<PAGE>1
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 September 30, 1997
[ ] 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 organization) 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 September 30, 1997.
14,586,341 shares of common stock, $.01 par value
______________________________________________________________________________
Page 1 of 10 Pages
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
SEPTEMBER 30
1997
(UNAUDITED)
CURRENT ASSETS
Cash $21,620
Accounts Receivable 128,480
Inventory (Note 2) 27,742
Other Current Assets
Advances 40,524
Deposits 14,811
Total Current Assets 233,177
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation of $527,689 208,528
INTANGIBLE ASSETS, net of accumulated amortization of
$15,728 28,355
$470,060
LIABILITIES & SHAREHOLDERS DEFICIENCY
CURRENT LIABILITIES
Notes Payable (Note 4) $139,067
Current Portion of long term debt: (Note 3)
Capital lease obligations 79,519
Other 1,147,534
Loans & advances:
Private lenders 106,912
Shareholders 23,530
Accounts payable and accrued expenses 518,000
Total Current Liabilities 2,014,562
LONG-TERM DEBT, net of current portion: (Note 3)
Shareholders 332,195
Other 51,152
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 (6,345,784)
Foreign currency translation adjustment 223,078
Total Shareholders' deficiency (1,927,849)
$470,060
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
SEPTEMBER 30,
1997 1996
SALES $394,926 $340,531
COST OF SALES 351,062 316,970
GROSS MARGIN 43,864 23,561
GENERAL EXPENSE
Administration 35,617 33,648
Financial
-Interest & Other 32,894 32,927
Research & Development 27,666 19,567
Selling 17,790 14,574
113,967 100,716
OTHER INCOME
R&D Tax Refund 3,451
NET LOSS ($66,652) ($77,155)
NET INCOME [LOSS] PER COMMON SHARE $0.00 ($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 STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss ($66,652) ($77,155)
Adjustments to reconcile net Income (Loss) to net cash
Provided (Used) by operating activities:
Depreciation and amortization 7,990 8,476
Interest Expense Charged To Debt Principal 10,993
Net Change in non-cash operating assets
and liabilities 73,651 66,066
Net Cash Provided (Used) by operating activities 14,989 8,380
CASH FLOWS FROM INVESTING ACTIVITIES:
Property & Equipment Acquisition (15,068)
Net Cash Used By Investing Activities (15,068)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) loans,
notes and advances:
Line of Credit (7,856) (3,660)
Long Term Debt 8,899
Shareholders (5,025) 14,890
Bank Note 3,837 3,857
Private Lenders (2,258)
Net Cash (Used) Provided by Financing Activities (2,403) 7,373
EFFECT OF EXCHANGE RATE ON CASH 330 161
CHANGE IN CASH BALANCE FOR THE PERIOD (2,152) 15,914
CASH, BEGINING OF PERIOD 23,772 7,552
CASH, END OF PERIOD $21,620 $23,466
See notes to condensed consolidated financial statements.
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
PAYMENTS MADE FOR INTEREST $3,643 $4,522
NET CHANGE IN NON-CASH OPERATING ASSETS
AND LIABILITIES:
Decreases (increases) in operating assets
and increases (decreases) in operating
liabilities:
Accounts Receivable $38,088 $50,669
Inventory 8,408 36,186
Other assets (6,122) 1,025
Accounts Payable and accrued expenses 33,277 (21,814)
$73,651 $66,066
See notes to condensed consolidated financial statements.
<PAGE>6
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-QSB 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 three months ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the year ended June 30, 1998. 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, 1997.
NOTE 2: INVENTORY:
Inventory is comprised of the following:
September 30,1997
Raw Materials $27,742
NOTE 3: LONG TERM DEBT:
At September 30, 1997 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 September 30, 1997 balance sheet
as current liabilities.
NOTE 4: At September 30, 1997 the Company had tentatively refinanced it's
note payable due to Cooper Financial Corp. This obligation, is guaranteed by
a shareholder of the Company. A refinancing charge was assessed, increasing
the principal owed to $143,000 US. At September 30, 1997 the Company was
current with the new loan provisions; with a payable balance of $139,007 US.
The Company has been maintaining monthly payments of $3,150 US. Interest
charged is 10% per annum calculated over a period of 57 months. The term
of the obligation, however, is twenty four months with a balloon payment
of $91,208 US, due June 30, 1999.
<PAGE>7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
Liquidity and Capital Resources:
Continued operating losses and significant monthly debt service requirements
continue to leave the Company in a position where it is unable to meet its
monthly cash flow requirements. Acquisition of property and equipment,
necessary to improve production, resulted in an increase in past due balances
to vendors. Cash flows resulting from financing activities enabled the
Company to remain current on the Dow line of credit and the bank note as well
to reduce private lenders and shareholder obligations.
Three of the Company's long term debt financing arrangements [Note 3] are
currently in arrears. The debtors have 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] have been
technically in default since Jan. 1, 1996; as such these debt's have been
reflected as current liabilities on the September 30/97 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. Negotiations which
took place with Dow in regard of the Company reducing it's long term
obligation were not successful, however, it was amiably agreed that the
Company would seek financing enabling it to pay off the debt as quickly as
possible. The Company is proceeding on this basis and is currently in the
midst of negotiations to meet not only the Dow obligation but also the IOC
obligation. Currently these negotiations are positive with the possibility
of achieving the required result. However, there can be no assurance as to
the results of the current negotiations.
The Company has submitted a Canadian R&D Tax Claim for fiscal 1996 amounting
to $17,490 (Canadian) and received $4,771 (Canadian) during September 1997
representing the Ontario portion of the tax claim. The tax department has
notified the Company that the scientific portion of the claim has been
accepted as filed and the business filing component is now being reviewed.
Additionally a claim for fiscal 1997 of approximately $30,000 (Canadian) will
also be submitted. The tax department maintains their position to audit all
such claims submitted.
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Present financing arrangements are not considered a long-term solution to the
Company's financial needs. The Company continues to assess and investigate all
avenues in respect of it's financial requirements. 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 during the remainder of
this fiscal year.
Results of Operations:
Sales revenues for the first three months of fiscal 1997 increased 16% over
those for the corresponding period of the previous year with comparative
gross margins increasing 4.2%. Both of these increases, due in part to a
shift in pricing arrangements with some of the Company's customers,
e.g. provision of raw materials or the non- provision of raw materials, when
processing the customer's order. The Company continues to pursue an ISO 9000
rating which has become an important requirement necessary to secure new
customers and also maintain existing customers.
Efforts in the sale of the Company's proprietary products continues. Lucent
Technologies, having specified the use of the Company's material for use in
their fiber optics, continue to purchase the Company's product.
The Company continues to develop and market the specialty compounding, with
this segment representing 90% of revenue during the first three months of
fiscal 1998 and continues to pursue several additional contracts of some
magnitude. Technical Ventures Inc. through its subsidiary Mortile Industries
have concluded, in principal, agreement with a customer to provide specialty
compounding services to meet the customers entire North American requirements.
This development is the result of two and a half years of joint product
development by both parties. In order to meet production demands required by
the contract, it is anticipated that the Company's present production
facilities will be operating near capacity. Additionally, with further
increased production called for in 1998 under the contract, a second dedicated
facility, to be located in North Carolina and funded by the customer is
expected to be operational by March 1998.
The Company has also completed it's initial evaluation of a by-product from
the pulp and paper mill industry which is felt could be used as a low cost
filler in plastics. At present this by-product has been land-filled and new
E.P.A. rulings in place are banning this practice. We have developed the
technology to utilize this by-product at a profit in substantial quantities.
The Company has proceeded with filing and has been granted a patent application
in this technology.
Gross margins increased 6% in the first quarter of fiscal 1998, when compared
with the previous years corresponding quarter; Contributing factors being
increased sales revenues with more favourable pricing. With the new specialty
compounding business referred to previously and acquisition of equipment
providing the more efficient use of production resources. As well, and in
that regard, the Company is currently involved with several other corporations
which may open additional opportunities in specialty compounding and metal
composites.
Administrative expenses increased minimally and interest and other financing
costs decreased slightly for the three months ended September 30, 1997, when
compared to those for the corresponding period of the previous year.
Relative to the corresponding period for the previous fiscal year, R&D expenses
increased due to resources being expended in the pursuit of enhanced and new
technology; an effort to assist in obtaining new business. Selling expenses
increased, with resources being expended in conjunction with the R&D effort,
towards the acquisition of new business. However, 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 September 30, 1997, 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: November 12, 1996 BY: Frank Mortimer
Frank Mortimer, President and
Chief Executive Officer
Date: November 12, 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
SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 21,620
<SECURITIES> 0
<RECEIVABLES> 128,480
<ALLOWANCES> 0
<INVENTORY> 27,742
<CURRENT-ASSETS> 233,177
<PP&E> 736,217
<DEPRECIATION> 527,689
<TOTAL-ASSETS> 470,060
<CURRENT-LIABILITIES> 2,014,562
<BONDS> 0
<COMMON> 145,863
0
0
<OTHER-SE> (1,927,849)
<TOTAL-LIABILITY-AND-EQUITY> 470,060
<SALES> 394,926
<TOTAL-REVENUES> 394,926
<CGS> 351,062
<TOTAL-COSTS> 351,062
<OTHER-EXPENSES> 113,967
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,894
<INCOME-PRETAX> (66,652)
<INCOME-TAX> 0
<INCOME-CONTINUING> (66,652)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (66,652)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
