<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended March 31, 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
Former Fiscal Year was July 31, New Fiscal Year is December 31
Former name, former address and formal fiscal year,
if changed since last report.
Number of common shares outstanding as of May 18, 1995: 21,207,488
Purpose of Amendment:
Part I. - Financial Information:
Item 1. Financial Statements - The financial statements are restated to
reflect the following changes:
1) Increase additional paid-in capital and accumulated deficit to reflect an
increase in the fiscal year ended July 31, 1994 expense of approximately
$5,870,000 relating to a reduction in the discount taken on stock option
issuances.
2) Increase additional paid-in capital and accumulated deficit to reflect an
increase in the five month period ended December 31, 1994 expense of
approximately $36,000 relating to a reduction in the discount taken on
stock issuanced in lieu of cash for services rendered.
3) Increase additional paid-in capital and accumulated deficit to reflect an
increase in the five month period ended December 31, 1994 expense of
approximately $338,000 relating to a reduction in the discount taken on
stock issuanced for an acquisition.
4) Reclass $72,868 of exclusivity rights to other assets which were
previously included with fixed assets as of December 31, 1994 and March
31, 1995. Related changes were also made to the cash flow statement.
5) Reclass the current and long-term portions of debt and capital lease
obligations and reclass amounts between debt and capital lease
obligations to the proper amounts related to the Three Dimensional
Products and Services segment.
<PAGE> 2
Purpose of Amendment (continued):
6) For the three months ended April 30, 1994 statement of operations,
reclass approximately $115,000 of expense related to the issuance of
stock options from unusual expense to selling, general and administrative
expense and increase selling, general and adminsitrative expenses by
approximately $2,450,000 relating to a reduction in the discount taken on
the stock option issuances. Related changes were also made to the cash
flow statement.
7) In the cash flow statement for the three months ended March 31, 1995 and
April 30, 1994 1993 the following changes were made:
a) The activity in deferred offering costs is separately disclosed as a
financing activity which was previously included in changes in other
assets.
b) The noncash expense of issuing stock in lieu of cash for services
rendered is shown disclosed separately as an adjustment to reconcile net
loss to cash provided by operations which was previously included with
repayments of long-term debt.
c) Added supplemental discosures of noncash investing and financing
activities for the three months ended April 30, 1994.
8) Disclosed the number of common shares authorized, issued and outstanding
on the face of the balance sheet.
9) Expanded the discussion regarding the computation of earnings per share in
the footnotes to describe the Company's treatment of the convertible
preferred stock in calculating weighted average number of shares
outstanding.
10) Added additional footnote disclosure regarding the restatement of prior
period financial statements.
11) Added full disclosure of acquisitions that affect all periods presented
in the financial statements.
12) Adjusted the segment analysis to reflect the increase in Corporate and
Other selling, general and administrative expenses.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
13) Liquidity and Capital Resources
a) Expanded discussion regarding the restriction of the use of a
subsidiary's cash is added.
b) Expanded discussion of changes in working capital assets/liabilities
is added, including the proposed refinancing of current debt
obligations.
c) Disclosure of the impact of loan defaults is added.
14) Results of Operations
a) Adjusted the segment percentage tables to reflect the increase in
Corporate and Other selling, general and administrative expenses.
b) Discussion is changed to reflect the changes made to the three months
ended April 30, 1994, of approximately $115,000 of expense related to
the issuance of stock options from unusual expense to selling,
general and administrative expense and the $2,450,000 increase in
selling, general and administrative expense relating to a reduction
in the discount taken on the stock option issuances.
<PAGE> 3
Consolidated Technology Group, Ltd.
Index
Page
----
Part I: - Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets - March 31, 1995
and December 31, 1994. 2-3
Consolidated Statements of Operations - Three Months Ended
March 31, 1995 and April 30, 1994. 4
Consolidated Statements of Cash Flows - Three Months Ended
March 31, 1995 and April 30, 1994. 5-6
Consolidated Statement of Shareholders' Equity - Three Months
Ended March 31, 1995. 7-8
Notes to Consolidated Financial Statements 9-19
Item 2. Management's Discussion and Analysis of the
Financial Condition and Results of Operations. 20-24
Part II:
Part II - Other Information:
Item 6. Exhibits and Reports on Form 8-K 25
1
<PAGE> 4
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Balance Sheets
(in 000's)
March 31, December 31,
1995 1994
----------- ------------
Assets:
Current assets:
Cash and cash equivalents $ 2,349 $ 1,727
Receivables, net of allowances 16,450 16,820
Inventories 3,477 3,466
Loans receivable 1,411 1,363
Prepaid expenses and other
current assets 98 412
Investments in common stock 179 151
------ ------
Total current assets 23,964 23,939
------ ------
Property, plant and equipment, net 12,280 12,911
------ ------
Other assets:
Capitalized software development costs 1,075 1,064
Goodwill, net 12,363 12,623
Covenant not to compete, net 3,130 3,451
Customer lists, net 12,558 12,770
Deferred offering costs 346 331
Receivables, related parties 157 160
Investments in common stock, long-term 195 383
Other Assets 453 456
------ ------
Total other assets 30,277 31,239
------ ------
Total Assets $66,521 $68,089
====== ======
See notes to consolidated financial statements.
2
<PAGE> 5
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Balance Sheets
(in 000's)
March 31, December 31,
1995 1994
----------- ------------
Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable and accrued expenses $ 7,427 $ 6,741
Accrued payroll and related expenses 2,486 1,774
Accrued interest 116 113
State franchise taxes payable 20 20
Interim billings in excess of costs
and estimated profits -- 655
Notes payable, related parties 183 183
Current portion of long-term debt 8,017 8,096
Current portion of subordinated debt 3,744 3,437
Current portion of capitalized
lease obligations 1,279 1,256
------ ------
Total current liabilities 23,272 22,275
------ ------
Long-term liabilities:
Long-term debt 7,901 8,512
Capitalized lease obligations 2,410 2,671
Subordinated debt 16,963 17,926
------ ------
Total long-term liabilities 27,274 29,109
------ ------
Shareholders' Equity:
Preferred stock 81 81
Additional paid-in capital,
preferred stock 311 311
Common stock (50,000,000 shares
authorized, 21,152,260 and 17,577,260
shares issued and outstanding as of
March 31, 1995 and December 31, 1994,
respectively) 212 176
Additional paid-in capital, common stock 48,329 45,597
Accumulated deficit (31,676) (29,288)
Unrealized exchange translation (33) (33)
Deferred consulting fees (1,235) --
Net unrealized gain (loss) on long-
term investments in common stock (14) (139)
------ ------
Total shareholders' equity 15,975 16,705
------ ------
Total Liabilities and Shareholders' Equity $66,521 $68,089
====== ======
See notes to consolidated financial statements.
3
<PAGE> 6
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statement of Operations
(in 000's except per share data)
Three Months Ended
---------------------
March 31, April 30,
1995 1994
--------- ---------
Revenues $28,410 $ 6,422
Direct Costs 23,327 5,766
------ ------
Gross Profit 5,083 656
Selling, General and Administrative 6,396 3,883
------ ------
Loss from Operations (1,313) (3,227)
------ ------
Other Income (Expense):
Interest Expense (984) (310)
Other Income (Expense) 78 415
Gain (Loss) from Security Sales (120) --
------ ------
Total Other Income (Expense)- Net (1,026) 104
------ ------
Loss Before Minority Interest (2,339) (3,122)
Income Taxes (44) --
Minority Interest in Loss of Subsidiaries (5) (34)
------ ------
Net Loss ($ 2,388) ($ 3,156)
====== ======
Loss per Common Share ($0.13) ($0.33)
====== ======
Weighted Average Number
of Common Shares 18,776,149 9,549,289
========== =========
See notes to consolidated financial statements.
4
<PAGE> 7
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statements of Shareholders' Equity for the
Three Months Ended March 31, 1995
(in 000's except per share data)
Shares Amounts
---------- -------
Preferred stock, $1.00 par value, 6%
Series A 77,713 shares authorized:
Beginning balance 77,713 $ 78
========== ======
Ending balance 77,713 $ 78
========== ======
Preferred stock, $1.00 par value, $3.50 and $.10
Series B & E 8,000 shares authorized each:
Beginning balance 262 $ 1
========== ======
Ending balance 262 $ 1
========== ======
Preferred stock, $1.00 par value, $8.00
subordinated Series F, 6,000 shares authorized:
Beginning balance 2,700 $ 2
========== ======
Ending balance 2,700 $ 2
========== ======
Total preferred stock - par 80,675 $ 81
========== ======
Additional paid-in capital,
preferred stock:
Beginning balance $ 311
======
Ending balance $ 311
======
Common stock, $0.01 par value,
50,000,000 shares authorized:
Beginning balance 17,577,260 $ 176
Issuance for stock options 3,500,000 35
Issuance in lieu of cash for
services rendered 75,000 1
---------- ------
Ending balance 21,152,260 $ 212
========== ======
Additional paid-in capital, common stock:
Beginning balance $45,597
Issuance for stock options 2,665
Issuance in lieu of cash for
services rendered 67
------
Ending balance $48,329
======
(continued)
See notes to consolidated financial statements.
5
<PAGE> 8
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statements of Shareholders' Equity for the
Three Months Ended March 31, 1995
(in 000's except per share data)
Shares Amounts
---------- -------
Accumulated deficit:
Beginning balance ($29,288)
Net loss (2,388)
------
Ending balance ($31,676)
======
Unrealized exchange translation:
Beginning balance ($ 33)
======
Ending balance ($ 33)
======
Deferred consulting fees:
Beginning balance --)
Exercise of stock options ($ 1,235)
------
Ending balance ($ 1,235)
======
Net unrealized gain (loss) on long-
term investments in common stock:
Beginning balance ($ 139)
Recognized investment security gains 125
------
Ending balance ($ 14)
======
Total shareholders' equity $15,974
======
(concluded)
See notes to consolidated financial statements.
6
<PAGE> 9
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statement of Cash Flows
(in 000's except per share data)
Three Months Ended
---------------------
March 31, April 30,
1995 1994
--------- ---------
Cash Flows from Operating Activities:
Net loss ($ 2,388) ($ 3,156)
------ ------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and Amortization 1,591 108
Minority interest in loss of
consolidated subsidiaries -- 34
Bad debt expense 232 --
Option exercise expense 740 2,870
Noncash expenses paid with the
issuance of stock 67 --
Loss on sale of marketable securities 120 --
Change in current assets and
current liabilities:
(Increase) decrease in current assets:
Receivables 137 264
Inventories (11) (300)
Prepaid expenses and other current assets 314 (189)
Increase (Decrease) in current liabilities:
Accounts payable and accrued expenses 686 70
Accrued payroll and related expenses 712 (1,179)
Accrued interest 3 (260)
Interim billings in excess of costs
and estimated profits (655) --
------ ------
Total adjustments 3,937 1,418
------ ------
Net cash provided by (used in)
operating activities 1,549 (1,738)
------ ------
Cash Flows from Investing Activities:
Decrease in other assets 104 304
Capital expenditures (174) (45)
Investments in common stock -- (95)
Proceeds from sale of marketable securities 165 --
Capitalized software development costs (63) (156)
Acquisition of subsidiary -- (500)
Cash of company acquired -- 105
Payments for loans made (122) (680)
Collections for repaymnet of loans made 77 --
------ ------
Net cash used in investing activities (13) (1,067)
------ ------
(continued)
See notes to consolidated financial statements.
7
<PAGE> 10
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statement of Cash Flows
(in 000's except per share data)
Three Months Ended
---------------------
March 31, April 30,
1995 1994
--------- ---------
Cash Flows from Financing Activities:
Repayment of long-term debt (690) (1,666)
Deferred offering costs (15) --
Repayment of subordinated debt (656) --
Payments on capital leases (278) (1)
Issuance of common stock -- 8,162
Exercise of stock options 725 2,050
------ ------
Net cash provided by financing activities (914) 8,545
------ ------
Net Increase in Cash and Cash Equivalents 622 5,740
Cash and Cash Equivalents at
Beginning of Period 1,727 1,196
------ ------
Cash and Cash Equivalents at
End of Period $ 2,349 $ 6,936
====== ======
Supplemental Disclosures of Cash
Flow Information:
Cash Paid for:
Interest $ 981 $ 571
====== ======
Income Taxes $ -- $ --
====== ======
(concluded)
Supplemental Disclosures of Noncash Investing and Financing Activities:
During the three month period ended March 31, 1995:
(1) - Acquired equipment under capital lease obligations with a net present
value of $39.
(2) - Issued stock options and received exercise proceeds of $725 and
incurred noncash deferred consulting fees of $1,235 and noncash
consulting fee expenses of $740.
During the three month period ended April 30, 1994:
(1) - Issued stock options and received exercise proceeds of $2,050 and
incurred noncash consulting fee expenses of $2,870.
See notes to consolidated financial statements.
8
<PAGE> 11
Consolidated Technology Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(in 000's, except per share data)
- ------------------------------------------------------------------------------
(1) 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 March 31, 1995 and December 31, 1994 and the results of its operations and
changes in cash flows for the three months ended March 31, 1995 and April 30,
1994.
(2) 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 ended March 31, 1995, the first quarter of the
new calendar year, and for the three months ended April 30, 1994, the third
quarter of the prior fiscal year. The Company's operations are not affected
by significant seasonal fluctuations that would make the periods reported
herein uncomparable.
(3) 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.
(4) The results of operations for the three months ended March 31, 1995 and
April 30, 1994 are not necessarily indicative of the results to be expected
for the full year.
(5) Earnings (Loss) Per Share - Earnings (loss) per share are computed by
dividing the net income (loss) for the period by the weighted average number
of common shares outstanding. For purposes of computing weighted average
number of common shares outstanding the Company has common stock equivalents
consisting of stock options and warrants and Series "A" Preferred Convertible
Stock. The Series "A" Preferred Stock was deemed to be a common stock
equivalent when issued. The common stock equivalents are assumed converted to
common stock, when dilutive. During periods of operations in which losses
were incurred, common stock equivalents were excluded from the weighted
average number of common shares outstanding because their inclusion would be
anti-dilutive.
(6) Industry Segments:
The Company currently classifies its operations into seven 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) 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; (iv)
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;
(v) Telecommunications consists of a subsidiary that, among other things, 8
9
<PAGE> 12
Consolidated Technology Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(in 000's, except per share data)
- ------------------------------------------------------------------------------
(6) Industry Segments (continued):
installs telephonic network systems and buys and resells local telephone
service; (vi) 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 (vii)
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 Ended
---------------------
March 31, April 30,
Segments 1995 1994
- -------- --------- ---------
Revenues:
Contract Engineering Services $17,800 $ 5,062
Medical Diagnostics 7,027 --
Electro-Mechanical and Electro-Optical
Products Manufacturing 1,171 866
Medical Information Services 1,427 --
Telecommunications 390 401
Three Dimensional Products and Services 589 68
Business Consulting Services 6 25
------ ------
Total Revenues $28,410 $ 6,422
====== ======
Gross Profit:
Contract Engineering Services $ 612 $ 234
Medical Diagnostics 3,393 --
Electro-Mechanical and Electro-Optical
Products Manufacturing 363 249
Medical Information Services 369 --
Telecommunications 57 102
Three Dimensional Products and Services 283 46
Business Consulting Services 6 25
------ ------
Total Gross Profit $ 5,083 $ 656
====== ======
10
<PAGE> 13
Consolidated Technology Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(in 000's, except per share data)
- ------------------------------------------------------------------------------
(6) Industry Segments (continued):
Three Months Ended
---------------------
March 31, April 30,
Segments 1995 1994
- -------- --------- ---------
Income (Loss) from Operations:
Contract Engineering Services ($ 294) ($ 47)
Medical Diagnostics 1,496 --
Electro-Mechanical and Electro-Optical
Products Manufacturing (4) 8
Medical Information Services (436) (87)
Telecommunications (214) 10
Three Dimensional Products and Services (415) (117)
Business Consulting Services (6) (17)
Corporate and other (1,440) (2,977)
------ ------
Total Income (Loss) from Operations ($ 1,313) ($ 3,227)
====== ======
Net Income (Loss):
Contract Engineering Services $ (574) $ (29)
Medical Diagnostics 833 --
Electro-Mechanical and Electro-Optical
Products Manufacturing (4) 283
Medical Information Services (467) (116)
Telecommunications (222) 2
Three Dimensional Products and Services (416) (124)
Business Consulting Services (8) (20)
Corporate and other (1,530) (3,152)
------ ------
Total Net Income (Loss) ($ 2,388) ($ 3,156)
====== ======
Depreciation and Amortization:
Contract Engineering Services $ 128 $ 69
Medical Diagnostics 1,253 --
Electro-Mechanical and Electro-Optical
Products Manufacturing 8 14
Medical Information Services 132 2
Telecommunications 8 8
Three Dimensional Products and Services 59 13
Business Consulting Services 1 1
Corporate and other 2 1
------ ------
Total Depreciation and Amortization $ 1,591 $ 108
====== ======
11
<PAGE> 14
Consolidated Technology Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(in 000's, except per share data)
- ------------------------------------------------------------------------------
(6) Industry Segments (continued):
Three Months Ended
---------------------
March 31, April 30,
Segments 1995 1994
- -------- --------- ---------
Capital Expenditures:
Contract Engineering Services $ 11 $ --
Medical Diagnostics 47 --
Electro-Mechanical and Electro-Optical
Products Manufacturing 4 23
Medical Information Services 4 --
Telecommunications -- --
Three Dimensional Products and Services 90 15
Business Consulting Services -- 4
Corporate and other 18 19
------ ------
Total Capital Expenditures $ 174 $ 61
====== ======
At At
March 31, April 30,
1995 1994
Identifiable Assets: --------- ---------
Contract Engineering Services $10,287 $ 5,565
Medical Diagnostics 39,989 --
Electro-Mechanical and Electro-Optical
Products Manufacturing 4,352 5,304
Medical Information Services 5,929 868
Telecommunications 1,094 1,010
Three Dimensional Products and Services 2,330 1,580
Business Consulting Services 261 594
Corporate and other 2,279 7,807
------ ------
Total Identifiable Assets $66,521 $22,728
====== ======
(7) 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 shares pursuant to the plan. During
the three months ended March 31, 1995, 3,500,000 shares were granted and
exercised of which 1,500,000 were exercised at $0.25 per share, 1,000,000 were
exercised at $0.35 per share and 1,000,000 were exercised at $0.00 per share,
resulting in $1,975 of consulting costs computed as follows:
12
<PAGE> 15
Consolidated Technology Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(in 000's, except per share data)
- ------------------------------------------------------------------------------
(7) Non-Employee Directors, Consultants and Advisors Stock Plan (continued):
Shares (in 000's) 1,500 1,000 1,000 = 3,500
Value of stock at date of grant $ 1.00 $ 1.00 $0.875 = $0.964286*
----- ----- ----- --------
Full Value of Stock 1,500 1,000 875 = 3,375
20% discount (300) (200) (175) = (675)
----- ----- ----- --------
Discounted value of stock 1,200 800 700 = 2,700
Exercise price (375) (350) -- = (725)
----- ----- ----- --------
Total consulting costs 825 450 700 = 1,975
Portion deferred 550 -- 685 = 1,235
----- ----- ----- = --------
Portion currently expensed $ 275 $ 450 $ 15 = $ 740
===== ===== ===== ========
* Represents weighted average.
In accordance with the agreements relating to the various parties involved,
$238, $138, and $364 were charged as consulting services, public relation
services and non-cash compensation, respectively, in the determination of
income from operations for the three months ended March 31, 1995.
Additionally, $1,235 was recorded as deferred charges in the equity section of
the balance sheet for services to be rendered subsequent to March 31, 1995.
Such deferred charges are being amortized over four years, the term of the
related contracts. A 20% discount was utilized because the shares issued
represents a large block of stock.
(8) Acquisitions:
(i) - On June 16, 1994, a subsidiary of the Company, Carte Medical Holdings
("CMH"), through a wholly-owned subsidiary, CSM Acquisition Corp.
("Acquisition Corporation"), acquired the assets and assumed liabilities of
Creative Socio-Medics Inc. ("CSM") pursuant to a plan and agreement of
reorganization dated as of April 13, 1994, as amended (the "Purchase
Agreement"), among the Company, Carte Medical Corp. ("Carte"), Acquisition
Corporation, CSM and Advanced Computer Techniques, Inc. ("ACT"), the parent of
CSM. The Company is the parent of SISC, which is the parent of CMH. In
connection with the purchase, (i) Acquisition Corporation purchased the assets
and assumed liabilities of CSM in exchange for 800,000 shares of the Company's
common stock and $500 which was advanced by Carte to Acquisition Corporation
from the proceeds of a loan made by SISC, (ii) CMH transferred the stock of
Acquisition Corporation to Carte, (iii) in consideration for the transfer of
the Acquisition Corporation stock, Carte is to issue to CMH an aggregate of
1,000,000 shares of common stock, of which 450,000 shares are issuable on or
about the date Carte receives the proceeds from an initial public offering,
and (iv) Acquisition Corporation changed its corporate name to Creative
Socio-Medics Corp. At the time of the execution of the Purchase Agreement,
SISC granted to former officers of ACT and CSM, options to purchase an
aggregate of 202,560 shares of Carte's common stock owned by SISC. The shares
13
<PAGE> 16
Consolidated Technology Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(in 000's, except per share data)
- ------------------------------------------------------------------------------
(8) Acquisitions (continued):
of common stock owned by SISC were transferred to CMH subject to the options.
The options are exercisable at an exercise price of $.174 per share during the
five-year period commencing on June 16, 1994, the date the acquisition of CSM
was consummated. At the closing of the acquisition, the Company issued to
such individuals an aggregate of 40,000 shares of its common stock. The
purchase price of this acquisition included $3,851 for customer lists of CSM
which will be amortized over 15 years under the straight line method. For
accounting purposes, the results of operations of CSM are included with the
results of the Company from July 1, 1994 onward.
(ii) - As of September 30, 1994, the Company acquired International Magnetic
Imaging, Inc. and its affiliated entities ("IMI, Inc.") in a business
combination accounted for as a purchase. The principal operations of IMI,
Inc. Are in the establishment and operation of outpatient diagnostic centers
providing MRI services and other modalities. The results of operations of
IMI, Inc. are included in the accompanying combined financial statements since
the date of acquisition. The total cost of the acquisition was $31,872 which
exceeded the fair value of net assets of IMI, Inc. By $11,068. The excess
purchase price, or goodwill, will be amortized by the straight-line method
over 20 years.
The other intangibles, specifically restrictive covenants and customer lists,
will be amortized by the straight-line method over 3 years and 15 years,
respectively.
The following summarizes the purchase price allocated to acquired assets at
fair value.
Cash $ 6,960
Subordinated Debt 19,863
Stock (3,343,000) 2,920
Notes [Covenants] 800
Acquisition Costs 1,329
------
Purchase Cost $31,872
======
Allocated to:
Cash $ 2,350
Other Assets 421
Covenants-Not-to-Compete 3,303
Property, Plant and Equipment 10,903
Accounts Receivable 7,379
Managed Care Contracts - Customer Lists 5,656
Liabilities Assumed ( 9,208)
Goodwill 11,068
------
Total $31,872
======
14
<PAGE> 17
Consolidated Technology Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(in 000's, except per share data)
- ------------------------------------------------------------------------------
(8) Acquisitions (continued):
The cash portion of the purchase price was subsequently refinanced through
DVI. The notes issued in connection with the acquisition of the centers
balloon primarily in September 1996, with notes in the principal amount of
$860 maturing in September 1997. The notes issued to acquire IMI and MD Corp.
balloon and mature in September 1997 and 1999, respectively. In connection
with this acquisition, the Company, through its subsidiaries, borrowed an
aggregate of approximately $7.1 million on a secured, term-loan basis over 60
months pursuant to loan and security agreements among the Company's
subsidiaries and DVI Financial Services, Inc. dba DVI Capital. For accounting
purposes, the results of operations of IMI are included with the results of
the Company from October 1, 1994 onward.
(iii) - In November 1994, the Company acquired the assets of two businesses,
Job Shop Technical Services, Inc. ("Job Shop") and Computer Engineering
Services, Inc. ("CES"). Job Shop provides engineers, designers and technical
personnel on a temporary basis, which is similar to the business performed by
Avionics Research Corporation, a subsidiary of the Company. CES is engaged in
the business of performing CAD (computer aided design) and CAM (computer aided
manufacturing) related services and the marketing and sale CAD/CAM software.
(a) - Pursuant to an asset purchase agreement dated as of August 19, 1994
among ITS Management Corp., a Delaware Corporation and wholly-owned subsidiary
of the Company ("ITS"), Job Shop and the sole stockholder of Job Shop, ITS
acquired substantially all of the assets of Job Shop in exchange for 750,000
shares of the Company's common stock valued at $450, and the assumption of
certain scheduled liabilities. The principal liability assumed was a $2
million obligation due to the Internal Revenue Service
pursuant to a settlement arrangement which Job Shop had negotiated. The
initial $500 payment was made in November, 1994. The balance is due in 15
monthly installments of $100, commencing May, 1995.
(b) - Pursuant to a plan and agreement of reorganization among CDS Acquisition
Corp. ("CDS"), a Delaware corporation and wholly-owned subsidiary of the
Company, CES and the sole stockholder of CES, CDS acquired substantially all
of the assets of CES in exchange for 750,000 shares of the Company's common
stock valued at $450, and the assumption of certain scheduled liabilities.
Prior to the acquisition, the businesses of Job Shop and CES were operated as
divisions of the same company, along with one other division which was not
acquired by the Company. For accounting purposes the results of operations of
ITS and CDS are included with the results of the Company from November 22,
1994 onward.
15
<PAGE> 18
Consolidated Technology Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(in 000's, except per share data)
- ------------------------------------------------------------------------------
(9) Subsequent Events
On May 8, 1995 SIS Capital Corp. ("SISC"), a wholly-owned subsidiary of the
Company, transferred all of its equity ownership in Trans Global Services,
Inc. ("Trans Global") to Concept Technologies Group, Inc. ("Concept"),
pursuant to an agreement dated as of March 31, 1995, among SISC, DLB, Inc.
("DLB"), Joseph G. Sicinski and Concept in exchange for a controlling interest
in Concept. Concept's common stock and warrants are traded on the Nasdaq
SmallCap Market. Trans Global's's common stock was owned by SISC (91.6%), DLB
(5.0%) and Mr. Sicinski (3.4%). DLB is owned by Ms. Carol Schiller, wife of
Mr. Lewis S. Schiller, the Company's chairman of the board, president and
chief executive officer. Mr. Schiller disclaims all beneficial interest in
the securities owned by DLB. The acquisition by Concept of the Trans Global
stock in exchange for Concept's capital stock is referred to as the "Trans
Global Transaction".
Pursuant to the Trans Global Transaction:
(i) - Warrants to purchase an aggregate of 500,000 shares of Trans Global
common stock held by SISC (475,000 shares) and DLB (25,000 shares) were
exchanged for Series B Common Stock Purchase Warrants ("Series B Warrants")
to purchase an aggregate of 500,000 shares of Common Stock until May 5, 1997.
(ii) - Concept issued to SISC 850,000 shares of Common Stock, Series B
Warrants to purchase 475,000 shares of Common Stock at $3.50 per share, 23,750
shares of Series A Preferred Stock, which will be converted into 1,900,000
shares of Common Stock upon the filing of the Certificate of Amendment, 23,750
shares of each of Series B and C Preferred Stock, which are convertible into
an aggregate of 2,375,000 shares of Common Stock if certain levels of income
before income tax are met, and 25,000 shares of Concept's Series D Preferred
Stock, which is not convertible and which has a redemption price of
approximately $1,700. SISC has deferred taking the physical delivery of
400,000 of the shares of Common Stock issuable in order to provide Concept
with flexibility in issuing shares of Common Stock.
(iii) - Concept issued to DLB in respect of its Trans Global stock and
warrants, 50,000 shares of Common Stock, Series B Warrants to purchase 25,000
shares of Common Stock, 1,250 shares of Series A Preferred Stock, which are
convertible into 100,000 shares of Common Stock upon the filing of the
Certificate of Amendment, and 1,250 shares of each of Series B and C Preferred
Stock, which are convertible into an aggregate of 125,000 shares of Common
Stock if certain levels of income before income taxes are attained.
(iv) - Concept issued to Mr. Sicinski, 100,000 shares of Common Stock.
As a result of the Trans Global Transaction, SISC owned, at the closing,
approximately 32.2% of the outstanding Common Stock, and 59.3% of the voting
rights on all matters, including the election of directors, except where the
holders of Common Stock are required by law to vote as a single class. Upon
the filing of the Certificate of Amendment, based on outstanding Common Stock
as of the closing date, SISC would own 59.3% of the outstanding Common Stock.
16
<PAGE> 19
Consolidated Technology Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(in 000's, except per share data)
- ------------------------------------------------------------------------------
(10) Pro Forma Results:
The following pro forma unaudited results assume that the acquisitions of
Creative Socio-Medics, International Magnetic Imaging, Inc., Job Shop
Technical Services and Computer Engineering Services in Note (8)and the
reverse merger in Note (9) had occurred at the beginning of the indicated
periods:
Three Months Ended
---------------------
March 31, April 30,
1995 1994
--------- ---------
Net revenues $ 29,000 $ 25,800
======= =======
Net income (loss) ($ 1,987) $ (2,038)
======= =======
Income (loss) per share ($ 0.11) $ (0.21)
======= =======
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.
(11) Restatements of Prior Period Financial Statements
The years ended December 31, 1994 and July 31, 1994 financial statements have
been restated. The following summarizes and describes impact of the
restatement on the periods included as a part of these financial statements.
Three Months Ended
---------------------
March 31, April 30,
1995 1994
--------- ---------
Income (Loss) from Operations:
Prior to Restatement ($ 1,313) ($ 662)
Prior Period Adjustments:
Decrease in discount on shares
issued for stock options [1] -- (2,450)
Reclass stock option expense
from unusual to selling, general
and administrative expenses [2] -- (115)
------ ------
As restated ($ 1,313) ($ 3,227)
====== ======
17
<PAGE> 20
Consolidated Technology Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(in 000's, except per share data)
- ------------------------------------------------------------------------------
(11) Restatements of Prior Period Financial Statements (continued):
Three Months Ended
---------------------
March 31, April 30,
1995 1994
--------- ---------
Other Income (Expense):
Prior to Restatement ($ 1,026) ($ 10)
Prior Period Adjustments:
Reclass stock option expense from
unusual to selling, general and
administrative expenses [2] -- 115
------ ------
As restated ($ 1,026) $ 105
====== ======
Net Income (Loss):
Prior to Restatement ($ 2,388) ($ 706)
Prior Period Adjustments:
Decrease in discount on
shares issued for stock
options [1] -- (2,450)
------ ------
As restated ($ 2,388) ($ 3,156)
====== ======
As of As of
March 31, December 31,
1995 1994
--------- ------------
Accumulated Deficit:
Prior to Restatement ($25,432) ($23,044)
Prior Period Adjustments:
Decrease in discount on
shares issued for stock
options [1] (5,870) (5,870)
Decrease in discount on shares
issued in lieu of cash payment
for services rendered [3] (36) (36)
Decrease in discount on shares
issued for acquisitions [4] (338) (338)
------ ------
As restated ($31,676) ($29,288)
====== ======
18
<PAGE> 21
Consolidated Technology Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(in 000's, except per share data)
- ------------------------------------------------------------------------------
(11) Restatements of Prior Period Financial Statements (continued):
As of As of
March 31, December 31,
1995 1994
--------- ------------
Additional Paid-in Capital,
Common Stock:
Prior to Restatement $42,085 $39,353
Prior Period Adjustments:
Decrease in discount on
shares issued for stock
options [1] 5,870 5,870
Decrease in discount on shares
issued in lieu of cash payment
for services rendered [3] 36 36
Decrease in discount on shares
issued for acquisitions [4] 338 338
------ ------
As restated $48,329 $45,597
====== ======
[1] - The Company originally used a 60% discount for valuing shares issued and
exercised pursuant to a Non Employee Directors, Consultants and Advisors Stock
Plan and it was subsequently determined that only a 20% discount should be
used resulting in an increase in noncash expenses of $5,870 in prior periods
of which $2,450 relates to the three months ended April 30, 1994. Such change
did not impact the operating statement for the three motnhs ended march 31,
1995.
[2] - The Company originally included $115 of noncash expenses from the
issuance and exercise of stock options pursuant to a Non Employee Directors,
Consultants and Advisors Stock Plan as an unusual expense in other income and
expense. Such expense has been reclassified as an operating expense for the
three months ended April 30, 1994 but did not impact the three months ended
March 31, 1995.
[3] - The Company originally used a 50% discount for valuing shares issued in
lieu of cash payment for services rendered and it was subsequently determined
that only a 20% discount should be used resulting in an increase in noncash
expenses of $36 in prior periods. Such change did not impact the three months
ended March 31, 1995 or April 30, 1994.
[4] - The Company originally used a 50% discount for valuing shares issued in
connection with the acquisition of a subsidiary and it was subsequently
determined that only a 20% discount should be used resulting in an increase in
noncash expenses of $338 in prior periods. Such change did not impact the
three months ended March 31, 1995 or April 30, 1994.
........................................
19
<PAGE> 22
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
Liquidity and Capital Resources
The Company's principal working capital consists of cash and cash equivalents.
Cash and cash equivalents were $2,344 at March 31, 1995 compared to $1,727 at
December 31, 1994. During the three months ended March 31, 1995, the
Company's principal source of cash was from the operations of the medical
diagnostics segment company, International Magnetic Imaging, ("IMI").
Pursuant to an IMI financing agreement with a creditor, restrictions exist on
the distributions of IMI funds whereby IMI may not make payments out of the
ordinary course of IMI operations and specifically, not to the parent company,
(Consolidated), or any subsidiary or affiliate. The other segments are
thereby required to operate on their own cash flows and as of March 31, 1995
the most significant impact from these restrictions is on the Three
Dimensional Products and Services and Medical Information Services segments
which are currently unable to operate without cash infusions from the parent
company, (Consolidated). If these segments do not obtain alternative sources
of funding (i.e. equity offerings, creditor financing or increased volume), it
is uncertain whether these segments will continue as operating groups. The
remaining segments are relatively unaffected by the restrictions on IMI's cash
since they operate substantially with their own cash flows. The other
significant source of cash was the proceeds from the exercise of stock
options. During the same period, the principal use of cash was to acquire
subsidiaries, purchase capital assets and repay scheduled debt maturities.
The only other significant change in working capital was an increase in
accounts payable and accrued expenses of approximately $686, the result of
extending trade payables, an increase in accrued paroll and related taxes of
approximately $712, the result of the timing of payroll payments in the
contract engineering services segment and a decrease in interim billings in
excess of costs and estimated profits, the result of billings made on
uncompleted projects in the medical services segment.
The Company has significant current portions of debt obligations that will
require cash payment in 1996. In 1996, subordinated debt, payable to the
former owners of IMI, require principal and interest payments of approximately
$2,500 and balloon payments due in September of 1996 of approximately $10,500.
It is not expected that the Company will generate funds from operations in
order to cover these impending obligations and funding will have to come from
a third party source. As a result, 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 of which
approximately $3,900 is due in 1997 and the remainder in 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 these commitments and as of December 31, 1994,
the Company has no other plan of action to rectify the impending default.
20
<PAGE> 23
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued):
Additionally, the Company is in default on loans aggregating $302 as of
December 31, 1994. Such defaults have not had, and are not expected to have a
significant impact on the operations of the related segments. The creditors
have not called such loans and are working under extended repayment terms.
Results of Operations
Consolidated revenues, gross profit and selling, general and administrative
expenses for the three months ended March 31, 1995 compared to the three
months ended April 30, 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.
Three Months Ended
---------------------
March 31, April 30,
Segments 1995 1994
- -------- --------- ---------
Revenues:
Contract Engineering Services 62% 78%
Medical Diagnostics 25% --
Electro-Mechanical and Electro-Optical
Products Manufacturing 4% 14%
Medical Information Services 5% --
Telecommunications 1% 6%
Three Dimensional Products and Services 2% 1%
Business Consulting Services 1% 1%
---------------------
Gross Profit:
Contract Engineering Services 12% 36%
Medical Diagnostics 66% --
Electro-Mechanical and Electro-Optical
Products Manufacturing 7% 38%
Medical Information Services 7% --
Telecommunications 1% 16%
Three Dimensional Products and Services 6% 7%
Business Consulting Services 1% 3%
---------------------
Selling, General and Administrative Expenses:
Contract Engineering Services 14% 7%
Medical Diagnostics 29% --
Electro-Mechanical and Electro-Optical
Products Manufacturing 6% 6%
Medical Information Services 13% 2%
Telecommunications 4% 2%
Three Dimensional Products and Services 10% 4%
Business Consulting Services 1% 3%
Corporate and Other 23% 76%
---------------------
21
<PAGE> 24
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued):
Discussion of Operations by Segment
Contract Engineering Services - This segment consists of two companies, ARC
Acquisition and Resource Management International, ("RMI"), which are
collectively referred to as Trans Global Services. Revenues and gross profit
for the three months ended March 31, 1995 increased 252% and 161%,
respectively, when compared to the three months ended April 30, 1994. These
significant increases are attributed to the operations of RMI, which was
acquired in November 1994. Losses from operations increased approximately
$248 which is attributable solely to the RMI operations which has a lower
gross margin ratio and a higher ratio of selling, general and administrative
expenses than ARC Acquisition. Interest expense increased approximately $147
due to the higher debt balances at RMI and other income decreased
approximately $150. This segment operates in a highly competitive environment
with low margins. Management believes that by combining the resources and
expertise of the two newly acquired companies, this segment will increase its
long-term profitability, however, it is anticipated that revenues and
operating income on an annualized basis will remain relatively level for 1995.
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 current quarter, this segment operated
at a gross margin ratio of approximately 48% and generated income from
operations of approximately $1,500. Selling, general and administrative and
interest expenses approximated $1,900 and $655, respectively. Typically, this
segment has its greatest revenue activity in the first quarter and management
anticipates that revenues and gross margin in the remaining quarters of 1995
will be moderately less while operating expenses will remain relatively level,
which is consistent with the past performance of this company.
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 and gross profit for the
three month period ended March 31, 1995 compared to the three month period
ended April 30, 1994 increased 35% and 46%, respectively, while overall
profitability remained relatively level. The profitability of Sequential
increased by approximately $64 due to increased revenues and gross margins
while selling, general and administrative expenses remained relatively level.
The losses from operations of S-Tech remained relatively level. Other income
and expenses resulted in a net decrease in other income of approximately $255.
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 through 1995. Management plans to continue
placing more emphasis on sales to the private sector and overall it is
anticipated that revenues and operating profits will remain relatively stable
in this segment.
22
<PAGE> 25
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued):
Medical Information Services - This segment consists of two companies, Carte
Medical Corporation, ("Carte") and Creative Socio-Medics, ("CSM"), which was
acquired in June 1994. CSM accounted for all of the revenues and gross profit
in this segment for the three months ended March 31, 1995. Selling, general
and administrative expenses for the three months ended March 31, 1995 included
approximately $156 of product enhancement expenses incurred by CSM and
approximately $70 of financing costs and $52 of amortized software development
costs incurred by Carte. For the three month period ended April 30, 1994 all
operations in this segment related to Carte's start-up costs which were
charged to selling, general and administrative expenses. During the
remainder of 1995, management anticipates that the revenues and gross margins
of the segment's operations will remain relatively level.
Telecommunications - In December of 1993 the Company acquired ARC Networks
which is the only entity operating in this segment. Comparing the three
months ended March 31, 1995 to the three months ended April 30, 1994, revenues
remained relatively level while gross profit decreased 44%. Network
installations and resale of telephone services provided approximately $35 and
$22 of gross profit, respectively. Selling, general and administrative
expenses increased 186% and consist primarily of salaries and commissions
related to the telephone services reselling operations. The
telecommunications segment operates in a highly competitive industry and
management believes that in order for this segment to become profitable, it
will have to distinguish itself from other telecommunications service
companies. For the remainder of 1995 management anticipates that revenues and
overall profitability on an annualized basis will marginally increase;
however, the ultimate profitability of this segment remains uncertain.
Three Dimensional Products and Services - This segment consists of three
companies, 3D Technology, Inc., ("3D- Tech"), 3-D Imaging International, Inc.,
("3DI") and Computer Design Services, ("CDS"), which was acquired in November
1994. Revenues and gross profit for the three months ended March 31, 1995
compared to the three months ended April 30, 1994 increased 776% and 493%,
respectively, due to the addition of CDS. Losses from operations increased
255%, due primarily to the increased selling, general and administrative
expenses resulting from CDS. In the prior period this segment had minimal
revenues, which accounts for the significant increase in revenues and gross
profit. The increase in operating losses is due to the continued costs
incurred to develop this segment's product line. During 1995, management
anticipates that this segment will begin to have increasing sales of the three
dimensional products and services which will result in higher gross margins.
Selling, general and administrative expenses are expected to remain relatively
level and overall profitability should become more favorable. Although the
ultimate profitability of this segment appears favorable; it can not be
determined at this time whether profit levels, if any, will be significant.
Business Consulting Services operations were not significant for the three
months ended March 31, 1995 and April 30, 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.
23
<PAGE> 26
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued):
Corporate and Other selling, general and administrative expenses for the three
months ended March 31, 1995 compared to the three months ended April 30, 1994
decreased 52% on an overall basis. Included in corporate and other selling,
general and adminsistrative expense is noncash expense from the exercise of
stock options for payment of consulting services which amounted to $740 for
the three months ended March 31, 1995 and $2,870 for the three months ended
April 30, 1994. Corporate and other selling, general and administrative
expense, other than that related to the exercise of stock options was $700 and
$107 for the three month periods ended march 31, 1995 and April 30, 1994,
respectively, representing an increase of 554%. Such increase is 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 1995, 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 months ended March 31, 1995 compared to the
three months ended April 30, 1994 increased 217%% which is attributed to the
issuance of debt instruments in connection with the acquisitions of new
companies during the respective periods.
Losses on Investment Securities - During the three month period ended March
31, 1995 the loss on sales of securities consisted primarily of the
recognition of investments that were determined to have a permanent decline in
market value and as such, the decline was recognized in the current period
operations of the Company and is no longer included in the unrealized loss
from marketable securities in the equity section of the balance sheet.
Security sales vary from period to period based on, among other things, market
activity and cash needs, and management cannot estimate the amount of future
security sales gains or losses, if any, that will be generated from such
transactions.
Impact of Inflation
The Company is subject to normal inflationary trends and anticipates that any
increased costs would be passed on to its customers.
........................................
24
<PAGE> 27
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Calculation of earnings per share.
(b) The following reports on Form 8-K were reported during the quarter:
1. On January 31, 1995, the Company filed a Form 8-K, dated January 30,
1995, reporting as Item 5., the filing of agreements related to the
acquisition of the assets of Job Shop Technical Services, Inc. and Computer
Engineering Services, Inc., reporting as Item 7., the filing of the asset
purchase agreement by and among ITS Management Corp., Job Shop Technical
Services, Inc. and Ralph Corace, and the filing of the plan and agreement of
reorganization by and among CDS Acquisition Corp., Computer Engineering
Services, Inc. and Yvonne Vargas, and reporting as Item 8., the change in the
fiscal year to a calendar year.
2. On March 2, 1995, the Company filed a Form 8-K, dated February 27,
1995, reporting as Item 2., a letter of intent with Concept Technologies
Group, Inc., pursuant to which the Company will acquire a controlling interest
in Concept Technologies Group, Inc.
........................................
25
<PAGE> 28
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.
/S/ President and Director May 10, 1996
- -------------------- (Principal Executive
Lewis S. Schiller Officer)
/S/ Chief Financial Officer May 10, 1996
- -------------------- (Principal Financial and
George W. Mahoney Accounting Officer)
<PAGE> 29
Consolidated Technology Group Ltd. and Subsidiaries
Index to Exhibits
March 31, 1995
1. 11.1 Calculation of earnings per share.
<PAGE> 30
Consolidated Technology Group, Ltd. and Subsidiaries
March 31, 1995
EX-11.1 Calculation of Earnings per Share
- ----------------------------------------------------------------------------
For the Three Months Ended March 31, 1995:
Net Loss ($2,388,607)
=========
Loss per Share:
Loss per share - Note 1 $(0.13)
====
Loss per Share - assuming full
dilution - Note 2 $(0.08)
====
Note 1:
Computed by dividing the net loss for the period by the weighted average
number of common shares outstanding (18,776,149). No stock options, warrants
or preferred convertible stock are assumed to be exercised because they are
anti-dilutive for the period
Note 2:
(i) Assumes that a warrant to purchase 1,000,000 common shares at $0.75 per
share was exercised on January 1, 1995 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 period as quoted on the
NASD.
(ii) Assumes that on January 1, 1995, 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.
