<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 March 31, 1998
[ ] 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 March 31, 1998.
14,711,341 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,
1998
(UNAUDITED)
CURRENT ASSETS
Cash $11,830
Accounts Receivable 43,458
Inventory (Note 2) 37,360
Advances 39,422
Other Current Assets 10,098
Total Current Assets 142,168
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation of $519,281 185,591
INTANGIBLE ASSETS, net of accumulated amortization of
$16,544 26,340
$354,099
LIABILITIES & SHAREHOLDERS DEFICIENCY
CURRENT LIABILITIES
Notes Payable (Note 4) $126,869
Current Portion of long term debt: (Note 3)
Capital lease obligations 78,275
Other 1,129,787
Loans & advances:
Private lenders 131,878
Shareholders 22,890
Accounts payable and accrued expenses 479,256
Total Current Liabilities 1,968,955
LONG-TERM DEBT, net of current portion: (Note 3)
Shareholders 347,593
Other 59,304
MINORITY INTEREST 0
SHAREHOLDERS' DEFICIENCY:
Common stock, $.01 par value, 15,000,000 shares authorized:
Issued and outstanding, 14,711,341 shares 147,113
Additional Paid In Capital 4,056,744
Deficit (6,490,005)
Foreign currency translation adjustment 264,395
Total Shareholders' deficiency (2,021,752)
$354,099
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,
1998 1997
SALES $844,363 $936,856
COST OF SALES 794,444 855,089
GROSS MARGIN 94,919 81,767
GENERAL EXPENSE
Administration 103,487 103,320
Financial
-Interest & Other 86,036 90,108
Research & Development 77,172 57,042
Selling 58,580 41,740
Gain From Disposal (3,486)
319,791 292,210
LOSS BEFORE INCOME TAX RECOVERY (224,872) (210,443)
OTHER INCOME
IncomeTax Refund 14,000
NET LOSS ($210,872) ($210,443)
NET INCOME [LOSS] PER COMMON SHARE ($0.01) ($0.01)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,711,341 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,
1998 1997
SALES $172,413 $267,680
COST OF SALES 170,604 253,920
GROSS MARGIN 1,809 13,760
GENERAL EXPENSE
Administration 33,426 33,608
Financial
-Interest & Other 22,789 28,055
Research & Development 19,644 20,910
Selling 19,696 15,179
95,556 97,752
NET LOSS ($93,747) ($83,992)
NET LOSS PER COMMON SHARE ($0.01) ($0.01)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,711,341 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,
1998 1997
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss ($210,872) ($210,443)
Adjustments to reconcile net Income (Loss) to net cash
Provided (Used) by operating activities:
Depreciation and amortization 14,969 25,302
Issue of Stock For Services 8,999
Net Change in non-cash operating assets
and liabilities 120,720 140,145
Net Cash Used By Operating Activities (66,184) (44,996)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property & Equipment Acquisition (3,346) (2,579)
Net Cash Used By Investing Activities (3,346) (2,579)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) loans,
notes and advances:
Line of Credit (11,514) (22,091)
Long Term Debt 36,469 21,004
Shareholders 19,548 13,848
Bank Note (8,361) (5,152)
Private Lenders 24,318 36,635
Net Cash (Used) Provided by Financing Activities 60,459 44,244
EFFECT OF EXCHANGE RATE ON CASH (2,871) 2,436
CHANGE IN CASH BALANCE FOR THE PERIOD (11,942) (895)
CASH, BEGINING OF PERIOD 23,772 7,552
CASH, END OF PERIOD $11,830 $6,657
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,
1998 1997
PAYMENTS MADE FOR INTEREST $12,063 $12,460
NET CHANGE IN NON-CASH OPERATING ASSETS
AND LIABILITIES:
Decreases (increases) in operating assets
and increases (decreases) in operating
liabilities:
Accounts Receivable $118,578 $50,427
Inventory (2,194) 19,188
Other assets (1,646) (5,756)
Accounts Payable and accrued expenses 5,982 (76,286)
$120,720 $140,145
See notes to condensed consolidated financial statements.
<PAGE>7
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
nine months ended March 31, 1998 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:
March 31,1998
Raw Materials $36,360
NOTE 3: LONG TERM DEBT:
At March 31, 1998 the Company was in default on it's notes payable
to 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, 1998 balance sheet as current liabilities.
NOTE 4: At March 31, 1998 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 March 31, 1998 the Company was current with the new loan
provisions; with a payable balance of $133,044 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>8
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 private lenders and shareholders,
enabled the Company to remain current on the bank note and maintain payments
on past due balances to vendors.
Two 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]. I.O.C. 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 March 31/98 balance sheet. I.O.C. has not
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.
Continued negotiations which took place with Dow in regard of the Company
reducing it's long term obligation were successful. A "Letter of
Understanding" was concluded with Dow Chemical Canada Inc. and The Dow
Chemical Company ("Dow"), as the case may be, in the matter of resolving the
outstanding Term Debt and earned interest owed by the Company's subsidiary
Mortile Industries Ltd. ("Mortile") to Dow Chemical Canada Inc. Detailed
terms will be covered in a binding settlement agreement now being prepared.
Dow will execute and deliver an Acknowledgement and Release, satisfying the
Term Debt; releasing Mortile from its obligations in aggregate of the debt
and related accrued interest, in the amount of $1.052 Million Canadian.
As well, guarantees made by both Technical Ventures Inc. and a shareholder
of the Company will be released.
In exchange the Company has agreed that Mortile will transfer to Dow, title
and ownership in it's existing intellectual property rights (including all
know-how, patents and patent applications) which relate to halogen free,
flame retardant thermoplastic composition technology and smelt filler
<PAGE>9
technology (the technology). These intellectual property rights have a
financial statement carrying value of $36,398 (Canadian).
The fiscal effects of this agreement have not been reflected in the financial
statements for the quarter ending March 31, 1998. However, the final
documentation is expected to be completed during the Company's fiscal fourth
quarter and the results reflected in the financial statements for the
financial year ending June 30, 1998.
The Company received $4,771 (Canadian) during September 1997 representing the
Ontario portion of the 1996 R&D tax claim. A further $14,910 (Canadian) was
received during the 2nd fiscal quarter of the current financial year.
Additionally a claim for fiscal 1997 of approximately $34,000 (Canadian) has
been submitted. The federal tax department is currently auditing this claim.
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 during the remainder of
this fiscal year.
Results of Operations:
Sales revenues for the first nine months of fiscal 1998 decreased 10% compared
to those for the corresponding period of the previous year, with the major
decrease taking place in the comparative third quarter. This decline due in
part in the lack of product requirement by the company's new contractual
compounding customer from France and a post holiday period decline of
business in general. However, comparative gross margins have improved
substantially. This increase, 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
<PAGE>10
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. The Company is endeavouring to reach
this goal by September 1998, however, there can be no guarantee in achieving
this target date.
Efforts in the sale of the thermoplastic products continues. Incorporated in
the "Letter of Understanding" reached with Dow, the Company will be provided
with a non-exclusive, non transferable, royalty free world-wide license for
use of the technology; with Dow having access on at least a non-exclusive
basis to improvements which the Company may make in the exercise of this
license.
The Company continues to develop and market the specialty compounding, with
this segment representing 95 % of revenue during the first nine months of
fiscal 1998 and continues to pursue additional contracts. 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 indicated production demands of 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
during fiscal year 1999. 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. The Company has developed the technology to utilize this
by-product, at a profit, in substantial quantities. Several potential and
major clients have been sampled the product with extremely positive response
and results. Based on customer feedback the prognosis for this new product
in the market place is very good and may represent substantial sales revenues
in the very near future, however, there can be no guarantee as to these
results.
Gross margins increased substantially during the first months of fiscal 1998,
when compared with the previous years corresponding period; Contributing
factors being increased sales revenues with more favourable pricing, the new
specialty compounding business referred to previously and acquisition of
equipment providing the more efficient use of production resources.
<PAGE>11
As well, and in that regard, the Company is currently involved with several
other corporations which may open additional opportunities in specialty
compounding. Metal composites, used in the munitions market, have become
active again with 10,000 KGs of material scheduled for production during late
April. Indications are that this customer has begun to make long awaited
sales and the Company has been advised by this customer that they anticipate
increased sales very soon.
Administrative expenses remained static for the nine month period ending March
31, 1998, with interest and other financing costs decreasing slightly for the
same, when compared to those for the corresponding period of the previous year.
With the Dow "Letter of Understanding" these financial cost will decline
substantially as interest due on the debt will no longer be charged and
expensed.
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 substantially, 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.
Forward Looking Statements:
This Form 10-QSB 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.
<PAGE>12
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, 1998, the Registrant
filed two reports on Form 8-K.
On March 20th, 1998 pertaining to changes in the Company's
Certifying Accountant.
On March 26th, 1998 pertaining to the Company having reached
an agreement documented in a "Letter of Understanding" with
Dow Chemical Canada Inc. and The Dow Chemical Company,
as the case may be, in the matter of resolving a term debt
owed Dow Chemical Canada Inc. and certain technology rights
of the Company. Additionally to advise of pending
finalization of the two year required audit.
<PAGE>13
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 14, 1998 BY: Frank Mortimer
Frank Mortimer, President and
Chief Executive Officer
Date: May 14, 1998 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 31,1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1998
<CASH> 11,830
<SECURITIES> 0
<RECEIVABLES> 43,458
<ALLOWANCES> 0
<INVENTORY> 37,360
<CURRENT-ASSETS> 142,168
<PP&E> 747,755
<DEPRECIATION> 535,824
<TOTAL-ASSETS> 354,099
<CURRENT-LIABILITIES> 1,968,955
<BONDS> 0
<COMMON> 147,113
0
0
<OTHER-SE> (2,021,752)
<TOTAL-LIABILITY-AND-EQUITY> 354,099
<SALES> 844,363
<TOTAL-REVENUES> 844,363
<CGS> 749,444
<TOTAL-COSTS> 749,444
<OTHER-EXPENSES> 224,235
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,247
<INCOME-PRETAX> (131,125)
<INCOME-TAX> 0
<INCOME-CONTINUING> (131,125)
<DISCONTINUED> 0
<EXTRAORDINARY> 14,000
<CHANGES> 0
<NET-INCOME> (117,125)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
