<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.. 20549
FORM 10-KSB
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1997
[ ] TRANSITIONAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 33-2775-A
TECHNICAL VENTURES INC.
(Exact name of registrant as specified in its charter)
New York State 13-3296819
(State or other Jurisdiction (I.R.S.
Employer
of incorporation or Identification
No.)
organization)
3411 McNicoll Avenue, Unit 11
Scarborough, Ontario, Canada M1V 2V6
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (416) 299-9280
Securities registered pursuant to Section 12 (b) of the Act: NONE
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $.01 Par Value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to
such
filing requirements for the past 90 days. Yes X No ___
Check if there is no disclosure of delinquent filers in response to Item
405
of Regulation S-B is not contained in this form, and no disclosure will be
contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-
KSB or any amendment to this Form 10-KSB [ ]
State Issuer's revenues for its most recent fiscal year, $1,414,062
The appropriate aggregate market value of the voting stock of the
Registrant
held by non-affiliates of the Registrant as of September 30, 1997 (based
upon
the average bid and asked prices as reported by the National Association of
Securities Dealers Automatic Quotation System) was approximately
$1,997,201.
The number of shares outstanding of the Registrant's common stock, as of
June
30, 1997 is 14,586,341.
Exhibit index is located on page 12 of this Annual Report on Form 10-KSB.
Page 1 of 30
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FORM 10-KSB
Fiscal Year Ended June 30, 1997
ITEM Table of Contents PAGE
PART I
Item 1. Business 3-6
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for Registrants Common Equity and Related
Stockholder Matters. 6-7
Item 6. Management's Discussions and Analysis of Financial
Conditions and Results of Operations. 7-10
Item 7. Financial Statements and Supplementary Data 10
Item 8. Changes in Disagreements with Accountants on
Accounting and Financial Disclosure. 10
PART III
Item 9. Directors and Executive Officers of the Registrant 10
Item 10. Executive Compensation 11
Item 11. Security Ownership of Certain Beneficial Owners
and Management 11
Item 12. Certain Relationships and Related Transactions 12
PART IV
Item 13. Exhibits, Financial Statement Schedules and Reports
on Form 8 K 12
Signatures 13
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Item 1. Business
Introduction:
Technical Ventures Inc. (the Company) is a New York corporation formed on
February 12, 1985 to raise capital for the purpose of seeking business
acquisition possibilities throughout North America. The primary objective
of
the Company was to search for a business which in the opinion of its
management, demonstrated long-term growth potential that would warrant
involvement. On April 14, 1986, the Company acquired all the issued and
outstanding shares of common stock of Mortile Industries Ltd. (Mortile) a
Canadian corporation. The Company's present operations, assets and
employees
are primarily those of Mortile. At June 30, 1997 the Company currently has
twelve full time employees, all being employees of Mortile.
The Company's efforts have been concentrated in the development of
proprietary
thermoplastic compounds, composite compounds which combine plastic with
other
granulated materials and specialty compounding in which the Company
compounds
and pelletizes proprietary formulations of the customer. Prior to April
1992,
the Company had been considered to be in its development stage.
Since inception, the Company has expended $2,910,225 US in the development
of
it's products, including $76,400 during fiscal 1997, $53,000 during fiscal
1996 and $70,000 in 1995.
Product Description:
Polymer Technologies:
The Company has developed a flame retardant, non-toxic plastic compound
which
minimizes the hazards of fire, can be easily processed into end-use
products
and resists corrosion.
Flame resistant polymer compositions have been available for many years.
However, the technology relied upon the presence of "halogens" to yield
flame
retardancy. Concerns by environmentalists world wide have resulted in
increased pressure to eliminate plastics which emit cyanide, bromide,
sulphur
and phosphoric gas, on combustion.
Thermoplastic HFFR's classified as thermoplastic pololefins (TPO's) are
based
on polymers and co-polymers of ethylene and propylene and have been the
focus
of much research for the construction and transportation industries because
of
their greater ease of use in fabrication and their ability to be recycled,
and
trimmed into scrap. The difference between thermoplastics and thermosets
is
that thermoplastics may be recycled and are much more difficult to develop.
With growing environmental pollution concerns it is expected that the
recycling of plastics will be forced upon the plastic industry by
legislation.
The development of a cost-effective and acceptable performance HFFR/TPO has
been a challenging and somewhat elusive project for the industry and
extensive
research has been conducted in this area during the last decade, mainly in
wire cable and construction industries.
With breakthroughs in polymer technology, incorporating; halogen free,
flame
retardant polyolefins referred to as HFFR/TPO's, the Company's products
have
been tested for applications in various industries including, wire cable,
fibre optic, injection and rotational moulding, petrochemical containment
and
various other applications.
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Performance test results have concluded that the materials produced by
Mortile
emits none of the aforementioned toxins and have shown the product to
possess
anticombustion, low toxicity and anticorrosive attributes considered to be
superior to other products presently available. A US Patent was issued to
the
company, for its flame retardant material in May 1991, the continuation in
part of this same patent was issued in June 1993. Patents have since been
granted by the European Communities Organization (Austria, Belgum, France,
Germany, Great Britain, Holland, Italy, Spain, Sweden and Switzerland). The
Australian Patent was granted effective March 17, 1989 with official
notification being received in January 1993. The Canadian Patent
application
was accepted and is pending.
Development of this material has been a lengthy project. Massive amounts
of
stringent tests have been required, with the results being most promising.
Management believes the market potential of the products developed as a
result
of these efforts will justify the time and costs.
Compounding, Specialty(Contract):
Specialty compounding may be defined as follows: the compounding,
enhancement
of the customers proprietary formulation(s) into pellet form; which is a
semi-
manufactured form. This process involves the customers presentation of
required mix components, the physical mixing of the components and then
pelletizing. Component raw materials may be supplied by the customer or
purchased by the Company on behalf of the customer.
Practical and technological expertise gained from use of the compounding
and
mixing machinery purchased in 1989 and laboratory facilities which have
been
put in place has allowed the Company to successfully secure major customers
in
this market. A relative component of this service is what as known as
masterbatches. This the predispersion of powders which are to be mixed
with
resins in the final stages of manufacture. The predispersed powders will
be
added to the resins at the extruder or moulders. Through its efforts in
this
field the Company has qualified to be appointed the compounders with three
(3)
major customers. Typical masterbatches are: foaming agents, sulphur, zinc
oxide, flame retardants, curing agents, processing aids, antioxidant
stablizers and slip and anti block agents.
Revenues and a percentage of Consolidated Contract Revenues
CUSTOMER 1997 1996 1995
Endex Polymer Additives $535,635 - 44 % $258,836 - 19 % $309,328 -
24 %
Shaw Industries $622,097 - 51 % $927,392 - 67 % $654,982 -
50 %
Water Gremlin Co. $175,950 -
13.6 %
Composite Technology
The object of composite technology is to mix plastic binders with fine
granulated material of choice, combining strength and durability with the
design options open to injection moulding, thereby reducing the cost of
machining and die casting significantly. By applying existing technology
to
new ideas the Company has been able to successfully produce metalic/plastic
compounds in an effort to meet demand for the replacement of lead in many
applications. Management anticipates opportunities to market these
compounds
in the automotive, construction and firearms markets in the near future.
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Other Products
Ceiling tile Inserts and related products; The Company's original product,
was
the "Insert", consists of a polymer compound plastic sheet developed by
DuPont
which is perforated and bonded by an adhesive to a vapour and moisture
barrier
and easily cleaned.
Utilizing this technology and attaching it to various backings such as
fiberglas and perlite (a generic term for expanded volcanic rock) a
complete
ceiling tile can be manufactured. Management of the Company has decided to
postpone indefinitely any further substantial investment in the insert and
related products until there is convincing evidence that such investment
would
be productive.
Recycling Plastics:
The problem of recycling plastics is well known to most people in the
industry. The Company's management believes that unless a continuous
contractual supply of material is readily available along with an
identified
end market, the opportunities will be limited. However, the Company will
continue to monitor and participate in research along these lines, should a
recycling proposal be presented.
Competition
Corporations such as Exxon, DuPont, Union Carbide, Raychem and Megalon
represent the most widely recognized competition with our polymer
technology;
all are substantially larger than the Company in terms of financial,
marketing
and research and development resources. However, Dow Chemical has licensed
our
technology and Lucent Technologies after a five year program rate our
product
quality at 100%, based on their internal rating procedures. The
application
of our polymer technology in wallboard is still the only plastic in its
field
to pass certain fire codes, in various jurisdictions, for high rise
buildings
and in other applications where the product is being tested, we are advised
that the Company's technology out performs the competition.
In regard of composite technology; the Company has been able to achieve the
highest filler levels to obtain maximum specific gravity and has no
competition. The Company has patent protection through a licensing
agreement
with DuPont Canada, as it pertains to fishing sinkers and lures. The
Company's composite for bushings for copiers and fax machines provides the
scenario that is extremely difficult if not impossible to reverse engineer.
However, as the product becomes more technical compounders such as L&P and
others exist and continue to develop, as do we.
Compounding, Specialty (Contract); in this market the Company has three
distinct advantages, equipment, personnel and size. The equipment was
selected to affect good dispersion in the proprietary polymer technology
and
composite technology. The Company's personnel and associations with
consulting scientists and chemist enables it to work closely and co-
operatively with customers to meet their needs. The Company's size allows
it
to direct immediate attention to existing and potential customers in a cost
effective and timely manner. The Company directs efforts to "niche"
markets
where the following criterion is essential: fast turn around of small
orders,
equipment designed for ease of cleaning at minimum downtime and wastage,
air
cooled die heads for moisture sensitive materials, excellent dispersion of
powders into the resins and nitrogen blankets for cooling in high humidity.
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Backlog Information:
At June 30, 1997 the Company had a backlog of orders totalling $3,000 US .
Item 2. Properties
The Company had leased 8,500 square feet of office and production
facilities at 3411 McNicoll Avenue, Scarborough, Ontario; in July the
Company increased its space to 17,300 square feet with a total monthly base
rent of $6,937 (Canadian) exclusive of real estate tax escalations. The
lease, expires on March 31 and June 30,1998. This requirement was
necessitated
by the Company having been successful in acquiring the Specialty
Compounding
work for a French company and their need for a major portion of this
increased
space for the storage of raw materials required for their orders.
Item 3. Legal Proceedings
There are presently no pending legal proceedings to which the registrant or
its subsidiaries is a party or of which any of their property is subject.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholders
Matters
Market Information:
The Company's common stock has been publicly traded since March 21, 1986 on
the over-the- counter market. The following table sets forth the quarterly
high and low bid quotations as reported by the National Quotation Bureau
Incorporated, a registered securities association:
Quarter Low High
Sept. 1995 0.125 0.25
Dec. 1995 0.063 0.188
Mar. 1996 0.125 0.25
June 1996 0.016 0.25
Sept. 1996 0.07 0.125
Dec. 1996 0.045 0.07
Mar. 1997 0.06 0.07
June 1997 0.165 0.21
These prices do not reflect retail mark-up, mark down or commissions and
may
not represent actual transactions.
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Holders:
As of June 30, 1997, there were approximately 1,017 shareholders of record.
Dividends:
To date the Company has paid no dividends to its shareholders. The Board
of
Directors of the Company will consider the payment of dividends when it
deems
it appropriate to do so, taking into account current and potential Federal
and
State regulatory restrictions, the Company's income and financial
condition,
economic conditions and other factors. However, no assurance can be given
that dividends will ever be paid to shareholders.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
During the year ended June 30, 1997, the Company's operating loss was
funded
primarily by working capital provided by a Canadian Tax refund and debt
financing. The Comany has reduced a portion of past due balances due to
vendors and creditors. However, 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.
Three of the Company's long term debt financing arrangement are currently
in
arrears, however, the debtors have verbally agreed to allow a moratorium
on
principal repayments until the Company is in a financial position to make
payment(s). The aggregate amount of principal payments currently in
arrears
and outstanding, $1,174,286 [US]. Negotiations are currently underway with
the intention of eliminating the Company of its obligation under its long
term note agreement with Dow Chemical Canada Inc.. As consideration for
the
reduction of debt, the Company intends to grant to Dow a fully paid
technology
license, as set out in the Dow Agreement. It is hoped that these
negotiations
will successfully conclude during the second quarter of fiscal 1998.
Accordingly, there can be no assurances as to when such negotiations can be
concluded, if at all.
Payment of expenses directly associated with the Company's production
operations
have been given a higher priority and management has made informal verbal
arrangements with creditors regarding resolution of past due balances.
As a result of the Company's inability to resolve its past due balances to
its
independent auditors as well as the uncertainty as to whether funds will be
available for current period audits, the Company has not been able to
include
audited financial statements with its annual filing on Form 10-KSB.
Intentions
are to arrange for completion of the required audits when and if
appropriate
funding is available. However, sustaining the day to day operations will
continue to be our utmost priority. Accordingly, there can be no assurances
as to when such arrangements can be made.
Presently there has been no indication from any of the Company's creditors
of
intent to take legal action for collection of balances due from the Company
or
to file bankruptcy petition against the Company. There is no present
intentions
on the part of the Company to seek bankruptcy protection from its
creditors.
There can be no assurance that this status will not change.
A Canadian tax refund for the year 1995 was received during April and May
1997 in the amount of $23,675 (Canadian). The Company has also submitted
a
claim for fiscal 1996 amounting to approximately $19,940 (Canadian),
additionally a claim for fiscal 1997 of approximately $30,000 (Canadian)
will
be submitted. The tax department has notified the Company of their intent
to
audit all such claims submitted.
Management does not consider these financings (assuming the above refund
claims are accepted) to be a long-term solution to the Company's financial
needs and efforts are being made to complement these funds with additional
financing. However, the present financial condition has hindered
management
in their pursuit of acceptable financing arrangements. Several major
investment banking providers have been meeting with the Company in respect
of
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 equity 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. However, if significant funds are to be
raised in this manner, it would require approval from a majority of the
Company stockholders, which management is confident it can receive.
Based on projections provided by existing customers, management expects
increases in sales during fiscal 1998, these projections are as follows:
Flame Retardant Products
Royalty payments by Dow to the Company are based on sales of Dow resin to
licensee's and could generate $1.5 million(Canadian) over the remaining 16
year term of license; the agreement does not contain minimum royalty
provisions.
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No Royalty payments were received during fiscal 1997 and Dow has not
indicated
the anticipated amount of their 1997 sales of resin, subject to the Royalty
Agreement. Lucent Technologies have specified our material for use in their
fiber optic product and increased their purchases during fiscal 1997 by
12.5%.
Sales levels for the Company's product are forecast at $850,000 if Lucent
Technologies and several clients based in the US., Europe and Canada meet
their forecasts. Sales for this product during fiscal 1997 where less than
$100,000.
Composite Technology
A contract signed with a training munitions manufacturer expired at
December
31, 1997; without significant sales during fiscal 1997. Management had
been
advised that this manufacturer was successful in a bid for a contract in
the
US, the residual effect on the Company being that it has been asked to
submitt
a quote on 126,000 lbs. of material for delivery in early calender year
1998.
The Company continues to retain optimism in this market. The fishing
sinkers
were well received, but there has been some delay in the implementation of
legislation giving rise to a complete ban on lead. However, there are
indications that public pressure to ban the use of lead is on the rise
again.
There are several projects within the realm of the metal technology that
are
currently being assessed and which could represent major sources of
revenue,
should they come to fruition. One such project is the supply of a
composition
to be used in the production of a metal filled laminated sheet. The
laminated
sheet is being considered in the manufacture of visual display boards,
which,
by applying the metal technology would allow the use of magnetized items on
the surface of the display. Other potential markets are: light weight x-ray
blankets, self lubricating bearings and bushings, the toy industry and any
lead replacement industry.
Specialty (Contract) Compounding
During 1997 total contract compounding revenues were $1,260 Million,
representing 89 % of net revenues. Quotes on further contract work have
been
given and the Company has been actively looking for suitable applications.
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The dispersion of powders into plastic, is normal in the industry.
However,
due to environmental concerns and the need for perfect dispersion of the
powders in the resins, more and more companies are starting to use
masterbatch
powders and plastics. The powders are predispersed and the extruders or
moulder will add essential ingredients to the resin in the final stages of
manufacture. This is particularly useful when the powders are reactive as
in
the curing or cross-linking of rubber or plastic. The Company has
concentrated on this business and has worked very closely for over two
years
with a few major customers. The Company has qualified to be appointed the
compounder with three( 3) major customers and expects substantial orders
over
a long period. Typical masterbatches are: foaming agents, sulphur, zinc
oxide, flame retardants, curing agents, processing aids, antioxidant
stabilizers and slip and anti block agents.
Significant property and equipment purchases and/or further expansion of
facilities will only be considered if demand for Company products warrant
such
expansion and the financing of such expansion would not adversely effect
the
Company's financial condition.
Results of Operations - Comparison of Fiscal 1997 To Fiscal 1996:
For the fiscal year ending June 30, 1997, the Company had gross sales of
$1.4
million, of which $1,260,000 was generated from specialty [contract]
compounding work.
Gross margins as a percentage of net sales decreased to 13 % from 15.4 %
for
the year ended June 30, 1997. This decline was the result of lower pricing
on
sales orders, caused by a decline in component raw material prices.
Additionally, more resources were committed to production in the current
year
increasing the Company's direct and overhead manufacturing expenses.
Financial and Interest Expense increased $16,624 in fiscal 1997. Increases
in
average outstanding indebtedness and less favorable foreign currency
exchange
positions were the primary factors contributing to this decrease.
Administrative expense decreased while R&D and selling expenses increased
in
fiscal 1997 due to utilization of more resources in existing and new
projects.
Efforts by the Company in the metal and polymer technologies has opened
several avenues to sales of related products. Lucent Technologies have
specified the Company's material for use in their fiber optic product;
Lucent Technologies increased their purchases of the Company's material
during fiscal 1997 by 12.5 %.
Although revenues for fiscal 1997 decreased slightly under the preceding
year
they were significantly below anticipated levels, in particular, sales of
proprietary products. Furthermore, while the Company's materials have been
accepted by its customers for use in their manufacturing, acceptance of the
finished products by the end users continue to be slower than expected.
This
had an adverse effect on demand for the Company's materials during the
fiscal
year.
While management is confident that these conditions will only have a
temporary
effect on sales of proprietary products. There can be no assurance of
success
in this regard.
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Projections for the current year anticipate a major growth of sales
revenues.
Such growth is anticipated to take place in all areas of the Company's
expertise and technology. However, there can be no assurance in this
regard.
During fiscal 1997 sales to some customers of specialty compounding
materials
were lower than levels which they had expected and had indicated to Company
management. Additionally, customers anticipated significant increases in
sales
of munitions products, manufactured using a composite of metal and plastic
materials, manufactured by the Company as a substitute for lead. Customer
projections had anticipated legislation banning lead, which did not take
place. The customers have indicated their optimism that future growth in
this market is imminent, but there can be no assurance in this regard.
Item 7. Financial Statements and Supplementary Data
See Part IV, item 13 for Index to Consolidated Financial Statements and
Schedules.
Item 8. Changes in and Disagreements on Accounting and Financial
Disclosures
None
PART III
Item 9. Directors and Executive Officers of the Registrant
The directors and officers of the Company at June 30, 1997 are as follows:
Name Age Position with Company
Frank Mortimer 58 Director, President
Bryan Carter 76 Director, Vice
President
Larry Leverton 58 Director, Secretary
Treasurer
Frank Mortimer has been President and a Director of the Company since April
1986. He is also President of Fam Tile Restoration Services Ltd. ("FAM"),
a
company specializing in the restoration of acoustical ceilings. Fam is a
wholly owned subsidiary of the Company. From 1967 to 1982 Mr. Mortimer
managed several export companies in South Africa. Mr. Mortimer is an
associate member of the Institute of Materials Handling (London UK).
Bryan Carter has been a director of the Company since April 1986. In 1982
he
formed Bryan Carter and Associates, a firm which offers international
consulting and marketing services to the plastics industry and small
business.
From 1954 to 1962 he was in charge of the North American base of Rosedale
Assoc. Manufacturers of London (UK.) in Toronto, Canada. From 1962 to
1982
he was President and part owner of Rosedale Plastics, a rotational moulding
company. Mr. Carter has extensive international business experience
including
work in Lebanon, Haiti and Australia, on behalf of various organizations.
Mr.
Carter pioneered the rotational moulding industry in North America and in
1982
served as the International President of Rotational Moulders.
Larry Leverton has been Secretary and Treasurer of the Company since April
1986. Since 1983 he has been president of L.R. Leverton Enterprises' Inc.,
a
transportation consulting firm. In 1982 he was vice-president of Newman
Harbour Terminals and Transportation.
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<PAGE>11
Item 10. Executive Compensation
Frank Mortimer, the Company's Principal Executive Officer, received salary
of
$66,000, $66,600 and $65,000, for the years ended June 30, 1997, 1996 and
1995, respectively. These amounts constituted Mr. Mortimer's sole
compensations from the Company. Amounts presented are expressed in US
dollars
and have been converted from Canadian dollars using the average exchange
rate
for the periods presented. No executive officer of the Company receivd a
total salary and bonus in excess of $100,000 during any of the years in the
three year period ended June 30, 1997.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the executive
officers and directors of the Company and persons who own more than ten
percent of the Company's Common Stock, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Such
executive officers, directors and greater than ten-percent stockholders are
required by SEC regulations to furnish the Company with copies of all
Section
16(a) filings.
Based solely on review of the copies of such forms furnished to the Company
and other information which has been made available to the Company,
management
believes that during the year ended June 30, 1997. all Section 16(a) filing
requirements applicable to the executive officers and directors of the
Company
and greater than ten-percent beneficial owners were complied with.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table indicates the name of each person who is known by the
Company to be a beneficial owner of more than five-percent of its common
stock
as of June 30, 1997, the ownership of those persons on such date, and the
stock ownership of all officers and directors of the Company as a group.
The
address of all persons listed is in care of the Company.
Number of Shares
Name of Beneficially Percent of
Beneficial Owner Owned (1) Common Stock
Frank Mortimer 949,753 (2) 6.5 %
L.R. Leverton Enterprises 341,448 (3) 2.3 %
Bryan Carter 115,000 0.8 %
Anthony Taverna 805,000 5.5%
All Officers and Directors
as a group 1,406,201 9.1 %
(4)
(1) Unless otherwise indicated, each such beneficial owner holds the sole
voting power and investment power over the shares beneficially owned.
(2) Includes 103,020 shares owned by Mr. Mortimer's wife, Anne Mortimer.
(3) L.R. Leverton Entprs.' Inc., is a corporation owned and controlled by
Larry Leverton, Secretary, Treasurer and Director of the Registrant.
(4) Excludes the effects on total outstanding shares which would result
from
exercise of stock purchase options and conversion of debt.
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Item 12. Certain Relationships and Related Transactions
For the fiscal year ended June 30, 1997, there were no material
transactions
between the Company and any of its officers, directors and/or beneficial
owners.
PART IV
Item 13. Exhibits, Financial Statements, and Reports on Form 8-K
(A) (1) Financial Statements:
See index to financial statements on Page F-1
(3) Exhibits:
(a) Exhibit 21 Subsidiaries of the Registrant are as
follows:
Mortile Industries Ltd., a Canadian Private Corporation
and majority- owned subsidiary of the Registrant
Fam Tile Restoration Services Ltd., a Canadian Private
Corporation and wholly-owned subsidiary of Mortile
Industries Ltd.
MPI Perlite Ltd., a Canadian Private Corporation and
wholly-owned subsidiary of Mortile Industries Ltd.
(B) Item -5- Reports on Form 8K
None
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<PAGE>13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: October 14, 1997 By: Frank Mortimer
Frank Mortimer, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated: October 14, 1997 By: Frank Mortimer
Frank Mortimer, President,
Principal Executive Officer and
Director
Dated: October 14, 1977 By: Bryan Carter
Bryan Carter, Vice President
Director
Dated: October 14, 1997 By: Larry Leverton
Larry Leverton, Secretary
Treasurer and Principal
Accounting Officer and Director
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<PAGE>14
TECHNICAL VENTURES INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1997
<PAGE>15
TECHNICAL VENTURES INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
Independent Auditors' report F-2
Technical Ventures Inc. and Subsidiaries
Consolidated Financial Statements:
Balance sheet:
June 30, 1997 F-3
Statement of Operations:
Years ended June 30, 1997 and 1996 F-4
Statement of Changes in Shareholders' Deficiency:
Years ended June 30, 1997 and 1996 F-5
Statement of Cash Flows:
Years ended June 30, 1997 and 1996 F-6 & F-7
Notes to Consolidated Financial Statements F-8 - F-17
F-1
<PAGE>16
Independent Audit on the financial statements for the years ended June 30,
1997 and 1996 have not been completed and therefore this filing includes
unaudited financial statements for these periods. The Registrant intends
to
file an amendment to this report under cover of Form 10 KSB-A, when the
audits
are completed.
F-2
<PAGE>17
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30
1997
ASSETS Unaudited
CURRENT ASSETS
Cash $23,772
Accounts Receivable 166,660
Inventory (Note 2) 36,170
Other Current Assets
Advances 38,374
Deposits 10,866
TOTAL CURRENT ASSETS 275,841
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation of $520,622 at June 30, 1997
(Note 3,6,10) 200,925
INTANGIBLE ASSETS, net of accumulated amortization of
$15,098 at June 30, 1997 29,009
$505,776
LIABILITIES AND STOCK HOLDERS DEFICIENCY
CURRENT LIABILITIES
Current Portion of long term debt (Note 6):
Notes Payable $135,230
Capital lease obligations 79,638
Other 1,146,569
Loans & advances:
Private Lenders (Note 10) 109,203
Shareholders, unsecured interest free 23,543
Accounts payable and accrued expenses 484,955
TOTAL CURRENT LIABILITIES 1,979,138
LONG-TERM DEBT, net of current portion (Note 6,10 & 11):
Shareholder 337,407
Capital lease obligations 480
Other 51,181
MINORITY INTEREST (Note 6) 0
COMMITMENTS AND CONTINGENCIES (Note 5,7,9)
SHAREHOLDERS' DEFICIENCY: (NOTE 8)
Common stock, $.01 par value, 15,000,000 shares authorized:
Issued and outstanding, 14,586,341 shares at
June 30, 1996 $145,863
Additional Paid in capital: 4,048,994
Deficit
(6,279,132)
Foreign currency translation adjustment 221,844
Total Shareholders' deficiency
(1,862,431)
$505,776
See notes to consolidated financial statements.
Information with respect to the June 30, 1997 Balance Sheet is unaudited
F-3
<PAGE>18
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Year Ended June 30,
1997 1996
Unaudited Unaudited
NET SALES $1,414,062
$1,504,339
COST OF SALES 1,229,902
1,273,337
GROSS MARGIN 184,160
231,002
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Administration 137,373
145,899
Financial
Interest & Other 119,456
136,080
Research & Development 82,225
62,523
Selling 61,949
53,776
401,003 398,278
LOSS BEFORE INCOME TAX RECOVERY (216,843)
(167,275)
INCOME TAX RECOVERY 20,521
40,139
NET LOSS ($196,322)
($127,137)
NET LOSS PER COMMON SHARE ($0.01)
($0.01)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,586,341
14,586,341
Information with respect to the June 30, 1997 AND 1996 Statement of
Operations, is unaudited
See notes to consolidated financial statements.
F-4
<PAGE>19
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(DEFICIENCY)
UNAUDITED
<S> <C> <C> <C>
<C> <C>
Common Stock Additional Cumulative
Issued and Outstanding Paid In
Translation
Shares Amount Capital Deficit Adjustment
Year Ended June 30, 1997:
Balance, beginning of year 14,586,341 $145,863 $4,048,994
($5,955,673) $206,965
Net Profit
(127,137)
Cumulative Translation Adjustment
(7,709)
Balance, end of year 14,586,341 $145,863 $4,048,994
($6,082,810) $199,256
Year Ended June 30, 1996
Net Loss
($196,322)
Cumulative Translation Adjustment
$22,588
Balance, end of year 14,586,341 $145,863 $4,048,994
($6,279,132) $221,844
See notes to consolidated financial statements
Information with respect to the June 30, 1997 and 1996 financial statements
are unaudited
F-5
</TABLE>
<PAGE>20
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended June 30,
1997 1996
Unaudited Unaudited
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss ($196,322)
($127,136)
Adjustment to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 33,832
55,580
Net Change in non-cash operating assets
and liabilities (107,070)
(118,131)
Net Cash used by operating activities (55,420)
(189,687)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property & Equipment Acquisition (2,586)
(554)
Net cash used by Investing Activities (2,586)
(554)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) loans,
notes and advances:
Bank Note (5,152)
(3,797)
Line of Credit (33,686)
18,403
Long-term debt 20,310
180,385
Private lenders 36,221
(16,848)
Shareholders 51,615
16,705
Net Cash Provided by Financing Activities 69,308
194,488
EFFECT OF EXCHANGE RATE ON CASH 4,918
825
Change in Cash Balance for the year $16,220 $
5,072
Cash Balance:
Beginning of year 7,552
2,480
End of Year $23,772
$7,552
Information with respect to the June 30, 1997 and 1996 financial statements
are unaudited
See notes to condensed consolidated financial statements.
F-6
<PAGE>21
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
SUPPLEMENTARY CASH FLOW INFORMATION
Year Ended June 30,
1997 1996
Unaudited Unaudited
Non-Cash Financing and Investing Activities:
Liabilities re-classified as long term debt (Note 11)
Dow Credit Line
$65,997
Accrued Interest:
Dow Credit Line
25,256
$0 $91,253
Payments made during the year for interest $19,751
$5,298
Net change in non-cash operating assets and liabilities:
Decreases (increases) in operating assets
and increases (decreases) in operating
liabilities:
Accounts Receivable ($57,025)
($1,298)
Inventory 34,940
1,526
Other assets (6,813)
(5,741)
Accounts Payable and accrued expenses 135,968
(112,618)
$107,070 ($118,131)
$107,070 ($118,131)
Information with respect to the June 30, 1997 and 1996 financial statements
are unaudited
See notes to condensed consolidated financial statements.
F-7
<PAGE>22
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of significant accounting policies:
Principals of Consolidation:
The consolidated financial statements include the accounts of Technical
Ventures Inc.("the Company") and its majority-owned subsidiaries, Mortile
Industries Ltd. ("Mortile"),Fam Tile Restoration Services Ltd. and MPI
Perlite
Ltd. All material intercompany transactions and balances have been
eliminated.
Organization and Operations:
Mortile, a Canadian corporation, which was organized on February 12,1985,
is
involved primarily in the development and manufacture of plastic compounds.
On April 14, 1986, the Company acquired all of the issued and outstanding
shares of common stock of Mortile.
Inventory:
Inventory is stated at the lower of cost or market. Cost is determined by
the
first-in, first out method.
Property and Equipment:
Property and equipment are recorded at cost and are depreciated or
amortized
over their estimated useful lives or related lease terms using the straight
line and accelerated methods.
Investment Tax Credits:
Refundable foreign investment tax credits related to research and
development
activities are recognized as income in the year they are received.
Loss Per Share:
Loss per share is computed based on the average number of common shares
outstanding during the period.
Outstanding warrants and convertible debt were not considered in the
computation as their effect on earnings per share would be anti-dilutive.
Intangible Assets:
Cost of intangible assets are being amortized using the straight-line
method
over periods ranging from 5 to 17 years.
F-8
<PAGE>23
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates
Foreign Currency Translation:
The financial statements of Canadian subsidiaries have been translated into
US. dollars as follows:
(a) Assets and Liabilities at the rate of exchange in effect at the
balance
sheet date.
(b) Revenues and expenses at the average exchange rate during the period.
Exchange gains or losses arising from the translation are deferred and
included as a separate component of shareholders' equity (deficiency).
All amounts presented in these financial statements are expressed in US.
dollars unless otherwise stated.
Fair Value Presentation
The Company has financial instruments, none of which are held for trading
purposes. The Company estimates that the fair value of all financial
instruments at June 30, 1997, does not differ materially from the aggregate
carrying values of its financial instruments recorded in the accompanying
balance sheet. The estimated fair value amounts have been determined by
the
Company using available market information and appropriate valuation
methodologies. Considerable judgement is necessarily required in
interpreting market data to develop the estimates of fair value
accordingly,
the estimates are not necessarily indicative of the amounts that the
Company
could realize in a current market exchange.
F-9
<PAGE>24
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Inventory:
Inventory at June 30, 1997 is comprised entirely of raw materials
inventory.
Note 3 - Property and Equipment:
Property and equipment at June 30,1997 is comprised as follows:
Equipment:
Under Capitalized Leasing Arrangements $261,022
Other 415,614
Furniture & Fixtures 41,528
Leasehold Improvements 3,383
721,547
Less Accumulated Depreciation & Amortization 520,622
$200,925
Note 4 - Foreign Operations:
The following table summarizes certain information regarding the Company's
US.
and Canadian operations:
U.S. Canadian Consolidated
Year Ended June 30, 1997
Revenue from unaffiliated customers $ 1,414,062 $ 1,414,062
Loss From Operations $(40,178) $ (156,144) $
(196,322)
Identifiable assets at end of year $505,776 $505,776
Year Ended June 30, 1996
Revenue from unaffiliated customers $ 1,504,339 $ 1,504,339
Income (Loss) From Operations $(36,743) $ (90,394) $
(127,137)
Identifiable assets at end of year $497,855 $497,855
F-10
<PAGE>25
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Income Taxes:
During the year ended June 30, 1997, the Company received $24,439
(Canadian)
resulting from research and development refundable tax credit claims filed
for
the year ended June 30, 1995. A claim for approximately $19,490 (Canadian)
has been submitted for 1996 and that a claim for approximately $30,000
(Canadian) will be filed for 1997. It is anticipated that claims for 1996
and 1997 will be subject to audits and there can be no assurance that they
will be honoured and if they are, the amount of the refunds may be
substantially less than the claim amounts.
Recovery of Income taxes for the year ended June 30, 1997 consists entirely
of
a current recovery of Canadian income taxes resulting from a reduction in
the
Company's deferred tax asset valuation allowance. The aforementioned tax
refund was the primary factor contributing to the decrease in the valuation
allowance.
The following is a summary of the tax effects of significant temporary
differences which comprise the Company's deferred tax asset at June 30,
1997:
US Federal State & Local Foreign(1)
Loss Carryforwards $290,000 $77,000 $504,639
Credit Carry Forwards:
Refundable credits 190,582
Non Refundable credits 35,725
Depreciation and amortization 0
Valuation allowance (290,000) (77,000) (730,946)
$0 $0 $0
Aggregate net operating loss carryforwards and tax credit carryforwards and
their expirations are summarized as follows:
Net Operating Loss Carryforward
Expiring June 30, US Federal State & Local Foreign(1) Foreign
Research
& Development
Tax Credits(1)
1998 $0 $0 $347,596 $64,093
1999 235,638 66,786
2000 415,357 3,492
2001 3,000 3,000 273,912
2002 225,000 225,000 276,510 1,079
Thereafter 626,000 624,000 221,072 2,002
TOTAL $854,000 $852,000 $1,770,085 $137,452
(1) Converted to US dollars based on conversion rate at June 30, 1997
F-11
<PAGE>26
<TABLE>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<S> <C>
<C> <C>
Note 6 - Long Term Debt:
At June 30, 1997, long-term debt consists of the following:
Notes & Loans
Unsecured shareholder notes, loans and other payable balances: CURRENT
NON-CURRENT TOTAL
Subordinate to notes payable to Cooper Financial Corp. and
I.O.C., interest at the greater of prime or 10%
$ 25,354 $25,354
Subordinate to note payable, I.O.C. :
Interest 15 %
10,866 10,866
Interest free:
Notes and loans
52,900 52,900
Accrued Interest
83,594 83,594
Accrued compensation
164,692 164,692
$0 $337,407 $337,407
Other:
Dow Chemical Canada, Inc. (Dow), Interest at prime plus 2%,
payable in (2) installments of $25,490 (Canadian), thereafter
in monthly installments of $19,657 (Canadian) through March
1999, at which time the entire unpaid balance becomes due.
At June 30, 1996 the Company was in default and the entire
balance past due (1). $735,035
$735,035
Dow Chemical Canada, Inc. (Dow), Re-Capitalization of Line
of Credit and Accrued Interest to April 30, 1996. Payable
in monthly installments of $6,011.14 (Canadian) including
interest at a rate of 10.75% (4) 49,334
49,334
Innovation Ontario Corp. (I.O.C.), outstanding balance of
$249,999 (Canadian) at June 30, 1995 plus $250,000 (Canadian)
received in July 1995, are payable in quarterly installments
of $30,315 (Canadian), including interest at 8% beginning
December1995, through September 2000. At June 30, 1996
the Company was in default and the entire balance past due (2) 362,199
362,199
Liabilities Subordinate To I.O.C. Note Payable:
Unsecured loans, private investor, interest at 10%
18,583 18,583
Unsecured loans, private investor
Note payable customer, interest at prime plus 1%, repayment
based on volume of materials processed by the Company on
behalf of the customer
32,598 32,598
$1,146,569 $51,181 $1,197,750
Leasing Liabilities
Obligations under capitalized leasing arrangements payable
in monthly installments of:
$9,981 net of amount representing interest of $4,241, at
June 30th the Company was in default and the entire balance
past due (3); $77,052
$77,052
$297(Canadian) through September 1998, net of amount
representing interest of $704 (Canadian). 2,586
480 3,066
$79,638 $ 480 $80,118
</TABLE>
F-12
<PAGE>27
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) During the current fiscal year the Company was unable to meet payments
on
it's refinanced consolidated note and corresponding accrued interest with
Dow. Accordingly the outstanding balance at June 30, 1997 is reflected as
a
current liability in these financial statements. Negotiations with Dow are
taking place in which it is hoped that agreement can be reached in the
second
quarter of fiscal 1998. These negotiations are towards a settlement which
may
eliminate all or part of the Company's obligation to repay this debt.
However
the Company may have to grant Dow a fully paid up license to practice the
technology. Payment fee for this license was to be completed through the
payment of royalty payments to the Company within the terms of the license
agreement.
(2) In accordance with the I.O.C. loan provisions, I.O.C. acquired a 15%
interest in Mortile In March 1995 and an additional 15% interest in July
1995. Mortile had previously been a wholly owned subsidiary of the
Company.
I.O.C. investment in Mortile is reflected in the financial statements as a
minority interest, Mortile has the option to repurchase the shares at a
price equal to the amount of the original loan principal times 1.02, times
the number of months the debt is outstanding (but not less than 12), less
the
amount of principal and interest payments made by Mortile to I.O.C. This
repurchase option expired in March 1997 and the Company failed to exercise
this option. The Company has been unable to meet payments in respect of
this
loan. Accordingly the outstanding balance at June 30, 1997 is reflected as
a current liability in these financial statements. Through ongoing
discussions with I.O.C., the Company feels that I.O.C. is amenable to not
demanding the loan be paid and to the Company's re-purchase of the Mortile
interest.
(3) At June 30, 1997, the Company was in default on this capital lease
arrangement and the entire balance was past due. Although the lessor has
not
called the lease, it is payable on demand. Accordingly the outstanding
balance at June 30, 1997, is reflected in these financial statements as a
current liability.
(4) In May, 1996 the Company reached an agreement with Dow Chemical of
Canada to recapitalize the outstanding principal of $90,000 (Canadian) and
accrued interest of $34,442 (Canadian) on the Company's line of credit.
Additionally, the new debt instrument bears interest of 10.75%. Monthly
payments of $6,011.14 commenced in May 1996 and are payable through March
1998. The Company is current with payments to June 1997 under the new
arrangements. Negotiations currently taking place with Dow encompass this
arrangement as well and Dow Chemical has not demanded the payments be
brought to date nor demanded the loan be paid.
Both the Dow and I.O.C. notes are collateralized by all previously
unsecured
assets of the Company. The I.O.C. collateral position is subordinate to
that of Dow.
F-13
<PAGE>28
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Long-term debt: (continued)
Long-Term debt matures as follows:
Year Ending June 30, Shareholders Other Total
1998 $1,000,468 $1,000,468
2002 337,407 18,583 355,990
$337,407 $1,019,051 $1,356,458
The Company's obligations under capitalized leasing arrangements are
payable
as follows:
Year Ended June 30,
1998 $ 82,430
1999 645
$ 83,075
Less amount representing interest 2,957
$ 80,118
Payments of long-term debt and capitalized lease obligations under
agreements
expressed in Canadian dollars, have been converted to U.S. dollars based on
the exchange rate at June 30,1997.
F-14
<PAGE>29
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - Going concern:
The company has sustained significant operating losses since its inception
and there is doubt as to the Company's ability to continue as a going
concern. The Company's continued existence is dependent upon its ability
to
generate sufficient cash flow to meet its obligations on a timely basis.
It
is not expected that cash flows from operations in the immediate future
will
be sufficient to meet the Company's requirements. As a result the Company
is
in need of additional financing. Liquidation value of the Company's assets
approximate carrying value. Accordingly, no adjustment has been made to
the
value of the Company's assets in consideration of its financial condition.
With expected increases in sales levels in the next fiscal year, it is
anticipated that cash flows required to fund operations will be reduced.
A Canadian income tax claim for approximately $19,490 (Canadian) has been
submitted for the fiscal year 1996, additionally a claim for fiscal 1997
will
be submitted for approximately $30,000 (Canadian). Even if these tax claims
are accepted and the funds are received, they would only be sufficient to
satisfy the Company's immediate cash flow requirements and are not
sufficient
for the Company to sustain it's operations and meet current debt service
requirements. Accordingly additional sources of funds are necessary. The
Company continues to assess completing a private or public stock offering.
In order for the Company to raise significant funds through the sale of
common stock, stock purchase warrants or convertible securities, the number
of authorized common shares must be increased or the number of issued and
outstanding shares must be decreased. Either of the actions would require
approval of the majority of the Company's stockholders. Management is
confident such approval can be obtained if necessary.
F-15
<PAGE>30
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Shareholders' deficiency:
Restricted Common Shares reserved for convertible debt and stock purchase
options:
For convertible debt 50,000
For common stock purchase options at:
$.50 per share; without expiration 50,000
100,000
Note 9 - Leases:
At June 30, 1997, under a real property lease classified as an operating
lease which expires in March and June 1998, the Company's future minimum
rental payments (excluding real estate taxes) are $65,880. In July 1997 the
Company doubled its existing facility to accomodate a European Specialty
Compounding client. Minimum rental payments in foreign currency have been
converted into US dollars using the exchange rate at June 30, 1997.
Rent expense was $46,833 and $42,367 for 1997 and 1996 respectively.
Note 10 - Loans and Advances At June 30, 1997:
Private Investors:
Equipment financing:
Interest at 10% $12,568
Unsecured Demand Loans:
Interest Free 25,000
Interest at 10%, convertible in 50,000
shares of common stock 25,000
Interest at 15% 46,635
$109,283
F-16
<PAGE>31
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Note Payable Financial Institution
At June 30, 1997 the Company had a note payable balance of $135,230 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
June 30, 1997, the Company was in default of the loan provisions, however,
the Company has been maintaining monthly payments of $2,500 US representing
current interest charges. A portion of this monthly payment is now being
credited to the loan principal and as such the outstanding principal
balance
reflects the amount which has been paid against outstanding principal
during
fiscal 1997.
In June the Company had received tentative agreement from Cooper Financial
of
their willingness to refinance the promissory note. The new payment
schedule
of the note is based on 57 months at a fixed interest rate of 10 %. A re-
financing charge was assessed increasing the principal to $143,000 US at
July
1, 1997.
The term of the new promissory note is 24 months, with a balloon payment of
$91,207.97 due June 30, 1999.
The note is shown as a long term liability on the Company balance sheet at
June 30, 1997. The Company is current with it's obligation under this new
agreement.
Note 12 - Major Customers:
One customer accounted for 51% and 67% of the Company's consolidated
revenues
for fiscal 1997 and 1996, respectively. Another customer accounted for 44%
and 19% of consolidated revenues for these respective periods. The loss of
either of these customers would have a detrimental effect on the Company's
operating results.
Note 13 - Forward Looking Statements:
This Form 10-KSB contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21B of the Securities
Exchange Act of 1934. The Company's actual results could differ materially
from those set forth in the forward looking statements.
F-17
<PAGE>31
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AND INCOME STATEMENT INCLUDED IN PART II, ITEM 7 OF
THE REGISTRANT'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED
JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 23,772
<SECURITIES> 0
<RECEIVABLES> 166,660
<ALLOWANCES> 0
<INVENTORY> 36,170
<CURRENT-ASSETS> 275,841
<PP&E> 721,547
<DEPRECIATION> 520,622
<TOTAL-ASSETS> 505,776
<CURRENT-LIABILITIES> 1,979,138
<BONDS> 0
<COMMON> 145,863
0
0
<OTHER-SE> (1,862,431)
<TOTAL-LIABILITY-AND-EQUITY> 505,776
<SALES> 1,414,062
<TOTAL-REVENUES> 1,414,062
<CGS> 1,229,902
<TOTAL-COSTS> 1,229,902
<OTHER-EXPENSES> 401,003
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119,456
<INCOME-PRETAX> (216,843)
<INCOME-TAX> (20,521)
<INCOME-CONTINUING> (196,322)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (196,322)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
