<PAGE>1
Form 10 -QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
Commission File Number 33-2775-A
TECHNICAL VENTURES INC.
_____________________________________________________________________________
(Exact Name of small business issuer as specified in its charter)
New York 13-3296819
_____________________________________________________________________________
(State or other jurisdiction of (I.R.S Employer
incorporation of organization) identification No.)
3411 McNicoll Avenue, Unit 11, Scarborough, Ontario, Canada M1V 2V6
____________________________________________________________________________
(Address of Principal Executive Offices, Zip Code)
Issuer's Telephone Number, Including Area Code (416) 299-9280
______________________________________________________________________________
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last
Report)
Indicate by a check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding for each of the issuer's classes of
common stock, as of March 31, 1999.
22,048,011 shares of common stock, $.01 par value
______________________________________________________________________________
Page 1 of 15 Pages
<PAGE>2
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
MARCH 31
1999
(UNAUDITED)
CURRENT ASSETS
Cash $27,388
Accounts Receivable 171,320
Inventory (Note 2) 64,209
Other Current Assets
Advances 58,403
Total Current Assets 321,320
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation of $471,334 158,186
DEPOSITS 11,753
INTANGIBLE ASSETS, net of accumulated amortization of
$5,219 706
$491,945
LIABILITIES & SHAREHOLDERS DEFICIENCY
CURRENT LIABILITIES
Notes Payable (Note 4) $100,572
Current Portion of long term debt: (Note 3)
Capital lease obligations 77,198
Other 332,049
Loans & advances:
Private lenders 61,522
Shareholders 173,251
Accounts payable and accrued expenses 317,967
Total Current Liabilities 1,062,559
LONG-TERM DEBT, net of current portion: (Note 3)
Shareholders 296,973
Other 26,034
MINORITY INTEREST 0
SHAREHOLDERS' DEFICIENCY:
Common stock, $.01 par value, 50,000,000 shares authorized:
Issued and outstanding, 22,048,011 shares 220,480
Additional Paid In Capital 4,165,410
Paid In Capital - For Common Stock Subscribed 178,535
Deficit (5,788,381)
Foreign currency translation adjustment 330,335
Total Shareholders' deficiency (893,622)
$491,945
See notes to condensed consolidated financial statements.
(2)
<PAGE>3
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
1999 1998
SALES $808,839 $844,363
COST OF SALES 547,670 749,444
GROSS MARGIN 261,169 94,919
GENERAL EXPENSE
Administration 119,399 100,001
Financial
-Interest & Other 52,677 86,036
Research & Development 61,989 77,172
Selling 61,605 56,580
295,670 319,791
LOSS BEFORE INCOME TAX RECOVERY (34,501) (224,872)
OTHER INCOME
R&d Tax Recovery 5,658 14,000
NET LOSS ($28,843) ($210,872)
NET LOSS PER COMMON SHARE $0.00 ($0.01)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 19,609,385 14,711,341
See notes to condensed consolidated financial statements.
(3)
<PAGE>4
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1999 1998
SALES $303,761 $172,413
COST OF SALES 191,269 170,604
GROSS MARGIN 112,492 1,809
GENERAL EXPENSE
Administration 49.381` 33,426
Financial
-Interest & Other 15,535 22,789
Research & Development 17,105 19,644
Selling 19,945 19,696
101,966 95,556
INCOME [LOSS] 10,526 ($93,747)
NET INCOME [LOSS] $10,526 ($93,747)
NET INCOME [LOSS] PER COMMON SHARE $0.00 ($0.01)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 22,019,122 14,711,341
See notes to condensed consolidated financial statements.
(4)
Page>5
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
1999 1998
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss ($28,843) ($210,872)
Adjustments to reconcile net Income (Loss) to
net cash provided (Used) by operating activities:
Depreciation and amortization 20,566 14,969
Gain on disposition of property & equipment (1,385)
Issue of Restricted Common Stock for Services 20,201 8,999
Net Change in non-cash operating assets
and liabilities (153,839) 120,720
Net Cash Used by Operating Activities (143,300) (66,184)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property & Equipment Acquisition (9,173) (3,346)
Proceeds from sale of property & equipment 3,321
Net Cash Provided(Used) By Investing Activities (5,852) (3,346)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) loans,
notes and advances
Line of Credit (34,371) (11,514)
Long Term Debt (23,827) 36,549
Shareholders 46,445 19,548
Bank Note (19,966) (8,361)
Private Lenders (60,892) 24,318
Issue of Restricted Common Stock 72,812
Issue of Debenture Subscription 179,535
Net Cash Provided by Financing Activities 159,736 60,459
EFFECT OF EXCHANGE RATE ON CASH (801) (2,871)
CHANGE IN CASH BALANCE FOR THE PERIOD 9,783 (11,942)
CASH, BEGINING OF PERIOD 17,605 23,772
CASH, END OF PERIOD $27,388 $11,830
See notes to condensed consolidated financial statements.
(5)
<PAGE>6
TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
1999 1998
NON CASH FINANCING ACTIVITIES:
Issue of Restricted Common Shares Reducing Debt
Liabilities:
Private Lenders 62,600
Shareholders 25,420
$88,020
PAYMENTS MADE FOR INTEREST $15,295 $12,063
NET CHANGE IN NON-CASH OPERATING ASSETS
AND LIABILITIES:
Decreases (increases) in operating assets
and increases (decreases) in operating
liabilities:
Accounts Receivable $56,281 $118,578
Inventory (30,456) (2,194)
Other assets (8,970) (1,646)
Accounts Payable and accrued expenses (58,132) 5,982
($153,839) $120,720
See notes to condensed consolidated financial statements.
(6)
<PAGE>7
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION :
The accompanying condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-QSB and Regulation S-B. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation have been
included. Operating results for the nine months ended March 31,1999
are not necessarily indicative of the results that may be expected for
the year ended June 30, 1999. For further information refer to the
financial statements and footnotes thereto included in the Company's
annual report on form 10-KSB for the year ended June 30, 1998.
NOTE 2: INVENTORY:
Inventory is comprised of the following:
March 31,
1999
Raw Materials $64,209
NOTE 3: LONG TERM DEBT:
At March 31 1999, the Company was in default on it's notes
payable to I.O.C. and it's lease payable to FBX Holdings Inc. .
Although the respective creditors have not called the obligations,
payments are due on demand and accordingly the balances are reflected
on the March 31, 1999 balance sheet as current liabilities.
(7)
<PAGE>8
NOTE 4: In July 1997 the Company had tentatively refinanced it's note payable
due to Cooper Financial Corp.. This obligation, is guaranteed by a
shareholder of the Company. A refinancing charge was assessed,
increasing the principal owed to $143,000 US. At March 31, 1999
the Company was current with the new loan provisions; with a payable
balance of $100,572 US. The Company has been maintaining monthly
payments of $3,150 US. Interest charged is 10% per annum calculated
over a period of 57 months. The term of the obligation, however, is
twenty four months with a balloon payment of $91,208 US, due
June 30, 1999.
NOTE 5: During the first nine months of fiscal 1999, the Company issued
7,336,670 Restricted Common Shares. These issuances were made in
consideration of the following: For Services Rendered, $20,201 US;
For reduction of Private Lender's debts, $62,600 US; For reduction
of existing shareholder debts, $25,420 US; Existing shareholders
private placement purchase of shares, $58,919 US and an additional
private placement of restricted common shares, $13,892 US.
(8)
<PAGE>9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
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 Company to remain
current on debt repayments, on past due balances to vendors, and as well,
current payments to vendors. The company's last two financial quarters have
been profitable, however, previous operating losses, monthly debt service
requirements leave the Company in a position where it is unable to meet its
monthly cash flow requirements.
During the first nine months of fiscal 1999 the company issued Restricted
Common stock in consideration of current debt and services in the amount of
$108,221. Additionally, through Private Placement of Restricted Common stock
an infusion of $72,811 capital was effected.
The Company received during October 1998, $8,373 (Canadian) representing the
Ontario portion of the 1997 R&D tax claim. A claim for fiscal 1998 of
approximately $35,000 (Canadian) will be submitted. The federal tax
department intent is to audit all such claims.
Two of the Company's long term debt financing arrangements [Note 3] are
currently in arrears. The debtors have verbally agreed to a moratorium on
principal repayments until the Company is in a financial position to make a
payment[s]. I.O.C. financing arrangements [Note 3] have been technically in
default since Jan. 1, 1996; as such these debt's have been reflected as
current liabilities on the March 31/99 balance sheet. I.O.C. has not
notified the Company of it's default and it is expected that a mutual
understanding of the Company's financial circumstances will preclude any
negative action by either of the principals. Additionally, negotiations are
continuing with I.O.C. to eliminate the debt; either by repayment in full,
including accrued interest or by exchanging the aggregate debt and interest
for an equity position in the Company. If these negotiations are successful
it would eliminate a $332,049 US current liability, however, there can be no
assurances that the Company will be successful in this endeavour.
(9)
<PAGE>10
Present financing arrangements are not considered a long-term solution to the
Company's financial needs. A change in the Company's capital structure had
become necessary as a then existing authorized issue of fifteen million
common shares was almost complete, therefore, to enable the Company to raise
additional funds through private or public issuances in the future. An
amendment to it's Certificate of Incorporation was completed in late July
1998. The Company's capital structure was modified to increase the number of
authorized common shares from fifteen million to fifty million shares.
In this regard the Company concluded in late January 1999, a Private Offering
under Regulation D of the Securities Act of 1933. The offering consisting of
8% Convertible Debentures in the aggregate of $225,000 US; additionally as
part thereof, Non RedeemableWarrants of a three[3] year term, allowing the
investor to purchase shares of the Corporation's Common Stock. Cash flow
resulting from the debenture offering was used to reduce current trade
payables and sustain on going operating expenses. In addition the offering
provided for a subscription agreement and registration agreement.
Accordingly the Company has set aside the appropriate number of shares from
the authorized and unissued shares of Common Stock for issuance (i) upon
conversion of the Debentures and exercise of the Warrants issued in
connection with the offering; a further issuance of 50,000 shares of
restricted common stock in consideration for legal services rendered and
50,000 shares of restricted common stock for services rendered in relation to
the private offering.
The Company prepared and filed, in accordance with the Private Offering, with
the Securities Exchange Commission, on April 8, 1999, a Registration
Statement on Form SB-2. In total an aggregate of 6,913,251 shares of the
company's common stock are being registered and sold to the public by our
shareholders and purchasers of our debentures which are convertible into our
common stock and which, additionally, bear warrants to purchase our common
stock.
The company will continue to assess and investigate all avenues in respect of
it's financial requirements. If it is deemed to be in the best interest of
the Company and its stockholders, serious consideration will be given to
raising additional funds through private or public issuance's in the future.
(10)
<PAGE>11
No significant capital expenditures are anticipated during the 4 Th. quarter
of this fiscal year, however, if the market develops to the extent indicated
by initial introduction of the Company's new product "Morfoam" to various
potential customers, it will necessitate immediate expansion of existing
warehouse facilities by approximately 30% and consideration of acquiring
additional manufacturing equipment necessary to performing a relative
manufacturing function in house, rather than contracting the work to an
outside firm.
"Morfoam", a product for the plastics and rubber industry, is a chemical
foaming agent and processing aid, providing significant cost reductions by
reducing the amount of plastic consumed, but also provides many other
advantages to the industry, such as improved surface finishes, physical
properties and sink mark elimination, lower part weight and shorter cycle
times. Morfoam is a concentrate encapsulated in an olefin binder, presented
in pellet form to be easily blended or metered into the users formulations.
The product improves cell structure and reduces voids when nitrogen is used
as the primary foaming agent.
Results of Operations:
The Company's last two consecutive financial quarters have experienced
profitability and it is hoped that this trend will continue for the fourth
and final quarter of fiscal 1999, however, there can be no assurances of
this.
Sales revenues for the first nine months of fiscal 1999 decreased 4 %, when
compared to those for the corresponding period of the previous year.
However, for the financial quarter ending March 31/99 sales revenues
increased some 43%. over the previous year. The majority increase due to
large metal composite orders received and processed. These orders
represented a 100% increase over the corresponding period in the previous
year. A larger percentage of this period revenues were for processing
services where the materials used in production are provided by the customer.
Accordingly, the current year decrease in revenues was offset by a
corresponding decrease in material costs. Comparative gross margins, however,
improved substantially due to the change in pricing arrangements and mix of
business. The Company continues to pursue an ISO 9000 rating which has
become an important requirement necessary to secure new customers and also
maintain existing customers. The Company is endeavouring to reach this goal
(11)
<PAGE>12
as soon as possible. It is hoped that the rating can be achieved during the
current financial year, however, there can be no assurances of this.
The Company continues to develop and market the specialty compounding, with
this segment representing 95 % of total revenues during the first nine months
of fiscal 1999. Technical Ventures Inc. through its subsidiary Mortile
Industries' agreement with a customer to provide specialty compounding
services to meet the customers entire North American requirements continues;
volumes, although not as great as originally forecast, are steadily growing.
The development of this agreement is the result of two and a half years of
joint product development by both parties. In order to meet indicated
production demands of this agreement and additionally with the very positive
reception of the Company's new product Morfoam, it is anticipated that the
Company's present production facilities will be operating near capacity by
the end of the current financial year.
Under their agreement, the customer has indicated increased production
requirements in calendar year 1999. With this possibility and the growth
of Morfoam, it is anticipated a second manufacturing facility to be located
in North Carolina, partially funded by the customer, could be operational
late in the current fiscal year.
The Company continues to assess additional opportunities in it's expertise
of specialty compounding. Metal composites, used in the munitions market,
have become active again, having produced 13,000 Lbs. in the 1st quarter.
In October 1998, 55,000 Lbs., 55,000 Lbs. in January 1999 and 73,309 Lbs. in
March 1999; representing year to date volumes of 210,392 Lbs, a 100% increase
over the previous year. The customer has indicated the possibility of an
additional large order. The Company anticipates that the order will be
received and process prior to the end of the current financial year. The
Company has also been advised by this customer that they anticipate sales
to continue at a strong pace.
Administrative expenses have increased 15 % for the nine month period ending
March 31, 1999 when compared to those for the corresponding period of the
previous year. This increase due in part to the on going quest for financing
and legal expense relative to modification of the Company's Certificate of
Incorporation.
Interest and other financing costs decreased substantially when compared to
those for the corresponding nine month period of the previous year, primarily
the result of the agreement which eliminated the Dow debts in the fourth
(12)
<PAGE>13
quarter of fiscal 1998 and the resultant decline in related interest expense
and improved foreign currency exchange rates.
R&D expenses decreased 20%, when compared to those of the corresponding nine
month period for the previous fiscal year, due to resources being redirected
to manufacturing and sales expense.
Selling expenses increased 9 % as efforts are stepped up to introduce the
new product Morfoam, to potential customers. In order to expedite sales of
Morfoam, a sound distribution network is being established. Potential
customers that have completed their testing advise that Morfoam is the
product of choice, in that regard; a major international toy manufacturer, a
plastic crate and skid manufacturer, as well, manufacturers in the
construction and marine industries, with applications for plastic wood,
decorative trim and marine plywood.
The Company, however, continues to take measures to contain all areas of
expense.
Forward Looking Statements:
This Form 10-QSB contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21B of the Securities
Exchange Act of 1934. The Company's actual results could differ materially
from those set forth in the forward looking statements.
(13)
<PAGE>14
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 K
(a) Exhibits - none
(b) Reports on Form 8-K - none
(14)
<PAGE>15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorised.
TECHNICAL VENTURES INC.
Date: April 30,1999 BY:/s/ Frank Mortimer
Frank Mortimer, President and
Chief Executive Officer
Date: April 30,1999 BY:/s/ Larry Leverton
Larry Leverton
Chief Financial Officer
(15)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AND INCOME STATEMENT INCLUDED IN PART I, ITEM 1 OF
THE REGISTRANT'S QUARTERLY REPORT ON FORM 10-QSB FOR THE PERIOD ENDED
March 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1999
<CASH> 27,388
<SECURITIES> 0
<RECEIVABLES> 171,320
<ALLOWANCES> 0
<INVENTORY> 64,209
<CURRENT-ASSETS> 321,320
<PP&E> 629,500
<DEPRECIATION> 471,334
<TOTAL-ASSETS> 491,945
<CURRENT-LIABILITIES> 1,062,559
<BONDS> 0
<COMMON> 220,480
0
0
<OTHER-SE> (893,622)
<TOTAL-LIABILITY-AND-EQUITY> 491,945
<SALES> 808,839
<TOTAL-REVENUES> 808,839
<CGS> 261,169
<TOTAL-COSTS> 261,169
<OTHER-EXPENSES> 295,670
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,677
<INCOME-PRETAX> (34,501)
<INCOME-TAX> 0
<INCOME-CONTINUING> (34,501)
<DISCONTINUED> 0
<EXTRAORDINARY> 5,658
<CHANGES> 0
<NET-INCOME> (28,843)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
