<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Amendment No. 1
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended October 31, 1994
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
Number of Common Shares outstanding as of December 16, 1994: 17,377,481
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) As of July 31, 1994, reclass approximately $1,936,000 of amounts payable
to a factor as a current debt in the liability section of the balance
sheet which was previously shown as a reduction of trade receivables in
current assets. Related changes were also made to the cash flow
statement.
3) As of July 31, 1994 reclass approximately $972,000 from goodwill to
customer lists.
4) As of July 31, 1994 reclass approximately $744,000 of billings in excess
of costs which were previously included in accounts payable. Related
changes were also made to the cash flow statement.
5) For the three months ended October 31, 1993 statement of operations,
reclass approximately $530,000 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 $2,030,000 relating to a reduction in the discount taken on
stock option issuances. Related changes were also made to the cash flow
statement.
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Purpose of Amendment (continued):
6) In the cash flow statement for the three months ended October 31, 1994 and
1993 the following changes were made:
a) Segregated cash paid for deferred offering costs which was previously
included with changes in other assets in investing activities and
are included in financing activities.
b) Supplemental disclosures of noncash investing and financing activities
was added.
7) Disclosed the number of common shares authorized, issued and outstanding
on the face of the balance sheet.
8) 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.
9) Additional footnote disclosure is added regarding the restatement of prior
period financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
10) Liquidity and Capital Reousreces - Discussion is changed to reflect the
changes made to the cash flow statement (see 2)and 4) above).
11) Results of Operations - Discussion is changed to reflect the changes made
to the three months ended October 31, 1993, of approximately $530,000 of
expense related to the issuance of stock options from unusual expense to
selling, general and administrative expense and the increase in selling,
general and administrative expense relating to a reduction in the
discount taken on stock option issuances..
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Consolidated Technology Group, Ltd.
Index
Page
----
Part I: - Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets - October 31, 1994
and July 31, 1994. 2-3
Consolidated Statements of Operations - Three Months Ended
October 31, 1994 and 1993. 4
Consolidated Statements of Cash Flows - Three Months Ended
October 31, 1994 and 1993. 5-6
Consolidated Statement of Shareholders' Equity - Three Months
Ended October 31, 1994. 7-8
Notes to Consolidated Financial Statements 9-14
4tem 2. Management's Discussion and Analysis of the
Financial Condition and Results of Operations. 15-17
Part II:
Part II - Other Information:
Item 6. Exhibits and Reports on Form 8-K 18
1
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Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Balance Sheets
(in 000's)
October 31, July 31,
----------- --------
1994 1994
----------- --------
Assets:
Current assets:
Cash and cash equivalents $ 3,244 $ 1,773
Cash escrow -- 2,000
Receivables, net of allowances 13,284 5,095
Inventories 3,881 3,727
Loans receivable 1,363 1,019
Prepaid expenses and other
current assets 1,778 899
------ ------
Total current assets 23,550 14,513
------ ------
Property, plant and equipment, net 11,539 906
------ ------
Other assets:
Capitalized software development costs 1,202 1,144
Goodwill, net 11,897 5,852
Covenant not to compete, net 3,680 514
Customer lists, net 11,427 972
Deferred offering costs 201 172
Receivables, long-term 93 56
Receivables, related parties 157 491
Investments in common stock, long-term 286 259
Other Assets 390 191
------ ------
Total other assets 29,333 9,651
------ ------
Total Assets $64,422 $25,070
====== ======
See notes to consolidated financial statements.
2
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Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Balance Sheets
(in 000's)
October 31, July 31,
----------- --------
1994 1994
----------- --------
Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable and accrued expenses $ 5,470 $ 3,276
Notes payable - short term 4,134 3,195
Accrued payroll and related expenses 188 127
Accrued interest 109 151
Current portion of subordinated debt 3,375 --
Current portion of capitalized
lease obligations 1,183 192
Excess of billings over accumulated
costs 1,059 744
State taxes payable 20 20
------ ------
Total current liabilities 15,538 7,705
------ ------
Long-term liabilities:
Notes payable - other 10,547 242
Capitalized lease obligations 2,640 56
Subordinated debt 16,380 --
------ ------
Total long-term liabilities 29,567 298
------ ------
Commitments and contingencies
Minority interest -- 6
------ ------
Shareholders' Equity:
Preferred stock 81 81
Additional paid-in capital,
preferred stock 311 311
Common stock (50,000,000 shares
authorized, 15,877,260 and 12,534,260
shares issued and outstanding as of
October 31, 1994 and July 31, 1994,
respectively) 159 125
Additional paid-in capital, common stock 44,615 41,731
Accumulated deficit (25,472) (24,802)
Net unrealized gain (loss) on long-
term investments in common stock (377) (385)
------ ------
Total shareholders' equity 19,317 17,061
------ ------
Total Liabilities and Shareholders' Equity $64,422 $25,070
====== ======
See notes to consolidated financial statements.
3
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Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statement of Operations
(in 000's except per share data)
Three Months Ended
October 31,
------------------
1994 1993
------ ------
Revenues:
Product Sales $ 905 $ 978
Fees and Services 9,363 601
Deleopment Stage 437 96
------ ------
Total Revenues 10,705 1,675
------ ------
Direct Costs:
Product Sales 533 594
Fees and Services 7,853 190
Development Stage 166 8
------ ------
Total Direct Costs 8,552 792
------ ------
Gross Profit 2,153 883
Selling, General and Administrative:
Regular 1,765 3,237
Development Stage 716 233
------ ------
Total Selling, General and Administrative 2,481 3,470
------ ------
Loss from Operations (328) (2,587)
------ ------
Other Income (Expense):
Interest Expense (487) (99)
Other Income (Expense) 138 (76)
Gain (Loss) from Security Sales -- 30
------ ------
Total Other Income (Expense)- Net (349) (145)
------ ------
Loss Before Minority Interest (677) (2,732)
Minority Interest in Loss of Subsidiaries 7 46
------ ------
Net Loss ($ 670) ($ 2,686)
====== ======
Loss per Common Share ($0.05) ($0.59)
====== ======
Weighted Average Number
of Common Shares 14,205,789 4,574,289
========== =========
See notes to consolidated financial statements.
4
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Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statements of Shareholders' Equity for the
Three Months Ended October 31, 1994
(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 12,534,260 $ 125
Issuance for acquisitions 3,343,000 34
---------- ------
Ending balance 15,877,260 $ 159
========== ======
Additional paid-in capital, common stock:
Beginning balance $41,731
Issuance for acquisitions 2,884
------
Ending balance $44,615
======
(continued)
See notes to consolidated financial statements.
5
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Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statements of Shareholders' Equity for the
Three Months Ended October 31, 1994
(in 000's except per share data)
Shares Amounts
---------- -------
Accumulated deficit:
Beginning balance ($24,802)
Net loss (670)
------
Ending balance ($25,472)
======
Net unrealized gain (loss) on long-
term investments in common stock:
Beginning balance ($ 385)
Recognized investment security gains 9
------
Ending balance ($ 377)
======
Total shareholders' equity $19,317
======
(concluded)
See notes to consolidated financial statements.
6
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Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statement of Cash Flows
(in 000's except per share data)
Three Months Ended
October 31,
------------------
1994 1993
------ ------
Cash Flows from Operating Activities:
Net loss ($ 670) ($ 2,686)
------ ------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and Amortization 589 28
Minority interest in loss of
consolidated subsidiaries (7) (46)
Bad debt expense 40 --
Option exercise expense -- 2,660
Gain on sale of marketable securities -- (30)
Change in current assets and
current liabilities:
(Increase) decrease in current assets:
Receivables (850) (21)
Inventories (154) (233)
Loan receivable (344) (74)
Prepaid expenses and other current assets (458) (15)
Increase (Decrease) in current liabilities:
Accounts payable and accrued expenses 711 367
Accrued payroll and related expenses 61 84
Accrued interest (42) 71
Interim billings in excess of costs
and estimated profits 315 --
------ ------
Total adjustments (139) 2,791
------ ------
Net cash provided used)
in operating activities (809) 105
------ ------
Cash Flows from Investing Activities:
Decrease in other assets (156) (58)
Capital expenditures (90) (4)
Investments in common stock (18) (552)
Proceeds from sale of marketable securities -- 31
Capitalized software development costs (58) (116)
Acquisition of subsidiary (8,289) --
Cash of company acquired 2,350 --
Cash escrow 2,000 --
Net loans made and repaid 298 --
------ ------
Net cash used in investing activities (3,963) (699)
------ ------
(continued)
See notes to consolidated financial statements.
7
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Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statement of Cash Flows
(in 000's except per share data)
Three Months Ended
October 31,
------------------
1994 1993
------ ------
Cash Flows from Financing Activities:
Net proceeds from and payments
on notes payable 6,355 552
Deferred offering costs (29) --
Payments on capital leases (83) (1)
Exercise of stock options -- 1,400
------ ------
Net cash provided by financing activities 6,243 1,951
------ ------
Net Increase in Cash and Cash Equivalents 1,471 1,357
Cash and Cash Equivalents at
Beginning of Period 1,773 174
------ ------
Cash and Cash Equivalents at
End of Period $ 3,244 $ 1,531
====== ======
Supplemental Disclosures of Cash
Flow Information:
Cash Paid for Interest $ 529 --
====== ======
(concluded)
Supplemental Disclosures of Noncash Investing and Financing Activities:
During the three month period ended October 31, 1994, the Company acquired
International Magnetic Imaging and in connection therewith issued subordinated
debt approximating $19,800, long-term debt approximating $12,000, capital
lease obligations approximating $3,700 and issued stock with a value of
$2,920.
During the three month period ended October 31, 1993 incurred $2,660 in
noncash expense from the issuance and exercise of options.
See notes to consolidated financial statements.
8
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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 October 31, 1994 and July 31, 1994 and the results of its operations for
the three months ended October 31, 1994 and 1993 and changes in cash flows for
the three months then ended.
The accounting policies followed by the Company are set forth in Note 1 to
the Company's financial statements in the July 31, 1994 Consolidated
Technology Group, Ltd. Annual Report which is incorporated by reference on
Form 10-K.
2. The results of operations for the three months ended October 31, 1994 and
1993 are not necessarily indicative of the results to be expected for the full
year.
3. 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.
4. Acquisitions
On December 22, 1993, the Company, acquired for 600,000 shares valued at
$1,440 (through a 90% owned subsidiary) Arc Acquisition Group, Inc., in a
business combination accounted for as a purchase. On the same date, the
Company also acquired for 250,000 shares valued at $600 (through a wholly
owned subsidiary) 80% of the outstanding voting common stock and 50.1% of the
outstanding non voting stock of ARC Networks, Inc., in a business combination
also accounted for as a purchase. The purchase price of these two
acquisitions exceeded the fair value of the net assets of ARC Acquisition
Group, Inc. and ARC Networks, Inc. by $2,543, consisting of Goodwill of $543
and Customer Lists of $2,000. Goodwill and Customer Lists will be amortized
over 20 years and 15 years, respectively, under the straight line method. For
accounting purposes, the results of operations of ARC Acquisition and ARC
Networks are included with the results of the Company from January 1, 1994
onward.
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
9
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Consolidated Technology Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(in 000's except per share data)
- ------------------------------------------------------------------------------
4. Acquisitions (continued)
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
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.
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 diagnostic 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 $11,069. 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
======
10
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Consolidated Technology Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(in 000's except per share data)
- ------------------------------------------------------------------------------
4. Acquisitions (continued)
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 ( 9,209)
Goodwill 11,069
------
Total $31,872
======
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 the management
and radiology company, 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.
5. Subsequent Events
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
11
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Consolidated Technology Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(in 000's except per share data)
- ------------------------------------------------------------------------------
5. Subsequent Events (continued)
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.
6. Pro Forma Information
The following pro forma unaudited results assume the above four acquisitions
had occurred at the beginning of the indicated periods:
Three Months Ended
October 31,
------------------
1994 1993
------ ------
Net revenues $28,170 $24,170
====== ======
Net income (loss) ($ 1,046) $ 581
====== ======
Income (loss) per share ($ 0.07) $ 0.05
====== ======
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.
7. Restatements of Prior Period Financial Statements
The fiscal years ended July 31, 1994 and 1993 financial statements have been
restated. The following summarizes and describes impact of the restatements
for the periods included as a part of these financial statements.
Three Months Ended
October 31,
------------------
1994 1993
------ ------
Income (Loss) from Operations:
Prior to Restatement ($ 328) ($ 27)
Prior Period Adjustments:
Reclass stock option expense
from unusual to selling,
general and administrative
expenses [1] -- (530)
Decrease in discount on shares
issued for stock options [] -- (2,030)
------ ------
As restated ($ 328) ($ 2,587)
====== ======
12
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Consolidated Technology Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(in 000's except per share data)
- ------------------------------------------------------------------------------
7. Restatements of Prior Period Financial Statements (continued)
Three Months Ended
October 31,
------------------
1994 1993
------ ------
Other Income (Expense):
Prior to Restatement ($ 349) ($ 675)
Prior Period Adjustments:
Reclass stock option expense
from unusual to selling,
general and administrative
expenses [1] -- 530
------ ------
As restated ($ 349) ($ 145)
====== ======
Net Loss:
Prior to Restatement ($ 670) ($ 655)
Prior Period Adjustments:
Decrease in discount on shares
issued for stock options [] -- (2,030)
------ ------
As restated ($ 670) ($ 2,685)
====== ======
As of As of
October 31, July 31,
----------- --------
1994 1994
----------- --------
Accumulated Deficit:
Prior to Restatement ($19,602) ($18,932)
Prior Period Adjustments:
Decrease in discount on
shares issued for stock
options [2] (5,870) (5,870)
------ ------
As restated ($25,472) ($24,802)
====== ======
Additional Paid-in Capital,
Common Stock:
Prior to Restatement $38,745 $35,861
Prior Period Adjustments:
Decrease in discount on
shares issued for stock
options [2] 5,870 5,870
------ ------
As restated $44,615 $41,731
====== ======
13
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Consolidated Technology Group, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(in 000's except per share data)
- ------------------------------------------------------------------------------
7. Restatements of Prior Period Financial Statements (continued)
[1] - The Company originally included $845 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 of $300
for the year ended December 31, 1994 and $845 for the year ended July 31,
1994.
[2] - 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 for the year ended
July 31, 1994 and $2,030 for the three months ended October 31, 1993.
........................................
14
<PAGE> 17
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (in 000's except share data)
Financial Condition:
Liquidity and Capital Resources:
Cash flow increased approximately $1,471 from $1,773 at August 1, 1994 to
$3,244 at October 31, 1994. Cash used in operations approximated $139. Cash
used in investing activities approximated $3,963 resulting primarily from
$2,000 from a cash escrow, $2,350 in cash from an acquired company and $8,289
used to acquire a subsidiary. Other investing activities amounted to a net
use of cash of approximately $24. Cash provided by financing activities
approximated $6,243 due substantially to proceeds and repayments of a loan
obtained to finance the acquisition of a subsidiary.
Results of Operations:
First Quarter Fiscal 1995 Compared to First Quarter Fiscal 1994:
Revenues:
Total revenues increased approximately $9,030 or 539% from the 1994 fiscal
quarter.
Fees and services revenues accounted for approximately $8,762 of the increase
due primarily to companies acquired subsequent to the 1994 fiscal quarter.
Such companies provide telecommunications, temporary employment, medical
diagnostic, and health information services and generated revenues of
approximately $437, $5,221, $2,354, and $1,344, respectively. Such increases
were offset by a decrease of approximately $594 in previously existing
companies due primarily to a decrease in business consulting services which
reflects managements decision to concentrate time and resources on
pre-existing and newly acquired subsidiaries.
Development stage company revenues increased by approximately $341 due
primarily to initial overseas sales of the three dimensional products and
services segment's Surfacer software product.
Product sales revenues remained relatively level with an overall decrease of
approximately $73. Sales of optical encoders, encoded motors and limit
programmer products increased approximately $101 while other product sales
(including avionics instruments and vending machines), decreased by
approximately of $174.
Gross Profit:
Gross profit increased approximately $1,270 or 144% from $883 at 53% for the
1994 fiscal quarter to $2,153 at 20% for the 1995 fiscal quarter. The
decreased margin rate reflects the acquisition of companies subsequent to the
1994 fiscal quarters that operate with lower margins than previously existing
companies but have greater revenue volume for the 1995 fiscal quarter.
15
<PAGE> 18
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (in 000's except share data)
Results of Operations (continued):
Fees and services gross profits increased approximately $1,099 due primarily
to the above mentioned newly acquired companies. Such companies added margins
of approximately $110 at 25%, $314 at 6%, $997 at 42%, and $81 at 6% in the
telecommunications, temporary employment, medical diagnostic, and health
information service segments, respectively. These increases were offset by a
decrease in gross profits of approximately $403 in previously existing
companies due primarily to the planned reduction in outside business
consulting services.
Development stage gross profits increased approximately $183 from $88 at 92%
to $271 at 62%. The increased gross profit is due to the above mentioned
initial sales of the three dimensional products Surfacer software product.
The prior fiscal quarter gross profit rate of 92% resulted from minimal sales
volume and is not considered to be a normal margin rate.
Product sales gross profits decreased approximately $12 from $384 at 39% to
$372 at 41%. Gross profits on sales of optical encoders, encoded motors and
limit programmer products increased approximately $68 from $243 at 37% to $311
at 41%. Gross profits on other products decreased approximately $80 from $142
at 43% to $62 at 39%.
Selling, General and Administrative Expenses:
Regular selling, general and administrative expenses for segments with fees
and services operations increased approximately $1,204 due primarily to the
above mentioned newly acquired companies. Such companies incurred regular
selling, general and administrative expenses of approximately $135, $239,
$528, and $302 in the telecommunications, temporary employment, medical
diagnostic, and health information service segments, respectively. Regular
selling, general and administrative expenses for pre-existing companies
operating in the fees and services segment remained level with the prior
fiscal quarter.
Regular selling, general and administrative expenses for previously existing
companies, including companies with product sales operations and the holding
and consulting companies, decreased approximately $2,676 due primarily to the
fact that the prior fiscal quarter included $2,660 of noncash expense from the
exercise of stock options.
Selling, general and administrative expenses for development stage operations
increased approximately $483 or 207%. Approximately $389 of the increase
relates to the continued costs of developing the products and markets related
to the three dimensional products and services segment and approximately $94
relates to the development of the CarteSmart system.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (in 000's except share data)
Results of Operations (continued):
Other Income (Expense):
Interest expense increased approximately $388 or 390% from the 1994 fiscal
quarter. This increase is due primarily to the above mentioned newly acquired
companies. Such companies incurred interest expense of approximately $6,
$151, $229, and $76 in the telecommunications, temporary employment, medical
diagnostic, and health information service segments, respectively. Interest
expense for pre-existing companies decreased approximately $74 due to
scheduled lower debt balances from the prior quarter.
Other income increased approximately $214 or 281% from net other expense of
$76 at fiscal quarter 1994 to net other income of $138 at fiscal quarter 1995.
The expenses in the prior quarter related to a write-off of pending
acquisition costs. The other income in the current quarter resulted primarily
from interest income earned by SIS Capital.
Gain from security sales decreased approximately $30 or 100% from the 1994
fiscal quarter. Security sales vary from period to period and at this time
management cannot estimate the amount of revenues, if any, that will be
generated from such transactions.
........................................
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Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(b) Form 8-K/A, Amendments to 8-K, dated July 19, 1994 were filed with the
SEC on September 16, 1994 and October 7, 1994 reporting as item 2., Agreement
to acquire the business of International magnetic Imaging, Inc. and certain
affiliated entities ["IMI"], Item 5., Election of George W. Mahoney as chief
financial officer, and Item 6., Financial statements of IMI and related
exhibits.
........................................
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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)
