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 December 31, 2000
[ ] 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 September 30, 2000.
26,238,006 shares of common stock, $.01 par value
______________________________________________________________________________
Page 1 of 23 Pages
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PART 1 FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS
TECHNICAL VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Notes 1,and 2)
December 31 December 31
2000 1999
NOT AUDITED NOT AUDITED
ASSETS
CURRENT ASSETS
Cash $3,414 $21,835
Accounts Receivable 129,838 145,656
Inventory (Note 3) 61,845 48,699
Prepaid Expenses 25,377 4,070
TOTAL CURRENT ASSETS 220,474 220,260
OTHER ASSETS
Advances To Stockholders 52,112 63,361
Deposits 46,646 13,835
PROPERTY AND EQUIPMENT, at cost,
net of accumlated depreciation of
$520,636 at Dec. 31,2000 and
$515,152 at Dec. 31, 1999 125,421 141,648
INTANGIBLE ASSETS, net of accumulated
amortization of $5,948 at Dec. 31, 2000
and $5,690 at Dec. 31, 1999 0 491
TOTAL ASSETS $444,653 $439,595
December 31 December 31
2000 1999
NOT AUDITED NOT AUDITED
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued expenses $736,322 $462,612
Current Portion Of Notes Payable (Note 4) 367,347 376,975
Capital lease obligations (Note 4) 75,378 78,341
Loans From Private Lenders 67,083 62,022
Current Portion of Loan From
Shareholders, Unsecured, 217,120 187,000
TOTAL CURRENT LIABILITIES 1,463,250 1,166,950
LONG-TERM LIABILITIES, net of current portion:
Convertible Debentures 278,267 203,991
Notes Payable (Note 4) 19,269 55,955
Shareholders 182,541 259,298
Other 26,136 27,163
506,213 546,408
MINORITY INTEREST 0 0
STOCKHOLDERS' DEFICIENCY
Common stock, $.01 par value, 50,000,000 shares
authorized (Note 6): Issued and outstanding,
26,238,006 at Dec. 31, 2000 and 23,752,031
shares at Dec. 31, 1999 $262,380 $237,520
Additional Paid in capital(Note 6): 5,279,592 4,933,203
ACCUMULATED OTHER COMPREHENSIVE INCOME 321,122 303,838
Deficit (7,387,904) (6,748,324)
Total Shareholders' deficiency (1,524,810) (1,273,763)
$444,653 $439,595
See Notes To Condensed Consolidated Financial Statements
(2)
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PART 1 FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS
TECHNICAL VENTURES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(NOT AUDITED)
SIX MONTHS ENDED
DECEMBER 31,
2000 1999
SALES $685,020 $672,070
COST OF SALES 533,346 513,445
GROSS MARGIN 151,674 158,625
EXPENSES
Administration 122,487 256,777
Interest And Other 91,948 40,556
Research & Development 28,581 35,047
Selling 72,058 65,482
Contingent Related Expense 742 120,959
315,816 518,821
LOSS BEFORE INCOME TAX RECOVERY (164,142) (360,196)
Income Tax Recovery 5,556
NET LOSS (158,586) (360,196)
BASIC LOSS PER COMMON SHARE ($0.01) ($0.02)
FULLY DILUTED LOSS PER COMMON SHARE ($0.01) ($0.02)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
FOR THE PERIOD 25,789,464 23,043,263
See notes to condensed consolidated financial statements.
(3)
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PART 1 FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS
TECHNICAL VENTURES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(NOT AUDITED)
THREE MONTHS ENDED
DECEMBER
2000 1999
SALES $408,214 $383,659
COST OF SALES 314,684 275,891
GROSS MARGIN 93,530 107,768
EXPENSES
Administration 69,509 32,601
Interest And Other 44,526 18,652
Research & Development 13,952 17,943
Selling 43,843 31,518
Contingent Related Legal Expense (Note 5) 27 46,606
171,857 147,320
LOSS BEFORE INCOME TAX RECOVERY (78,328) (39,552)
Income Tax Recovery 5,556
NET LOSS (72,772) (39,552)
BASIC LOSS PER COMMON SHARE ($0.00) ($0.00)
FULLY DILUTED LOSS PER COMMON SHARE ($0.00) ($0.00)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING FOR THE PERIOD 26,238,006 23,352,102
See notes to condensed consolidated financial statements.
(4)
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PART 1 FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS
TECHNICAL VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
(Amounts Expressed In U.S. Dollars)
Not Audited
Common Stock Additional Cumulative
Issued and Outstanding Paid In Translation
Shares Amount Capital Deficit Adjustment
$ $ $ $
Balance June 30, 1999 22,198,011 221,980 4,702,463 (6,338,128) 313,319
Common Shares Issued
(NOTE 6) 1,554,020 15,540 230,740
Net Loss (360,196)
Cumulative Translation
Adjustment (9,481)
Balance,
December 31, 1999 23,752,031 237,520 4,933,203 (6,748,324) 303,838
Balance June 30, 2000 24,847,031 248,470 5,126,586 (7,229,318) 310,124
Issued For Services 77,260 773 8,499
Issued For Debt
Reduction 1,313,715 13,137 144,507
Net Loss (158,586)
Cumulative Translation
Adjustment 10,998
Balance, December 31,
2000 26,238,006 262,380 5,279,592 (7,387,904) 321,122
See notes to consolidated financial statements
(5)
<Page 6>
PART 1 FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS
TECHNICAL VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts Expressed in U.S. Dollars)
Not Audited
SIX MONTHS ENDED
DECEMBER 31
2000 1999
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss ($158,586) ($360,196)
Adjustment to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 11,665 16,433
Issue of Stock For Services 58,871 190,838
(Increase) Decrease in accounts receivable 3,955 (19,510)
(Increase) Decrease in Prepaid Expenses (24,169) 11,915
(Increase) Decrease in inventory (1,102) (2,935)
Increase (Decrease) in accounts payable and
accrued expenses 101,299 174,770
(8,067) 11,316
CASH FLOW FROM INVESTING ACTIVITIES:
(Increase) Decreases In Deposits (33,334)
(Increases) Decreases In Advances To Stockholders (1,145) (111)
Property & Equipment Acquisition (6,223)
(40,702) (111)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of note payable to Cooper Financial (15,774) (7,097)
Proceeds from Capital Lease Obligations 235
Proceeds from Private Lenders 5,516
Proceeds from (repayments of) Stockholders'
loans (46,726) 18,957
Proceeds from issue of shares for Stockholders'
loans 108,045
Related Issuance Costs Of Convertible
Debentures & Warrants (16,500)
51,061 (4,405)
EFFECT OF EXCHANGE RATE ON CASH (3,841) 1,152
NET INCREASE (DECREASE) IN CASH BALANCE
FOR THE PERIOD (1,549) 7,952
Cash Balance, begining of period 4,963 13,883
Cash Balance, end of period $3,414 $21,835
PAYMENTS MADE DURING THE PERIOD FOR INTEREST $7,857 $7,699
See notes to condensed consolidated financial statements.
(6)
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(NOT AUDITED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES :
a) 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 six
months ended December 31, 2000 are not necessarily indicative of the
results that may be expected for the year ended June 30, 2001. 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, 2000.
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) Accounting Changes
In June 1998, the Financial Accounting Standards Board [FASB] issued
Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities".
This Statement requires that an entity recognizes all derivatives
as either assets or liabilities and measure those instruments at fair
value. If certain conditions are met, a derivative may be specifically
designated as a hedge. The accounting for changes in the fair value of
a derivative depends on the intended use of the derivative and the
resulting designation. The adoption of this standard will not have
a material impact on the financial statements of the company.
d) Foreign Currency Translation:
Mortile maintains its books and records in Canadian dollars.
Foreign currency transactions are reflected using the temporal
method. 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
comprehensive income in stockholders' deficiency.
(7)
8
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(NOT AUDITED)
NOTE 1: (cont'd)
e) 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 December 31, 2000, 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) Net Income (Loss) Per Share:
Basic net income (loss) per share is computed based on the
average number of common shares outstanding during the period.
Fully diluted net income (loss) 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.
g) 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.
(8)
9
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(NOT AUDITED)
NOTE 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.
NOTE 3: INVENTORY:
Inventory is comprised of the following:
Dec. 31, Dec. 31,
2000 1999
Raw Materials $61,845 $48,699
NOTE 4: LONG TERM DEBT:
At December 31, 2000 the Company was in default on it's notes payable
to Ontario Development Corporations [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 December 31, 2000 balance sheet as
current liabilities.
In August 1999 the Company refinanced it's note payable due to Cooper
Financial Corp. This obligation, is guaranteed by a stockholder of
the Company. A refinancing charge was assessed, increasing the
principal owed to $95,999 US. At December 31, 2000 the Company was
current with the new loan provisions; with a payable balance of
$53,272 US. The Company has been maintaining monthly payments of
$3,150 US. Interest charged is 10% per annum calculated over a period
of 35 months.
(9)
10
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(NOT AUDITED)
NOTE 5: CONTINGENT LIABILITY AND RELATED COSTS:
The Company is contingently liable under a breach of secrecy
agreements, fiduciary duty and misuse of confidential information
lawsuit. 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.
The Company does, however, reflect legal and any other related costs
incurred for any contingencies as a charge to operations of the year
in which the expenditures are determined.
NOTE 6: COMMON SHARES
Common shares have been issued in consideration of services rendered
and consulting services for financing incurred. The shares have been
valued at their fair market value considering that they are
restricted shares. The excess of the fair market value of the shares
over the consideration received at their issue has been charged to
expenses in the current period as the period over which the services
have been rendered does not extend beyond the balance sheet date.
The shares issuance's for the six months ended December 31, 2000 are
summarized as follows:
Nature Of Number of Shares Additional Issue Subscription
Payments of Shares Paid Up Paid Expense Proceeds
Capital In Capital Expense
In Exchange
For Loans &
Accounts
Payable 1,390,975 13,910 153,006 166,917 - -
TOTALS 1,390,975 13,910 153,006 - 166,917 -
The share issuance's for the three months ended December 31, 1999
are summarized as follows:
Nature Of Number of Shares Additional Issue Subscription
Payments of Shares Paid Up Paid Expense Proceeds
Capital In Capital Expense
Consulting
Fees For
Financing 1,050,000 10,500 180,338 - - 190,838
In Exchange
For Loans 504,020 5,040 50,402 - 55,442
Payable
TOTALS 1,554,020 15,540 230,740 - - 190,838
(10)
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(NOT AUDITED)
NOTE 6: (cont'd)
The expense amounts indicated above have been included in the following:
Dec. 31, Dec. 31,
2000 1999
Administration 190,838
Research & Development
TOTALS 190,838
NOTE 7: MAJOR CUSTOMERS
Two customers accounted for 79 % and 84 % of the Company's
consolidated revenues for the six month period ending Dec. 31, 2000
and 1999 respectively. The loss of one or more of these customers
would have a detrimental effect on the Company's operating results.
NOTE 8: SUBSEQUENT EVENT
The Company entered into a letter of intent to acquire by November 1,
2000, all of the outstanding shares of an unrelated company in
exchange for the issuance of 2,125,000 shares of common stock of the
Company at fair market value on the date of closing. This acquisition
will be accounted for as a purchase. The acquiree company is a
manufacturer of industrial products compatible to the Company's
operations. Completion of the legal documentation relative to this
acquisition has delayed the original closing of November 1, 2000,
however, the Letter of Intent remains effective. An external audit
and valuation of the potential acquisition has been delayed with
closing now expected in the third quarter of fiscal 2001.
(11)
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(NOT AUDITED)
NOTE 9: RELATED PARTY TRANSACTIONS
For the six month period ended December 31, 2000, 1,313,715 common
shares were issued in consideration of debt due a stockholder of the
company.
(12)
13
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2000
PART 1 - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources:
During the first six months of fiscal 2001 the company incurred an operating
loss of [$164,140], before income tax recovery, on net sales revenues of
$685,020. The loss was funded by receivable's, an increase in accounts
payable, proceeds from stockholder loans and it's tax claim refund. However,
monthly debt service requirements leave the Company in a position where it
has difficulty in being able to meet its monthly cash flow requirements.
Two of the Company's long term debt financing arrangements, Note 4, are
currently in arrears, as such these debt's continue to be reflected as
current liabilities on the December 31,2000 balance sheet. The amount of
debt, including both principal and accrued interest is as follows: ODC
[formerly IOC] is $623,698 CND; FBX Holdings $202,056 CND. Both debtors
clearly understand the Company's financial position and as such have verbally
agreed to a moratorium on principal repayments until the Company is in a
financial position to make a payment [s] or suggest an alternate and
acceptable method[s] of settlement.
The Company received $8,354 CND refund for the 1999 taxation year during the
fiscal quarter ending December 31, 2000, additionally $26,441 CND was
received during January 2001, representing the balance of the 1999 claim.
Additionally the Company has filed a tax claim for fiscal 2000 of
approximately $32,763 (Canadian) . The tax department had notified the
Company of their intent to audit all such claims submitted.
During the first six months of fiscal year 2001, the Company issued 1,313,715
Restricted Common Shares in consideration of loans and interest due a
shareholder in the amount of $157,646. Additionally during the first six
months of fiscal 2001 the company issued 77,260 Restricted Common Shares to
it's former Canadian Accounting firm, for outstanding invoices in the amount
of $9,272. The price per share $0.11, with fair market value on the date of
both considerations being $0.20. As the shares are Restricted they were
valued at a 40% discount to the market price.
(13)
14
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2000
GOING CONCERN (Note 2), 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,
in that regard;
The company had 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; additionally as part
thereof, Non-Redeemable Warrants of a three year term, 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 on April 8, 1999 a Registration Statement on
Form SB-2, in accordance with it's Private Offering of late January 1999.
The Company has also filed an amended SB-2 Registration in September 1999 and
December 30, 1999, in response to S.E.C. comments. The Company received
S.E.C. comments relative to this amended SB-2 filing and responded on
April 24, 2000, along with an amended SB 2 Registration. Subsequently the
Company received comments in early June 2000, on it's April amended SB 2,
however, no further amendments or responses have been filed at the date of
this report and therefore the registration has not become effective. An
aggregate of 8,625,512 shares were to have been registered to be sold to the
public by our stockholders 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.
(14)
15
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2000
Additionally, the Company's financial and public relations consultants have
expressed their confidence in being able to secure financing enabling the
company to sustain cash flow requirements and also provide capital for
expansion when required. However, there can be no assurance of these factors.
Significant property and equipment purchases and/or expansion of facilities
will only be considered if demand for Company products warrant such expansion
and the financing of such expansion would not adversely effect the Company's
financial condition.
The Company's new product "Morfoam" introduction to many potential customers,
could necessitate, should sales efforts come to fruition, 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.
On September 19, 2000 the company reached agreement in principal to acquire
control of Multi-Web Lamination Inc. a Canadian corporation located in
Woodbridge, Ontario, Canada; in consideration of certain commitments which to
take place over the next 30 - 60 days, one of which being a Definitive
Agreement was to be concluded by no later than November 1, 2000. Multi-Web
Lamination will survive as a corporation, as a wholly owned subsidiary of the
company. Multi-Web currently has annual sales of $1 Million CND and is
forecasting sales of $2 Million CND during the current financial year. A
Letter of Intent was signed on October 1, 2000 outlining the basic agreement,
subject to the purchase being effected in accordance with a negotiated
definitive agreement containing representations and other terms, in which the
company will acquire control of all outstanding shares of Multi-Web
Laminations Inc. in exchange for 2,125,000 Restricted Common Shares of
Technical Ventures Inc. At December 31, 2000, completion of the legal
documentation, an external audit and valuation relative to this acquisition
has delayed the closing, however, the Letter of Intent remains effective
unitl such time as these procedures are completed and results deemed
acceptable. At the date of this report the status remains the same as at
December 31, 2000.
(15)
16
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2000
Results of Operations:
Net sales revenues for the first six months of fiscal 2001 increased 2 % to
$685,020 from $672,070, when compared to those for the corresponding period
of the previous year. Gross margins, decreased to 22% from 24 %.
Total expenses declined $203,006 to $315,816 from $518,821 for the
corresponding period of the previous year. Much of the decline due to
reduced administration expenses of $122,487 as compared to $256,777 for the
corresponding period of the previous year and a $120,217 reduction in
contingent related legal expenses.
Net Sales by geographic area for the six month period ended December 31, 2000
and 1999, in US$ are as follows:
Geographic Area 2000 1999
United States $ 89,990 $ 58,551
Canada 440,500 424,226
France 154,530 189,223
$685,020 $ 672,070
Net Sales by product line for the six month period ended December 31, 2000
and 1999, in US$ are as follows:
Product Line 2000 1999
Specialty Compounding $613,764 $ 634,307
(including Composite)
Polymer Technology 60,029 32,748
Miscellaneous 11,227 5,015
$685,020 $672,070
Technical Ventures continues to develop and market the specialty compounding,
with this segment representing 91 % of total revenues during the first six
months of fiscal 2001. There have been some decreases in this area of the
company's business in the year to date, stemming from several existing
customers. Additionally there are new customers in this market which the
company is developing and has secured minimal initial orders. The Company
will continue to assess all potential and additional opportunities in it's
expertise of specialty compounding.
(16)
17
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2000
Comparative gross margins, as a percent of revenue, decreased to 22% from
24 %.. The decrease was due to mix of clients from which the Company
received orders; with the major portion of revenue earned in the first six
months coming from both proprietary [Morfoam] and clients for which the
company purchases raw materials and provided compounding services, charging
the client accordingly. Margins for this segment of the business are lower
because of very competitive circumstances, however, the Company continues to
undertake negotiations for price increases from some of it's core customers,
with some success, and will continue to seek other increases.
Net sales revenues for the period ending December 31, 2000 and 1999 are
categorised as follows:
Category 2000 1999
Proprietary -Thermo Plastic $ 0 $ 7,415
Proprietary - Morfoam 60,029 25,333
Compounding With Materials 387,587 376,383
Compounding Without Materials 226,177 257,924
Miscellaneous Without Materials 11,227 5,015
$685,020 $672,070
Administrative expenses decreased 52 % or $134,290, when compared to those
for the corresponding six month period of the previous year as significant
administrative expense arose on the issue of common stock in fiscal 2000.
Financial expenses increased substantially [$51,392] when compared to those
for the corresponding six month period of the previous year, as the company
accrued expenses such as interest related to it's 8% Debenture and interest
related to it's ODC/IOC debt.
R&D expenses decreased 18 % when compared to those for the corresponding
period of the previous year as expense rose on the issue of common stock in
fiscal 2000. Additionally, resources, were redirected to manufacturing.
Selling expenses increased 10 % from $65,482 to $72,058 for the six month
period ending December 31, 2000, when compared to the corresponding period
for the previous year. 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
(17)
18
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2000
well, manufacturers in the construction and marine industries, with
applications for plastic wood, decorative trim and marine plywood. Sales
revenue in this product have, as yet, been minimal, however, during the first
six months sales revenues from Morfoam products increased $34,700. The
company has now received another large order from it's US distributor for its
customer. The company continues to remain very optimistic in this regard as
efforts in both the US and Canada are proceeding quickly and with very
positive reactions from potential clients.
"Morfoam", is 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.
For the financial quarter ending December 31, 2000, net sales revenues
increased $133,148 or 47.5% over the first quarter of the current financial
year and increased by 6.4% when compared to the corresponding period of the
previous year. Gross margins decreased in comparison with the 1st quarter and
as with the corresponding period of the previous year. The increase in sales
revenues coming from customers using proprietary products and those in which
the company provides both compounding and raw materials in its pricing.
All operating expenses increased substantially [17%] during the 2nd quarter
of the current financial year, when compared to the corresponding period of
the previous year. This was due to increased expenses relating to financial
activities such as; accrued debenture interest, financial consulting, legal
work and the marketing and sales efforts directed towards Morfoam, including
the launch of the company's web site. There were, however, declines of
approximately $3,991 in R&D expense and $46,579 in contingent liability
expense related to the legal action against the company; resources which had
been used in R&D having been redirected to manufacturing and sales and the
legal action against the company remains dormant with no indication as to
resumption or conclusion.
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Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2000
Effect of the Year 2000 Issue On Our Operations
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. Although the change in date has
occurred, it is not possible to conclude that all aspects of the Year 2000
Issue that may affect the entity, including those related to customers,
suppliers, or other third parties, have been fully resolved.
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 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially
from those set forth in the forward looking statements.
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Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2000
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings
A legal action was commenced against the Corporation, 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
(Commerical List); by a former customer, Endex Polymer Additives Inc.,
Endex Polymer Additives Inc. (USA), Endex International Limited and G. Mooney
And Associates. The Dow Chemical Company is defending separately.
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.
Based on prior written legal opinions from its patent attorneys that the
allegations are without merit, the Corporation retained a law firm
specializing in Intellectual Property Law and is vigorously defending the
action.
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 examinations for
injunction proceedings with those for the preparation for trial.
On September 16-17, 1999, at the hearing of the interlocutory injunction
motion, the parties agreed, on consent, to adjourn the motion until trial.
The parties agreed to expedite the matter to trial with an original target
date of about December 1999.
At December 31, 2000 no further direction had been received by the company's
counsel as to when the matter might proceed to trial nor had any direction
been received at the time of filing this report.
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Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2000
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the first six months of fiscal 2001 the company issued 77,260
Restricted Common Shares to it's former Canadian Accountants in consideration
of outstanding accounts payable. This transaction took place on August 29,
2000, with the average market price per share $0.20. The value of the
consideration being known and the number of shares issued was based on a 40 %
discount, to fair market value, on the date of conversion, that being $0.12
per share.
Additionally the company issued 1,313,715 Restricted Common Shares in
consideration of a loan and accrued interest due to a stockholder of the
company. The transaction took place on August 31,2000, with the average
market price per share $0.20. The value of the consideration being known and
the number of shares issued was based on a 40 % discount, to fair market
value, on the date of conversion, that being $0.12 per share.
Please refer to Page 5 of this report, Statement of Stockholders' Deficiency
and Note 6 - Common Stock on page 10 and 11 of this report for information in
this regard.
All of the shares indicated in the preceding information were issued in
private transactions pursuant to Section 4(2) of the Securities Act Of 1933.
Shares issued were in exchange for services provided based on the date of
consideration of the invoice provided and in consideration of debt owed to a
stockholder of the company.
All shares issued bore a Restrictive Legend restricting their transfer and
may only be publicly traded when and if registered for sale by means of a
duly processed registration, filed with the Securities And Exchange Commission
by the company or, alternatively, pursuant to Rule 144.
Due to the Restrictions of the instruments issued, the value of the shares
issued is based on a discount of 35 - 40 % to the average market price on the
date of the transaction.
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Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2000
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 K
(a) Exhibits - none
(b) Reports on Form 8-K - On October 4, 2000 the Company
filed in regard to reaching an agreement in principal
to acquire control of Multi-Web Lamination Inc. Please
refer to page 15, Item 2 - Liquidity and Captial
Resources for more detailed infomation related to
this matter.
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Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2000
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: February 14, 2001 BY:/s/Frank Mortimer
Frank Mortimer, President and
Chief Executive Officer
Date: February 14, 2001 BY:/s/Larry Leverton
Larry Leverton
Chief Financial Officer
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