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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, 1996
[ ] 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, 1996.
14,586,341 shares of common stock, $.01 par value
______________________________________________________________________________
Page 1 of 10 Pages
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
SEPTEMBER 30
1996
(UNAUDITED)
CURRENT ASSETS
Cash $23,466
Accounts Receivable 60,464
Inventory (Note 2) 35,896
Other Current Assets
Advances 33,740
Deposits 8,242
Total Current Assets 161,808
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation of $503,862 224,925
INTANGIBLE ASSETS, net of accumulated amortization of
$13,361 31,349
$418,082
LIABILITIES & SHAREHOLDERS DEFICIENCY
CURRENT LIABILITIES
Notes Payable (Note 4) $136,525
Current Portion of long term debt: (Note 3)
Capital lease obligations 97,884
Other 1,134,583
Loans & advances:
Private lenders 73,297
Shareholders 23,865
Accounts payable and accrued expenses 331,259
Total Current Liabilities 1,797,413
LONG-TERM DEBT, net of current portion: (Note 3)
Shareholders 304,587
Capital lease obligations 2,511
Other 81,247
MINORITY INTEREST 0
SHAREHOLDERS' DEFICIENCY:
Common stock, $.01 par value, 15,000,000 shares authorized:
Issued and outstanding, 14,586,341 shares 145,863
Additional Paid In Capital 4,048,994
Deficit (6,159,965)
Foreign currency translation adjustment 197,432
Total Shareholders' deficiency (1,767,676)
$418,082
See notes to condensed consolidated financial statements.
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
SALES $340,531 $432,275
COST OF SALES 316,970 371,043
GROSS MARGIN 23,561 61,232
GENERAL EXPENSE
Administration 33,648 44,180
Financial
-Interest & Other 32,927 40,914
Research & Development 19,567 20,881
Selling 14,574 13,617
100,716 119,592
NET INCOME [LOSS] ($77,155) ($58,360)
NET INCOME [LOSS] PER COMMON SHARE ($0.0053) ($0.0040)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,586,341 14,586,341
See notes to condensed consolidated financial statements.
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income [Loss] ($77,155) ($58,360)
Adjustments to reconcile net Income (Loss) to net cash
Provided (Used) by operating activities:
Depreciation and amortization 8,476 14,163
Interest Expense Charged To Debt Principal 10,993
Net Change in non-cash operating assets
and liabilities 66,066 (122,890)
Net Cash Provided (Used) by operating activities 8,380 (167,087)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) loans,
notes and advances:
Line of Credit (3,660)
Long Term Debt 181,250
Shareholders 14,890 (17,124)
Bank Note (3,857) 9,825
Net Cash Provided by Financing Activities 7,373 173,951
EFFECT OF EXCHANGE RATE ON CASH 161 88
CHANGE IN CASH BALANCE FOR THE PERIOD 15,914 6,952
CASH, BEGINING OF PERIOD 7,552 2,480
CASH, END OF PERIOD $23,466 $9,432
See notes to condensed consolidated financial statements.
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
PAYMENTS MADE FOR INTEREST $4,522 $1,128
NET CHANGE IN NON-CASH OPERATING ASSETS
AND LIABILITIES:
Decreases (increases) in operating assets
and increases (decreases) in operating
liabilities:
Accounts Receivable $50,669 ($72,821)
Inventory 36,186 21,892
Other assets 1,025 (16,390)
Accounts Payable and accrued expenses (21,814) (55,571)
$66,066 ($122,890)
See notes to condensed consolidated financial statements.
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION :
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to form 10-Q SB 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, 1996 are not necessarily indicative of the results that may be
expected for the year ended June 30, 1997. 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, 1996.
NOTE 2: INVENTORY:
Inventory is comprised of the following:
September 30,
1996
Raw Materials $35,896
NOTE 3: LONG TERM DEBT:
At September 30, 1996 the Company was in default on it's notes payable to Dow
and IOC 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 September 30, 1996 balance sheet
as current liabilities.
NOTE 4: At September 30, 1996 the Company had a note payable balance of
$136,525 due on demand to Cooper Financial Corp. This obligation, which had
previously been payable to the Federal Deposit Insurance Corporation, as
receiver for another financial institution, is guaranteed by a shareholder of
the Company. At September 30, the Company was in default of the loan
provisions, however, the Company has been maintaining monthly payments of
$2,500 US representing current interest charges. A portion of this monthly
payment is now being credited to the loan principal and as such the
outstanding principal balance reflects the amount which has been paid against
outstanding principal during the first quarter of fiscal 1997
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources:
During the fiscal quarter ending September 30, 1996, inventory levels
decreased as a result of reduced production. With more favorable collections
during the period resulting from higher sales volume for the prior fiscal
years's final quarter, the Company was able to reduce a portion of past due
balances due vendors and creditors. However, the Company remains in a
position where it is unable to meet its monthly cash flow requirements.
Three of the Company's long term debt financing arrangements [Note 3] are
currently in arrears. The debtors have verbally agreed to a moratorium on
principal repayments until the Company is in a financial position to make a
payment[s]. Both the Dow and IOC financing arrangements [Note 3] were
technically in default on Jan. 1, 1996; as such these debt's have been
reflected as current liabilities on the September 30/96 balance sheet.
Neither principal has notified the Company of it's default and it is expected
that a mutual understanding of the Company's financial circumstances will
preclude any negative action by either of the principals. Dow reviews the
Company's cash flow projections on an ongoing basis with the objective being a
re-capitalization of outstanding interest with the current principal, thereby
arriving at a payment amount and schedule based on a conservative assessment
of the Company's cash flows.
The Company will submit a Canadian R&D Tax Claim for fiscal 1995 amounting to
approximately $27,000 (Canadian), additionally a claim for fiscal 1996 of
approximately $17,500 (Canadian) will also be submitted. The tax department
has notified the Company of their intent to audit all such claims submitted.
Present financing arrangements are not considered a long-term solution to the
Company's financial needs. Several major investment banking providers have
been meeting with the Company 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. The Company's current capital
structure of an authorized issue of fifteen million common shares is almost
complete. Therefore, a change in the capital structure would become necessary
to raise additional funds through private or public issuance's in the
future.
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No significant capital expenditures are anticipated in this fiscal year.
Results of Operations:
Sales revenues for the first three months of fiscal 1997 decreased
substantially under those for the corresponding period of the previous year,
with all segments of the Company's revenues having been effected. The primary
factor contributing to the decrease was a decline in orders for the period
which was relative to the summer months vacation period. Our major customer in
contract compounding extended their vacation shut down period in the current
year. Sales of products with less favorable pricing arrangements were also a
factor contributing to the decrease in revenues.
Efforts in the sale of the Company's proprietary products by the Company's
distributors in the US., Canada and Europe continues. The marketing of the
Company's proprietary material requires highly qualified representation and
the Company has initiated a commissioned representative to market it's
proprietary products in the US.
The Company continues to develop and market the specialty compounding, with
this segment representing 91% of revenue during the first three months of
fiscal 1997. The Company continues to pursue several additional contracts of
some magnitude. Several trials have been completed and the results appear
very promising.
Gross margin as a percentage of sales decreased from 14% for the three months
of fiscal 1996, to 7% in the corresponding period in fiscal 1997. Lower
production volume resulting in less efficient use of production resources was
the primary factor contributing to this decline. Lower sales to markets with
less favorable pricing arrangements also contributed to the decrease.
The Company continues to operate at well below capacity. In that regard the
Company is currently involved with several corporations which may open
additional opportunities in specialty compounding and metal composites. Known
potential quantities are five to six million pounds per annum; potential
revenues are unknown at this time.
Interest and other financing costs for the three months ended September 30,
1996, decreased substantially over those for the corresponding period of the
previous year. Decreases in the prime lending rate, more favorable foreign
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currency exchange positions were the primary factors contributing to this
decrease. Additionally, interest charges for the three months ended September
30, 1995, included charges which were related to prior periods.
Administrative expenses decreased as indirect costs related to procurement of
I.O.C. debt which occurred during the previous years fiscal quarter were not
repeated. R&D and Selling expenses remained relatively stable with those of
the corresponding period of the previous year. The Company continues to take
measures to contain all areas of expense.
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 K
(a) Exhibits - none
(b) Reports on Form 8-K
During the quarter ended September 30, 1996, the Registrant did not
file any reports on Form 8-K.
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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 8, 1996 BY: Frank Mortimer
Frank Mortimer, President and
Chief Executive Officer
Date: November 8, 1996 BY: Larry Leverton
Larry Leverton
Chief Financial Officer