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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, 1998
[ ] 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, $1,185,091
The appropriate aggregate market value of the voting stock of the Registrant
held by non-affiliates of the Registrant as of June 30, 1998 (based upon
the average bid and asked prices as reported by the National Association of
Securities Dealers Automatic Quotation System) was approximately $2,678,558.
The number of shares outstanding of the Registrant's common stock, as of June
30, 1998 is 14,711,341.
Exhibit index is located on page 16 of this Annual Report on Form 10-KSB.
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FORM 10-KSB
Fiscal Year Ended June 30, 1998
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 7
PART II
Item 5. Market for Registrants Common Equity and Related
Stockholder Matters. 8
Item 6. Management's Discussions and Analysis of Financial
Conditions and Results of Operations. 9-12
Item 7. Financial Statements and Supplementary Data 12
Item 8. Changes in Disagreements with Accountants on
Accounting and Financial Disclosure. 12
PART III
Item 9. Directors and Executive Officers of the Registrant 13
Item 10. Executive Compensation 14
Item 11. Security Ownership of Certain Beneficial Owners
and Management 15
Item 12. Certain Relationships and Related Transactions 15
PART IV
Item 13. Exhibits, Financial Statement Schedules and Reports
on Form 8 K 16
Signatures 17
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Item 1. Business
Introduction:
Technical Ventures Inc. (the Company) is a New York corporation formed on
June 14, 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, 1998 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 $3,005,100 US in the development of
it's products, including $94,874 during fiscal 1998, $76,400 during fiscal
1997 and $53,000 in 1996.
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. In June 1998 the
Company reached agreement with Dow Chemical Canada and Dow Chemical to
transfer HFFR/TPO and smelt filler technology to Dow in exchange for a debt
owed by the Company to Dow. However, the Company has been given the right by
Dow, to continue to enhance, manufacture and market the technology, royalty
free.
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 [CND]
CUSTOMER 1998 1997 1996
Endex Polymer Additives $312,576 - 18 % $535,635 - 44 % $258,836 - 19 %
Shaw Industries $698,583 - 41 % $622,097 - 51 % $927,392 - 67 %
MLPC International $277,980 - 16 %
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.
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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.
New Product
During the fourth quarter of fiscal 1998 the Company commenced supplying
samples of its new product "MORFOAM"; a chemical foaming agent, pigment
extender and nucleating agent which reacts with process temperatures to
produce a fine cell structure in extrusion molded parts. The product
technology combines chemical foaming and a nucleating agent in to one easy to
use masterbatch concentrate. The inherent fine particle size in the product
acts as a nucleating agent to form fine cell structures in the polymer. This
provides for improved surface finishes physical properties, and sink mark
elimination, lower part weight and shorter cycle times.
Morfoam is a concentrate encapsulated in an olefin binder, presented in
pellet form to be easily blended or metered in to various polymers. The
product improves cell structure and reduces voids when nitrogen is used as
the primary foaming agent.
The product was developed for use in the following applications:
* Injection Molding
* Structural Foam Molding
* Blow Molding
* Extrusion (film, sheet, profiles)
Preliminary testing in the market has brought most favourable results.
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.
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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 were advised by customers 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.
Backlog Information:
At June 30, 1998 the Company had a backlog of orders totalling $114,617 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 1997 the Company
increased its space to 17,300 square feet with a total monthly base rent of
$6,397 (Canadian) exclusive of real estate tax escalations. The current
leases expires on March 31, 1999 and June 30, 1999 respectively.
This requirement was necessitated by the Company having been successful in
acquiring the Specialty Compounding work for a French company and their need
of a major portion of this increased space for the storage of raw materials
required for their production 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.
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Item 4. Submission of Matters to a Vote of Security Holders
On June 10, 1998, the Company's Board of Directors unanimously authorized an
amendment to the Company's Certificate of Incorporation (i) increasing the
number of authorized shares of Common Stock from 15 million to 50 million
shares; (ii) permitting any action which might be taken at a meeting of
stockholders to be adopted by written consent of stockholders holding such
number of shares of Common Stock as would be required to pass the proposal at
a meeting of stockholders; and (iii) prescribing a majority vote of
outstanding shares for the adoption or approval of a plan of merger or
consolidation, the sale,lease,exchange or other disposition of all or
substantially all of the assets of the Company, or a plan of binding shares
exchanges.
The amendment was subsequently approved by a majority (67%) of the outstanding
stock entitled to vote thereon at a special meeting of the Company's
holders held on July 22,1998. At the meeting, a majority of the shareholders
also ratified the selection of Schwartz Levitsky Feldman, Chartered
Accountants, as the Company's independent accountants for the fiscal year ended
June 30, 1998.
For a complete description of the foregoing transaction, reference is hereby
made to the Company's Information Statement pursuant to Section 14 of the
Securities Exchange Act of 1934 and Regulation 14C and Schedule 14C
promulgated thereunder, as filed with the Securities and Exchange Commission
on June 18, 1998.
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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. 1996 $0.070 $0.125
Dec. 1996 0.045 0.070
Mar. 1997 0.060 0.070
June 1997 0.165 0.210
Sept. 1997 0.200 0.230
Dec. 1997 0.250 0.280
Mar. 1998 0.150 0.190
June 1998 0.300 0.380
These prices do not reflect retail mark-up, mark down or commissions and may
not represent actual transactions.
Holders:
As of June 30, 1998, there were approximately 972 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.
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Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
During the year ended June 30, 1998, 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 monthly debt
service requirements continue to leave the Company in a position where it is
unable to meet its monthly cash flow requirements.
Two of the Company's long term debt financing arrangements 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) or alternate arrangements can be completed. The aggregate amount
of principal payments currently in arrears and outstanding, $376,296 [US].
Negotiations are currently taking place to eliminate one debt agreement and
related accrued interest in the aggregate amount of $580,854 [Canadian], in
exchange the debtor will receive an equity position in the Company. There can
be no assurances that the Company will be successful in this endeavour,
however, the debtor has indicated it's willingness to negotiate an equitable
settlement.
In June the Company finalized a transfer of technology in exchange for debt
agreement with Dow Chemical Canada Inc. and The Dow Chemical Company ("Dow"),
as the case may be. The Company transferred 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 retardent
thermoplastic composition technology and smelt filler technology
(the technology).
Dow will provide the Company 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 the Company may make in the
exercise of this license.
Dow in turn has released Mortile from its relative obligations under the Term
Debt and related accrued interest, as well as guarantees made by both
Technical Ventures Inc. and a shareholder of the Company. The result of this
transfer to Dow, the Company realized a net gain of $1,016,738 [Canadian],
which is reflected in the financial statements of June 30, 1998.
A Canadian tax refund for the year 1996 was received during fiscal 1998 in
the amount of $19,680 (Canadian). The Company had also submitted a claim
for fiscal 1997 amounting to approximately $34,000 (Canadian) for which it
had received notice of assessment informing and confirming a $26,000
(Canadian) refund, which was recognized in the fiscal year ending
June 30,1998. It is expected that an additional provincial refund of
approximately $8,000. (Canadian) relative to the Company's 1997 tax filing
will be received during the first financial quarter of fiscal 1999.
Additionally, a claim for fiscal 1998 of approximately $35,000 (Canadian)
will be filed. The tax department has notified the Company of their intent to
audit all such claims submitted.
Management does not consider these sources of funds (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 financial condition of the Company has
hindered management in their pursuit of acceptable financing arangements.
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The Company continues to explore all opportunities with major investment
banking providers 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.
In late July, by amendment to its Certificate of Incorporation, the Company's
capital structure was modified to increase the number of authorized common
shares from fifteen million to fifty million.
Based on projections provided by existing customers, management expects
increases in sales during fiscal 1998.
Flame Retardant Products
Lucent Technologies have specified the material for use in their fiber optic
product. Sales levels for the Company's product could be substantial, if
Lucent Technologies and several clients based in the US., Europe and Canada
meet their forecasts. Sales for this product during fiscal 1998 where less
than $20,000.
Composite Technology
A contract signed with a training munitions manufacturer was renewed for an
additional year through December 31, 1998 and remains in force; Sales during
fiscal 1998 amounted to $13,433 and additional orders. Management has
recently been advised by this manufacturer of successful bids for a contracts
in the US, the residual effect on the Company has not been indicated by the
customer and the Company retains some optimism. 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 1998 total contract compounding revenues were $1.2 Million,
representing 98 % of revenues. Quotes on further contract work continue to be
submitted 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. The signing of a 3-year contract with a French company was
completed and manufacturing commenced in early March 98, the result of 2 years
of combined R&D to manufacture master batch products for the rubber industry.
This opportunity should expand rapidly in sales and will require additional
manufacturing facilities in North Carolina.
Significant property and equipment purchases and/or 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 1998 To Fiscal 1997:
For the fiscal year ending June 30,1998, the Company had gross sales of
$1.2 million, of which $1.1 million was generated from specialty [contract]
compounding work.
Gross margins as a percentage of net sales increased to 17 % from 13 % for
the year ended June 30,1997. This increase was due in part as the result of a
shift in pricing arrangements with some of the Company's customers,
e.g. non provision or provision of raw materials when processing the
customer's orders. The Company is pursuing an ISO 9000 rating which has
become an important requirement, necessary to secure new customers and
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.
Financial and Interest Expense decreased $12,655 in fiscal 1998. Decreases in
the average outstanding indebtedness was the primary contributing factor,
however, less favorable foreign currency exchange positions somewhat diluted
the effect of decreased average indebtedness.
Administrative expense increased slightly during fiscal 1998 relative to the
quest for financing. R&D and selling expenses increased $12,649 and $9,841
respectively in fiscal 1998 as the Company pursued development of technology
related to its new product "Morfoam" and endeavours in introducing the
product to the market place.
Revenues for fiscal 1998 decreased 16% over the preceding year, however,
gross margins increased due in part to a shift in pricing arrangements with
customers. Sales 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 slow.
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This had an adverse effect on demand for the Company's materials during the
fiscal year.
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 technolgoy. However, there can be no assurance in this regard.
During fiscal 1998 sales to several newer 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.
The sales launch of a new product for the rubber and plastic industry
commenced in early June 1998 and response to the product exceeded all
expectations. This product provides not only significant cost reductions by
reducing the amount of plastic consumed but also provided many other
advantages to the Industry. The market is not only significant in terms of
potential revenues and profits in North America but will open many export
potentials in Europe.
The Company enters its fiscal year with some confidence, that the
technological advantage obtained over the past years will enable it to obtain
a significant market share for its products at satisfactory selling prices,
thereby enabling the Company to grow and meet the anticipated demand for its
products, although there can be no assurance of this.
Forward Looking Statements:
This Form 10 KSB contains forward looking statements within the meaning of
Section 27A of the Securities Exchange 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.
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
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PART III
Item 9. Directors and Executive Officers of the Registrant
The directors and officers of the Company at June 30, 1998 are as follows:
Name Age Position with Company
Frank Mortimer 59 Director, President
Bryan Carter 77 Director, Vice President
Larry Leverton 59 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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Item 10 Executive Compensation
Frank Mortimer, the Company's Principal Executive Officer, received salary of
$63,450, $66,000 and $66,000, for the years ended June 30, 1998, 1997 and
1996, 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 exces of $100,000 during any of the three year
period ended June 30, 1998.
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, 1998. 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.
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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, 1998, 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 846,733 5.8 %
All Officers and Directors
as a group 1,406,201 9.6 %(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.
Item 12. Certain Relationships and Related Transactions
For the fiscal year ended June 30, 1998, there were no material transactions
between the Company and any of its officers, directors and/or beneficial
owners.
-15-
<PAGE>16
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
-16-
<PAGE>17
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 13,1998 By:/s/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 13,1998 By:/s/Frank Mortimer
Frank Mortimer, President
Principal Executive Officer
and Director
Dated: October 13,1998 By:/s/Bryan Carter
Bryan Carter,
Vice President, Director
Dated: October 13,1998 By:/s/Larry Leverton
Larry Leverton, Secretary
Treasurer and Principal
Accounting Officer and
Director
-17-
<PAGE>18
TECHNICAL VENTURES INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1998
<PAGE>19
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, 1998 F-3
Statement of Operations:
Years ended June 30,1998 and 1997 F-4
Statement of Changes in Shareholders' Deficiency:
Years ended June 30,1998 and 1997 F-5
Statement of Cash Flows:
Years ended June 30,1998 and 1997 F-6 & F-7
Notes to Consolidated Financial Statements F-8 - F-17
F-1
<PAGE>20
Schwartz Levitsky Feldman
Chartered Accountants
Toronto, Ottawa, Montreal
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stocholders of
Technical Ventures Inc.
We have audited the acompanying consolidated balance sheet of Technical
Ventures Inc. as of June 30, 1998 and the related consolidated statements
of income, cash flows and changes in stockholders' equity for the year ended
June 30, 1998. These consolidated financial statements are the
responsibility of the company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Technical
Ventures Inc. as of June 30, 1998 and the results of its operations and its
cash flows for the year ended June 30, 1998, in conformity with generally
accepted accounting principles in the United States of America.
Toronto, Ontario /s/Schwartz Levitsky Feldman
September 30,1998 Chartered Accountants
F-2
<PAGE>21
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30
1998
ASSETS
CURRENT ASSETS
Cash $17,605
Accounts Receivable 118,140
Inventory (Note 2) 34,663
Other Current Assets
Advances 35,904
Deposits 26,931
TOTAL CURRENT ASSETS 233,244
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation of $510,118 at June 30,1998
(Note 3,6,10) 171,231
INTANGIBLE ASSETS, net of accumulated amortization of
$5,119 at June 30,1998 965
$411,440
LIABILITIES AND STOCK HOLDERS DEFICIENCY
CURRENT LIABILITIES
Current Portion of long term debt (Note 6):
Notes Payable (Note 11) $120,538
Capital lease obligations 77,594
Other 376,296
Loans & advances:
Private Lenders (Note 10) 170,668
Shareholders, unsecured interest free 147,653
Accounts payable and accrued expenses 384,889
TOTAL CURRENT LIABILITIES 1,277,637
LONG-TERM DEBT, net of current portion (Note 6):
Shareholder 330,022
Other 52,891
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, 14,711,341 shares at
June 30, 1998 $147,113
Additional Paid in capital: 4,056,744
Deficit (5,759,538)
Foreign currency translation adjustment 306,571
Total Shareholders' deficiency (1,249,110)
$411,440
See notes to consolidated financial statements.
F-3
<PAGE>22
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended June 30,
1998 1997
NET SALES $1,185,091 $1,414,062
COST OF SALES 984,899 1,229,902
GROSS MARGIN 200,192 184,160
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Administration 146,789 137,373
Financial
Interest & Other 106,801 119,456
Research & Development 94,874 82,225
Selling 71,790 61,949
Gain From Disposal (3,486)
416,768 401,003
LOSS BEFORE INCOME TAX RECOVERY & GAIN
ON TRANSFER OF TECHNOLOGY RIGHTS (216,576) (216,843)
Gain From Transfer of Technology Rights 693,415
INCOME AFTER GAIN ON TRANSFER OF TECHNOLOGY RIGHTS 476,839
Income Tax Recovery 42,755 20,521
NET INCOME [LOSS] $519,594 ($216,843)
NET INCOME [LOSS] PER COMMON SHARE $0.04 ($0.01)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,676,752 14,586,341
See notes to consolidated financial statements.
F-4
<PAGE>23
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
<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 ($6,082,810) $199,256
Net Loss (196,322)
Cumulative Translation Adjustment 22,709
Balance, end of year 14,586,341 $145,863 $4,048,994 ($6,279,132) $221,844
Year Ended June 30, 1998
Issued In Exchange For Services 125,000 1,250 7,750
Net Income $519,594
Cumulative Translation Adjustment $84,727
Balance, end of year 14,711,341 $147,113 $4,056,744 ($5,759,538) $306,571
See notes to consolidated financial statements
F-5
</TABLE>
<PAGE>24
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended June 30, 1988 1997
1998 1997
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income [Loss] $519,594 ($196,322)
Adjustment to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 10,874 33,832
Gain On Transfer of Technology Rights (682,278)
Issue of Stock For Services 8,999
Net Change in non-cash operating assets
and liabilities (53,749) 107,070
Net Cash used by operating activities (196,560) (55,420)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property & Equipment Acquisition (8,035) (2,586)
Net cash used by Investing Activities (8,035) (2,586)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) loans,
notes and advances:
Bank Note (14,692) (5,152)
Line of Credit (11,150) (33,686)
Long-term debt 32,576 20,310
Private lenders 81,298 36,221
Shareholders 121,483 51,615
Net Cash Provided by Financing Activities 209,515 69,308
EFFECT OF EXCHANGE RATE ON CASH (11,088) 4,918
Change in Cash Balance for the year ($6,168) $16,220
Cash Balance:
Beginning of year 23,772 7,552
End of Year $17,605 $23,772
See notes to condensed consolidated financial statements.
F-6
<PAGE>25
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
SUPPLEMENTARY CASH FLOW INFORMATION
Year Ended June 30,
1998 1997
Non-Cash Financing and Investing Activities:
Payments made during the year for interest $15,203 $19,751
$15,203 $19,751
Net change in non-cash operating assets and liabilities:
Decreases (increases) in operating assets
and increases (decreases) in operating
liabilities:
Accounts Receivable $38,765 ($57,025)
Inventory (610) 34,940
Other assets (16,477) (6,813)
Accounts Payable and accrued expenses (75,427) 135,968
($53,749) $107,070
$107,070 ($118,131)
See notes to condensed consolidated financial statements.
F-7
<PAGE>26
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.
Income [Loss] Per Share:
Income per share is computed based on the weighted average number of common
shares outstanding during the period.
Convertible debt was not considered in the computation as the 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>27
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, 1998, 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>28
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Inventory:
Inventory at June 30,1998 is comprised entirely of raw materials inventory.
Note 3 - Property and Equipment:
Property and equipment at June 30,1998 is comprised as follows:
Equipment:
Under Capitalized Leasing Arrangements $204,981
Other 442,819
Furniture & Fixtures 35,341
Leasehold Improvements 4,208
687,349
Less Accumulated Depreciation & Amortization 510,118
$177,231
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, 1998
Revenue from unaffiliated customers $ 1,185,091 $ 1,185,091
Loss From Operations $(46,220) $ 565,814 $ 519,594
Identifiable assets at end of year $411,440 $411,440
Year Ended June 30, 1997
Revenue from unaffiliated customers $ 1,414,062 $ 1,414,062
Income (Loss) From Operations $(40,178) $ (156,144) $ (196,322)
Identifiable assets at end of year $505,776 $505,776
F-10
<PAGE>29
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Income Taxes:
During the year ended June 30,1998, the Company received $19,681 (Canadian)
resulting from research and development refundable tax credit claims filed for
the year ended June 30,1996. A claim for approximately $34,000 (Canadian)
had been submitted for 1997, the Company having received notice from the tax
department that the claim had been approved and the amount would be remitted
shortly, the approved amount has been recognized as income tax recovery in
fiscal 1998. A claim for approximately $35,000 (Canadian) will be filed for
1998. It is anticipated that claims for 1998 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 30,1998 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, 1998:
US Federal State & Local Foreign(1)
Loss Carry Forwards $306,000 $81,000 $664,840
Credit Carry Forwards:
Non Refundable Credits 61,903
Refundable credits 35,000
Depreciation and amortization
Valuation allowance (306,000) (81,000) (761,743)
$0 $0 $0
Aggregate net operating loss carry forwards and tax credit carry forwards and
their expirations are summarized as follows:
Net Operating Loss Carry Forward
Expiring June 30, US Federal State & Local Foreign(1) Foreign Research
& Development
Tax Credits(1)
1999 $ 80,105 $56,073
2000 229,975 2,932
2001 3,000 3,000 232,155
2002 225,000 225,000 1,218
2003 21,000 21,000 39,642 1,680
Thereafter 651,000 649,000 82,963
TOTAL $900,000 $898,000 $ 664,840 $ 61,903
(1) Converted to US dollars based on conversion rate at June 30, 1998.
F-11
<PAGE>29
<TABLE>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<S> <C> <C> <C>
Note 6 - Long Term Debt:
At June 30, 1998, 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% $ 23,870 $23,870
Subordinate to note payable, I.O.C. :
Interest 15 % 10,230 10,230
Interest free:
Notes and loans 147,653 52,200 199,853
Accrued Interest 88,668 88,668
Accrued compensation 155,053 155,053
$147,653 $330,021 $477,674
Other:
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% (1) $35,297 $35,297
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
December 1995, through September 2000. At June 30, 1998
the Company was in default and the entire balance past due (2) 340,999 340,999
Liabilities Subordinate To I.O.C. Note Payable:
Unsecured loans, private investor, interest at 10% 26,736 26,736
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 26,155 26,155
$ 376,296 $52,891 $429,187
Leasing Liabilities
Obligations under capitalized leasing arrangements payable
in monthly installments of:
$9,981 net of amount representing interest of $2,790, at
June 30th the Company was in default and the entire balance
past due (3); $76,993 $76,993
$297(Canadian) through September 1998, net of amount
representing interest of $11.79 (Canadian). 601 601
$77,594 $77,594
</TABLE>
F-12
<PAGE>30
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) In June, 1998 the Company reached an agreement with Dow Chemical of
Canada to repay the outstanding principal of $51,755 (Canadian) on the
Company's line of credit. This repayment, was integrated in a transfer of
technology rights to Dow Chemical of Canada and Dow Chemical which pertained
to the repayment of another of the Company's loans with Dow; the obligation
in regard of the outstanding line of credit was fulfilled in August 1998.
(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 30,1998 is reflected as
a current liability in these financial statements. The I.O.C. note is
collateralized by all previously unsecured assets of the Company.
Negotiations are currently underway to eliminate this loan by means of paying
the loan accrued interest in full, or, in exchange for an equity position in
the Company.
(3) At June 30, 1998, 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, 1998, is reflected in these financial statements as a
current liability.
F-13
<PAGE>31
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
1999 $376,296 $376,296
After 2003 330,022 52,891 382,913
$330,022 $429,187 $759,209
The Company's obligations under capitalized leasing arrangements are payable
in fiscal 1999.
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 30,1998.
F-14
<PAGE>32
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 $34,000 (Canadian) was submitted
for the fiscal year 1997, additionally a claim for fiscal 1998 will be
submitted for approximately $35,000 (Canadian). Tax claims for 1997 have
been accepted by the federal tax department and notice of payment has been
received in the amount of $26,000 (Canadian). This amount, therefore, has
been accounted for in the month of June 1998. The provincial portion of this
claim remains in audit with that tax department and has not been accounted for
in June 1998. The provincial portion of the claim approximates a further
$8,000 (Canadian). Even if the 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. Therefore a special meeting of shareholders was held July 22, 1998
for the purpose of amending the Corporation's New York State, Certificate of
Incorporation. All of the amendments passed; one of which increased the
authorized issue of shares from fifteen million to fifty million common shares.
This amendment will enable the Corporation to act on obtaining funding through
private or public stock offering[s].
F-15
<PAGE>33
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, 1998, under a real property lease classified as an operating
lease which expires in March 1999 and June 1999, the Company's future minimum
rental payments (excluding real estate taxes) are $32,303. 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, 1998.
Rent expense was $58,061 and $46,833 for 1998 and 1997 respectively.
Note 10 - Loans and Advances At June 30,1998:
Private Investors:
Equipment financing:
Interest at 10% $11,833
Unsecured Demand Loans:
Interest Free 85,000
Interest at 10%, convertible in 50,000
shares of common stock 25,000
Interest at 15% 48,835
$170,668
F-16
<PAGE>34
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Note Payable Financial Institution
At June 30,1998 the Company had a note payable balance of $120,538 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 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 current liability on the Company balance sheet at
June 30, 1998. The Company is current with it's obligation under this new
agreement.
Note 12 - Major Customers:
One customer accounted for 41% and 51% of the Company's consolidated revenues
for fiscal 1998 and 1997, respectively. Another customer accounted for 18%
and 44% of consolidated revenues for these respective periods. A new
customer accounted for 16% of consolidated revenues for fiscal 1998.
The loss of one or more 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>35
<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, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 17,605
<SECURITIES> 0
<RECEIVABLES> 118,140
<ALLOWANCES> 0
<INVENTORY> 34,663
<CURRENT-ASSETS> 233,244
<PP&E> 687,349
<DEPRECIATION> 510,118
<TOTAL-ASSETS> 411,440
<CURRENT-LIABILITIES> 1,277,637
<BONDS> 0
<COMMON> 147,113
0
0
<OTHER-SE> (1,249,110)
<TOTAL-LIABILITY-AND-EQUITY> 411,440
<SALES> 1,185,091
<TOTAL-REVENUES> 1,185,091
<CGS> 984,899
<TOTAL-COSTS> 984,899
<OTHER-EXPENSES> 416,768
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 106,801
<INCOME-PRETAX> (216,576)
<INCOME-TAX> 42,755
<INCOME-CONTINUING> (173,821)
<DISCONTINUED> 0
<EXTRAORDINARY> 693,415
<CHANGES> 0
<NET-INCOME> 519,594
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
