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Form 10 -QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
Commission File Number 33-2775-A
TECHNICAL VENTURES INC.
(Exact Name of small business issuer as specified in its charter)
New York 13-3296819
(State or other jurisdiction of (I.R.S. Employer
incorporation of organisation) identification No.)
3411 McNicoll Avenue, Unit 11, Scarborough, Ontario, Canada M1V 2V6
(Address of Principal Executive Offices, Zip Code)
Issuer's Telephone Number, Including Area Code (416) 299-9280
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last
Report)
Indicate by a check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding for each of the issuer's classes of
common stock, as of March 31, 1996.
14,586,341 shares of common stock, $.01 par value
Page 1 of 13 Pages
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
MARCH 31
1996
CURRENT ASSETS (UNAUDITED)
Cash $22,342
Accounts Receivable 198,730
Inventory (Note 2) 50,336
Other Current Assets 41,958
Total Current Assets 313,366
PROPERTY AND EQUIPMENT, at cost, net of accumlated
depreciation of $483,644 245,976
INTANGIBLE ASSETS, net of accumulated amortization of
$12,089 32,706
$592,048
LIABILITIES & SHAREHOLDERS DEFICIENCY
CURRENT LIABILITIES
Note Payable - line of credit (NOTE 4) $66,213
Notes Payable (Note 5) 144,179
Current Portion of long term debt: (Note 3, 4)
Capital lease obligations 97,783
Other 1,080,514
Loans & advances:
Private lenders 73,342
Shareholders 23,910
Accounts payable and accrued expenses 437,251
Total Current Liabilities 1,923,192
LONG-TERM DEBT, net of current portion: (Note 3)
Shareholders 287,879
Capital lease obligations 3,701
Other 51,980
MINORITY INTEREST 0
SHAREHOLDERS' DEFICIENCY:
Common stock, $.01 par value, 15,000,000 shares authorized:
Issued and outstanding, 14,586,341 shares 145,863
Additional Paid In Capital 4,048,994
Deficit (6,064,339)
Foreign currency translation adjustment 194,778
Total Shareholders' deficiency (1,674,703)
$592,048
See notes to condensed consolidated financial statements.
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
1996 1995
SALES $1,178,002 $1,197,151
COST OF SALES 983,067 977,730
GROSS MARGIN 194,935 219,421
GENERAL EXPENSE
Administration 117,894 122,429
Financial
-Interest & Other 98,771 73,499
Loss (Gain) From Disposition of Property & Equipment (2,923)
Research & Development 48,018 48,909
Selling 38,917 46,265
303,600 288,179
LOSS BEFORE INCOME TAX RECOVERY (108,665) (68,758)
INCOME TAX RECOVERY 0 154,562
NET INCOME [LOSS] ($108,665) $85,804
NET INCOME [LOSS] PER COMMON SHARE ($0.01) $0.01
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,586,341 14,586,341
See notes to condensed consolidated financial statements.
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31
1996 1995
SALES $459,208 $444,657
COST OF SALES 341,787 343,457
GROSS MARGIN 117,421 101,200
GENERAL EXPENSE
Administration 34,222 43,557
Financial
-Interest & Other 30,394 25,699
Loss [Gain] From Disposition Of Property & Equipment (2,923)
Research & Development 11,631 14,617
Selling 11,899 17,306
88,146 98,256
INCOME 29,275 2,944
NET INCOME $29,275 $2,944
NET INCOME PER COMMON SHARE $0.00 $0.00
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,586,341 14,586,341
See notes to condensed consolidated financial statements.
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
1996 1995
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income [Loss] ($108,665) $85,804
Adjustments to reconcile net Income (Loss) to net cash
Provided (Used) by operating activities:
Depreciation and amortization 41,779 46,003
Loss on Disposition of Property & Equipment (3,292)
Net Change in non-cash operating assets
and liabilities (99,232) (316,322)
Net Cash Provided (Used) by operating activities (166,118) (187,807)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds From Disposition Of Property & Equipment 3,340
Other (1,329)
Net cash provided [used] by Investing Activities 0 2,011
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) loans,
notes and advances:
Line of Credit (62,505)
Long-term debt 187,879 237,996
Shareholders (16,903) 11,752
Bank Note 14,390 (9,907)
Net Cash Provided by Financing Activities 185,366 177,336
EFFECT OF EXCHANGE RATE ON CASH 614 5,267
CHANGE IN CASH BALANCE FOR THE PERIOD 19,862 (3,193)
CASH, BEGINING OF PERIOD 2,480 27,824
CASH, END OF PERIOD $22,342 $24,631
See notes to condensed consolidated financial statements.
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
1996 1995
PAYMENTS MADE FOR INTEREST $25,631 $4,093
NET CHANGE IN NON-CASH OPERATING ASSETS
AND LIABILITIES:
Decreases (increases) in operating assets
and increases (decreases) in operating
liabilities:
Accounts Receivable ($88,687) ($92,673)
Inventory 23,415 (24,187)
Other assets (4,630) (30,586)
Accounts Payable and accrued expenses (29,330) (168,876)
($99,232) ($316,322)
See notes to condensed consolidated financial statements.
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION:
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to form 10-Q SB and
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for fair
presentation have been included. Operating results for the nine months ended
March 31, 1996 are not necessarily indicative of the results that may be
expected for the year ended June 30, 1996. For further information refer to
the financial statements and footnotes thereto included in the Company's
annual report on form 10-KSB for the year ended June 30, 1995.
NOTE 2: INVENTORY:
Inventory is comprised of the following:
March 31,
1996
Raw Materials $50,336
$50,336
NOTE 3: LONG TERM DEBT:
During the previous fiscal year the Company refinanced and consolidated its
outstanding note payable and corresponding accrued interest with Dow.
Interest is charged at prime plus 2%, payable in installments of $25,490
(Canadian) in December 1995 and March 1996 and in monthly installments of
$19,657 (Canadian) from April 1996 through March 1999, at which time the
entire unpaid balance becomes due.
On March 23, 1995 the Company's subsidiary Mortile Industries Ltd. ("Mortile")
closed a five year Debt/Equity financing agreement (The Agreement) with
Innovation Ontario Corporation Inc.("IOC"). IOC agreed to loan Mortile up to
$499,999 (Canadian), in two advances, the balance of the loan proceeds,
$249,999 (CND) were received in July 1995. Quarterly, blended principal and
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interest payments of $30,315 (Canadian) based on 8% interest cost, commence in
December 1995. Additionally, under the agreement, IOC acquired a 30% equity
position in Mortile. Mortile has the option to repurchase the shares based on
a price calculated using the principal loaned, times a factor of 1.02, times
the number of months expired (but no less than twelve), less the amount of any
principal and interest payments made to IOC by Mortile. The repurchase option
expires in March 1997. IOC's investment in Mortile is reflected as a
minority interest in these financial statements.
Both the Dow and I.O.C. notes are collateralized by all previously unsecured
assets of the Company. I.O.C.'s collateral position is subordinate to that of
Dow.
At March 31, 1996 the Company was in default on it's notes payable to Dow and
IOC and it's lease payable to FBX Holdings Inc.. Although the respective
creditors have not called the obligations, payments are due on demand and
accordingly the balances are reflected on the March 31, 1996 balance sheet as
current liabilities.
In October 1993 Mortile Industries Ltd. (Mortile), a subsidiary of the Company
borrowed $45,000. (Canadian) from SNC Industrial Technologies (SNC), under a
Commercial Agreement (the Agreement). Interest is at prime plus 1% and
interest along with principal is payable at $ .75 (Canadian) for each kilogram
of certain material identified under the Agreement, processed by Mortile for
SNC. As it is not expected that a significant amount of such materials will
be processed during fiscal 1996, the entire balance has been classified as
long-term debt.
NOTE 4: Line of Credit:
At March 31, 1996 the Company had borrowings of $90,000 (Canadian) against
what had been a $250,000 (Canadian) line of credit with Dow Chemical of
Canada, Inc. (Dow). In April 1995, Dow had restructured this debt instrument,
which had an outstanding principal balance of $100,000 at that time, as a
$50,000 revolving line of credit and a $50,000 term loan; payable in monthly
installments of $10,000 beginning in April 1995. At March 31, 1996 the
Company was in arrears on four monthly payments ($40,000 in aggregate)
and the entire balance due to Dow is payable on demand.
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NOTE 5: At March 31, 1996 the Company had a note payable balance of
$144,179 due on demand to Cooper Financial Corp. This obligation, which had
previously been payable to the Federal Deposit Insurance Corporation, as
receiver for another financial institution, is guaranteed by a shareholder of
the Company. At March 31, 1996, the Company was in default of the loan
provisions and negotiations for principal repayment will occur when the
Company has sufficient cash flow to commence repayment of principal in an
orderly fashion.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources:
As a result of closing the long term debt financing with Innovation Ontario
Corporation Inc. in late July, 1995 the Company received $250,000 (Canadian).
The funds were used, primarily, for working capital. The Company reduced a
portion of past due balances due to vendors and creditors. However, the
Company remains in a position where it is unable to meet its monthly cash flow
requirements.
Three of the Company's long term debt financing arrangements [Note 3] are
currently in arrears. One debtor has verbally agreed to a moratorium on
principal repayments until the Company is in a financial position to make a
payment[s]. Both the Dow and IOC financing arrangements [Note 3] were
technically in default on Jan. 1, 1996; as such both debt's have been
reflected as current liabilities on the March 31, 96 balance sheet. Neither
principal has notified the Company of it's default and it is expected that a
mutual understanding of the Company's financial circumstances will preclude
any negative action by either of the principals. Dow is currently reviewing
the Company's cash flow projections with the objective being a capitalization
of outstanding interest with the current principal, arriving at a repayment
amount and schedule; based on a conservative assessment of the Company's cash
flow ability to commence repayment on a monthly basis. It is expected that
this negotiation will be completed in the 4th quarter of the Company's current
fiscal year.
A revised statement of account has been submitted by the tax auditor in regard
of the Company's tax refund claim for the taxation years 1993 and 1994. The
cumulative refund has been reassessed at $54,211 CND. and is expected to be
received in May 1996. The Company had originally filed Canadian Tax refund
claims in the aggregate amount of $61,741. The Company will also submit a
claim for fiscal 1995 amounting to approximately $27,000 (Canadian).
Present financing arrangements are not considered a long-term solution to the
Company's financial needs. However, the Company's present financial condition
has hindered management in their pursuit of acceptable financing arrangements.
It is hoped that with the completion of the Company's first quarter of
operating profit that this obstacle will be somewhat alleviated. Efforts are
being made to complement present cash flows with accounts receivable and/or
"purchase order" financing. As well, several major investment banking
providers have been meeting with the Company in respect of it's financial
requirements.
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If it is deemed to be in the best interest of the Company and its
stockholders, serious consideration will be given to raising additional funds
through private or public issuance's in the future. The Company's current
capital structure of an authorized issue of fifteen million common shares is
almost complete. Therefore, a change in the capital structure would become
necessary to raise additional funds through private or public issuance's in
the future.
No significant capital expenditures are anticipated in this fiscal year.
Results of Operations:
Sales revenues for the first nine months of fiscal 1996 decreased by 1.5 %
under those for the corresponding period of the previous year. Custom
compounding revenues increased by 6% with proprietary product revenues
declining 18%. Sales of products with less favorable pricing arrangements was
the primary factor contributing to this decrease.
Efforts in the sale of the Company's proprietary products by the Company's
distributors in the US., Canada and Europe continues. It is expected that
proprietary sales will increase in the fourth quarter, but there can be no
assurances of success.
The Company continues to develop and market the specialty compounding, with
this segment representing 93 % of revenue during the first nine months of
fiscal 1996. The Company continues to pursue several additional contracts of
some magnitude. Several trials have been completed and the results appear
very promising. The Company's major customer in the specialty compounding had
advised management of an expected increase of 30% or more in their orders;
commencing in the 3rd quarter of the current fiscal year. However, this did
not materialize but is anticipated to commence in the fourth quarter.
Gross margin as a percentage of sales decreased from 18% for the first nine
months of fiscal 1995, to 17% in the corresponding period in fiscal 1996.
Lower sales to markets with less favourable pricing arrangements during the
current fiscal period was the primary factor contributing to this decline.
The Company continues to operate at well below capacity. In that regard the
Company is currently involved with several corporations which may open
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additional opportunities in specialty compounding and metal composites. Known
potential quantities are five to six million pounds per annum; potential
revenues are unknown at this time.
Interest and other financing costs for the nine months ended March 31, 1996,
increased substantially over those for the corresponding period of the
previous year. Increases in average outstanding indebtedness, the prime
lending rate and less favorable foreign currency exchange positions were the
primary factors contributing to this increase.
Administrative, R&D and Selling expenses decreased 6%. The Company continues
to take measures to contain all areas of expense.
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 K
(a) Exhibits - none
(b) Reports on Form 8-K
During the quarter ended March 31, 1996, the Registrant did not file
any reports on Form 8-K.
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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.
TECHNICAL VENTURES INC.
Date: May 6, 1996 BY: Frank Mortimer
Frank Mortimer, President and
Chief Executive Officer
Date: May 13, 1996 BY: Larry Leverton
Larry Leverton
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AND INCOME STATEMENT INCLUDED IN PART I, ITEM 1 OF
THE REGISTRANT'S QUARTERLY REPORT ON FORM 10-QSB FOR THE PERIOD ENDED
MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-29-1996
<CASH> 22,342
<SECURITIES> 0
<RECEIVABLES> 198,730
<ALLOWANCES> 0
<INVENTORY> 50,336
<CURRENT-ASSETS> 313,366
<PP&E> 729,620
<DEPRECIATION> 483,644
<TOTAL-ASSETS> 592,048
<CURRENT-LIABILITIES> 1,923,192
<BONDS> 0
<COMMON> 145,863
0
0
<OTHER-SE> (1,820,566)
<TOTAL-LIABILITY-AND-EQUITY> 592,048
<SALES> 1,178,002
<TOTAL-REVENUES> 1,178,002
<CGS> 983,067
<TOTAL-COSTS> 983,067
<OTHER-EXPENSES> 303,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 98,771
<INCOME-PRETAX> (108,665)
<INCOME-TAX> 0
<INCOME-CONTINUING> (108,665)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (108,665)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
