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, 2001
[ ] 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, 2001.
27,123,006 shares of common stock, $.01 par value
______________________________________________________________________________
Page 1 of 24 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)
March 31 March 31
2001 2000
NOT AUDITED NOT AUDITED
ASSETS
CURRENT ASSETS
Cash $3,647
Accounts Receivable $184,708 150,184
Inventory (Note 3) 54,180 53,926
Prepaid Expenses 11,655 1,979
TOTAL CURRENT ASSETS 250,543 209,736
OTHER ASSETS
Advances To Stockholders 49,551 63,115
Deposits 44,387 13,775
PROPERTY AND EQUIPMENT, at cost,
net of accumlated depreciation of
$501,495 at Mar. 31,2001 and
$520,797 at Mar. 31, 2000 115,682 134,650
INTANGIBLE ASSETS, net of accumulated
amortization of $5,660 at Mar. 31, 2001
and $5,747 at Mar. 31, 2000 0 408
TOTAL ASSETS $460,163 $421,684
March 31 March 31
2001 2000
NOT AUDITED NOT AUDITED
LIABILITIES
CURRENT LIABILITIES
Bank $3,459
Accounts payable and accrued expenses 758,791 $489,937
Current Portion Of Notes Payable (Note 4) 354,810 376,505
Capital lease obligations (Note 4) 71,727 78,002
Loans From Private Lenders 66,256 61,970
Current Portion of Loan From Shareholders,
Unsecured, 244,324 180,326
TOTAL CURRENT LIABILITIES 1,499,367 1,186,740
LONG-TERM LIABILITIES, net of current portion:
Convertible Debentures 248,267 189,574
Notes Payable (Note 4) 10,225 45,085
Shareholders 173,700 258,933
Other 24,870 27,046
457,062 520,638
MINORITY INTEREST 0 0
STOCKHOLDERS' DEFICIENCY
Common stock, $.01 par value, 50,000,000
shares authorized (Note 6):
Issued and outstanding, 27,123,006
at March 31, 2001 and 23,802,031 shares
at Mar. 31, 2000 $271,230 $238,020
Additional Paid in capital(Note 6): 5,341,004 4,942,703
ACCUMULATED OTHER COMPREHENSIVE INCOME 360,892 303,532
Deficit (7,469,392) (6,769,949)
Total Shareholders' deficiency (1,496,266) (1,285,694)
$460,163 $421,684
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)
NINE MONTHS ENDED
MARCH 31,
2001 2000
NOT AUDITED NOT AUDITED
SALES $960,411 $987,350
COST OF SALES 738,946 768,283
GROSS MARGIN 221,465 219,067
EXPENSES
Administration 194,194 295,772
Interest And Other 139,554 56,172
Research & Development 43,295 51,674
Selling 106,613 96,271
Contingent Related Expense 742 126,054
484,398 625,943
LOSS BEFORE INCOME TAX RECOVERY (262,933) (406,876)
Income Tax Recovery 22,859 25,055
NET LOSS ($240,074) ($381,821)
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 26,032,215 23,285,983
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
MARCH 31,
2001 2000
NOT AUDITED NOT AUDITED
SALES $275,391 $315,280
COST OF SALES 205,600 254,838
GROSS MARGIN 69,791 60,442
EXPENSES
Administration 71,707 38,995
Interest And Other 47,607 15,616
Research & Development 14,714 16,627
Selling 34,556 30,789
Contingent Related Legal Expense (Note 5) 5,094
168,584 107,122
LOSS BEFORE INCOME TAX RECOVERY (98,793) (46,680)
Income Tax Recovery 17,304 25,055
NET LOSS ($81,489) ($21,625)
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 26,528,506 23,776,756
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) 1,604,020 16,040 240,240
Net Loss (381,821)
Cumulative Translation
Adjustment (9,787)
Balance,
March 31, 2000 23,802,031 238,020 4,942,703 (6,769,949) 303,532
Balance June 30, 2000 24,847,031 248,470 5,126,586 (7,229,318) 310,124
Common Shares Issued
(Note 6) 2,275,975 22,760 214,418
Net Loss (240,074)
Cumulative Translation
Adjustment 50,768
Balance, March 31,
2001 27,123,006 271,230 5,341,004 (7,469,392) 360,892
See notes to consolidated financial statements
(5)
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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
NINE MONTHS ENDED
MARCH 31
2001 2000
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss ($240,074) ($381,821)
Adjustment to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 17,181 24,321
Issue of Stock For Services 99,132 200,838
(Increase) Decrease in accounts receivable (57,397) (24,584)
(Increase) Decrease in Prepaid Expenses (10,505)
(Increase) Decrease in inventory 3,620 (8,361)
Increase (Decrease) in accounts payable
and accrued expe 85,872 203,332
(102,170) 13,725
CASH FLOW FROM INVESTING ACTIVITIES:
(Increase) Decreases In Deposits (31,720) 13,937
(Increases) Decreases In Advances To
Stockholders (1,053) (139)
Property & Equipment Acquisition (8,341) (1,491)
(41,114) 12,307
CASH FLOWS FROM FINANCING ACTIVITIES
Bank 3,459
Repayments of note payable to
Cooper Financial (21,208) (16,936)
Proceeds from Capital Lease Obligations 234
Proceeds from Private Lenders 5,254
Proceeds from (repayments of)
Stockholders' loans (6,737) 14,009
Proceeds from (repayments of) Debenture (30,000)
Proceeds from issue of shares for
Stockholders' loans 206,706
Related Issuance Costs Of Convertible
Debentures & Warrants (30,916)
157,475 (33,610)
EFFECT OF EXCHANGE RATE ON CASH (19,154) (2,657)
NET INCREASE (DECREASE) IN CASH
BALANCE FOR THE PERIOD (4,963) (10,236)
Cash Balance, begining of period 4,963 13,883
Cash Balance, end of period $0 ` $3,647
PAYMENTS MADE DURING THE PERIOD FOR INTEREST $11,867 $12,579
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 March 31, 2001 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)
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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 March 31, 2001, 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)
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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:
Mar. 31, Mar. 31,
2001 2000
Raw Materials $54,180 $53,926
NOTE 4: LONG TERM DEBT:
At March 31, 2001 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 March 31, 2001 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 $95,999US. At March 31, 2001 the Company was
current with the new loan provisions; with a payable balance of
$47,837US. 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)
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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 nine months ended March 31, 2001 are
summarized as follows:
Nature Of Number of Shares Additional Issue Subscription
Payments of Shares Paid Up Paid Expense Proceeds
Capital In Capital Expense
Issued For
Services 487,260 4,873 25,599 25,599
In Exchange
For Loans &
Accounts
Payable 1,788,715 17,887 188,819 188,819 - -
TOTALS 2,275,975 22,760 214,418 - 214,418 -
The share issuance's for the nine months ended March 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
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
Issued for
Services
Related to
Debentures 50,000 500 9,500 10,000
TOTALS 1,604,020 16,040 240,240 10,000 55,442 190,838
(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:
Mar. 31, Mar. 31,
2001 2000
Administration 190,838
Research & Development
TOTALS 190,838
NOTE 7: MAJOR CUSTOMERS
Three customers accounted for 80% of consolidated revenues for the nine
month period ending March 31,2001 and for the corresponding period of
fiscal 2000, 80% of the Company's consolidated revenues were accounted
for by two customers. The loss of one or more of these customers
would have a detrimental effect on the Company's operating results.
NOTE 8: SUBSEQUENT EVENT
On April 9,2001, the Company received notice that ODC[formerly IOC]
accepted, subject to the execution and delivery of definitive
agreements, the Company's offer to extinguish the ODC investment in
the Company's 70% owned subsidiary Mortile Industries Ltd. (Note 4).
The effect of this transaction will be reflected on the financial
statements for the year ending June 30,2001.
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 fourth 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 nine month period ended March 31, 2001, 1,788,715 common
shares were issued in consideration of debt due a stockholders of the
company.
(12)
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Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending March 31, 2001
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 nine months of fiscal 2001 the company incurred an operating
loss of [$262,933], before income tax recovery, on net sales revenues of
$960,411. The loss was funded by receivable's, an increase in accounts
payable, proceeds from stockholder loans and it's tax claims refunds.
Two of the Company's long term debt financing arrangements, Note 4, are in
arrears, as such these debt's continue to be reflected as current liabilities
on the March 31, 2001 balance sheet. The amount of debt, including both
principal and accrued interest is as follows: ODC [formerly IOC] is $633,931
CND; FBX Holdings $202,056 CND. Debtor FBX Holdings clearly understands the
Company's financial position and as such has 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.
On April 9th, 2001 the company received notice that the Ontario Development
Corporation [ODC] had accepted, subject to the execution and delivery of
definitive agreements, the Company's offer to extinguish the ODC's investment
in the Company's 70% owned subsidiary (Mortile). The Company has offered to
purchase the portfolio for an aggregate amount of $130,000. CND. The amount
is payable as follows: $50,000 CND - 120 days from the closing under the
definitive agreements and $80,000. CND - 245 days from the closing under the
definitive agreement. The purchase will be funded through invesment in the
company. [Note 4 & Note 8]
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 company's 1999 tax claim.
Early in the fourth quarter the company received it's fiscal 2000 tax claim
in the amount of $33,871 CND. The tax department has notified the Company of
their intent to audit all such claims submitted.
(13)
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Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending March 31, 2001
During the first nine 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. Also during the first nine 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.
Additionally during the third fiscal quarter of 2001, the company issued
410,000 shares in consideration of services. The price per share $0.05, with
fair market value on the date of consideration being $0.07 . As the shares
issued are Restricted shares, they are valued at a 29% discount to the market
price.
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,
(14)
15
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending March 31, 2001
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.
In that regard, in March 2001 the company was able to come to an agreement
with one holder of the above referenced debentures. The holder agreed to
convert the debenture and all accrued interest to 475,000 Restricted Common
Shares of the company. The debenture holder, an existing stockholder of the
company, did not wish to exercise the warrant option attached to the debenture,
at that time. The price per share agreed upon was $0.10 per share. Fair
market value per share on the date of consideration was $0.07 per share.
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.
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 foaming product's 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
(15)
16
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending March 31, 2001
were 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 March 31, 2001, 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.
Results of Operations:
Net sales revenues for the first nine months of fiscal 2001 decreased 3 % to
$960,411 from $987,350, when compared to those for the corresponding period of
the previous year. Gross margins, increased to 23% from 22 %.
Total expenses declined $141,545 to $484,398 from $625,943 for the
corresponding period of the previous year. Much of the decline due to
reduced administration expenses of $101,578 as compared to $295,772 for the
corresponding period of the previous year and a $125,312 reduction in
contingent related legal expenses. However, these decreases were offset by
increases in financial and selling expenses.
Net Sales by geographic area for the nine month period ended March 31, 2001
and 2000, in US$ are as follows:
Geographic Area 2001 2000
United States $147,180 $ 98,735
Canada 554,860 641,778
France 258,371 246,837
$960,411 $ 987,350
(16)
17
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending March 31, 2001
Net Sales by product line for the nine month period ended March
31, 2001 and 2000, in US$ are as follows:
Product Line 2001 2000
Specialty Compounding $823,775 $ 931,338
(including Composite)
Polymer Technology 123,492 48,974
Miscellaneous 13,144 7,038
$960,411 $987,350
Technical Ventures continues to develop and market the specialty compounding,
with this segment representing 86 % of total revenues during the first nine
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.
Comparative gross margins, as a percent of revenue, increased to 23% from
22 % for the comparative nine month period.
Net sales revenues for the period ending March 31, 2001 and 2000 are
categorised as follows:
Category 2001 2000
Proprietary -Thermo Plastic $ 0 $ 7,415
Proprietary - Morfoam 123,492 41,559
Compounding With Materials 447,684 571,503
Compounding Without Materials 376,091 359,690
Miscellaneous Without Materials 13,144 7,183
$ 960,411 $ 987,350
Administrative expenses decreased 34 % or $101,578, when compared to those
for the corresponding nine month period of the previous year as significant
administrative expense arose on the issue of common stock in fiscal 2000.
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Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending March 31, 2001
Financial expenses increased substantially [$83,382] when compared to those
for the corresponding nine 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 16 % 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 11 % from $96,271 to $106,613 for the nine month
period ending March 31, 2001, when compared to the corresponding period for
the previous year. Potential customers that have completed their testing
advise that the Company's foaming products are 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. Sales revenue in this product have, as yet, been minimal, however,
during the first nine months sales revenues from products increased 100%.
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.
The Company's foaming products are products for the plastics and rubber
industry, and is a 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 March 31, 2001, net sales revenues decreased
$39,889 or 12.6 % under the third quarter corresponding period of the
previous year. Gross margins, however, increased in comparison with the
corresponding period of the previous year due to the mix of compounding orders
which the company received during the period. The decrease in sales revenues
coming from all customers due mainly to the economic downturn.
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19
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending March 31, 2001
Operating expenses increased substantially [57%] during the 3rd 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 foaming products.
There were, however, declines of approximately 11.5% in R&D expense and
$5,094 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.
At March 31, 2001 the company had a back log of orders totalling
$166,000 .
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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20
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending March 31, 2001
A development program has been entered into by the company to develop products
based on cross-linked polyolefins for injection moldings parts for a wide
market opportunity. Finished products could be supplied to markets as
diversified as automotive and to the high volume commodity markets. In all
cases TVI will be supplied compounded materials for injection molding into
finished products.
The participating company has installed a 6 station injection molding machine
capable of generating $2 million of sales revenues. This company is well
funded and willing to install more molding machines at an investment of
$850,000 per machine. A long term supply contract is being drawn up between
the two companies.
Also, a two part agreement will be entered into by the company, with another
participant company, encompassing the following:
a. T.V.I. or a subsidiary of T.V.I. will be the contracted company
supplying the compounded formulation to the participant and
its newly formed company.
b. The "Newco" business activities are clearly spelled out as
"continuous" process fabrication and T.V.I. will participate in
the share structure and the profits of this new company.
The participating company anticipates having all their production machinery
in place for the startup of July 1st, 2001.
Additonally, a German compounding company wishing to obtain North American
exposure, would like to provide a compounding unit, to be installed in
Mortile's premises for compounding under Mortile's supervision, master batch
formulations for supply to their customer base at large.
Agreements have been reached in principle and meetings between Mortile and
the representatives of the participating company are scheduled for early May.
It is anticipated that the compounding lines will be fully obtained by
September, 2001.
It is not possible at this stage to estimate what revenues would flow from
this venture, and they can only be factored in after a detailed business plan
has been generated by both parties to the agreement.
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21
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending March 31, 2001
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 March 31, 2001 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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22
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending March 31,2001
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the first nine 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.
Also, 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.
Additionally during the third fiscal quarter of 2001, the company issued
410,000 shares in consideration of services. The price per share $0.05,
with fair market value on the date of consideration being $0.07 . As the
shares issued are Restricted shares, they are valued at a 29% discount to the
market price.
In March 2001 the company was able to come to an agreement with one holder of
it's debentures. The holder agreed to convert the debenture and all accrued
interest to 475,000 Restricted Common Shares of the company. The debenture
holder, an existing stockholder of the company, did not wish to exercise the
warrant option attached to the debenture, at that time. The price per share
agreed upon was $0.10 per share. Fair market value per share on the date of
consideration was $0.07 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.
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23
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending March 31,2001
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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 K
(a) Exhibits - none
(b) Reports - None
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24
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending March 31,2001
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: May 14, 2001 BY:/s/Frank Mortimer
Frank Mortimer, President and
Chief Executive Officer
Date: May 14, 2001 BY:/s/Larry Leverton
Larry Leverton
Chief Financial Officer
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