<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.. 20549
FORM 10-KSB A1
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1999
[ ] TRANSITIONAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 33-2775-A
TECHNICAL VENTURES INC.
(Exact name of registrant as specified in its charter)
New York State 13-3296819
(State or other Jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
3411 McNicoll Avenue, Unit 11
Scarborough, Ontario, Canada M1V 2V6
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (416) 299-9280
Securities registered pursuant to Section 12 (b) of the Act: NONE
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $.01 Par Value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB [ ]
State Issuer's revenues for its most recent fiscal year, $1,131,279
The appropriate aggregate market value of the voting stock of the Registrant
held by non-affiliates of the Registrant as of September 30, 1998 (based upon
the average bid and asked prices as reported by the National Association of
Securities Dealers Automatic Quotation System) was approximately $4,261,000.
The number of shares outstanding of the Registrant's common stock, as of Sept
ember 30, 1999 is 23,248,011.
Exhibit index is located on page 16 of this Annual Report on Form 10-KSB.
Page 1 of 32
<PAGE>2
TECHNICAL VENTUES INC.
FORM 10-KSB A
Fiscal Year Ended June 30, 1999
ITEM Table of Contents PAGE
Explanation regarding issuance of 2
Form 10-KSB A1
PART IV
Item 13. Exhibits, Financial Statement Schedules and F1 - F27
Reports on Form 8K
Signatures 4
-2-
<PAGE>3
TECHNICAL VENTUES INC.
FORM 10-KSB A
Fiscal Year Ended June 30, 1999
The Registrant is filing this amendment for the purpose of addressing certain
deficiencies in its financial statements included in Report 10 KSB, filed for
the financial year ending June 30, 1999.
The purpose of this amendment is to submit revised consolidated financial
statements together with the revised report of independent auditors.
The Registrant would ask that the reader refer to Note 1 of the Revised
Consolidated Financial Statements, which gives in more detail, the reasons
for revision of these financial statements.
- 3 -
<PAGE>4
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TECHNICAL VENTURES INC.
Dated: January 7, 1999 By:/s/Frank Mortimer
Frank Mortimer, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated: January 7,2000 By:/s/Frank Mortimer
Frank Mortimer, President
Principal Executive Officer
and Director
Dated: January 7,2000 By:/s/Bryan Carter
Bryan Carter,
Vice President, Director
Dated: January 7,2000 By:/s/Larry Leverton
Larry Leverton, Secretary
Treasurer and Principal
Accounting Officer and
Director
- 4 -
<PAGE>5
TECHNICAL VENTURES INC. AND SUBSIDIARIES
REVISED CONSOLIDATED FINANCIAL STATEMENTS
AS OF YEAR ENDED JUNE 30, 1999 AND 1998
<PAGE>5
TECHNICAL VENTURES INC. AND SUBSIDIARIES
INDEX TO REVISED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1999 AND JUNE 30, 1998
TOGETHER WITH REPORT OF INDEPENDENT AUDITORS
PAGE
Report Of Independent Auditors F-2
Revised Consolidated Balance Sheets at June 30, 1999 and 1999 F-3
Revised Consolidated Statement of Operations for the Years
Ended June 30, 1999 and 1998. F-4
Revised Consolidated Statement of Changes in Stockholders'
Equity (Deficiency for the years ended ended June 30, 1999 and 1998. F-5
Revised Consolidated Statement of Cash Flows for the Years
ended June 30, 1999 and 1998. F-6
Notes to Revised Consolidated Financial Statements F7 - F27
F - 1
<PAGE>6
Schwartz Levitsky Feldman
Chartered Accountants
Toronto, Ottawa, Montreal
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
Ventures Inc. (Incorporated in New York State) as of June 30, 1999 and
June 30, 1998 and the related consolidated statements of income, cash flows
and changes in stockholders' equity for the years ended June 30, 1999 and
June 30, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly in all material respects, the financial position of Technical
Ventures Inc. as of June 30,1999 and June 30, 1998 and the results of its
operations and its cash flows for the years ended June 30, 1999 and
June 30, 1998, in conformity with generally accepted accounting principles
in the United States of America.
The company has sustained significant operating loss since its inception as
indicated in Note 2. There is substantial doubt as to the company's
ability to continue as a going concern if additional financing is not
obtained. Management's plans in this regard to these matters are also
described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Toronto, Ontario /s/Schwartz Levitsky Feldman
October 12,1999 Chartered Accountants
except for note 1 as
to which the date is
October 26, 1999
1167 Caledonia Road
Toronto, Ontario, Canada
M6A 2X1
Tel: 416 785 5353
Fax: 416 785 5663
F - 2
<PAGE>7
PART II FINANCIAL INFORMATION ITEM 7 FINANCIAL STATEMENTS
TECHNICAL VENTURES INC. AND SUBSIDIARIES
REVISED CONDENSED CONSOLIDATED BALANCE SHEET (Note 1)
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
June 30 June 30
1999 1998
ASSETS
CURRENT ASSETS
Cash $ 13,883 $17,605
Accounts Receivable 124,435 118,140
Inventory (Note 2) 45,143 34,663
TOTAL CURRENT ASSETS 183,461 170,408
OTHER ASSETS
Advances To Shareholders (Note 6) 62,392 35,904
Deposits 13,647 26,247
Prepaid Expenses 15,769 685
PROPERTY AND EQUIPMENT,
(Note 7) 155,437 177,231
INTANGIBLE ASSETS,
(NOTE 8) 646 965
TOTAL ASSETS $431,351 $411,440
<PAGE>8
PART II FINANCIAL INFORMATION ITEM 7 FINANCIAL STATEMENTS
TECHNICAL VENTURES INC. AND SUBSIDIARIES
REVISED CONDENSED CONSOLIDATED BALANCE SHEET (Note 1)
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
June 30 June 30
1999 1998
LIABILITIES
CURRENT LIABILITIES
Accounts Payable & Accrued Expenses (Note 9) $283,965 $384,889
Current Portion Of Notes Payable (Note 10) 371,278 496,834
Capital Lease Obligations (Note 11) 77,046 77,594
Loans From Private Lenders (Note 12) 61,859 138,458
Current Portion Of Loans From Shareholders,
Unsecured, Interest Free (Note 13) 170,793 179,863
TOTAL CURRENT LIABILITIES 964,941 1,277,637
LONG-TERM LIABILITIES, net of current portion:
Convertible Debentures (Note 16 (h)) 220,490
Notes Payable (Note 10) 64,049
Shareholders (Note 13) 305,442 330,022
Other (Note 14) 26,795 52,891
616,776 382,913
MINORITY INTEREST (Note 15) 0 0
SHAREHOLDERS' DEFICIENCY
CAPITAL STOCK (Note) 16 $221,980 $147,113
ADDITIONAL PAID IN CAPITAL (Note 16) 4,702,463 4,056,744
ACCUMULATED OTHER COMPREHENSIVE INCOME
(Note 17) 313,319 306,571
DEFICIT (6,388,128) (5,759,538)
(1,150,366) (1,249,110)
$431,351 $411,440
See notes to consolidated financial statements.
F - 3
<PAGE>9
PART II FINANCIAL INFORMATION ITEM 7 FINANCIAL STATEMENTS
TECHNICAL VENTURES INC. AND SUBSIDIARIES
REVISED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Note 1)
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
Year Ended June 30,
1999 1998
NET SALES $1,131,279 $1,185,091
COST OF SALES : 763,922 984,899
GROSS MARGIN 367,358 200,192
EXPNSES
Administration 175,352 146,789
Interest & Other 139,689 106,801
Research & Development 80,498 94,874
Selling 90,746 71,790
Gain From Disposal (3,486)
486,286 416,768
LOSS BEFORE THE UNDERNOTED (118,928) (216,576)
Compensation and finance charges (Note 18) 515,320
LOSS BEFORE INCOME TAX RECOVERY
& EXTRORDINARY ITEM (634,248) (216,576)
Income Tax Recovery (Note 19) 5,658 258,977
INCOME [LOSS] BEFORE EXTRAORDINARY ITEM ($628,590) $42,401
Gain from transfer of technology rights
(Note 10(i)) 477,193
NET INCOME [LOSS] ($628,590) $519,594
BASIC INCOME [LOSS] BEFORE EXTAORDINARY ITEM
PER COMMON SHARE (Note 20) (0.03) 0.00
BASIC INCOME [LOSS] PER COMMON SHARE (Note 20) (0.03) 0.04
FULLY DILUTED INCOME [LOSS] PER COMMON SHARE
(Note 20) (0.03) 0.04
See notes to consolidated financial statements.
F - 4
<PAGE>10
<TABLE>
PART II FINANCIAL INFORMATION ITEM 7 FINANCIAL STATEMENTS
TECHNICAL VENTURES INC. AND SUBSIDIARIES
REVISED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
<S> <C> <C> <C> <C> <C>
Common Stock Additional Cumulativ
Issued and Outstanding Paid In Translation
Shares Amount Capital Deficit Adjustment
For The Year Ended June 30, 1998:
Balance,begining of year 14,586,341 $145,863 $4,048,994 ($6,279,132) $221,844
Issued In Exchange For Services 125,000 1,250 7,750
Net Income $519,594
Cumulative Translation Adjustment $84,727
Balance, June 30, 1998 14,711,341 $147,113 $4,056,744 ($5,759,538) $306,571
For The Year Ended June 30, 1999
Issued In Exchange For Services 5,250,000 52,500 420,913
Issued For Cash 116,670 1,167 13,833
Issued For Debt Reduction 2,120,000 21,200 189,240
Issuance of Warrants (Note 16) 21,733
Net Loss ($628,590)
Cumulative Translation Adjustment $6,748
Balance, June 30, 1999 22,198,011 $221,980 $4,702,463 ($6,388,128) $313,319
See notes to consolidated financial statements
F - 5
</TABLE>
<PAGE>11
PART II FINANCIAL INFORMATION ITEM 7 FINANCIAL STATEMENTS
TECHNICAL VENTURES INC. AND SUBSIDIARIES
REVISED CONSOLIDATED STATEMENT OF CASH FLOWS
(AMOUNTS EXPRESSED IN U.S. DOLLARS)
Year Ended June 30,
1999 1998
CASH FLOW FROM OPERATING ACTIVITIES:
Net [Loss] Income ($628,590) $519,594
Adjustment to reconcile net [loss] income
to net cash used by operating activities:
Depreciation and amortization 30,079 10,874
Gain on Disposition of Property & Equipment (1,373)
Discount on convertible debentures
(Note 16 (b)) 75,000
Compensation & Finance Charges (Note 18) 515,320
Gain On Transfer of Technology Rights (682,278)
Issue of Restricted Common Stock For
Services 22,701 9,000
(Increase) Decrease in accounts receivable (6,035) 38,765
(Increase) Decrease in inventory (10,404) (610)
Increase (Decrease) in accounts payable
and accrued expenses (101,661) (75,427)
(104,963) (180,082)
CASH FLOW FROM INVESTING ACTIVITIES:
Increase In Deposits (2,472) (19,471)
(Increases) Decreases In Advances
To Stockholders (26,363) 2,994
Property & Equipment Acquisition (9,565) (8,035)
Proceeds From Sale of Property & Equipment 3,321
(35,079) (24,512)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of note payable to Cooper
Financial Corp (26,960) (14,692)
Proceeds from (repayments of) note payable
to Dow Chemical Canada (35,375) 14,555
Proceeds from (repayments of) Capital Lease
Obligations (718) 2,164
Proceeds from (repayment of) Other
Loans Payable (26,212) 4,706
Proceeds from (repayments of) Private Lenders (14,061) 66,820
Proceeds from (repayments of) Stockholders'
loans (9,352) 135,962
Proceeds from issue of restricted common stock 72,812
Proceeds from issue of convertible debentures
and warrants, net of issuance costs 167,223
127,357 209,515
EFFECT OF EXCHANGE RATE ON CASH 8,963 (11,089)
NET INCREASE (DECREASE) IN CASH BALANCE FOR
THE PERIOD (3,722) (6,168)
Cash Balance, begining of period 17,605 23,772
Cash Balance, end of period 13,883 17,605
PAYMENTS MADE DURING THE PERIOD FOR INTEREST 19,745 15,203
INCOME TAXES PAID - -
See notes to condensed consolidated financial statements.
F - 6
<PAGE>12
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
1. REVISIONS TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements as at June 30, 1999 have been
revised in order to:
i) provide additional information to readers.
ii) reclassify financial statement amounts to provide more precise
information and better comparison with prior years.
iii) reflect the issuances of common shares at fair market value;
iv) recognize discounts given by the company in relation to the issuance
of convertible debentures;
v) segregate the gain from the transfer of technology rights as an
extraordinary item.
2. 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. No
adjustment has been made to the value of the Company's assets in
consideration of its financial condition.
The Company continues to assess completing private or public stock
offerings. In order for the Company to raise significant funds through
the sale of common stock, stock purchase warrants or convertible
securities, the number of authorized common shares must be increased.
Therefore a special meeting of shareholders was held July 22, 1998 for
the purpose of amending the Corporation's New York State Certificate of
Incorporation. All of the amendments passed; one of which increased the
authorized issue of shares from fifteen million to fifty million common
shares. This amendment will enable the Corporation to act on obtaining
funding through private or public stock offering[s].
F - 7
<PAGE>13
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a) 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.
b) 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, Fam Tile Restoration Services Ltd. and MPI Perlite Ltd. are
currently inactive.
c) Revenue Recognition:
Sales are recognized when goods and services are delivered.
d) Inventory:
Inventory is stated at the lower of cost or market. Cost is determined
by the first-in, first out method.
e) 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.
f) Investment Tax Credits:
Refundable foreign investment tax credits related to research and
development activities are recognized as income in the year they are
received.
g) 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, 1999, 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 - 8
<PAGE>14
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (cont'd)
h) Intangible Assets:
Cost of intangible assets is being amortized using the straight-line
method over periods ranging from 5 - 17 years.
i) Income Taxes:
The Company accounts for income tax under the provisions of Statement
of Financial Accounting Standards No. 109, which requires recognition
of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial
statements or tax returns. Deferred income taxes are provided using
the liability method. Under the liability method, deferred income
taxes are recognized for all significant temporary differences between
the tax and financial statement bases of assets and liabilities.
j) Net Income Per Share:
Basic income per share is computed based on the average number of
common shares outstanding during the year.
Diluted income per share reflects the potential dilution that could
occur if securities, or other contracts to issue common stock, were
exercised or converted into common stock or resulted in the issuance
of common stock that then shared in the income of the company. Such
securities or contracts are not considered in the calculation of
diluted income per share if the effect of their exercise or conversion
would be antidilutive.
k) Stock Based Compensation:
In December 1995, SFAS No 123, Accounting for Stock-Based Compensation,
was issued. It introduced the use of a fair value-based method of
accounting for stock-based compensation. It encourages, but does not
require, companies to recognize compensation expense for stock-based
compensation to employees based on the new fair value accounting rules.
Companies that choose not to adopt the new rules will continue to apply
the existing accounting rules contained in Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees. However,
SFAS No. 123 requires companies that choose not to adopt the new fair
value accounting rules to disclose pro forma net income and earnings per
share under the new method. SFAS No. 123 is effective for financial
statements for fiscal years beginning after December 15, 1995. The
Company has adopted the disclosure provisions of SFAS No. 123.
F - 9
<PAGE>15
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (cont'd)
l) Foreign Currency Translation:
Mortile maintains its books and records in Canadian dollars. Foreign
currency transactions are reflected using the temporal method.
Under this method, all monetary items are translated into Canadian
funds at the rate of exchange prevailing at balance sheet date.
Non-monetary items are translated at historical rates. Income and
expenses are translated at the rate in effect on the transaction dates.
Transaction gains and losses are included in the determination of
earnings for the year.
The translation of the financial statements of the subsidiary from
Canadian dollars into United States dollars is performed for the
convenience of the reader. Balance sheet accounts are translated
using closing exchange rates in effect at the balance sheet date and
income and expense accounts are translated using an average exchange
rate prevailing during each reporting period. No representation is
made that the Canadian dollar amounts could have been or could be
realized at the conversion rates. Adjustments resulting from the
translation are included in the accumulated other comprehensive
income in stockholders' deficiency.
m) 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.
n) Contingent Liability Costs
The Company reflects legal costs incurred for any contingencies as a
charge to operations of the year in which the expenditures are
determined.
NOTE 4 - ACCOUNTS RECEIVABLE
June 30, June 30,
1999 1998
$ $
Accounts Receivable 124,435 118,140
Less: Allowances for
doubtful accounts
124,435 118,140
F - 10
<PAGE>16
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 5 - INVENTORY
Inventory at June 30, 1999 and 1998 is comprised entirely of raw
materials inventory.
NOTE 6 - ADVANCES TO STOCKHOLDERS
The advances to stockholders are unsecured, are noninterest
bearing, are not subject to specified terms of repayments.
Note 7 - PROPERTY AND EQUIPMENT
Property and equipment at June 30,1999 and 1998 is comprised as follows:
June 30, June 30,
1999 1998
$ $
Equipment:
Under Capitalized Leasing Arrangements 230,360 204,981
Other 375,811 442,819
Furniture & Fixtures 37,502 35,341
Leasehold Improvements 4,217 4,208
647,890 687,349
Less Accumulated Depreciation
& Amortization 492,453 510,118
155,437 177,231
Note 8 - INTANGIBLES
June 30, June 30,
1999 1998
$ $
Patents at cost 6,098 6,084
Less Accumulated amortization 5,452 5,119
646 965
F - 11
<PAGE>17
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 9 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
June 30, June 30,
1999 1998
$ $
Trade Payables 57,946 189,833
Accrued Expenses 226,019 195,056
283,965 384,889
NOTE 10 - NOTES PAYABLE
Notes Payable consist of the following: June 30, 1999 June 30, 1998
Dow Chemical Canada, Inc. (Dow) re- $ $
capitalization of line of credit and
accrued interest to April 30, 1996.
Payable in monthly installments of
$4,100 including interest at a rate
of 10.75% (i) 35,297
Inovation Ontario Corp. (I.O.C.)
outstanding balance of $341,749
repayable in quarterly instalments of
$20,675 including interest at 8%.
The Company is in default and the entire
balance is past due (ii) 341,749 340,999
Cooper Financial Corp.'s note, repayable
$3,150 monthly plus interest at 10%, due
August, 2002 (iii) 93,578 120,538
435,327 496,836
Less: Current Portion (371,278) (496,834)
64,049 -
i) In March 1998, the company reached an agreement with Dow to settle the
company's certain indebtedness to Dow by the transfer of technology
rights to Dow. The agreemen transferred to Dow, the title and ownership
of the patents and intellectual rights which relate to the halogen free
flame retardant thermoplastic composition technology. In turn, Dow would
provide Mortile with a non-exclusive, non-transferable and royalty free
world-wide license for Mortile's use of the said technology. The company
recorded the transaction as follows:
F - 12
<PAGE>18
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 10 - NOTES PAYABLE i) (cont'd)
Note Payable to Dow Settled $ 531,570
Accrued interest on note payable settled 197,304
Less: net book value of patents and intellectual rights (24,681)
Gain on transfer before income taxes 704,193
Less: Income Taxes 227,000
Gain on transfer, net of income taxes $ 477,193
In June, 1998 the Company reached an agreement with Dow Chemical of
Canada to repay the outstanding principal of $35,297 on the Company's
line of credit; the obligation in regard of the outstanding line of
credit was fulfilled in August 1998.
ii) 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. The Company has been unable to meet
payments in respect of this loan. Accordingly the outstanding balance is
reflected as a current liability in these financial statements.
The I.O.C. note is collateralised by all previously unsecured assets of
the Company.
iii) In June 1997 the Company had received agreement from Cooper Financial
Corp. of its 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 at July 1, 1997. The term of the new promissory
note is 24 months with a balloon payment of $91,208 due June 30, 1999.
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.
The note is shown as a current liability on the Company balance sheet at
June 30, 1998. The Company is current with its obligation under this new
agreement.
In August 1999, the Company refinanced its obligation to Cooper Financial
Corp. A refinancing charge was assessed, increasing the then outstanding
principal balance of $91,208 to $95,999. The terms of the refinancing
require 35 monthly payments of $3,150. and a final payment of $954.
Interest is at $10 %.
F - 13
<PAGE>19
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 10 - NOTES PAYABLE (iii) cont'd
This obligation is included in the balance sheet with long-term debt
under the terms of the refinancing arrangement.
Notes payable mature as follows:
2000 $ 371,278
2001 32,621
2002 31,428
$ 435,327
NOTE 11 - CAPITAL LEASE OBLIGATIONS
June 30, June 30,
1999 1998
$ $
Capital Lease obligations consist
of the following:
Obligations under capitalized leasing
arrangements payable in monthly
instalments of $9,981 net of amount
representing interest of $2,790 at
June 30; the company is in default
and the entire balance is
past due. 77,046 76,993
Others 601
77,046 77,594
At June 30, 1999 accrued interest of $60,647 (1998 - $60,647) was
outstanding.
F - 14
<PAGE>20
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 12 - LOANS FROM PRIVATE LENDERS
June 30, June 30,
1999 1998
$ $
Loans from private lenders are due on
demand and consist of the following:
Private Investors:
Equipment Financing - interest at 10% 11,859 11,833
Unsecured demand loans:
Interest Free 25,000 85,000
Interest at 10%, convertible into
50,000 shares of common stock 25,000 25,000
Interest at 15% - 16,625
61,859 138,458
NOTE 13 - LOANS FROM SHAREHOLDERS
Current Non-Current Total
$ $ $
Loans From shareholders as at
June 30, 1999 and 1998 consist
of the following:
a) June 30, 1999
Unsecured shareholders notes,
loans and other payable
balances:
Subordinate to notes payable to Cooper
Financial Corp. interest at the greater
of prime or 10% 23,395 23,395
Subordinate to note payable, I.O.C. 10,253 10,253
Interest Free - Notes and Loans 170,793 17,250 188,043
Accrued Interest 99,150 99,150
Accrued Compensation 155,394 155,394
170,793 305,442 476,235
F - 15
<PAGE>21
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 13 - LOANS FROM SHAREHOLDERS, cont'd
Current Non-Current Total
$ $ $
b) June 30, 1998
Unsecured shareholders notes, loans
and other payable balances:
Subordinate to notes 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 Free - Notes and Loans 179,863 52,200 232,063
Accrued Interest 88,668 88,668
Accrued Compensation 155,054 155,054
179,863 330,022 509,885
As at June 30, 1999, loans from shareholders mature as follows:
2000 $170,793
2001 -
2002 -
2003 -
After 2004 305,442
$476,235
NOTE 14 - OTHER LOANS
June 30, June 30,
1999 1998
$ $
Other Loans consist of the following:
Unsecured loans, private investor,
interest at 10% not subject to specified
terms of repayments 26,795 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
26,795 52,891
F - 16
<PAGE>22
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 15 - MINORITY INTEREST
Innovation Ontario Corp. has a 30 % interest in Mortile (see note 10).
As Mortile was in a capital deficiency position as at June 30, 1999 and
1998, the minority interest was $ Nil.
NOTE 16 - CAPITAL STOCK
a) Authorized
50,000,000 Common stock $0.01 par value (note 16 (b))
Issued Shares Amount
$
June 30, 1999 22,198,011 221,980
June 30, 1998 14,711,341 147,113
b) On July 22, 1998, stockholders of the company approved an amendment
increasing the authorized common shares from 15,000,000 to
50,000,000.
c) Common shares issued during the years ended June 30, 1999 and 1998
were as follows:
Number Capital Additional Paid
Stock In Capital
$ $
i During the year ended
June 30, 1998 125,000 common
shares were issued for
services rendered 125,000 1,250 7,750
ii During the year ended June 30,
1999, 5,250,000 common shares
were issued for services
rendered 5,250,000 52,500 420,913
During the year ended June 30,
1999, 116,670 common shares
were issued for cash 116,670 1,167 13,833
During the year ended June 30,
1999, 2,120,000 common shares
were issued in exchange for
repayment of loans from private
lenders of $62,600 and loans
from shareholders of $25,420 2,120,000 21,200 189,240
F - 17
<PAGE>22
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 16 - CAPITAL STOCK, cont'd
Number Capital Additional Paid
Stock In Capital
$ $
During the year ended June 30, 1999
warrants were issued as described in
note 16 (ii) 21,733
7,486,670 74,867 645,719
iii These shares issued, were recorded at their fair market values on the
dates of issuance.
iv The company does not have a formal stock-based compensation plan.
Stock-based compensation was negotiated on an individual basis.
d) 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 [see note 16 (h)
(ii)]; additionally as part thereof, Non-Redeemable Warrants of a three
year term [see note 16 (i)] allowing the investor to purchase shares of
the Corporation's Common Stock.
Accordingly the company has set aside the appropriate number of shares
from the authorized and unissued shares of common stock for issuance upon
conversion of the Debentures and exercise of the Warrants issued in
connection with the 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 6,893,041 shares of the
company's common stock are being registered and sold to the public by
certain shareholders and purchasers of our debentures which are
convertible into our common stock and which, additionally, bear warrants
to purchase our common stock.
This SB-2 Registration filed in April has received comments from the
S.E.C. and requires an amended filing, therefore the SB-2 Registration
has not been declared effective. The company filed the amendment early
in September 1999 and has subsequently received, on October 8, 1999,
additional comments from S.E.C. which must be responded to and will
require a further amendment to the SB-2 Registration.
F - 18
<PAGE>23
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 16 - CAPITAL STOCK, cont'd
e) The numbers of common shares reserved for convertible debt, stock
purchase options and warrants were as follows:
June 30, June 30,
1999 1998
For convertible debt 50,000 50,000
For common stock purchase options 50,000 50,000
For convertible debentures 6,535,888
For warrants 127,840
6,763,728 100,000
f) Stock Purchase Option
In January 1990, the company granted a stock purchase option to a
convertible debt holder, which would allow the debt holder to purchase
50,000 shares of the company's common stock at an exercise price at the
then fair market value of $0.50 per share. There is no termination date
on the options.
The company does not have a formal stock purchase option plan other
than the above.
g) Convertible Debt
Since January 27, 1990, the company has 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 the company's common stock at the
then fair market value of $0.50 per share.
h) On February 8, 1999, the Company issued an aggregate of $225,000 of 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 $0.176 per share or 75 % of the average closing
bid price of the common stock on the 10 days prior to when a debenture
is presented for conversion. Thus, the debentures are convertible into
a minimum of 1,704,545 shares of common stock. In the event the
registration statement covering the shares of common issuable upon
conversion of the debentures is not declared effective by June 8, 1999,
the company shall pay to the holders of the debentures a penalty of
one-fifteenth of one percent of principal amount of the notes for each
day beyond such date until such registration statement is declared
effective.
F - 19
<PAGE>24
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 16 - CAPITAL STOCK, cont'd
h) cont'd
As the conversion feature of the convertible debentures represented a
minimum of $75,000 discounts to the debenture holders, the company had
recorded the transaction as follows:
Face value of debentures $ 225,000
Discounts 75,000
Less: value assigned to warrants
(see note 16 (i) ) (21,733)
Less: issuance costs (57,777)
$ 220,490
The discounts were expensed in the year.
i) Warrants
On February 8, 1999, the company issued warrants representing the right
to purchase common stock. There will be 127,840 shares of common stock
underlying the warrants at an exercise price of $0.176 per share. The
expiration date of the warrants is January 31, 2002. Using the
Black-Scholes method, the company has calculated and assigned a value
of $21,733 to the warrants.
The company has reserved from its authorized but unissued shares
sufficient number of shares of our common stock for issuance. The
exercise price of the warrants were determined by negotiation and,
upon notice to warrant holders, the company has the right to reduce the
exercise price or extend the expiration date of the warrants. The
warrants to not confer upon the warrant holder any voting or other
rights of a stockholder of the 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
its' capital structure.
NOTE 17 - COMPREHENSIVE INCOME (LOSS)
The company has adopted Statement of Financial Accounting Standards
No. 130 "Reporting Comprehensive Income" as of January 1, 1998 which
requires standards for reporting and display of comprehensive income
and its components in the financial statements. However, it does not
affect net income (loss) or total stockholders' deficiency. The
components of comprehensive income are as follows:
F - 20
<PAGE>25
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 17 - COMPREHENSIVE INCOME (LOSS), cont'd
June 30, 1999 June 30, 1998
$ $
Net income (loss) (628,590) 519,594
Other comprehensive income:
foreign currency translation
adjustments 6,748 84,727
Comprehensive income (loss) (621,842) 604,321
The components of accumulated other comprehensive
income as at June 30, 1997, 1998 and 1999 are as
follows:
Accumulated other comprehensive
income, June 30, 1996 Foreign currency translation $ 199,256
adjustments for year ended June 30, 1997 22,588
Accumulated other comprehensive income, June 30, 1997 221,844
Foreign currency translation adjustments for year ended
June 30, 1998 84,727
Accumulated other comprehensive income, June 30, 1998 306,571
Foreign currency translation adjustments for year ended
June 30, 1999 6,748
Accumulated other comprehensive income, June 30, 1999 $ 313,319
The foreign currency translation adjustments are not currently adjusted
for income taxes since the company is situated in Canada and the
adjustments relate to the translation of the financial statements from
Canadian dollars into United States dollars is done only for the
convenience of the readers as disclosed in Note 3 (1).
NOTE 18 - COMPENSATION AND FINANCE CHARGES
The company has issued common shares in consideration of compensation and
finance charges. The excess of the fair market value over the amount
received for the common shares issued has been expensed.
NOTE 19 - INCOME TAXES
During the year ended June 30, 1999, the Company received $5,930
resulting from research and development refundable tax credit claims
filed for the year ended June 30, 1997. A claim for approximately
$24,000 has been submitted for 1998. 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 $24,000 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 amount.
Recovery of income taxes for the year ended June 30, 1999 consists
entirely of a current recovery of Canadian income taxes resulting from
a reduction in the Company's deferred tax asset valuation allowance.
F - 21
<PAGE>26
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 19 - INCOME TAXES, cont'd
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,
1999:
U.S. State &
Federal Local Foreign
at 34% at 9% at 43%
$ $ $
Loss carry forwards 531,000 140,000 276,403
Credit carry forwards:
Non-refundable credits 6,201
Refundable Credits 23,923
Valuation allowance (531,000) (140,000) (306,527)
- - -
Aggregate net operating loss carry forwards and tax credit carry forwards
and their expirations are summarized as follows:
Net Operating Loss Carry Forward
Foreign Research &
Expiring Development
June 30, US Federal State & Local Foreign Tax Credits
$ $ $ $
2000 - - 244,115 3,294
2001 3,000 3,000 260,898 -
2002 225,000 225,000 - 1,018
2003 21,000 21,000 44,550 1,889
2004 150,000 150,000 93,235 -
Thereafter 1,165,000 1,162,000 - -
TOTAL 1,564,000 1,561,000 642,798 6,201
F - 22
<PAGE>27
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 20 - NET INCOME (LOSS) PER COMMON SHARE
Net Income (Loss) per share has been calculated as follows:
June 30,
1999 1998 1997
$ $ $
Basic income (loss) before
extraordinary item per share:
Income (loss) before
extraordinary item (628,590) 42,401 (196,322)
Weighted average number of common
shares outstanding 20,237,097 14,678,752 14,586,341
Income (loss) before extraordinary
item per common share (0.03) 0.00 (0.01)
Basic income (loss) per share:
Net Income (loss) per common stock (628,590) 519,594 (196,322)
Weighted average number of common
shares outstanding 20,237,097 14,678,752 14,586,341
Net Income (loss) per common
stock (0.03) 0.04 (0.01)
F - 23
<PAGE>28
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 20 - NET INCOME (LOSS) PER COMMON SHARE, (cont'd)
June 30,
1999 1998 1997
$ $ $
Diluted Income (loss) per share:
Net Income (loss) per common share (628,590) 519,594 (196,322)
Interest on dilutive convertible debt - - -
Interest on dilutive stock purchase
options - - -
Interest on dilutive convertible
debentures - - -
Interest on dilutive warrants - - -
Net Income (loss) attributable to
a common stock assuming dilution (628,590) 519,594 (196,322)
Weighted average number of
common shares outstanding 20,237,097 14,678,752 14,586,341
Assume conversion of dilutive
convertible debt - - -
Assume conversion of dilutive stock
purchase options - - -
Assume conversion of dilutive
convertible debentures - - -
Assume exercise of dilutive warrants - - -
Weighted average number of
common shares outstanding, assuming
dilution 20,237,097 14,678,752 14,586,341
Net Income (loss) per common share
assuming dilution (0.03) 0.04 (0.01)
F - 24
<PAGE>29
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 21 - FOREIGN OPERATIONS
The folowing table summarizes certain information regarding the company's
US and Canadian operations for the years ended
June 30, 1999, 1998 and 1997:
US Canadian Consolidated
$ $ $
Year ended June 30, 1999,
Revenue from unaffiliated customers - 1,131,279 1,131,279
Income (loss) from operations (663,381) 34,791 (628,590)
Identifiable assets at end of year - 431,351 431,351
Year ended June 30, 1998
Revenue from unafiliated 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, 1997 - 1,414,062 1,414,062
Loss from operations (40,178) (156,144) (196,322)
Identifiable assets at end of year - 505,776 505,776
F - 25
<PAGE>30
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 22- MAJOR CUSTOMERS
One customer accounted for 40 % and 41 % of the Company's consolidated
revenues for fiscal 1999 and 1998, respectively; another customer, with
whom the company is currently involved in a lawsuit (see note 23),
accounted for 21 % and 18 % of consolidated revenues for these
respective periods. A new customer accounted for 13 % of consolidated
revenues for fiscal 1999.
Loss of one or more of these customers would have a detrimental effect
on the Company's operating results.
NOTE 23 - CONTINGENT LIABILITY
The company is contingently liable under a breach of secrecy agreements,
fiduciary duty and misuse of confidential information lawsuit by one of
its major customers (see note 22). Management of the company is of the
opinion that this legal action would not have significant adverse effect
on the company's future sales. The company's attorneys are of the
opinion that the company's defences are meritorious and the lawsuit will
result in no material losses. Accordingly, no provision is included in
the accounts for possible related losses.
NOTE 24 - RELATED PARTY TRANSACTIONS
For the year ended June 30, 1999, 3,850,000 and 1,600,000 common shares
were issued to the company's stockholders for services rendered and debt
reduction respectively. In addition, for the year ended June 30, 1999,
300,000 (1998 - 100,000) common shares were issued to an employee
related to a stockholder of the company, for services rendered.
The company has recorded these shares at fair market value with a
corresponding charge to expenses for the difference between the fair
market value and the issuance price.
F - 26
<PAGE>31
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts Expressed in U.S. Dollars)
NOTE 25 - LEASES
At June 30, 1999, under a real property lease classified as an
operating lease which expires in March 2002, the company's future
annual minimum rental payments (excluding real estate taxes) are as
follows:
2000 $ 64,228
2001 65,219
2002 49,640
$ 179,087
Rent expense was $49,965, $58,061 and $46,833 for 1999, 1998 and
1997 respectively.
NOTE 26 - 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.
NOTE 27 - COMPARATIVE FIGURES
Certain figures in the June 30, 1998 and 1997 revised consolidated
financial statements have been reclassified to conform with the basis of
presentation used in 1999.
NOTE 28 - FORWARD LOOKING STATEMENTS
The Form 10-KSB contains forward looking statements within the meaning
of Section 27 A of The Securities Act of 1933 and Section 21B of the
Securites Exchange Act of 1934. The Company's actual results could
differ materially from those set forth in the forward looking
statements.
F - 27
<PAGE>32
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AND INCOME STATEMENT INCLUDED IN PART II, ITEM 7 OF
THE REGISTRANT'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED
JUNE 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 13,883
<SECURITIES> 0
<RECEIVABLES> 124,435
<ALLOWANCES> 0
<INVENTORY> 45,143
<CURRENT-ASSETS> 183,461
<PP&E> 647,890
<DEPRECIATION> 492,453
<TOTAL-ASSETS> 431,351
<CURRENT-LIABILITIES> 964,941
<BONDS> 0
<COMMON> 221,980
0
0
<OTHER-SE> (1,150,366)
<TOTAL-LIABILITY-AND-EQUITY> 431,351
<SALES> 1,131,279
<TOTAL-REVENUES> 1,131,279
<CGS> 763,922
<TOTAL-COSTS> 763,922
<OTHER-EXPENSES> 486,286
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 139,689
<INCOME-PRETAX> (118,928)
<INCOME-TAX> 0
<INCOME-CONTINUING> (118,928)
<DISCONTINUED> 0
<EXTRAORDINARY> (509,662)
<CHANGES> 0
<NET-INCOME> (628,590)
<EPS-BASIC> (.00)
<EPS-DILUTED> (.00)
</TABLE>
