and gross profit, they have not yet reached a level to cover
selling, general and administrative expenses. Additionally, included in
selling, general and administrative expense is approximately $118,000 of
amortized software development costs. During the remainder of 1995, management
anticipates that this segment will have increasing sales based on current sales
orders for the segment's surfacer software, optical laser scanner and laser
tracer and other CAD/CAM products which will result in higher gross margins.
Additionally, selling, general and administrative expenses are expected to
decrease based on a reduction of overhead costs from the combining of resources
functions of 3D Tech and CDS. Although the current trend is expected to result
in a higher level of revenues and gross margins, it can not be determined at
this time whether profit levels, if any, will be significant on a long-term
basis.
Business Consulting Services operations were not significant for the three and
nine months ended September 30, 1995 and October 31, 1994 which is consistent
with management's decision to concentrate time and resources managing internal
operations of the pre-existing and newly acquired companies. During the
remainder of 1995, management anticipates that consulting revenues and related
expenses will not be a significant portion of the Company's operations.
Corporate and Other selling, general and administrative expenses for the three
and nine months ended September 30, 1995 compared to the comparable prior
periods increased $496,000 and $2,278,000, respectively, due primarily to the
expenses resulting from the issuance and exercise of stock options for payment
of consulting services which accounted for approximately, $145,000 and
$1,410,00, respectively, of the increase. Other increases were due to increased
legal and accounting fees to outside firms related to the reverse merger with
Concept Technologies and an increase in the number of financial support staff.
During the remainder of 1995 and in the near future, it is anticipated that
corporate selling, general and administrative expense levels will be a factor of
the activity of additional acquisitions and capitalization activities. The
Company will need to raise additional capital in the short-term and it is
anticipated that corporate and other costs will increase.
Discussion of Other Significant Financial Line Items
Interest Expense for the three and nine months ended September 30, 1995 compared
to the three and nine months ended October 31, 1994 increased by approximately,
$446,000 and $2,259,000 which is primarily attributed to the issuance of debt
instruments in connection with the acquisition of IMI. During the three and
nine month periods ended September 30, 1995, interest expense related to IMI was
approximately, $629,000 and $1,954,000, respectively. The remaining increase in
interest expense is from the contract engineering services segment which, for
the three and nine month periods ended September 30, 1995, had interest expense
of approximately $105,000 and $687,000.
25
<PAGE> 27
Managements Discussion and Analysis (continued):
Unusual item - For the nine months ended October 31, 1994, the unusual item
consists of expenses of $115,000 resulting from the issuance and exercise of
stock options pursuant to a stock option plan for Non-Employee Directors,
Consultants and Advisors. Such expenses for similar transactions during the
current year have been charged to selling, general and administrative expenses.
Income taxes - The Company has not provided for income taxes for the three and
nine month periods ended September 30, 1995 due to current period losses.
Federal and state tax benefits have not been recognized for the three and nine
month periods ended September 30, 1995 due to the fact that all potential loss
carry backs have been fully utilized and, under SFAS No. 109, "Accounting for
Income Taxes", the Company has determined that it is more likely than not, that
the deferred tax asset will not be realized.
Impact of Inflation
The Company is subject to normal inflationary trends and anticipates that any
increased costs would be passed on to its customers.
. . . . . . . . . . . . . . . . . . . . . . . . . .
26
<PAGE> 28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On or about September 29, 1995, an action was commenced against the Company and
others by the filing of a summons with notice in the Supreme Court of the State
of New York, County of New York. The action was commenced by Jacque W. Pate,
Jr., Melvin Pierce, Herbert A. Meisler, John Gavin, Elaine Zanfini, individually
and derivatively as shareholders of Onecard Health Systems Corporation and
Onecard Corporation, which corporations are collectively referred to as
"Onecard". The named defendants include, the Company, Mr. Lewis S. Schiller,
chairman of the board and chief executive officer of the Company, certain
wholly-owned or controlled subsidiaries of the Company, including Carte Medical
Corporation, which is now known as CSMC Corporation ("Carte"), certain
stockholders, directors and officers of Carte and certain former directors of
Onecard. A complaint was served on November 15, 1995. The complaint makes
broad claims respecting alleged misappropriation of Onecard's trade secrets,
corporate assets and corporate opportunities, breach of fiduciary relationship,
unfair competition, fraud, breach of trust and other similar allegations,
apparently arising at the time, or in connection with the organization of, Carte
in September 1992. The complaint seeks injunctive relief and damages, including
punitive damages, of $130,000,000. The management and legal counsel believe
that the Company has meritorious defenses against such lawsuit. No estimate of
potential losses relating to this action can currently be determined.
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits
1. EX-11 Calculation of earnings per share.
2. EX-27 Financial Data Schedules.
27
<PAGE> 29
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.
CONSOLIDATED TECHNOLOGY GROUP LTD.
(Registrant)
Date: November 15, 1995 /S/
---------------------
LEWIS S. SCHILLER
(President & Chief Executive Officer)
Date: November 15, 1995 /S/
---------------------
GEORGE W. MAHONEY
(Chief Financial Officer)
<PAGE> 30
Consolidated Technology Group Ltd. and Subsidiaries
Index to Exhibits
September 30, 1995
EX-11 Calculation of earnings per share.
EX-27 Financial Data Schedule
(filed only to the SEC in electronic format)
<PAGE> 31
Consolidated Technology Group, Ltd. and Subsidiaries
EX-11 Calculation of Earnings per Share
- ----------------------------------------------------------------------------
Three Nine
Month Month
Period Period
Ended Ended
September 30, September 30,
1995 1995
---- ----
Net Loss $(1,440,601) $(5,548,529)
========= =========
Loss per Share:
Loss per share - Note 1 $(0.06) $(0.26)
==== ====
Loss per Share - assuming full
dilution - Note 2 $(0.04) $(0.16)
==== ====
Note 1:
Computed by dividing the net loss for the period by the weighted average number
of common shares outstanding (23,707,264 and 21,488,233 for the three and nine
months ended September 30, 1995). No stock options, warrants or preferred
convertible stock are assumed to be exercised because they are anti-dilutive for
the periods. The weighted average number of common shares outstanding is
calculated by weighting common shares issued during the period by the actual
number of days that such shares are outstanding for the period.
Note 2:
(i) Assumes that the 6,000,000 common shares issued pursuant to the exercise
of stock options were outstanding as of the beginning of the respective periods.
(ii) Assumes that a warrant to purchase 1,000,000 common shares at $0.75 per
share was exercised at the beginning of the respective periods, and that all
proceeds from such exercise were used to purchase treasury stock at a price
equal to the average market price of the Company's common shares for the
respective period as quoted on the NASD.
(iii) Assumes that at the beginning of the respective periods, the 77,713 shares
of preferred convertible stock, were converted to common shares at the
conversion rate of 130.20833 shares of common for each share of convertible
preferred stock.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS
FILED AS PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,892,009
<SECURITIES> 578,204
<RECEIVABLES> 24,496,244
<ALLOWANCES> 4,764,860
<INVENTORY> 4,142,402
<CURRENT-ASSETS> 27,990,188
<PP&E> 20,887,707
<DEPRECIATION> 8,872,435
<TOTAL-ASSETS> 70,497,767
<CURRENT-LIABILITIES> 37,405,352
<BONDS> 0
<COMMON> 237,073
0
80,675
<OTHER-SE> 14,155,178
<TOTAL-LIABILITY-AND-EQUITY> 70,497,767
<SALES> 6,327,585
<TOTAL-REVENUES> 83,011,548
<CGS> 5,029,140
<TOTAL-COSTS> 67,812,085
<OTHER-EXPENSES> 17,892,300
<LOSS-PROVISION> 764,852
<INTEREST-EXPENSE> 3,087,305
<INCOME-PRETAX> (5,400,032)
<INCOME-TAX> 148,497
<INCOME-CONTINUING> (5,548,529)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,548,529)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
