As filed with the Securities and Exchange Commission on ^ September 3, 1999
Registration No. 333-^ 75901
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TECHNICAL VENTURES INC.
(Name of Small Business Issuer as specified in its charter)
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New York 13-3296819 1700
(State or other jurisdiction of (I.R.S. Employer Identification Number) (Primary Standard Industrial
incorporation or organization) Classification Code Number)
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3411 McNicoll Avenue
Unit 11
Scarborough, Ontario
Canada M1V 2V6
(416) 299-9280
(Address and telephone number of principal executive offices)
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Frank Mortimer, President
3411 McNicoll Avenue
Unit 11
Scarborough, Ontario
Canada M1V 2V6
(416) 299-9280
(Name, address and telephone number of agent for service)
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Copies of all communications to:
Gregory Sichenzia, Esq.
Richard A. Friedman, Esq.
Sichenzia Ross & Friedman, LLP
135 West 50th Street
New York, New York 10022
Telephone No.: (212) 664-1200
Facsimile No.: (212) 664-7329
Approximate date of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check
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the following box.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. o
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. o
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
Title of Each ^ Offering Aggregate Amount of
Class of Securities Amount to be Price Per Offering Registration
to be Registered Registered Security(1)(2) Price(1) Fee
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Common Stock, $0.01 par value ^ 6,893,141 $.27 ^ $1,861,148 $373.35*
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*Previously paid.
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(a) of the Securities Act of 1933, as amended.
(2) Represents the closing sale price for the Registrant's common stock on
April 1, 1999.
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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TECHNICAL VENTURES INC.
Cross Reference Sheet
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Form SB-2 Item Number and Caption Captions In Prospectus
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1. Front of Registration Statement and Outside Front Cover of Prospectus..................... Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus................................... Cover Page, Inside Cover Page,
Outside Back Page
3. Summary Information and Risk Factors...................................................... Prospectus Summary, Risk Factors
4. Use of Proceeds........................................................................... Use of Proceeds
*
5. Determination of Offering Price...........................................................
6. Dilution.................................................................................. Dilution
7. Selling Securityholders................................................................... Selling Shareholders, Plan of
Distribution
8. Plan of Distribution...................................................................... Prospectus Summary, Selling
Securityholders
9. Legal Proceedings......................................................................... Business
10. Directors, Executive Officers, Promoters and Control Persons.............................. Management, Principal
Stockholders
11. Security Ownership of Certain Beneficial Owners and Management............................ Principal Stockholders
12. Description of Securities................................................................. Description of Securities
13. Interest of Named Experts and Counsel..................................................... Legal Matters
14. Disclosure of Commission Position on Indemnification for Securities Act Liabilities....... Management
15. Organization Within Last Five Years...................................................... *
16. Description of Business................................................................... Prospectus Summary, Business
17. Management's Discussion and Analysis or Plan of Operation................................. Management's Discussion and
Analysis of Financial
Condition and Results of
Operations
18. Description of Property................................................................... Business
19. Certain Relationships and Related Transactions............................................ Certain Transactions
20. Market for Common Equity and Related Shareholder Matters.................................. Front Cover Page, Description of
Securities
21. Executive Compensation.................................................................... Management
22. Financial Statements...................................................................... Financial Statements
*
23. Changes in and Disagreements with Accounts on Accounting and Financial Disclosure.........
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*Not Applicable
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SUBJECT TO COMPLETION
^ Prospectus
^______, 1999
^ Technical Ventures Inc.
^ 6,893,141 Shares of Common Stock
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Technical Ventures Inc.: The Offering:
o We are engaged in the design, development o This ^ prospectus is prepared in connection
and manufacture of [highly engineered with the sale to the public of shares of our
products made primarily from specially common stock. ^ The selling shareholders
formulated high performance polymer are offering all of the 6,893,141 shares of ^
materials]. common stock.
o Technical Ventures Inc. ^o There is no underwriter or coordinating
3411 McNicoll Avenue broker acting in connection with this
Scarborough, Ontario, Canada M1V 2V6 offering.
o Over-the-Counter Bulletin Board o We will not receive any proceeds from the
Symbol: TEVT shares ^ sold by the selling shareholders.
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Investing in our common stock ^ involves ^ risk. See "Risk Factors"
beginning on page ___.^
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
The date of this ^ prospectus is September 3, 1999
The information in this preliminary prospectus is not complete and may be
changed . We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities and it is not soliciting and
offer to buy these securities in any jurisdiction where the offer or sale is not
permitted.
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Table of Contents
Page
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Prospectus Summary................................................................................
Risk Factors......................................................................................
Special Note About Forward-Looking Statements.....................................................
^ Use of Proceeds.................................................................................
Dividends.........................................................................................
Dilution..........................................................................................
Capitalization....................................................................................
Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................................
Business..........................................................................................
Management........................................................................................
Principal Stockholders............................................................................
Certain Related Transactions......................................................................
Description of Our Securities.....................................................................
Shares Eligible for Future Sale...................................................................
Selling Shareholders.............................................................................
.................................................................................................
Plan of Distribution..............................................................................
Legal Matters.....................................................................................
Experts...........................................................................................
Where You Can Find More Information...............................................................
Index to Financial Statements..................................................................... F-1
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^
2
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this ^
prospectus. This summary may not contain all of the information that ^ you
should consider before decoding to invest in our common stock. You should read
the entire ^ prospectus carefully, including the ^ Risk Factors ^ section ^,
financial statements^ and notes thereto.
References in this prospectus to "Technical Ventures,""we,""our," and "us,"
refer to Technical Ventures Inc.
Technical Ventures Inc.
We are a corporation organized under the laws of the State of New York. We
were formed for the purpose of acquiring businesses which, in our opinion,
demonstrate long-term growth potential. Since our formation, we have only
acquired one business, Mortile Industries Ltd.^, which we presently have a 70%
interest. Mortile is a corporation organized under the federal laws of Canada.
Through Mortile, we are engaged in the design, development and manufacture of
highly engineered products made primarily from specially formulated high
performance polymer materials.
Our products are used in a wide range of applications primarily by
manufacturers of end-use products, particularly products used in industrial
markets. We focus on niche markets and applications for which we can provide our
customers application-specific product solutions based on our polymer based
materials technology, engineering expertise and production technology. Our
products and technologies are sold to manufacturers of end-use products in the
industrial equipment, transportation, electronics, munitions and process
industries markets.
3
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The Offering
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Common Stock Offered........................ ^ 6,893,141 shares
Common Stock Outstanding Before
this Offering......................... 22,048,011 shares(1)
Common Stock Outstanding After this
Offering.............................. ^ 28,941,152 shares(2)
Use of Proceeds.............................. We will not receive any proceeds from the shares sold by the selling
shareholders. Any money we receive upon the exercise of warrants
will be used to pay for the expenses of this offering. See "Use of
Proceeds."
Risk Factors................................ You should read the "Risk Factors" section beginning on page
[___], as well as other cautionary statements throughout the entire
prospectus, to ensure you understand the risks associated with an
investment in our stock.
Over-the-Counter Bulletin Board
Symbol...................................... TEVT
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^
The 6,893,141 shares being offered includes: 1) 127,841 shares of common
stock issuable upon the exercise of warrants we previously issued; 2) 6,098,630
shares of common stock issuable upon the conversion of debentures; and 3)
666,670 shares of common stock being offered by the selling shareholders.
(1) Excludes (a)^ 50,000 shares of common stock issuable upon the
conversion of promissory notes outstanding, and (b) 50,000 shares of common
stock issuable upon exercise of outstanding options.
(2) Assumes (a) the debentures are converted into ^ 6,098,630 shares of
common stock and all of the outstanding warrants to purchase 127,842 shares of
common stock are exercised^ and (b) the issuance of all 500,000 shares of common
stock issuable to Coleman Capital Partners Ltd. in connection with consulting
services to be performed pursuant to an Advisory Agreement, dated January 11,
1999.
4
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Summary Financial Information
The following is a summary of our financial information for the nine
months ended March 31, 1999 and fiscal years ended June 30, 1998 and June 30, ^
1997. You should also read our ^ financial statements and notes to those
statements which begin at the end of this ^ prospectus, beginning on page F-1.
Statement of Operations Data:
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^ Nine Months Ended ^ March Year Ended June 30,
31,
1999 1998 ^ 1997
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1998
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Net ^ sales ................. $^ 808,839 $ ^ 844,363 $ 1,185,091 $ 1,414,062
Gross profit ................ ^ 261,169 184,160 200,192 184,160
Income (loss) from operations ^(34,501) (224,872) (216,576) (216,843)
Net income (loss) ........... ^ 28,843 (210,872) 519,594(1) ^(196,322)(2)
Earnings (loss) per share ... $ ^(0.00) $ (0.01) $ 0.04 $ (0.01)
Weighted average number of
common stock outstanding . ^ 19,609,385 14,711,341 14,676,752 14,586,341
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Balance Sheet Data:
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^ Nine Months Ended Year ^ Ended June 30,
^ March 31, ^ 1999
1998 1997
---- ----
$
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Working ^ capital.................... ^(741,239) $ ^(1,044,393) $(1,703,297)
Total ^ assets....................... 491,945 411,440 505,776
Total ^ liabilities.................. 1,385,556 1,660,550 2,368,206
Stockholders' ^ equity............... (893,622) (1,249,110) (1,862,431)
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(1) Reflects gain from transfer of technology rights of $693,415 and income
tax recovery of $42,755.
(2) Reflects income tax recovery of $20,521.
5
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^ RISK FACTORS
You should carefully consider each of the following ^ risks and all of the
other information set forth in this ^ prospectus before ^ deciding to invest in
shares of our common stock. Some of the following risks relate principally to
our business in general and the industry in which we operate. Other risks relate
principally to the securities markets and ownership of our stock. The risks and
uncertainties described below are not the only ones facing our company.
Additional risks that generally apply to publicly traded companies, that are not
yet identified or that we currently think are immaterial, may also impair our
business operations and adversely affect our business.
If any of the following risks and uncertainties develop into actual events,
our business, financial condition or results of operations could be materially
adversely affected. In such a case, the trading price of our common stock could
decline, and you may lose all or part of your investment.
Risk Factors Relating to Our Business
Our business is subject to the following risks, which include risks
relating to the industry in which we operate.
We have had a history of net losses, have experienced cash flow
deficiencies, and have, at times, been unable to pay many of our obligations as
they became due.
For fiscal year ended June 30, 1998, we incurred net losses of $216,576
before accounting for an income tax recovery and a gain on a transfer of
technology. For fiscal year ended June 30, 1997, we incurred net losses of
$216,843. At June 30, 1998, we had an accumulated deficit of ^ $5,759,533. At
times, our cash shortages have caused us to be delinquent in paying its
suppliers, and have impaired our ability to purchase raw materials, causing
production delays that resulted in back orders and lost sales. Cash shortages
have hindered our existing operations and, thus, prevented any expansion. As a
result, our auditors have noted in their report that we have experienced
significant operating losses and have an accumulated deficit which raise
substantial doubt about our ability to continue as a going concern.
We may be unable to continue operations if we are unable to find
additional financing.
^ We intend to seek additional funding through public or private equity
or debt financing. We cannot assure you that additional financing will be
available on acceptable terms, or at all. If we are required to sell equity to
raise additional funds, our existing shareholders may incur substantial dilution
to the value of their shares, and any shares so issued may have rights,
preferences and privileges superior to the rights, preferences and privileges of
our outstanding common stock. Insufficient funds may require us to delay, scale
back or eliminate some or all of our activities or to obtain funds through
arrangements with third parties that may require us to relinquish rights to
certain of its technologies, product candidates or products that we would
otherwise seek to develop or commercialize.
Acceptance and use of our products in the marketplace is uncertain.
Part of our business is to develop innovative products which will
improve the manufacture of plastics and plastic products. To be successful, our
products must have a price-value relationship that is competitive with
alternative products and technologies. We cannot assure you that we will not
experience unforseen problems with our technology or products. Nor can we
provide you with assurance that our products or technology will be commercially
accepted.
6
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Our revenues are ^ dependent on the continued operation of our
manufacturing facilities.
The operation of manufacturing facilities involves risk. Our
manufacturing equipment may break down, fail to operate or perform at
substandard levels. We may be effected by natural disasters which may make the
operation of our facilities impossible. Also, our manufacturing facilities must
comply with directives of government agencies. Any reduction or suspension of
manufacturing operations from any of the events listed above is likely to have a
material adverse effect on our productivity and profitability.
We may be unable to compete favorably in this highly competitive
industry.
^ Each of the industries in which we compete is highly competitive. We
compete with other companies primarily on the basis of price, service, product
quality and performance. We compete with some of the world's largest chemical
companies, such as Exxon Corp., E.I. DuPont De Nemours & Co., Union Carbide
Corp., and Raychem Corp. Our competitors have significantly greater financial,
technical and human resources. We cannot provide you with assurances that our
competitors will not develop products or technologies that are more effective
than any we have developed or are developing, or that our competitors will
render our products or technologies obsolete and noncompetitive. Our competitors
may succeed in obtaining market acceptance for products more rapidly than us.
Furthermore, even if our products are accepted by the marketplace, we will
compete with respect to volume manufacturing efficiency and marketing
capabilities; areas in which we have limited or no experience.
We ^ are dependent on our key personnel for our future success.
Our future success partly depends upon key ^ personnel and upon our
ability to continue to attract and retain such highly talented individuals.
Competition for qualified personnel is intense in our industry. We are dependent
upon the efforts and abilities of Frank Mortimer, our President, Bryan Carter,
our Vice President, and Larry Leverton, our Secretary and Treasurer. We are not
presently engaged in employment agreements with Messrs. Mortimer, Carter and
Leverton^. Also, we do not maintain key man life insurance policies on ^ any of
these individuals. The loss of the services of any of the above individuals^
could adversely affect our business. We cannot assure you that we will retain
our key employees or that we will attract or assimilate such employees in the
future.
If the protection of our patents and proprietary technology is
inadequate, our business may be materially adversely affected.
^ Our future success will partly depend on our ability to maintain
protection for our products and manufacturing processes under United States and
foreign patent laws, to preserve its trade secrets and to operate without
infringing the proprietary rights of third parties. We currently hold patents
and trademark registrations for various products and plan to continue to
establish and protect their proprietary rights with respect to new products we
develop. U.S. patent applications are maintained in secrecy until patents issue.
Since publication of inventions in technical or patent literature tend to lag
behind inventions by several months, we cannot be certain that we are the first
creator of inventions covered by our issued patents or pending patent
applications, or that we were the first to file patent applications for such
inventions.
We also rely on trade secrets and proprietary know-how, which we seek
to protect, in part, by confidentiality agreements with our research partners,
employees, consultants, advisors and others. However, actions taken to establish
and protect proprietary rights may be inadequate to prevent imitation of such
products by others or to prevent others from claiming violations of their
proprietary rights by our
7
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company. In addition, others may assert rights in our proprietary products
and processes and other proprietary rights.
^ We are dependent on maintaining our supply of raw materials.
^ If we are unable to obtain a supply of raw materials, and we are
unable to develop alternative sources of supply quickly and on a cost-effective
basis, our ability to manufacture and deliver ^ our products would be materially
impaired. Should demand for our products substantially exceed current
expectations, or if we experience supply problems we cannot assure you that we
would be able to obtain sufficient quantities of raw materials from our current
sources, or that alternate sources could be found without disrupting our
manufacturing process.
Our products may be subject to government regulation.
Certain end products into which our products are to be incorporated are
subject to extensive government regulation in the United States by federal,
state and local agencies including the EPA and the Food and Drug
Administration^. Similar regulatory agencies exist worldwide. Our customers who
incorporate our products into consumer products will bear primary responsibility
for obtaining any required regulatory approvals. The process of obtaining and
maintaining FDA and any other required regulatory approvals for products is
lengthy, expensive and uncertain, and regulatory authorities may delay or
prevent product introductions or require additional tests prior to introduction.
We cannot assure you that changes in existing regulations or the adoption of new
regulations will not occur, which could prevent us or our customers from
obtaining approval ^ or delay the approval of^ various products ^ could
adversely affect market demand for our ^ products.S
We are subject to many foreign and domestic laws and regulations
relating to the protection of human health and the environment.
These laws and regulations govern areas such as emissions to the air,
discharges to land and water and the generation, handling, storage,
transportation, treatment and disposal of waste.
We believe that our business, operations and facilities are being
operated in compliance with environmental laws and regulations. However, we are
exposed to risks relating to accidental discharges of hazardous materials,
personal injury, property damage and environmental damage. Furthermore,
environmental laws and regulations provide for substantial fines and criminal
sanctions in the event we do not comply. As such, we cannot provide you with
assurance that our ongoing operations will not be effected by material costs or
liabilities resulting from such risks.
Additionally, we believe that, in the future, environmental and health
and safety laws and regulations, including the enforcement of such laws and
regulations, will become more strict. Increased regulation of our operating
activities could involve material expenditures with respect to our handling,
manufacture, use or disposal of substances, waste or pollutants at our
facilities. To meet changing regulatory standards, we may be required to
significantly modify our operations or manufacturing sites. Such modifications
may involve substantial expenditures and reductions or suspensions of certain
operations.
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We could be liable for damages in connection with product liability
claims.
Product liability claims may be asserted against us in the event that
the use of our products, or products which incorporate our products, are alleged
to have caused injury or other adverse effects. Such claims may involve large
amounts of alleged damages and significant defense costs. We do not maintain
product liability insurance. If we do obtain product liability insurance in the
future, we cannot assure you that the liability limits, or the scope of such
insurance policy, would be adequate to protect against such potential claims.
Additionally, we may not be able to obtain product liability insurance. Whether
or not we obtain such insurance, a successful claim against us could materially
affect our financial stability. In addition, our reputation could be adversely
affected by product liability claims, regardless of such claim's merit or
eventual outcome.
Our business may be affected by problems associated with the Year 2000
issue.
Many existing computer programs use only a two digit suffix to identify
a year in the date field with an assumed prefix of "19". Consequently, this
limits those systems to dates between 1900 and 1999. If not corrected, many
computer systems and applications could fail or create erroneous results at or
in connection with applications after the year 2000.
We have assessed the potential impact of the Year 2000 issue to our
internal operations. Such assessment included a review of the impact of the
issue in primarily four areas: products, manufacturing systems, business systems
and miscellaneous/other areas. Based on the results of that initial review, we
do not anticipate that the Year 2000 issue will impact operations or operating
results. We cannot assure you, however, that our review efforts, when completed,
will not result in a different conclusion or that the inability of third parties
on which we rely (such as suppliers) to implement corrective actions would not
materially adversely affect our operations or operating results.
Our ^ revenues are dependent on several key customers.
We have several key customers which presently account for more than 76%
of our total revenues. For the fiscal year end 1998, Endex Polymer Additives
accounted for 18%, Shaw Industries accounted for 41% and MLPC International
accounted for 16% of our total revenues. For the nine month period ended March
31, 1999, Shaw industries accounted for 40%, MLPC International accounted for
17%, SNC Industrial Technologies accounted for 16%, and FinProject accounted for
3.4% of our total revenues. Many of our customers operate in cyclical industries
and, as a result, their order levels have varied significantly from period to
period in the past and may vary significantly in the future. Such customer
orders are dependent upon their markets and customers and may be subject to
delays or cancellations. The loss of one or more of such customers, or a
declining market in which such customers reduce orders or request reduced
prices, could have a material adverse effect on our operations or financial
condition.
We do not expect to pay dividends on our common stock.
To date, we have paid no dividends on our common stock. The payment of
any future dividends will be at the sole discretion of the board of directors.
We intend to retain earnings to finance the expansion of our business and do not
anticipate paying dividends on our common stock in the foreseeable future.
9
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Risk Factors Relating to Securities Markets
There are risks relating to the securities market that you should
consider in connection with your investment in and ownership of our stock.
Our possible failure to comply with recent Over-the-Counter Bulletin
Board listing qualifications may affect the trading of our common stock.
NASD Regulation, Inc. has enacted rules to limit quotations on the
Over-the-Counter Bulletin Board to the securities of issuers that make current
filings pursuant to the Securities Exchange Act of 1934. Furthermore, NASD
Regulation, Inc. has enacted rules which require members to review current
issuer financial statements prior to recommending a transaction to a customer in
an Over-the-Counter Bulletin Board security and to deliver a disclosure
statement to a customer prior to an initial purchase of an Over-the-Counter
equity security. If we are unable to satisfy reporting requirements our common
stock may be de-listed from the Over-the-Counter Bulletin Board and/or may
severely limit the trading activity of our securities.
Shares of our common stock that are eligible for future sale could
adversely affect its market price.
Our common stock presently trades on the Over-the-Counter Bulletin
Board. Sales of substantial amounts of our common stock in the public market or
the prospect of such sales by existing shareholders, and holders of our
warrants, could materially reduce the market price of our common stock. As of
the date hereof, we had outstanding 22,048,011 shares of common stock. This
number does not take into account shares of common stock issuable upon
conversion of the debentures or exercise of the warrants. Virtually all of our
outstanding shares of common stock are either registered, and therefore freely
tradable, or may be transferred pursuant to Rule 144(k) under the Securities
Act, unless held by our "affiliates" as that term is defined in Rule 144 under
the Securities Act.
Our common stock is currently subject to penny stock rules which may
affect its marketability.
Trading in the Over-the-Counter Bulletin Board allows market makers to
enter quotes and trade securities that do not meet listing requirements of the
Nasdaq SmallCap Market or any regional exchange. In such case, sales of our
common stock will be subject to the ^ penny stock ^ rules promulgated by the
Securities and Exchange Commission^. The SEC's regulations generally define a ^
penny stock ^ as any equity security that has a market price (as defined) of
less than $5.00 per share. The rules impose various sales practice requirements
on broker-dealers who sell securities governed by the rules to persons other
than established customers and certain accredited investors. For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to sale. The rules further require the delivery by the
broker-dealer of a disclosure schedule prescribed by the SEC relating to the
penny stock market. Disclosure must also be made about all commissions and about
current quotations for the securities. Finally, monthly statements must be
furnished to the SEC disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.
Although the regulations provide several exceptions to, or exemptions
from, the penny stock rules based on, for example, specified minimum revenues or
asset-value, we ^ currently do not fall within any of the stated exceptions.
Thus, a transaction in our securities would subject the broker-dealer to sales
practice and disclosure requirements that make trading of the stock more
cumbersome which could materially
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adversely affect the marketability of the stock.
Our common stock price may be volatile, which could result in
substantial losses for investors.
^ The market price of our securities may be highly volatile, as has
been the case with the securities of other companies engaged in high technology
research and development. Any announcements we or our competitors make
concerning technological innovations, new commercial products or procedures,
proposed government regulations and developments, disputes relating to patents
or proprietary rights, operating results, market conditions and economic factors
may have a significant impact on the market price of our common stock. Investors
may be unable to resell their shares of our common stock at or above the
offering price.
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SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus may contain forward-looking
statement. Such statement can be identified by the use of forward-looking
terminology such as "may", "will", "expect", "anticipate","estimate","continue";
or other similar words. These statements discuss future expectations, contain
projections of results of ^ operations or financial condition or state other
"forward-looking" information. A number of important factors could cause actual
results to differ materially from those in the forward-looking statements. Some
factors include inflation, government regulations, and economic conditions and
competition in the geographic areas in which we conduct our operations. For a
discussion of factors that could cause actual results to differ please see the
discussion under "Risk Factors" contained in this prospectus generally, and in
other factors noted throughout this prospectus.^
USE OF PROCEEDS
The only proceeds we expect to receive will be from the exercise of the
warrants. However, pursuant to the terms of the warrants, the holders of the
warrants have a ^ cashless exercise ^ option. The cashless exercise option
permits the holders of the warrants to exercise the warrants without paying to
us the exercise price of the warrant. Instead, the holders of the warrants would
receive an amount of common stock with a dollar value that is equal to the
difference between the market price of the common stock less the exercise price
of the warrant multiplied by the number of warrants owned by the holder thereof.
In such a case, we would not receive any funds. In the event the holders of all
the outstanding warrants elect to exercise the warrants by paying the exercise
price of the warrants, we will receive a maximum of $22,500. Any proceeds
received by us will be applied towards the expenses of this offering which we
estimate to be $30,000.
DIVIDENDS
To date, we have paid no dividends on our common stock and our ^ board
of ^ directors has no present intention to pay dividends on its ^ common stock
in the foreseeable future. See "Description of Securities." The payment of
dividends in the future, if any, rests solely within the discretion of our ^
board of ^ directors. Our future dividend policy will depend upon, among other
things, our earnings, capital requirements and financial condition, as well as
other factors deemed relevant by our ^ board of ^ directors. Although we are not
limited to pay dividends by any agreements, we anticipate that future
agreements, if any, with institutional lenders or others may limit our ability
to pay dividends.
12
<PAGE>
DILUTION
Our present shareholders have acquired their shares of common stock and
a controlling interest in us, at a cost that is substantially less than which
you may purchase shares. Net tangible book value represents the amount of our
tangible assets, reduced by the amount of our liabilities, and it is a means to
determine the dollar value of our common stock. At ^ March 31, ^ 1999, our net
tangible book value ^(defecit) was ^($893,622), or ^($.04) per share based on ^
22,048,011 shares of common stock outstanding. When our net tangible book value
per share is adjusted to take into account the sale of $225,000 of debentures
and the receipt of $22,500 of proceeds from the exercise of 127,842 warrants,
our net tangible book value (deficit) as of ^ March 31, ^ 1999 would be
approximately ^($646,122), or ($.03) per share. This means that you will
experience an immediate dilution (the difference between the offering price of
the shares and the net tangible book value per share after the Offering) per
share of approximately ^ $.30 (or ^ 111%).
The following table illustrates the per share dilution:
<TABLE>
<CAPTION>
Per Share of
Common Stock
<S> <C> <C>
Assumed public offering price ^ $0.27
Net tangible book value at ^ March 31^ 1999 $(0.04)
Increase in net tangible book value attributable
to new investors ^ $0.01
Net tangible book value after this offering ^ $0.03
- -----
Dilution of net tangible book value to new ^ $0.30
= =====
investors
</TABLE>
13
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of ^ March 31,
1999 and as adjusted to reflect:
o the sale of $225,000 of debentures and the conversion of such
debentures into 6,098,630 shares of common stock
o the receipt of $22,500 upon the exercise of warrants into
127,841 shares of common stock
o the issuance of 100,000 shares of common stock in connection
with consulting and legal services rendered
o the issuance of 500,000 shares of common stock issuable to
Coleman Capital Partners Ltd. pursuant to its advisory
agreement with us, dated January 11, 1999
This table should be reviewed in conjunction with our ^ financial statements
which begin at the end of this ^ prospectus on page F-1.
<TABLE>
<CAPTION>
^ March 31, ^ 1999
Actual As
Adjusted^
<S> <C> <C> <C> <C>
Long-term debt, less current maturities...................... $ ^ 323,007 $ ^ 323,007
Shareholders' equity:
Common stock, $.01 par value, ^ 22,048,011
issued and outstanding; ^ 28,874,481 issued
and outstanding, as adjusted............................. ^ 220,480 ^ 288,745
Additional paid-in-capital................................... 4,165,410 ^ 4,165,410
Net paid in capital for subscribed........................... 178,535 178,535
Paid in capital for warrants exercised....................... 22,500
Foreign currency translation adjustment...................... ^ 330,335 330,335
Deficit...................................................... (5,788,381) (5,788,381)^
----------- ------------
Total shareholders' equity.......................... (893,622) (802,856)
--------- ---------
Total capitalization....................... ^ $ $
(570,615)^ ^(479,849)
==================== ===================
</TABLE>
^
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements and notes thereto included at the end of this ^ prospectus beginning
on page F-1. This discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include but are not limited to those discussed in "Risk
Factors."
Results of Operations
^ Nine Months ended March 31, 1999 Compared to Nine Months Ended March 31, 1998
Sales. Total sales decreased ^ 4% to $808,839 for the nine months ended
March 31, 1999, from $844,363 for the nine months ended March 31, 1998. This
decrease in sales was attributable to ^ pricing adjustments. A larger percentage
of this period revenues were for processing services where the materials used in
production are provided by the customer. Accordingly, ^ this decrease in sales
was offset by a corresponding decrease in material costs ^.
Gross Margins. Gross margins, as a percentage of net sales, increased to ^
32.3% during the ^ nine months ended ^ March 31, ^ 1999, from ^ 11.2% for the ^
nine months ended ^ March 31, 1998. This increase was due^ to change in pricing
arrangements and mix of business.
Financial and Interest Expense. Financial and interest expense decreased ^
38% or $33,359 from the nine months ended March 31, 1998, through the nine
months ended March 31, 1999. This change was a result of the elimination of the
^ Dow debts in the fourth quarter of fiscal 1998 and the resultant decline in ^
related expense and improved foreign currency rates.
Administrative Expense. Administrative expense increased to ^ $119,399 for
the nine months ended March 31, 1999, as compared to $100,001 for the nine
months ended March 31, 1998. This increase is attributable in part to
expenditures on seeking financing and legal expense relating to amending our
certificate of incorporation.
Research and Development and Selling Expenses. Research and development
expenses decreased ^ $15,183 to $61,989 for the nine months ended March 31,
1999, compared to $77,172 for the nine months ended March 31, 1998. This
decrease was due to resources being redirected to manufacturing and sales
expenses. Selling expenses increased ^ $5,025 to $61,605 for the nine months
ended March 31, 1999, compared to $56,580 for the nine months ended March 31,
1998. This increase is attributable the increase in marketing our new product
Morfoam.
Fiscal Year Ended June 30, 1998 Compared to Fiscal Year Ended June 30, 1997
Sales. Total sales decreased 16% to $1,185,091 for fiscal year ended 1998
from $1,414,062 for fiscal year ended 1997. Sales during fiscal 1998,
particularly sales of proprietary products, were significantly less than we
anticipated. While our products were widely accepted for use in the
manufacturing of our customer's products, acceptance in the marketplace by
end-users of our customers products was slow, thus, having an adverse effect on
sales. For example, we manufacture a composite of
15
<PAGE>
metal and plastic. The composite is used in lieu of lead in the manufacture of
munitions. We anticipated that legislation banning the use of munitions products
composed of lead would boost sales; however, such legislation was never passed.
Additionally, sales to customers of specialty compounding materials were lower
in fiscal 1998 as a result of our customers' difficulties in marketing new
munitions products which resulted in decreased demand for our products.
Sales by geographic area for fiscal years ended 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
Geographic Area 1998 1997
- ---------- ---- ---- ----
<S> <C> <C>
United States $ 33,277 $ 549,953
Ontario, Canada 1,104,222 864,031
Quebec, Canada 47,560 -
-------------------- -------------------
$ 1,185,059 $ 1,414,062
==================== ===================
</TABLE>
Sales by product line for fiscal years ended 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
Product Line 1998 1997
- ------- ---- ---- ----
<S> <C> <C>
Specialty Compounding $1,153,433 $1,280,496
(including Composite
Technology)
^ Polymer Technology ^ 20,075 93,850
Miscellaneous ^ 32,690 39,368
--------------- ---------------
^ $1,413,984
=============== ===============
</TABLE>
Gross Margins. Gross margins, as a percentage of net sales, increased to
17% during fiscal year ended June 30, 1998, from 13% for the fiscal year ended
June 30,1997. This increase was due, in part, to a shift in pricing arrangements
with some of our customers. For example, a number of our customers will purchase
and provide us with the raw materials necessary to make the compounds ordered.
As such, the purchase of raw materials is not included in invoiced sales, thus,
costs of sales are reduced and gross margins have increased.
Financial and Interest Expense. Financial and interest expense decreased
10.6%, or $12,655, from fiscal year ended 1997 through fiscal year ended 1998.
Decreases in our average indebtedness outstanding was the primary contributing
factor; however, less favorable foreign currency exchange between the Canadian
and U.S. dollars diluted the effect of decreased average indebtedness.
Administrative Expense. Administrative expense increased to $146,789 for
fiscal year ended June 30, 1998, as compared to $137,373 for fiscal year ended
June 30, 1997. This increase in attributable to our increased efforts to seek
financing.
Research and Development and Selling Expenses. Research and development
expenses increased $12,649 to $94,874 for fiscal year ended June 30 1998,
compared to $82,225 for fiscal year ended June 30, 1997. Selling expenses
increased $12,649 to $94,874 for fiscal year ended June 30 1998, compared to
$82,225 for fiscal year ended June 30, 1997. Increases in research and
development and selling expenses is attributable to the development of
technology related to its our new product ^ MORFOAM and our endeavors in
introducing the product to the marketplace.
16
<PAGE>
Liquidity and Capital Resources
^ Cash flows resulting from the issue of restricted common stock,
shareholders loans and cash provided from the conclusion of a private offering
under Regulation D of the Securities Act of 1933, enabled the us to remain
current on debt repayments to vendors. Our last two financial quarters have bben
profitable, however, previous operating losses, monthly debt service
requirements ^ leave us in a position where we are unable to meet our monthly
cash flow requirements.
During the first nine months of fiscal 1999 we issued restricted common
stock in consideration of current debt and services in the amount of $108,221.
Additionally, through private placement of our restricted common stock, an
infusion of $72,811 capital was effected.
Our long term debt financing arrangements with Innovative Ontario
Corporation and FBX Holdings are presently past due. The aggregate amount of
principal payments currently in arrears and outstanding on this debt is
$376,296. Both of these creditors have verbally agreed to allow a moratorium on
principal repayments until we are in a financial position to make payment(s) or
alternate arrangements can be completed. We have entered into negotiations with
Innovative Ontario to eliminate all debt, plus accrued and unpaid interest,
which totals ^ $332,049 in exchange for shares of common stock. We cannot assure
you that we will be successful in reaching an agreement with Innovative Ontario
Corporation; however, Innovative Ontario Corporation has indicated it's
willingness to negotiate an equitable settlement.
In July 1997, we had tentatively refinanced our note payable due to Cooper
Financial Corp. This obligatio, is guaranteed by a shareholder. A refinancing
charge was assessed, increasing the principal owed to $143,000. At March 31,
1999, we were current with the new loan provisions; with a payable balance of
$100,572. We have been maintaining monthly payments of $3,150. Interest charged
is 10% per annum calculated over a period of 57 months. The term of the
obligation is twenty four months and a ballon payment of $91,208 was due on June
30, 1999. To date we have not made this ballon payment, hiowever we have come to
an agreement with principal. This $91,208 balance will be paid out at 10% per
annum payable over 35 installments with a final payment of $953.67.
In June 1998, we finalized a transfer of technology in exchange for debt
agreement with Dow Chemical Canada Inc. and The Dow Chemical Company (
collectively "Dow"). We transferred to Dow title and ownership in our existing
intellectual property rights (including all proprietary knowledge, patents and
patent applications) relating to halogen free, flame retardant thermoplastic
composition technology and smelt filler technology. Dow granted us a
non-exclusive, non transferable, royalty free world-wide license for use of the
technology, pursuant to which, Dow has access on, at least, a non-exclusive
basis to improvements we make in the technology. Dow, in turn, released Mortile
from its CND$767,499.68 debt obligations to Dow, plus ^ CND$284,873.81 accrued
and unpaid interest owed on the debt. Dow also released us and Frank Mortimer,
our President, from guarantees made by both in connection to such debt. As a
result of the transfer of technology to Dow, we realized a net gain of $693,415,
which is reflected in our financial statements for fiscal year ended June 30,
1998.
During fiscal 1998, we received a Canadian research and development tax
refund from fiscal year ended 1996 in the amount of ^ CDN.$19,680. We also
submitted a claim for fiscal 1997 amounting to approximately ^ CDN.$34,000, for
which we received a refund of ^ CDN.$26,000. This refund was recognized in the
fiscal year ended June 30, 1998. We received an additional provincial refund of
approximately ^ CDN.$8,000 during the first financial quarter of fiscal 1999 in
connection with our 1997 tax filing. Additionally, we will file a claim for
fiscal 1998 of approximately ^ CDN.$35,000. Revenue
17
<PAGE>
Canada, the Canadian federal tax authority, has notified us of its intent to
audit all submitted claims. We do not consider these funds (assuming the refund
claims listed above are accepted) to be a long-term solution to our financial
needs. We are making efforts to find additional financing; however, our ^
financial condition has hindered us in our pursuit of acceptable financing
arrangements. We will give serious consideration to raising additional funds
through private or public equity ^ issuances in the future if we deem that it is
in our best interest and that such financing is in the best interest of our
stockholders.
In late July, by amendment to ^ our certificate of incorporation, our
capital structure was modified to increase the number of authorized common
shares from fifteen million to fifty million. On February 5, 1999, we completed
a private offering of 8% convertible debentures and common stock purchase
warrants. Pursuant to the offering, we sold an aggregate of $225,000 of
debentures and common stock purchase warrants. The debentures are convertible at
the option of the holders thereof, into a minimum aggregate of 1,278,409 shares
of our common stock. The warrants are exercisable at an exercise price of $.176
per share into 127,842 shares of our common stock. The aggregate gross proceeds
from the offering was $225,000, of which we received $191,520, after deducting
the expenses of the offering. The net proceeds of the offering was used for
working capital purposes. We believe that the proceeds of the offering will be
sufficient to meet our capital needs for the next three months.
On January 11, 1999, we entered into an advisory agreement with Coleman
Capital Partners Ltd., whereby Coleman agreed to advise and assist us with,
among other things, raising capital, arranging ^ road shows ^ and other formal
presentations to the investing community and listing our common stock on NASDAQ
or a major stock exchange in the United States and Europe. For the services
Coleman will perform, Coleman will receive $5,000 per month, an aggregate of
550,000 shares of common stock, of which 50,000 shares have been issued, plus a
cash fee of eight percent of the total gross proceeds raised in any capital
raising transaction for our benefit. The term of the advisory agreement is for
one year and it can be renewed or restructures with the written consent of both
parties. The advisory agreement can be terminated by either party ^ at the
following intervals:
on day 91 following the date of the advisory agreement; on day 121 following the
date of the advisory agreement; on day 151 following the date of the advisory
agreement; on day 181 following the date of the advisory agreement; or on day
271 following the date of the advisory agreement.
To date, we do not have any planned material capital expenditures in the
next twelve months.
Operating Trends and Uncertainty
Our ability to attain a profitable level of operations is dependent upon
expansion of sales volume, both domestically and internationally, and continued
development of new, advanced products. We believe that we will increase sales
with the continued release of new products, market expansion, and the addition
of new customers.
As previously discussed, we have developed a number of component products,
used in the manufacture of end-use products, that are alternatives to hazardous
component materials, such as lead. We have developed such products in
anticipation of legislation, including environmental regulations, that will ban
the use of these hazardous materials. A number of our products are poised for
tremendous success should certain legislation be enacted. For example, there are
several projects within the realm of the metal
18
<PAGE>
technology that we are currently assessing which could represent major sources
of revenue. 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 uses for this product are light weight x-ray blankets,
self lubricating bearings and bushings, components for the toy industry and any
lead replacement industry.
Although some of our products are more costly than more hazardous
alternatives, some manufacturers of end-use products have elected to use our
materials in the manufacture of their products. For example, Lucent Technologies
Corp. has specified our flame retardant material for use in their fiber optic
products and we presently manufacture a product for a munitions manufacturer
that is used in lieu of lead. We believe that there are indications that there
has been a recent increase in public pressure to ban the use of certain
hazardous materials, particularly lead. However, in the absence of specific
legislation banning the use of such materials, the growth in sales of certain of
our products may be slow or certain of our products may never achieve market
acceptance.
Specialty (Contract) Compounding represented 98% of our revenues during
1998. We continue to submit bids and quotes on further contract work, and we
actively look for suitable applications for our compounding technologies. We
expect an increase in future sales of masterbatch powders and plastics. See the
section "Business-Specialty Compounding" for a discussion of masterbatch powders
and plastics.
We have worked very closely for over two years with a few major customers,
including MLBC International, on the development of technology relating to the
compounding of masterbatch powders and plastics. Each of these customers has
appointed us as the compounder in connection with their masterbatch compounding
needs. We expect substantial orders over a long period in connection with our
efforts. We have entered into a three year contract with MLBC for the supply of
masterbatch compounds. We commenced manufacturing for MLBC in early March 1998.
Should specialty compounding sales to MLBC increase substantially, we will need
to expand our manufacturing facilities.
Effect of the Declining Value of the Canadian Dollar on Our Business
We do not anticipate that recent declines in the value of the Canadian
dollar, as compared to the U.S. dollar, will have a material adverse effect on
our business operations or financial results. Nearly all of our raw materials
and operating costs are realized in Canada, and nearly all of our sales are to
customers in Canada. Should we be required to purchase raw materials in the
United States or other foreign countries, we incorporate any price increase into
invoiced sales.
Effect of the Year 2000 Issue on the Our Operations
Many existing computer programs use only a two digit suffix to identify a
year in the date field with an assumed prefix of "19". Consequently, this limits
those systems to dates between 1900 and 1999. If not corrected, many computer
systems and applications could fail or create erroneous results at or in
connection with applications after the year 2000.
We undertaken to review the potential impact of the Year 2000 issue to
our internal operations. Such assessment has included a review of the impact of
the issue in primarily four areas: products, manufacturing systems, business
systems and miscellaneous/other areas. Based on the results of our review, we do
not anticipate that the Year 2000 issue will impact operations or operating
results. We have determined that all
19
<PAGE>
of our systems are currently Year 2000 compliant.
We rely on our customers, suppliers, utility service providers, financial
institutions and other partners in order to continue normal business operations.
We have been advised by most, if not all, of our external vendors, business
associates and associated financial institutions that they are now Year 2000
compliant. However, at this time, it is impossible to assess the impact of the
Year 2000 issue on each of these organizations. There can be no guarantee that
the systems of other unrelated entities on which we will be corrected on a
timely basis and will not have a material adverse effect on us. Our task force
has identified the other organizations which are critical to our continued
operations.
20
<PAGE>
BUSINESS
Introduction
We were formed on June 14, 1985 in the state of New York. Our primary
purpose was to search for a business which, in the opinion of management,
demonstrated long-term growth potential that would warrant involvement.
Presently, our only operating subsidiary is Mortile Industries Ltd.^, a Canadian
corporation which we have a 70% interest. Our present operations, assets and
employees are primarily those of Mortile.
Through Mortile, we are engaged in the design, development and
manufacture of highly engineered products made primarily from specially
formulated high performance polymer materials. Our products are used in a wide
range of applications primarily by manufacturers of end-use products. We focus
on niche markets and applications for which we can provide our customers
application-specific product solutions based on our polymer based materials
technology, engineering expertise and production technology. Our products and
technologies are sold to manufacturers and industrial aftermarket equipment and
maintenance providers in the industrial equipment, transportation, electronics,
munitions and process industries markets.
Our business is comprised of three distinct industrial units:
o Specialty compounding
o Polymer technologies
o Composite technology
Specialty Compounding
Over 98% of our revenues for fiscal year end 1998, and the majority of
our efforts, to date, have been concentrated on specialty compounding. In this
business unit, our customers retain us to enhance and compound its proprietary
formulations into a pellet form. To complete the compounding process, a customer
would designate the mix components it requires. With the assistance of our
customer, we formulate the most effective and efficient method to mix the
components. Once a method for mixing is determined, we physically mix the
components. The end-product of mixed components is called a ^ masterbatch, ^ and
in certain cases, we convert the masterbatch into a pelletized form. Typical
masterbatches are: foaming agents, sulphur, zinc oxide, flame retardants, curing
agents, processing aids, antioxidant stabilizers and slip and anti block agents.
Customers who retain us for specialty compounding are, typically,
manufacturers of plastics and plastic products. Generally, it is not necessary
for manufacturers of these products to compound component materials into a
pelletized form prior to manufacturing end-products. However, an increase number
of manufacturers prefer this process because it provides for a more perfect
dispersion of component materials which are often in powder form. Specialty
compounding is particularly useful when manufacturing components are reactive.
Reactive components are used in the curing or cross-linking of rubber or
plastic. Additionally, because powder components are difficult to work with,
manufactures prefer to work with masterbatches as there are less environmental
risks when working with components in a pelletized form.
During fiscal year 1998, we worked closely with three customers
developing compounding methodology for each customer's proprietary component
formulations. We provided compounding services
21
<PAGE>
for Shaw Industries Ltd. in connection with Shaw's formulation ^ for a variety
of proprietary formulations for industrial pipe wrap and coating. We provide
compounding services for MLPC International in connection with MLPC's
formulation for various proprietary rubber curing compounds, and for FinProject
in connection with FinProject's proprietary formulation for the footwear
industry. For the six month period ended December 31, 1998, we continued to
provide compounding services for these customers.
The following table lists amount of revenues in Canadian dollars
generated by each of these customers, and the revenues as a percentage of our
total revenues for the ^ nine month period ended ^ March 31, ^ 1999 and for
fiscal year ended June 30, 1998: <TABLE> <CAPTION>
^ Nine Months Ended Fiscal Year Ended
Customer ^ March 31, ^ 1999 June 30, 1998
- -------- - ----- --- - ---- ---- --- ----
<S> <C> <C> <C> <C>
Shaw Industries ^ $497,100 40% $698,583 41%
MLPC International ^ 214,749 17% 277,980 16%
SNC Industrial
Technologies 197,648 16% 0% 0%
FinProject ^ 42,325 3.4% 0% 0%
Endex Polymer
Additives 0 0% 312,576 18%
</TABLE>
Composite Technology
We are also engaged in sale of products that are developed and
manufactured using composite technology. The object of composite technology is
to mix plastic binders with fine granulated material, such as fine metal
powders. The end result is a material that is both strong and durable, yet has
flexible design options as it can be used in injection molding applications.
Injection molding is a process by which a compound is heated to a fluid state
and injected into a cavity mold in the shape or form and density required. The
fluid compound flows to the shape of the mold and is cooled to a solid state and
then removed. Injection molding is a significantly less expensive alternative to
machining and die casting.
Using composite technology, we have successfully produced metal/plastic
compounds that can be used in many applications as a replacement for lead. We
presently supply this product for use in munitions, fishing sinkers and lures,
and for bushings in copiers and fax machines. We also expect to market lead
replacement compounds in the automotive, construction and additional areas of
the firearms markets. The sale of products manufactured using composite
technology represented ^ 16% of total revenues, or ^ CDN$197,648 during the ^
nine month period ended ^ March 31, ^ 1999.
Polymer Technologies
Approximately ^ CDN$26,174 (1.5%) of our total revenues during fiscal
year ended June 30, 1998, was derived from the sale of products which were
developed and manufactured using polymer technologies.
A polymer consists of chains of chemicals, called monomers, that
combine or polymerize (normally with help from a catalyst) to form large
molecular structures. Polymers are very versatile materials. They can be cast
into molds to create intricate structures, extruded through a spinneret to make
fibers, blended with
22
<PAGE>
liquids including water to make coatings, adhesives and thickeners and generally
bonded to other materials or each other with adhesives. As a result, polymers
have replaced, and continue to replace, natural products such as metal, wood,
paper, cotton and glass in a broad range of applications. Moreover, substitution
is not driven primarily by cost, but by the increasing desirability of polymers
based on their versatility and performance characteristics. Two common types of
polymers are thermoplastics and thermosets which, collectively, are referred to
as plastics.
Thermoplastics are the most common synthetic polymers. They are
relatively inexpensive, light and durable, but not particularly strong.
Thermoplastics can be melted at relatively low temperatures and recrystallized,
thus making them recyclable. They are used in structural applications where
exposure to high stresses and heat are concerns. Common thermoplastics include
polyethylene, polypropylene, polystyrene, polyvinyl chloride and most polyester.
Thermosets polymerize at relatively high temperatures, normally through
mixing with an initiation compound. During polymerization they are cross-linked,
a process that increases their strength and durability relative to
thermoplastics. They are generally stronger, more heat resistant and more
difficult to process than thermoplastics. Common thermosets include epoxies,
most polyurethanes, unsaturated polyester, melamine and phenolics. Thermosets,
however, cannot be remelted or recycled.
In light of growing environmental pollution concerns, we expect that
the plastics industry will be forced by legislation to develop and manufacture
plastics that are recyclable. The plastics industry has undertaken extensive
research to develop cost-effective thermoplastic products which are both durable
and flame retardant; particularly for applications in the wire cable and
construction industries.
Flame resistant polymer compositions have been available for many
years. However, such compositions relied on the presence of ^ halogens to yield
flame retardancy. Halogens are gases which, on combustion, emit toxins,
including cyanide, bromide, sulphur and phosphoric gas. Concerns by
environmentalists world-wide have resulted in increased pressure on
manufacturers of polymer-based products to eliminate plastics with such
potential dangers.
We ^ develop, manufacture and sell a flame retardant, non-toxic,
thermoplastic compound that is corrosion resistant, minimizes the hazards of
fire and can be easily processed into end-use products. We have conducted
extensive research and testing with regard to the use of this product in the
construction and transportation industries, because of their greater ease of use
in fabrication and their ability to be recycled, and trimmed into scrap^. In
addition, we have researched and tested this compound and for use in
applications such as wire cable, fiber optics, injection and rotational molding,
and petrochemical containment.
Our performance test results have concluded that our thermoplastic
products, when burned, emit none of the aforementioned toxins. Additionally, our
products possess anticombustion, low toxicity and anticorrosive attributes
considered to be superior to other products presently available. Although the
sale of our thermoplastic products has not represented a significant portion of
our revenues to date, we believe that these products have significant market
potential.
In June 1998, we entered into an agreement with Dow Chemical Canada and
Dow Chemical to transfer the rights to the technology we developed with regard
to the production of flame retardant thermoplastics and smelt fillers in
exchange for satisfaction of a debt we owed to Dow. However, pursuant to this
agreement, we continue to enhance, manufacture and market this technology,
royalty free. See the
23
<PAGE>
section "Management's Discussion and Analysis of Financial Condition and Results
of Operations" beginning on page __, and the section "Certain Transactions" for
a discuss relating to our agreement with Dow.
MORFOAM. During the fourth quarter of fiscal 1998, we commenced
supplying samples of our new product ^ MORFOAM. MORFOAM is a chemical foaming
agent, pigment extender and a nucleating agent which reacts with process
temperatures to produce a fine cell structure in extrusion molded parts. ^ This
product technology combines chemical foaming and a nucleating agent in to one
easy to use masterbatch concentrate which is encapsulated in an olefin binder,
presented in pellet form to be easily blended or metered in to various polymers.
MORFOAM's fine particle size acts as a nucleating agent to form fine cell
structures in polymers. The product improves cell structure and reduces voids
when nitrogen is used as the primary foaming agent. This provides for improved
surface finishes, physical properties, and sink mark elimination, lower part
weight and shorter cycle times.
The product was developed for use in the following applications:
o Injection Molding
o Structural Foam Molding
o Blow Molding
o Extrusion (film, sheet, profiles)
Research and Development
Since inception, we have expended $3,005,100 in the development of our
products. During fiscal year ended June 30, 1999, we expended $94,874 on
research and development. Our research and development efforts have led to the
development and manufacture of our composite and polymer related products, and
the development of our specialty compounding technologies. We maintain
continuous dialogue with our customers and technology partners to ensure that
our products and technologies incorporate features that are essential for our ^
customers' rapidly evolving requirements.
Licenses
In June 1998, The Dow Chemical Company has granted us a non-exclusive,
non transferable, royalty free world-wide license for use of technology,
pursuant to which, Dow has access on, at least, a non-exclusive basis to
improvements we make relating to halogen free, flame retardant thermoplastic
composition technology and smelt filler technology for an indefinite period.
This license was granted to us in connection with our agreement to transfer this
technology to Dow in exchange for being release from certain debts owed by us to
Dow. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" beginning on page __ ^.
Employees
As of ^ March 31, ^ 1999, we employed ^ thirteen full time employees of
which seven were engaged in manufacturing and quality control, three in general
administration and executive activities and two in engineering and research and
development. We are not a party to any collective bargaining agreement and
consider our ^ relationships with ^ our employees to be good.
24
<PAGE>
Environmental Consideration
^ Technical Ventires has not incurred any significant environmental
compliance cost, and compliance with environmental regulation has not had a
material effect in our operation of financial condition. Our primary waste
products are non-toxic and non-corrosive and are disposed of by a private
sanitation company in accordance with all appropriate regulations.
Competition in Our Industry
We compete with some of the world's largest chemical companies, such as
Exxon Corp., E.I. DuPont De Nemours & Co., Union Carbide Corp., and Raychem
Corp. Our competitors are substantially larger than us in terms of financial,
marketing, and research and development resources.
25
<PAGE>
Our Competitive Advantages
Polymer Technology. Dow Chemical ^ and Lucent Technologies, have
licensed our technology after subjecting our product to a five year rating
program, has assigned our product the highest quality rating 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 for
high rise buildings. ^
Composite Technology. We have achieved the highest filler levels to
obtain maximum specific gravity and have no competition. Our composite for
bushings for copiers and fax machines is extremely difficult, if not impossible,
to reverse engineer.
Specialty Compounding. We believe we have three distinct advantages,
equipment, personnel and size. Our equipment was selected to allow for superior
dispersion in connection with proprietary polymer technology and composite
technology. The Our personnel and our associations with consulting scientists
and chemist enables us to work closely and co-operatively with our customers to
meet their needs. Our size allows us to direct immediate attention to existing
and potential customers in a cost effective and timely manner. We direct our
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 and
excellent dispersion of powders into the resins and nitrogen blankets for
cooling in high humidity.
Property
We lease our headquarters, an 8,500 square foot ^ office space and
production facility, located at 3411 McNicoll Avenue, Scarborough, Ontario,
Canada. In July 1997, we leased an additional 8,800 square feet of spcae for
storage of raw materials. We pay ^ monthly rent of ^ CDN.$6,397, exclusive of
real estate tax escalations. The lease on the 8,500 square foot facility expires
on March 31, 1999, and the lease on the additional 8,800 square foot facility
expires on June 30, 1999.
Legal Proceedings
A legal action has been commenced against Technical Ventures, its
subsidiary, Mortile Industries Ltd., Their President, Frank Mortimer and the Dow
Chemical Company, on June 4, 1999 in the Ontario Superior Court of Justice
(Commercial List); by a former customer, Endex Polymer Additives Inc., Endex
Polymer Additives Inc. (USA), Endex International Limited and G. Mooney And
Associates.
The claims allege breach of secrecy agreements, fiduciary duty and
misuse of Endex confidential information. The Plaintiffs are seeking CND$10
million compensatory damages, further punitive damages of CND$1 million and
interlocutory and permanent injunctions.
After submission of the Defendants' evidence, the Plaintiffs abandoned
their claim for an interim injunction. The Defendants have moved for an
expeditious trial. The Court has ordered the parties to combine the examination
for injunction proceedings with those for the preparation for trial.
Based on prior written legal opinion from its patent attorneys that the
allegations are without merit, Technical Ventures has retained a law firm
specializing in Intellectual Property Law and is vigorously defending the
action.
26
<PAGE>
The injunction motion is to be heard on September 16/17th, 1999. The
Dow Chemical Company is defending separately ^.
Address
Our principal executive offices are located at 3411 McNicoll Avenue,
Unit 11, Scarborough, Ontario, Canada M1V 2V6.
27
<PAGE>
MANAGEMENT
The following table sets forth certain information regarding our
executive officers and directors. There are no family relationships among our
directors and executive officers.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Frank Mortimer ^ 60 President and Director
Bryan Carter ^ 78 Vice President and Director
Larry Leverton ^ 60 Secretary, Treasurer and Director
</TABLE>
Frank Mortimer has been President and a Director ^ since April 1986. He
is also President of Fam Tile Restoration Services ^ Ltd., a company
specializing in the restoration of acoustical ceilings. FAM is one of Mortile's
wholly owned subsidiaries and is presently inactive. 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 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 businesses. 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 molding 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 molding industry in North America and in 1982 served as
the International President of Rotational Moulders.
Larry Leverton has been Secretary and Treasurer 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.
Directors serve until the next annual meeting of stockholders or until
their successors are elected and qualified. Officers serve at the discretion of
the ^ board of ^ directors. Directors do not currently receive fees for their
services as directors, but are reimbursed for travel expenses.
28
<PAGE>
Executive Compensation
The following table sets forth ^ summary information with respect to
the compensation paid Frank Mortimer, our President, for services rendered in
all capacities to ^ us for the fiscal years ended June 30, 1998, 1997 and 1996.
Other than as listed below, we had no executive officers whose total annual
salary and bonus exceeded $100,000 for that fiscal year:
<TABLE>
<CAPTION>
Long Term
Name and Compensation
Principal Other Annual All Other Awards/
Position Year Salary Compensation Bonus Compensation Option ^
<S> <C> <C> <C> <C> <C> <C>
Frank Mortimer, 1998 $63,450 - - - -
President 1997 $66,000 - - - -
1996 $66,000 - - - -
</TABLE>
Employment Arrangements
Presently, none of our officers or directors are employed pursuant to
an employment agreement.
29
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the
beneficial ownership of our outstanding common stock known by us as of ^ March
31, ^ 1999 after giving effect to:
^o the sale of 50,000 shares of common stock upon exercise of
options which are outstanding
^o the sale of 50,000 shares of common stock upon the conversion
of debt which is outstanding
^o the sale of the our common stock offered ^.
Also, the following table sets forth the information with respect to:
^o each person or entity known by us to be the beneficial owner
of more than 5% of our common stock
^o each of our directors who owns any shares of our common stock
^o each of our named executive officers set forth in the
Executive Compensation table above who beneficially owns any
shares of our common stock
^o all of our directors and named executive officers as a group.
Except as otherwise indicated, the persons listed below have sole voting and
investment power with respect to all shares of our common stock owned by them,
except to the extent such power may be shared with a spouse.
<TABLE>
<CAPTION>
Number of Shares Approximate
Beneficially Percentage of
Name Owned^ Common Stock
- ---- ------ ------------
<S> <C> <C> <C>
Frank Mortimer ^(1) 2,199,753 ^ 9.9%
Larry Leverton ^(2) 591,448 ^ 2.7%
Bryan Carter 165,000 ^ 0.7%
All Officers and
Directors as a group 2,956,201 ^ 12.4%
^(3)
- ------------------
</TABLE>
Except as noted above, the address for the above identified officers
and directors is care of Technical Ventures Inc., 3411 McNicoll Avenue, Unit 11,
Scarborough, Ontario, Canada M1V 2V6.
(1)^ Includes 453,020 shares owned by Mr. Mortimer's wife and 200,000
shares owned by Mr. Mortimer's son.
^(2) All shares are owned in the name of L.R. Leverton Enterprises^ Inc., a
corporation owned and controlled by Larry Leverton.
(3) Presently, none of ^ our officers or directors own options, warrants or
other securities which are convertible into the common stock, nor do we have a
plan for the issuance of options or securities to purchase shares of our common
stock.
30
<PAGE>
CERTAIN RELATED TRANSACTIONS
In June 1998, we finalized a transfer of technology in exchange for
debt agreement with Dow Chemical Canada Inc. and The Dow Chemical Company. We
transferred to Dow title and ownership in our existing intellectual property
rights (including all proprietary knowledge, patents and patent applications)
relating to halogen free, flame retardant thermoplastic composition technology
and smelt filler technology. Dow granted us a non-exclusive, non transferable,
royalty free world-wide license for use of the technology, pursuant to which,
Dow has access on, at least, a non-exclusive basis to improvements we make in
the technology. Dow, in turn, released Mortile from its CND$767,499.68 debt
obligations to Dow, plus ^ CND$284,873.81 accrued and unpaid interest owed on
the debt. Dow also released us and Frank Mortimer, our President, from
guarantees made by both in connection ^ with this debt.
This transaction was not made on terms less favorable to Technical
Ventures than those from third parties.
DESCRIPTION OF OUR SECURITIES
The following description of our securities ^ and selected provisions
of our certificate of incorporation and bylaws is a summary and is qualified in
its entirety by reference to such documents and New York Law.
Common Stock
Our authorized capital stock consists of 50,000,000 shares of common
stock, $.01 par value per share. As of the date of this Prospectus, 22,048,011
shares of our common stock are issued and outstanding. Holders of our common
stock will have the right to cast one vote for each share held of record on all
matters submitted to a vote of our stockholders, including the election of
directors. There is no right to cumulate votes for the election of directors.
Stockholders holding a majority of the voting power of the capital stock issued
and outstanding and entitled to vote, represented in person or by proxy, are
necessary to constitute a quorum at any meeting of our stockholders, and the
vote by the holders of a majority of such outstanding shares is required to
effect certain fundamental corporate changes such as liquidation, merger or
amendment of our Certificate of Incorporation.
Holders of our common stock are entitled to receive dividends pro rata
based on the number of shares held, when, as and if declared by ^ our board of
directors, from funds legally available therefor. In the event of the
liquidation, dissolution or winding up of our affairs, all of our assets and
funds remaining after the payment of all debts and other liabilities, shall be
distributed, pro rata, among holders of our common stock. Holders of our common
stock are not entitled to preemptive or subscription or conversion rights, and
there are no redemption or sinking fund provisions applicable to our common
stock. All outstanding shares of our common stock are, and the shares of our
common stock offered hereby will be when issued, fully paid and non-assessable.
Warrants
On January 27, 1999, we issued warrants representing the right to
purchase shares of our common stock. There will be 127,842 shares of common
stock underlying the warrants at an exercise price of $.176 per share. The
expiration date of the warrants is January 31, 2002. All of the shares of common
stock
31
<PAGE>
underlying the warrants are being registered pursuant to the registration
statement filed in connection with this ^ prospectus.
The exercise prices of the warrants were determined by negotiation and
should not be construed to imply that any price increases in our securities will
occur. We have reserved from its authorized but unissued shares a sufficient
number of shares of our common stock for issuance upon the exercise of the
warrants. Upon notice to the warrant holders, we have the right to reduce the
exercise price or extend the expiration date of the warrants.
The warrants do not confer upon the warrant holder any voting or other
rights of a stockholder of our company. The warrants provide for customary
anti-dilution provisions in the event of certain events which may include
mergers, consolidations, reorganizations, recapitalizations, stock dividends,
stock splits and other changes in our capital structure.
The foregoing is a summary of the terms generally applicable to the
warrants as of the date of this ^ prospectus. The terms of the individual
warrants may vary according to negotiation between us and the various warrant
holders.
Options
Presently, there are options outstanding to purchase 50,000 shares of
our common stock at an exercise price of $.50 per share. All of such options are
presently exercisable and there is no termination date on the options.
Debentures
On January 27, 1999, we issued an aggregate of $225,000 principal
amount in 8% convertible debentures. Interest on the debentures is payable
quarterly and the principal on the debentures is due on January 31, 2002. From
and after the time that such principal amount on the debentures shall have
become due and payable (whether at maturity or by acceleration), interest shall
be payable, to the extent permitted by law, at the rate equal to the lesser of
(i) eighteen percent (18%) per annum or (ii) the maximum rate permitted by law,
on the entire unpaid principal amount of this ^ debenture.
Unpaid principal plus all accrued and unpaid interest and penalties on
the debentures is convertible at a conversion price that is the lesser of $.176
per share or 75% of the average closing bid price of our common stock on the 10
days prior to when a debenture is presented for conversion. Thus, the debentures
are convertible into a minimum of 1,278,409 shares of common stock. In the event
the registration statement (for which this ^ prospectus forms a part) covering
the shares of common issuable upon conversion of the debentures is not declared
effective by June 8, 1999, we shall pay to the holders of the debentures a
penalty of one-fifteenth of one percent of the principal amount of the notes for
each day beyond such date until such registration statement is declared
effective.
Convertible Promissory Notes
We have outstanding a $25,000 principal amount promissory note which is
payable upon demand of the holder thereof. Such note is convertible, at any
time, at the option of the holder thereof, into 50,000 shares of our common
stock.
32
<PAGE>
Trading Information
Our common stock is publicly traded on the Over-the-Counter Bulletin
Board, a regulated quotation service that captures and displays real-time quotes
and/or indications of interest in securities not listed on The NASDAQ Stock
Market or any U.S. exchange. As of December 31, 1998, the closing price for our
common stock was $0.26 and the 52 week high and low prices were $1.01 and $0.08,
respectively. Information as to trading volumes, and bid and asked prices, for
our common stock may be obtained directly from the Over-the-Counter Electronic
Bulletin Board.
The following table sets forth the high and low bid (price which a
market maker is willing to pay for our common stock) quotations for our common
stock, as reported to us by the Over-the-Counter Bulletin Board. These
quotations are between dealers, do not include retail mark-ups, markdowns or
other fees and commissions, and may not represent actual transactions.
<TABLE>
<CAPTION>
Quarter Low High
Bid Bid
<S> <C> <C> <C> <C>
September 30, 1996................................. $0.125 $0.070
December 31, 1996.................................. $0.045 $0.070
March 31, 1997..................................... $0.060 $0.070
June 30, 1997...................................... $0.165 $0.210
September 30, 1997................................. $0.200 $0.230
December 31, 1997.................................. $0.250 $0.280
March 31, 1998..................................... $0.150 $0.190
June ^ 30, 1998.................................... $0.300 $0.380
September 30, 1998................................. $.0789 $.4931
December 31, 1998.................................. $.1447 $.3422
March 31, 1999..................................... $.2105 $.3027
</TABLE>
As of ^ March 31, ^ 1999, there were ^ 1020 holders of our Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
If we sell all ^ 6,893,141 shares offered under this ^ prospectus,
28,9411,152 shares of our common stock will be outstanding, all of which will be
freely tradable without restriction or further registration under the Securities
Act, unless purchased or held by our "affiliates," as defined in Rule 144 of the
Securities Act ("Rule 144").
33
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the holders of our common stock who are
offering their shares of common stock pursuant to this ^ prospectus, and the
number of shares of common stock being offered by each person:
<TABLE>
<CAPTION>
Shares Owned Prior to Shares Owned
the Offering After the Offering
Number of
^ Selling Stockholders Shares
Offered
Number Percent Number Percent
<S> <C> <C> <C> <C> <C>
Gene Howland......................... ^ 5,396,275(1) 18.6% --- ---%
5,396,275(1)
William Hoops........................ ^ 830,196(2) 830,196(2) 2.9% --- ---
Coleman Capital Partners
Ltd.................................. 550,000(3) 550,000(3) 1.9% --- ---
Steven Hocke......................... 66,670(4) 66,670(4) * --- ---
Sichenzia, Ross &
Friedman LLP......................... ^ 50,000(5) 50,000(5) * --- ---
</TABLE>
* Indicates less than one percent of the total outstanding common stock.
- -----------------------
(1) On January 27, 1999, Gene Howland purchased an 8% convertible debenture
which is convertible into an estimated ^ 5,285,480 shares of common stock.
Additionally, Mr. Howland was issued warrants to purchase ^ 110,795 shares of
common stock at an exercise price of $.176 per share.
(2) On January 27, 1999, William Hoops purchased an 8% convertible debenture
which is convertible into an estimated ^ 813,151 shares of common stock.
Additionally, Mr. Hoops was issued warrants to purchase ^ 17,045 shares of
common stock at an exercise price of $.176 per share.
(3) Represents 50,000 shares of common stock issued to Coleman Capital Partners
Ltd., and an additional 500,000 shares of common stock to be issued Coleman
pursuant to its advisory agreement with us, dated January 11, 1999, in
consideration for consulting services rendered.
(4) Represents shares of common stock issued to Steven Hocke upon the conversion
of a $10,000 principal amount promissory note we previously issued to Mr. Hock.
(5) Represents shares of common stock issued to Sichenzia, Ross & Friedman LLP,
our counsel in the United States, in consideration for legal services rendered
on our behalf.
34
<PAGE>
^ PLAN OF DISTRIBUTION
Each stockholder selling securities pursuant to this offering is free
to offer and sell his or her shares of common stock at such times, in such
manner and at such prices as he or she shall determine. Such common shares may
be offered by selling stockholders in one or more types of transactions, which
may or may not involve brokers, dealers or cash transactions. The selling
stockholders may also use Rule 144 under the Securities Act, to sell such
securities, if they meet the criteria and conform to the requirements of such
Rule.
There is no underwriter or coordinating broker acting in connection
with the proposed sale of common stock by the selling stockholders. The selling
stockholders have advised us that sales of common stock may be effected from
time to time in ^ by the following events:
o transactions in the Over-the-Counter Bulletin Board, including block
transactions
o negotiated transactions
^o through the writing of options on the common stock
^o a combination of such methods of sale^ at fixed ^ prices which may be
changed, at market prices prevailing at the time of sale, or at
negotiated prices
^ The selling stockholders may effect such transactions by selling
common stock directly to purchasers or to or through broker/dealers which may
act as agents or principals. Such broker/dealers may receive compensation in the
form of discounts, concessions, or commissions from the selling stockholders ^.
The selling stockholders and any broker/dealers that act in connection
with the sale of the common stock might be deemed to be ^ "underwriters" within
them meaning of Section 2(11) of the Securities Act, and any commissions
received by them and any profit on the resale of the common stock as principal
might be deemed to be underwriting discounts and commissions under the
Securities Act. The selling stockholders may agree to indemnify any agent,
dealer or broker/dealer that participates in transactions involving sales of the
shares against certain liabilities, including liabilities arising under the
Securities Act. Because selling stockholders may be deemed to be ^
"underwriters" within the meaning of Section 2(11) of the Securities, they will
be subject to prospectus delivery requirements under the Securities Act.
Furthermore, in the event of a ^ distribution of his or her common
stock, any selling stockholder, any selling broker/dealer and any ^ affiliated
purchasers may be subject to Regulation M which prohibits any "stabilizing bid"
or "stabilizing purchase" for the purpose of pegging, fixing or stabilizing the
price of the common stock in connection with the offering.
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed
upon for us by our counsel, Sichenzia, Ross & Friedman LLP, 135 West 50th
Street, 20th Floor, New York, New York, 10020.
EXPERTS
Our financial statements for each of the two fiscal years in the
period ended June 30, 1998 and ^ 1997, appearing in this ^ prospectus have been
audited by Schwartz Levitsky Feldman, Chartered Accountants, to the extent and
for the periods set forth in their reports appearing elsewhere herein and in the
Registration Statement and are included in reliance upon such reports given upon
the authority of said firm as experts in accounting and auditing.
35
<PAGE>
^ WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement with the SEC on Form SB-2 relating
to the shares offered in this ^ prospectus. This ^ prospectus does not contain
all of the information included in the registration statement. For further
information about us and the shares we are offering in this ^ prospectus, refer
to the registration statement and its exhibits. The statements we make in this ^
prospectus regarding the content of any contract or other document are
necessarily not complete, and you may examine the copy of the contract or other
document that we filed as an exhibit to the registration statement. All our
statements about those contracts or other documents are qualified in their
entirety by referring you to the exhibits to the registration statement.
You should rely only on the information contained in this document or
that we have referred you to. We have not authorized anyone to provide you with
information that is different. The information contained in this document is
current as of the date this document was filed with the SEC. If any material
changes occur after such date, then we will notify you of the changes by an
amendment to this document. We are not offering to sell you securities if you
live in a jurisdiction where such an offer would be unlawful.
After the effective date of this offering, we intend to furnish to our
stockholders annual reports containing audited financial statements and interim
reports. We currently file annual, quarterly and special reports, proxy
statements and other information with the SEC. Such reports, proxy statements
and other information can be inspected and copied at the public reference
facility of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's Regional Offices located at Seven World
Trade Center, Suite 1300, New York, New York 10048, and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials can be obtained by
mail from the Public Reference Section of the SEC at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Our ^
common stock is traded in the over-the-counter market and is quoted on the
Over-the-Counter Bulletin Board and such reports, proxy statements and other
information concerning us may be inspected and copied at the offices of the
National Association of Securities Dealers, Inc., 9801 Washingtonian Boulevard,
Gaithersburg, Maryland 20878. In addition, we are required to file electronic
versions of these documents with the SEC through the SEC's Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system. The SEC maintains a World
Wide Web site at http://www.sec.gov that contains reports, proxy statements and
other information regarding registrants that file electronically with the SEC.
36
<PAGE>
<TABLE>
<CAPTION>
^
<S> <C>
^ 6,893,141 Shares
of Common Stock
^
TECHNICAL VENTURES INC.
---------------
^ Prospectus
---------------
Until _______, 1999 (25 days after the date of this Prospectus), all dealers
effecting transactions in the Common Stock, whether or not participating in this
distribution, may be required to deliver a Prospectus. This __________, 1999
is in addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
</TABLE>
<PAGE>
TECHNICAL VENTURES INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1998
<PAGE>
TECHNICAL VENTURES INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
<S> <C>
Independent Auditors' Report F - 2
Balance Sheet at June 30, 1998 June 30, 1997 and
at March 31, 1999 (unaudited) and March 31, 1998 (unaudited) F - 3
Statement of Operation for the years ended June 30, 1998 and 1997 and for
the nine month periods ended
March 31, 1999 (unaudited) and March 31, 1998 (unaudited) F - 4
Statement of Changes in Shareholders' Deficiency
for the years ended June 30, 1998 and June 30, 1997 F - 5
Statement of Cash Flows for the years ended June 30, 1998 and June 30,
1997and for the nine month periods ended
March 31, 1999 (unaudited) and March 31, 1998 (unaudited) F - 6
Notes to Consolidated financial statements F-8 - 17
</TABLE>
F - 1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Technical Ventures Inc.
We have audited the accompanying consolidated balance sheets of Technical
Venture (incorporated in New York State) as of June 30, 1998 and June 30, 1997
and the related consolidated statements of income, cash flows and changes in
stockholders' equity for the years ended June 30, 1998 and June 30, 1997. 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 with
generally accepted auditing standards in the United States of America. Those
standards required 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 June 3, 1997 and the results of its
operations and its cash flows for the years ended June 30, 1998and June 30, 1997
in conformity with generally accepted accounting principles in the United States
of America.
The company has sustained significant operating losses since its inception
as indicated in Note 7. There is substantial doubt as to the company's ability
to continue as a going concern if additional financing is not obtained.
Toronto, Ontario
September 30, 1998 Chartered Accountants
F - 2
<PAGE>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
Consolidated Balance Sheet
June 30, 1998 and 1997, and March 31, 1998 and 1997
<TABLE>
<CAPTION>
June 30, June 30, March 31, March 31,
1997 1998 1998 1999
$ $ $ $
(Unaudited - see note 1)
ASSETS
CURRENT ASSETS
<S> <C> <C> <C> <C>
Cash 23,772 17,605 11,830 27,388
Accounts receivable 166,660 118,140 43,458 171,320
Inventory (note 2) 36,170 34,663 37,360 64,209
Other current assets
Advances 38,374 35,904 39,422 58,403
Deposits 10,866 26,931 10,098 -
275,842 233,244 142,168 321,320
PROPERTY AND EQUIPMENT, at cost,
net of accumulated depreciation of
$471,334 at March 31, 1999
(note 3, 6, 10) 200,925 177,231 185,591 158,166
DEPOSITS - - - 11,753
INTANGIBLE ASSETS, net of accumulated
amortization of $5,219 at March 31,
1999 29,009 965 26,340 706
505,776 411,440 354,099 491,945
</TABLE>
APPROVED ON BEHALF OF THE BOARD
Director
Director
<PAGE>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
Consolidated Balance Sheet
June 30, 1998 and 1997, and March 31, 1998 and 1997
<TABLE>
<CAPTION>
June 30, June 30, March 31, March 31,
1997 1998 1998 1999
$ $ $ $
(Unaudited - see note 1)
LIABILITIES
CURRENT LIABILITIES
Current portion of long-term debt (note 6)
<S> <C> <C> <C> <C>
Bank overdraft 135,230 120,538 126,869 100,572
Notes payable (note 11) 79,638 77,594 78,275 77,198
Capital lease obligations 1,146,569 376,296 1,129,787 332,049
Other loans and advances:
Private lenders (note 10) 109,203 170,668 131,878 61,522
Shareholders, unsecured
interest free 23,543 147,653 22,890 173,251
Accounts payable and accrued
expenses 484,955 384,889 479,256 317,967
1,979,138 1,277,637 1,968,955 1,062,559
- -------
LONG-TERM DEBT, net of current portion (note 6)
Shareholder 337,407 330,022 347,593 296,973
Capital lease obligations 480 - - -
Other 51,181 52,891 59,304 26,034
STOCKHOLDERS' DEFICIENCY
COMMON STOCK $0.1 par value, 50,000,000
Shares authorized
Issued and outstanding, 21,948,011
shares at December 31, 1998 145,863 147,113 147,113 220,480
Additional paid in capital 4,048,994 4,056,744 4,056,744 4,165,410
Paid in capital-for common stock
subscribed - - - 178,535
Deficit (6,279,132) (5,759,538) (6,40,005) (5,788,381)
Foreign currency translation adjustment 221,844 306,571 264,395 330,335
Total stockholders' deficiency (1,862,431) (1,249,110) (2,021,752) (893,622)
505,776 411,440 354,099 491,945
</TABLE>
See notes to consolidated financial statements
F - 3
<PAGE>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Operations For the year ended June 30, 1998
and 1997, and for the nine month periods ended March 31, 1999 and 1998 <TABLE>
<CAPTION>
Year ended Nine months ended
June 30, March 31,
1997 1998 1998 1999
$ $ $ $
(Unaudited - see note 1)
<S> <C> <C> <C> <C>
NET SALES 1,414,062 1,185,091 844,363 808,839
COST OF SALES 1,229,902 984,899 749,444 547,670
GROSS MARGIN 184,160 200,192 94,919 261,169
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Administration 137,373 146,789 100,003 119,399
Financial
Interest and other 119,456 106,801 86,036 52,677
Research and development 82,225 94,874 77,172 61,989
Selling 61,949 71,790 56,580 61,605
Gain from disposal - (3,486) - -
401,003 416,768 319,791 295,670
LOSS BEFORE INCOME TAX RECOVERY AND
GAIN ON TRANSFER OF TECHNOLOGY RIGHTS (216,843) (216,576) (224,872) (34,501)
Gain from Transfer of Technology Rights - 693,415 - -
INCOME AFTER GAIN ON TRANSFER
OF TECHNOLOGY RIGHTS - 476,839 - -
Income tax recovery 20,521 42,755 14,000 5,658
NET INCOME (LOSS) (196,322) 519,594 (210,872) (28,843)
NET INCOME (LOSS) PER COMMON SHARE (0.01) 0.04 (0.01) (0.00)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,586,341 14,676,752 14,711,341 19,609,385
</TABLE>
See notes to consolidated financial statements
F - 4
<PAGE>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders' Equity (Deficiency) For the
years ended June 30, 1998 and 1997 <TABLE> <CAPTION>
Common
Stock
Issued and
Outstanding Additional Cumulative
Number of Paid in Translation
Shares Amount Capital Deficit adjustments
$ $ $ $
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1997:
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 fiscal 1998 14,711,341 147,113 4,056,744 (5,759,538) 306,571
</TABLE>
See notes to consolidated financial statements
F - 5
<PAGE>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows For the years ended June 30, 1998 and 1997
and For the nine month periods ended March 31, 1999 and 1998 <TABLE> <CAPTION>
Year ended Nine months ended
June 30, March 31,
1997 1998 1998 1999
$ $ $ $
(Unaudited - see note 1)
CASH FLOW FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net earnings (loss) ........................ (196,322) 519,594 (210,872) (28,843)
Adjustments to reconcile net income (loss) to net cash used by operating
activities:
Depreciation and amortization ......... 33,832 10,874 14,969 20,566
Gain on disposition of property and
equipment ........................... -- -- -- (1,385)
Gain on transfer of Technology Rights . -- (682,278) -- --
Issue of Restricted Stock for Services -- 8,999 8,999 20,201
Net change in non-cash operating
assets and liabilities .............. 107,070 (53,749) 120,720 (153,839)
(55,420) (196,560) (66,184) (143,300)
CASH FLOW FROM INVESTING ACTIVITIES
Property and equipment acquisition ......... (2,586) (8,035) (3,346) (9,173)
Proceeds from sale of property and
equipment ............................... -- -- -- 3,321
(2,586) (8,035) (3,346) (5,852)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from (repayment of) loans notes
and advances
Bank note ............................. (5,152) (14,692) (8,361) (19,966)
Line of credit ........................ (33,686) (11,150) (11,514) (34,371)
Long-term debt ........................ 20,310 32,576 36,469 (23,827)
Private lenders ....................... 36,221 81,298 24,318 (60,892)
Stockholders .......................... 51,615 121,483 19,548 46,445
Issue of Restricted Common Stock ........... -- -- -- 72,812
Issue of Debenture subscription ............ -- -- -- 179,535
69,308 209,515 60,459 159,736
EFFECT OF EXCHANGE RATE ON CASH ................ 4,918 (11,088) (2,871) (801)
CHANGE IN CASH BALANCE FOR THE YEAR ............ 16,220 (6,168) (11,942) 9,783
Cash balance, beginning of year ............ 7,552 23,772 23,772 17,605
Cash, end of year .......................... 23,772 17,605 11,830 27,388
</TABLE>
See notes to condensed consolidated financial statements
F - 6
<PAGE>
TECHNICAL VENTURES INC.
Consolidated Statement of Cash Flows
Supplementary Cash Flows Information For the years ended June 30, 1998 and 1997
and For the nine month period ended March 31, 1999 and 1998 <TABLE> <CAPTION>
Year ended Nine month ended
June 30, March 31,
1997 1998 1998 1999
$ $ $ $
(Unaudited - see note 1)
NON-CASH FINANCING AND INVESTING
ACTIVITIES
Issue of restricted C0mmon Shares
reducing debt liabilities
<S> <C> <C> <C> <C>
Private lenders - - - 62,600
Shareholders - - - 25,420
- - - 88,020
Payments made during the year for interest 19,751 15,203 12,063 15,295
Net change in non-cash operating assets
and liabilities
Decreases (increase) in operating assets and increase (decrease)
in operating liabilities:
Accounts receivable (57,025) 38,765 118,578 (56,281)
Inventory 34,940 (610) (2,194) (30,456)
Other assets (6,813) (16,477) (1,646) (8,970)
Accounts payable and accrued
expenses 135,968 (75,427) 5,982 (58,132)
107,070 (53,749) 120,720 (153,839)
</TABLE>
See notes to condensed consolidated financial statements.
F -7
<PAGE>
TECHNICAL VENTURES INC.
Notes to Consolidated financial statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Unaudited Comparatives
The financial statements and related notes thereto as of March
31, 1999 and for the nine months ended March 31, 1998 are unaudited
and although they have been prepared on the same basis as the audited
financial statements included herein they do not form part thereof as
no audit opinion has been expressed thereon. In the opinion of
management, such unaudited financial statements include all
adjustments necessary to present fairly the information set forth
herein. The interim results are not necessarily indicative of the
results for any future period.
b) 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.
c) Revenue Recognition
Mortiles' sales are recognized when clients goods are returned
and invoices for the services are issued.
d) 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. The
Company's other two subsidiaries, Famtile Restoration Services Ltd.
and MPI Perlite Ltd. are currently inactive.
e) Inventory
Inventory is stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.
f) 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. The estimated useful
lives for property and equipment range from 5 to 8 years.
g) Investment Tax Credits
Refundable foreign investment tax credits related to research and
development activities are recognized as income in the year they are
received.
F - 8
<PAGE>
TECHNICAL VENTURES INC.
Notes to Consolidated financial statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
h) Income (Loss) Per Share
Income 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.
i) Intangible Assets
Cost of intangible assets are being amortized using the
straight-line method over periods ranging from 5 to 17 years.
j) 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.
k) 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 affect
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.
l) 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, and accordingly, the estimates are not necessarily
indicative of the amounts that the Company could realize in a
current market exchange.
F - 9
<PAGE>
TECHNICAL VENTURES INC.
Notes to Consolidated financial statements
2. INVENTORY
Inventory at March 31, 1998 is comprised entirely of raw
materials inventory.
3. Property and Equipment
Property and equipment at June 30, 1998 is comprises as
follows:
Equipment:
Under capitalized leasing arrangements .. $204,981
Other ................................... 442,819
Furniture and fixtures .................. 35,341
Leasehold improvements .................. 4,208
687,349
Less accumulated depreciation and amortization 510,118
$177,231
4. FOREIGN OPERATIONS
The following table summarizes certain information regarding
the company's US and Canadian operations:
<TABLE>
<CAPTION>
US Canadian Consolidated
$ $ $
Year ended June 30, 1998
<S> <C> <C> <C>
Revenue from unaffiliated customers - 1,185,091 1,185,091
Income (loss) from operations (46,220) 565,814 519,594
Identifiable assets at end of year - 411,440 411,440
Year ended June 30, 1998
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
</TABLE>
F - 10
<PAGE>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
Notes to Consolidated financial statements
5) INCOME TAXES
During the period ended March 31, 1999, the Company received
$19,681 (Canadian) resulting from research and development
refundable tax credits claims filed for the period ended June 30,
1996. A claim for approximately $34,000 (Canadian) has 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. A claim for approximately $35,000
(Canadian) will be filed for 1999. It is anticipated that the
claim for 1999 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 then 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.
<TABLE>
<CAPTION>
U.S. State &
Federal Local Foreign(1)
<S> <C> <C> <C>
Loss carry forwards 306,000 81,000 664,840
Credit carry forwards:
Non-refundable credits - - 61,903
Refundable credits - - 35,000
Valuation allowance 306,000 81,000 761,743
- - -
</TABLE>
Aggregate net operating loss carry forwards and tax credit
carry forwards and their expirations are summarized as follows:
<TABLE>
<CAPTION>
Net Operating Loss Carry forward
Foreign
Research &
Expiring Development
June 30, US Federal State & Local Foreign(1) Tax Credits(1)
<S> <C> <C> <C> <C>
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 92,963 -
TOTAL $ 900,000 898,000 664,840 61,903
</TABLE>
(1) Converted to US dollars based on conversion rate at June 30, 1998.
F - 11
<PAGE>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
Notes to Consolidated financial statements
6. LONG-TERM DEBT
At June 30, 1998 long-term debt consists of the following:
<TABLE>
<CAPTION>
Current Non-current Total
Notes & Loans $ $ $
<S> <C> <C> <C>
Unsecured shareholder notes, loans and other payable balances:
Subordinate to note payable to cooper Financial
Corp. interest at the greater of prime or 10% - 23,870 23,870
Subordinate to note payable, I. O. C.: - 10,230 10,230
Interest
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
instalments of $6,011 (Canadian) including interest at a rate of
10.75%. At June 30, 1998 the Company was in default and
the entire balance past due (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 instalments 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 - 340,909
Liabilities Subordinate to I.O.C. Note Payable:
Unsecured loans, private investor, interest at 10% - 26,736 26,736
^ 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
</TABLE>
F - 12
1
<PAGE>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
Notes to Consolidated financial statements
6. LONG-TERM DEBT (cont'd)
<TABLE>
<CAPTION>
Leasing liabilities:
Current Non-current Total
$ $ $
Obligation under capitalized leasing arrangements payable in monthly
instalments of $9,981 net of amount representing interest of $2,790
at June 30th, the company was in default and the entire
<S> <C> <C> <C> <C>
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>
(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 had 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, 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 and 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. The lessor has not called the
lease as two payments were made during the fiscal 1997. The lease 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>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
Notes to Consolidated financial statements
6. LONG-TERM DEBT (cont'd)
Long-term debt matures as follows:
<TABLE>
<CAPTION>
Year ending June 30,
Shareholders Other Total
$ $ $
<S> <C> <C> <C>
1999 - 376,296 376,296
After 2003 330,022 52,891 382,913
330,022 429,187 759,209
</TABLE>
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, 1999.
7. GOING CONCERN
The Company has sustained significant operating losses
since its inception and there is substantial 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.
F - 14
<PAGE>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
Notes to Consolidated financial statements
GOING CONCERN (cont'd)
A Canadian income tax claim for approximately $34,000 (Canadian) was
submitted for the fiscal year 1997, additionally a claim for fiscal
1999 will be submitted for approximately $35,000 (Canadian). Tax
claims for 1998 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 its claim remains in
audit with that department and has not been accounted for in June
1999. 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].
SHAREHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
Restricted common shares reserved for convertible debt and stock
purchase options:
<S> <C>
For convertible debt $ 50,000
For common stock purchase options at:
$0.50 per share ; without expiration 50,000
$ 100,000
</TABLE>
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
accommodate 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.
F - 15
<PAGE>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
Notes to Consolidated financial statements
<TABLE>
<CAPTION>
10. LOANS AND ADVANCES AT JUNE 30, 1998
Private investors:
Equipment financing:
<S> <C> <C>
Interest at10% $ 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
</TABLE>
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.
In June 1997 the Company had received 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's balance
sheet at June 30, 1998. The Company is current with it's obligation
under this new agreement.
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
respectively 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.
F - 16
<PAGE>
TECHNICAL VENTURES INC.
Notes to Consolidated financial statements
13. FORWARD LOOKING STATEMENTS
This registration statement on Form SB-2 contains forward
statements within the meaning of Section 27A of the Securities Act of
1993 and Section 21B of the Securities Exchange Act of 1934. The
Company's results could differ materially from those set forth in the
forward looking statements.
14. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems
may recognize the year 2000 as 1900 or some other date, resulting in
errors when information using year 2000 dates is processed. In
addition, similar problems may arise in some systems which use
certain dates in 1999 to represent something other than a date. The
effects of the Year 2000 Issue may be experienced before, on, or
after January 1, 2000, and, if not addressed, the impact on
operations and financial reporting may range from minor errors to
significant systems failure which could affect a company's ability to
conduct normal business operations. It is not possible to be certain
that all aspects of the Year 2000 Issue affecting the company,
including those related to the efforts of customers, suppliers, or
other third parties, will be fully resolved.
F - 17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Article Seventh of our certificate of incorporation provide that
Technical Ventures may indemnify directors and officers of Technical Ventures to
the fullest extent permitted by Section 721 through 726 of the Business
Corporation Law of New York.
See Number 4. of Item 28 below for information regarding the position ^
of the Securities and Exchange Commission^ with respect to the effect of any
indemnification for liabilities arising under the Securities Act of 1933, as
amended.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the securities offered hereby.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee............................................................... $373.35
NASD registration fee.............................................................. 0.00
Printing and engraving............................................................. $5,000.00
Accountants' fees and expenses..................................................... $5,000.00
Legal fees......................................................................... $10,000.00
Transfer agent's fees and expenses................................................. 0.00
Blue Sky fees and expenses......................................................... 0.00
Miscellaneous...................................................................... $9,626.65
Total..................................................................... $30,000.00
</TABLE>
Item 26. Recent Sales of Unregistered Securities
In the past three years the Registrant has issued securities to a
limited number of persons as described below. Except as indicated, there were no
underwriters involved in the transactions and there were no underwriting
discounts or commissions paid in connection therewith.
In February 1999, the Registrant sold to two investors, Gene Howland
and William Hoops, an aggregate of $225,000 principal amount of 8% convertible
debentures which are convertible into a minimum of 1,278,410 shares of common
stock^, and common stock purchase warrants to purchase ^ 127,840 shares of
common stock. This sale of securities was exempt from registration pursuant to
Rule 506 under Section 4(2) of the Act.
In February 1999, the Registrant issued to Coleman Capital Partners
Ltd. 50,000 shares of common stock in consideration for consulting services
rendered pursuant to an advisory agreement between the Registrant and Coleman,
dated January 11, 1999. The transaction was exempt from registration under
Section 4(2) of the Act.
<PAGE>
In July 1998, the Registrant issued to Sichenzia, Ross & Friedman LLP
("SRF"), United States legal counsel to the Registrant, in consideration of
certain legal services performed by SRF for the benefit of the Registrant. The
issuance of securities was exempt from registration pursuant to Section 4(2) of
the Act. The Registrant has valued these 50,000 shares of stock at $10,000.
<TABLE>
<CAPTION>
Item 27. Exhibits
<S> <C>
3.1 Certificate of Incorporation, as amended to date^**
3.2 By-Laws^**
4.1 Form of Common Stock Certificate^**
4.2 Form of 8%Convertible Debenture issued to Messrs. Howland and
Hoops^* 4.3 Form of Warrant issued to Messrs. Howland and Hoops^** 5.1
Opinion of Sichenzia, Ross & Friedman, LLP^** 10.1 Lease of premises
located at 3411 McNicoll Ave, Unit 11, Scarborough, Ontario,
Canada^**
10.2 Advisory Agreement, dated January 11, 1999, between the
Registrant and Coleman Capital Partners ^ Ltd.**
21.1 Subsidiaries of the Registrant^*
24.1 Consent of Schwartz Levitsky Feldman, Chartered Accountants, the Registrant's
Independent Auditors^
24.2 Consent of Sichenzia, Ross & Friedman, LLP (Included in Exhibit ^5.1).
25.1 Powers of Attorney (see Page II-5)^
27.1 Financial Data Schedule^*
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</TABLE>
^* Previously filed.
^** To be filed by amendment.
Item 28. Undertakings
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
a. To include any prospectus required by Section
10(a)(3) of the Securities Act;
b. To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
registration statement;
c. To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
2. For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
<PAGE>
3. To remove from the registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
4. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities
Act, and is therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
5. For determining any liability under the Securities Act, to treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the issuer under Rule 424(b)(1), or (4) or 497(h) under the
Securities Act as part of this registration statement as of the time the
Commission declared it effective.
6. For determining any liability under the Securities Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe it meets all the
requirements of filing on Form SB-2 and authorized this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
Province of Ontario, Canada, ^ September 3, 1999.
TECHNICAL VENTURES INC.
By: /s/ Larry Leverton
Larry Leverton, Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Larry Leverton his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits and schedules thereto, and
all other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully ratifying and confirming all that said attorney-in-fact and
agent or their substitutes or substitute may lawfully do or cause to be done by
virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on ^ September 3, 1999.
<TABLE>
<CAPTION>
<S> <C>
Signature Title
President (Principal
Executive Officer) and
Director
^/s/ Frank Mortimer
Frank Mortimer
^/s/ Larry Leverton Secretary and Treasurer
(Principal Financial and
Larry Leverton Accounting Officer) and
Director
- -----------------------
^ Bryan Carter Vice President and
Director
</TABLE>
<PAGE>
^ ^ ^ ^ ^ ^ Exhibit - 24.1 Consent of Schwartz Levitsky Feldman, Chartered
Accountants, the Registrant's Independent Auditors
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated June 30, 1998 in the Registration Statement on
Form SB-2 and related prospectus of Technical Ventures Inc.
for the registration of ^ 6,893,141 shares of common stock.
/s/Schwarz Levitsky Feldman
Schwartz Levitsky Feldman
Chartered Accountants
Toronto, Ontario, Canada
^ September 1, 1999
Exhibit 5.1
SICHENZIA, ROSS & FRIEDMAN LLP
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: TECHNICAL VENTURES INC.
SEC File No. 333-75901
Ladies and Gentlemen:
We refer to the above-captioned registration statement on Form SB-2
(the ?Registration Statement?) under the Securities Act of 1933, as amended (the
?Act?), filed by Technical Ventures Inc., a New York corporation (the
?Company?), with the Securities and Exchange Commission.
We have examined the originals, photocopies, certified copies or other
evidence of such records of the Company, certificates of officers of the Company
and public officials, and other documents as we have deemed relevant and
necessary as a basis for the opinion hereinafter expressed. In such examination,
we have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as certified copies or photocopies and the
authenticity of the originals of such latter documents.
Based on our examination mentioned above, we are of the opinion that
the securities being registered pursuant to the Registration Statement are duly
authorized and issued.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm under ?Legal Matters? in
the related Prospectus. In giving the foregoing consent, we do not hereby admit
that we are in the category of persons whose consent is required under Section 7
of the Act, or the rules and regulations of the Securities and Exchange
Commission.
Very truly yours,
