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 September 30, 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 September 30, 2001.
27,163,006 shares of common stock, $.01 par value
______________________________________________________________________________
Page 1 of 20 Pages
<Page>
PART 1 FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS
TECHNICAL VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Notes 1,and 2)
September 30, JUNE 30,
2001 2001
NOT AUDITED AUDITED
ASSETS
CURRENT ASSETS
Cash $6,618 $22,960
Accounts Receivable 171,604 94,127
Inventory (Note 3) 63,807 72,702
TOTAL CURRENT ASSETS 242,029 189,789
OTHER ASSETS
Deposits 44,567 46,213
PROPERTY AND EQUIPMENT, at cost, net of
accumlated depreciation of $512,481
at Sep. 30,2001 and $513,591 at
Sep. 30, 2000 103,820 114,964
TOTAL ASSETS $390,416 $350,966
<Page>
September 30, June 30,
2001 2001
NOT AUDITED AUDITED
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued expenses $846,200 $791,798
Current Portion Of Notes Payable (Note 4) 347,730 366,943
Capital lease obligations (Note 4) 71,625 74,678
Loans From Private Lenders 66,233 66,925
Current Portion of Loan From Shareholders,
Unsecured, 254,793 270,263
TOTAL CURRENT LIABILITIES 1,586,581 1,570,607
LONG-TERM LIABILITIES, net of current portion:
Convertible Debentures 248,267 248,267
Shareholders 113,823 122,344
Other 24,835 25,893
386,925 396,504
MINORITY INTEREST - -
STOCKHOLDERS' DEFICIENCY
Common stock, $.01 par value, 50,000,000
shares authorized (Note 6):
Issued and outstanding, 27,123,006 at
September 30, 2001 and June 30, 2001 $271,630 $271,630
Additional Paid in capital(Note 6): 5,342,204 5,342,204
ACCUMULATED OTHER COMPREHENSIVE INCOME 362,277 327,035
Deficit (7,559,201) (7,557,014)
Total Shareholders' deficiency (1,583,090) (1,616,145)
$390,416 $350,966
See Notes To Condensed Consolidated Financial Statements
(2)
<Page>
PART 1 FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS
TECHNICAL VENTURES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(NOT AUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
2001 2000
SALES $323,340 $276,806
COST OF SALES 230,121 218,662
GROSS MARGIN 93,219 58,144
EXPENSES
Administration 31,518 52,978
Interest And Other 21,580 47,421
Research & Development 14,816 14,629
Selling 27,492 28,215
Contingent Related Expense 714
95,406 143,957
NET LOSS ($2,187) ($85,813)
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 27,163,006 25,340,923
See notes to condensed consolidated financial statements.
(3)
<Page>
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
<Table>
Common Stock Additional Cumulativ
Issued and Outstanding Paid In Translati
Shares Amount Capital Deficit Adjustmen
$ $ $ $
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 13,137 144,508
Net Loss (85,813)
Cumulative Translation
Adjustment 13,199
Balance, September 30,
2000 26,238,006 262,380 5,279,593 (7,315,131) 323,323
Balance June 30, 2001 27,163,006 271,630 5,342,204 (7,557,014) 327,035
Net Loss (2,187)
Cumulative Translation
Adjustment 35,242
Balance, September 30,
2001 27,163,006 271,630 5,342,204 (7,559,201) 362,277
</Table>
See notes to consolidated financial statements
(4)
<Page>
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
FISCAL PERIOD ENDED
SEPTEMBER 30
2001 2000
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss ($2,187) ($85,813)
Adjustment to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 6,188 5,841
Issue of Stock For Services 9,271
(Increase) Decrease in accounts receivable (81,325) 45,636
(Increase) Decrease in Prepaid Expenses (561)
(Increase) Decrease in inventory 5,923 9,575
Increase (Decrease) in accounts payable and
accrued expe 86,767 27,921
14,805 12,432
CASH FLOW FROM INVESTING ACTIVITIES:
(Increase) Decreases In Deposits 318 (35,985)
(Increases) Decreases In Advances To
Stockholders (1,277)
Property & Equipment Acquisition 255 (1,034)
573 (38,296)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of note payable to Cooper Financial (5,712) (7,789)
Proceeds from (repayments of) Stockholders'
loans (7,943) 104,570
(13,655) 96,781
EFFECT OF EXCHANGE RATE ON CASH (18,065) (4,521)
NET INCREASE (DECREASE) IN CASH BALANCE
FOR THE PERIOD (16,342) 66,397
Cash Balance, begining of period 22,960 4,963
Cash Balance, end of period $6,618 $71,360
PAYMENTS MADE DURING THE PERIOD FOR INTEREST $5,075 $3,523
NON CASH FINANCING ACTIVITIES
(Issue of Shares Reducing Debt) - $157,645
See notes to condensed consolidated financial statements.
(5)
<Page>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AT SEPTEMBER 30, 2001 (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
three months ended September 30, 2001 are not necessarily indicative
of the results that may be expected for the year ended June 30, 2002.
For further information refer to the financial statements and
footnotes thereto included in the annual report on form 10-KSB for
the year ended June 30, 2001.
b) Principals Of Consolidation
The consolidated financial statements include the accounts of
Technical Ventures Inc. ("TVI") 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.
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
(37)
<Page>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AT SEPTEMBER 30, 2001 (NOT AUDITED)
NOTE 1: (cont'd)
rates. Adjustments resulting from the translation are included in the
accumulated comprehensive income in stockholders' deficiency.
e) Fair Value Presentation:
There are financial instruments, none of which are held for trading
purposes. Estimates that the fair value of all financial instruments
at September 30, 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 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 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 any income. 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 disclosure provisions of SFAS
No. 123 has been adopted.
(7)
<Page>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AT SEPTEMBER 30, 2001 (NOT AUDITED)
NOTE 2: GOING CONCERN
Significant operating losses have been sustained since inception
and there is substantial doubt as to the ability to continue as a
going concern. Continued existence is dependent upon the ability
to generate sufficient cash flow to meet obligations on a timely
basis. As a result there is need of additional financing. No
adjustment has been made to the value of assets in consideration of
the financial condition.
NOTE 3: INVENTORY:
Inventory is comprised of the following:
Sept. 30, June. 30,
2001 2001
Raw Materials $63,807 $72,702
NOTE 4: LONG TERM DEBT:
At September 30, 2001 a note payable to Ontario Development
Corporations [I.O.C.] and a lease payable to FBX Holdings Inc. were
in default. Although the respective creditors have not called the
obligations, payments are due on demand and accordingly the balances
are reflected on the September 30, 2001 balance sheet as current
liabilities. On June 25, 2001, O.D.C.[I.O.C.] agreed, on the basis
of two payments from the company totalling U.S.$86,000 (Canadian
$130,000) plus interest by February 25, 2002, to discharge its
security on its note and to assign its 15% interest in Mortile to
Mortile for cancellation.
In accordance with SFAS No. 140, this transaction would be treated as
a sale and the resulting gain would be recorded in the fiscal year
ending June 30, 2002 should the payments be made by February 25,
2002 and the company be released from its obligations.
In August 1999 refinancing of the note payable to Cooper Financial
Corp. was completed. This obligation, is guaranteed by a
stockholder. A refinancing charge was assessed, increasing the
principal owed to $95,999 US. At September 30, 2001 the new loan
provisions of $3,150 payments, monthly, have been maintained; with a
payable balance of $30,981 US. Interest charged is 10% per annum
calculated over a period of 35 months.
(8)
<Page>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AT SEPTEMBER 30, 2001 (NOT AUDITED)
NOTE 5: CONTINGENT LIABILITY AND RELATED COSTS:
Contingent liability under a breach of secrecy agreements, fiduciary
duty and misuse of confidential information lawsuit. Company's
attorneys are of the opinion that'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. However,
legal and any other related costs incurred, are reflected for any
contingencies, as a charge to operations for 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 three months ended September 30, 2001 are
summarized as follows:
<Table>
Nature Of Number of Paid Up Additional Issue Subscription
Payments Shares Capital Paid In Expense Proceeds Expense
Capital
None - - - - - -
TOTALS - - - - - -
</Table>
The share issuance's for the three months ended September 30, 2000
are summarized as follows:
<Table>
Nature Of Number of Paid Up Additional Issue Subscription
Payments Shares Capital Paid In Expense Proceeds Expense
Capital
In Exchange
For Loans
& Accounts
Payable 1,390,975 13,910 153,007 166,917 -
TOTALS 1,390,975 13,910 153,007 166,917 - - -
</Table>
(9)
<Page>
TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AT SEPTEMBER 30, 2001 (NOT AUDITED)
NOTE 7: MAJOR CUSTOMERS
Four customers accounted for 88 % of consolidated net revenues for the
three month period of fiscal 2002, ending September 30, 2001 and for
the corresponding period of fiscal 2001, 78 % of consolidated revenues
were accounted for by two customers. The loss of one or more of
these customers would have a detrimental effect on operating results.
NOTE 8: ACQUISITION LETTER OF INTENT
On October 1, 2000, 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 at fair market value, on the date of closing.
Subsequently, both parties agreed to postpone the closing date and
currently, negotiations are still on-going. This acquisition, if
completed, will be accounted for as a purchase. The acquiree company
is a manufacturer of industrial products compatible to current
company operations.
(10)
<Page>
<Page>11
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources:
During the first three months of fiscal 2002 the company incurred an minimal
operating loss of ($2,187), on net sales revenues of $323,340. Operations were
funded by accounts receivable, and an increase in accounts payable.
TVI's foreign subsidiary, Mortile Industries, had an income of $20,546,
however, administrative and financial expenses incurred by TVI of $22,733
produced the consolidated loss of ($2,187).
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 September 30, 2001 balance sheet. The amount of debt, including both
principal and accrued interest is as follows: ODC [formerly IOC] is $404,763;
FBX Holdings $128,002. 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.
The Ontario Development Corporation [ODC] accepted, and delivered definitive
agreements, relative to 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. CAD.
The amount is payable as follows: $50,000 CAD - 120 days from the closing
under the definitive agreements and $80,000. CAD - 245 days from the closing
under the definitive agreement. Additionally, interest of 8% per annum,
calculated monthly, including default and judgment, until such time as actual
payment plus interest is made. The purchase will be funded through investment
in the company. [Note 4 & Note 8]
A income tax claim relative to R&D expenses will be filed for fiscal 2001 of
approximately $23,000. The tax department has expressed their intent to
audit all such claims submitted.
(11)
<Page>
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2001
Continued existence is dependent upon the ability to generate sufficient cash
flow to meet obligations on a timely basis. It is anticipated that cash flows
from operations in the immediate future will be minimally sufficient to meet
the Company's requirements, however, there can be no assurance of this and in
order that current operations, continued development and growth be sustained,
there is, therefore, the need of additional financing, which is currently being
sought.
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.
In that regard, in March 2001 an agreement was reached 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.
TVI 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.
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 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
(12)
<Page>
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2001
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
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
CAD and is forecasting sales of $2 Million CAD 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. Talks with Multi-Web were put on hold during the
final stages of negotiations with the Ontario Development Corporation, these
talks have now resumed to explore the feasibility of a merger or strategic
alliance. Multi-Web has sales of $1.5 million but is limited to the Canadian
market due to the cost of raw materials currently purchased in the USA.
Technical Venture's in cooperation with Multi-Web, manufacturers of CushionAir
underlay, have an excellent opportunity to enter into this segment of the
market with it's large potential for consumption of the unique underlay on
offer from the new venture. Multi-web currently supplies large box stores
like Home Depot, and has generated a lot of interest from the carpet industry.
Additionally, the patented rotary mould with it's well tested and proven
benefits, offers a product destined to generate a great deal of market
acceptance.
Multi-web is looking for resources to expand. The cross linked polyethylene
product has superior attributes over urethanes and rubber under-cushion, the
main competitors. The product contains no clay fillers or latex, nor is
there any presence of cyanide or formaldehyde present in some products
currently in use. Furthermore, after passing through the rotary mould,
cushionaire has 280% more support capacity than the best high-end rebound
product on the market. Cross linked polyethylene products are closed cell
(13)
<Page>
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2001
and therefore waterproof. This prevents the mildew and mold growth where
moisture is present. The underlay will therefore not absorb excess carpet
cleaning chemicals or spills as well as soiling.
At September 30, 2001, the Letter of Intent remains effective and negotiations
have resumed until such time as evaluations are completed and results deemed
acceptable. At the date of this report the status remains the same, however,
it is anticipated that the matter will proceed or be rejected by the end of
December 2001.
Results of Operations:
Net sales revenues for the first three months of fiscal 2002 increased 17 %
to $323,340 from $276,806, when compared to those for the corresponding period
of the previous year. The majority increase taking place in proprietary
foaming agents and thermoplastics.
Comparative gross margins, as a percent of revenue, increased to 29% from 21%.
for the three month period. This improvement is primarily based on increased
pricing for polymer products and specialty compounding service [excluding the
provision of materials] and improved manufacturing processes.
Total expenses declined by $48,551 to $95,406, from $143,957 for the
corresponding period of the previous year. The majority of decline due to
reduced administration and financial expenses of $53,098, in aggregate, as
compared to $100,399 for the corresponding period of the previous year.
Net Sales, generated by TVI's foreign operations [Mortile Ind.], by product
line, for the three month period ended September 30, 2001 and 2000, in US$
are as follows:
Product Line 2001 2000
Specialty Compounding $210,343 $ 250,781
(including Composite)
Polymer Technology 109,090 25,125
Miscellaneous 3,907 900
$323,340 $276,806
TVI continues to develop and market the specialty compounding, with this
segment representing 65 % of total revenues during the first three months of
fiscal 2002.
(14)
<Page>
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2001
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.
Net sales revenues, generated by TVI's foreign operations [Mortile Ind.], for
the period ending September 30, 2001 and 2000 are categorized as follows:
Category 2001 2000
Proprietary -Thermo Plastic $ 44,932 $ 0
Proprietary - Morfoam 64,158 26,338
Compounding Incl. Materials 115,629 117,846
Compounding Excl. Materials 94,714 131,722
Miscellaneous Without Materials 3,907 900
$323,340 $276,806
Administrative expenses decreased 41 % or $21,460, when compared to those for
the corresponding three month period of the previous year as administrative
expense arose on the issue of common stock in fiscal 2001.
Financial expenses decreased $25,841 when compared to those for the
corresponding three month period of the previous year, as expenses such as
accrued interest declined due to reduction of debt through the issue of stock
in the previous year and the reduction in ODC/IOC, stockholder interest and
as well, improved foreign exchange expense.
R&D expenses increased minimally when compared to those for the corresponding
period of the previous year and selling expenses remained constant when
compared to the previous corresponding period.
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 more than doubled over the corresponding period
of the previous year and future sales appear even more promising.
(15)
<Page>
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2001
The foaming products are for the plastics and rubber industry, and are 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.
A development program, noted in the March 31, 2001 report, has been entered
into 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 RVI will be supplied compounded materials
for injection molding into finished products. 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.
This program has not progressed as anticipated and is still being discussed
between the participants.
The company has been involved over the last 14 months in a Research &
Development program with foamed polyethylene's at densities between 1.5 lb.
and 6 lb. per cubic foot. Although this technology has been used in the
manufacturing of "Buns" for some time the objectives were to eliminate at
least four [4] manufacturing steps and produce a finished part in a one step
manufacturing process. For competitive reasons no in information will be made
public until potential patent positions have been explored.
The first commercial production run was completed on October 10th, 2001 and
it represents a milestone in company long term objectives and a second order
was received on October 24, 2001. The success of this run is the result of
many years of research and pilot production to prove the viability of the
process which is a necessity of it's business objectives.
(16)
<Page>
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2001
Additionally this success has resulted in a substantial market opportunity,
which could generate revenues in excess of $2 M within the next twelve to
fifteen months. Several other market opportunities of similar potential
could be achieved.
At September 30, 2001 there was a back log of orders totaling $86,408 .
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.
(17)
<Page>
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2001
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 CAD $10 Million
compensatory damages, further punitive damages of CAD $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 SEPTEMBER 30, 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.
(18)
<Page>
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2001
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 K
(a) Exhibits - none
(b) Reports - none
(19)
<Page>
Technical Ventures Inc. And Subsidiaries
Report 10 QSB For The Financial Period Ending September 30,2001
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 authorized.
TECHNICAL VENTURES INC.
Date: November 9, 2001 By: /S/Frank Mortimer
Frank Mortimer, President
and Chief Executive Officer
Date: November 9, 2001 By: /S/Larry Leverton
Larry Leverton
Chief Financial Officer
(20)