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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 March 31, 1997
[ ] 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, 1997.
14,586,341 shares of common stock, $.01 par value
______________________________________________________________________________
Page 1 of 11 Pages
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
MARCH 31,
1997
(UNAUDITED)
CURRENT ASSETS
Cash $ 6,657
Accounts Receivable 58,890
Inventory (Note 2) 51,716
Other Current Assets
Advances 39,212
Deposits 8,848
Total Current Assets 165,324
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation of $511,317 208,138
INTANGIBLE ASSETS, net of accumulated amortization of
$14,417 29,562
$403,024
LIABILITIES & SHAREHOLDERS DEFICIENCY
CURRENT LIABILITIES
Notes Payable (Note 4) $135,230
Current Portion of long term debt: (Note 3)
Capital lease obligations 88,916
Other 1,132,617
Loans & advances:
Private lenders 109,551
Shareholders 23,475
Accounts payable and accrued expenses 424,406
Total Current Liabilities 1,914,195
LONG-TERM DEBT, net of current portion: (Note 3)
Shareholders 298,811
Capital lease obligations 1,055
Other 63,828
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 (6,293,253)
Foreign currency translation adjustment 223,531
Total Shareholders' deficiency (1,874,865)
$403,024
See notes to condensed consolidated financial statements.
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
1997 1996
SALES $936,856 $1,178,002
COST OF SALES 855,089 983,067
GROSS MARGIN 81,767 194,935
GENERAL EXPENSE
Administration 103,320 117,894
Financial
-Interest & Other 90,108 98,771
Research & Development 57,042 48,018
Selling 41,740 38,917
292,210 303,600
NET LOSS ($210,443) ($108,665)
NET LOSS PER COMMON SHARE ($0.01) ($0.01)
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 STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1997 1996
SALES $267,680 $459,209
COST OF SALES 253,920 341,787
GROSS MARGIN 13,760 117,421
GENERAL EXPENSE
Administration 33,608 34,222
Financial
-Interest & Other 28,055 30,394
Research & Development 20,910 11,631
Selling 15,179 11,899
97,752 88,146
NET LOSS ($83,992) $29,275
NET LOSS PER COMMON SHARE ($0.01) $0.00
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)
NINE MONTHS ENDED
MARCH 31,
1997 1996
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss ($210,443) ($108,665)
Adjustments to reconcile net Loss to net cash
Provided (Used) by operating activities:
Depreciation and amortization 25,302 41,779
Net Change in non-cash operating assets
and liabilities 140,145 (99,232)
Net Cash Provided (Used) by operating activities (44,996) (166,118)
CASH FLOWS FROM INVESTING ACTIVITIES
Property & Equipment Acquisition (2,579)
Net Cash Used By Investing Activities (2,579)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) loans,
notes and advances:
Line of Credit (22,091)
Long Term Debt 21,004 187,879
Shareholders 13,848 14,390
Bank Note (5,152)
Private Lenders 36,635 (16,903)
Net Cash Provided (Used) by Financing Activities 44,244 185,366
EFFECT OF EXCHANGE RATE ON CASH 2,436 614
CHANGE IN CASH BALANCE FOR THE PERIOD (895) 19,862
CASH, BEGINING OF PERIOD 7,552 2,480
CASH, END OF PERIOD $ 6,657 $22,342
See notes to condensed consolidated financial statements.
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
1997 1996
PAYMENTS MADE FOR INTEREST $12,460 $25,631
NET CHANGE IN NON-CASH OPERATING ASSETS
AND LIABILITIES:
Decreases (increases) in operating assets
and increases (decreases) in operating
liabilities:
Accounts Receivable $50,427 (88,687)
Inventory 19,188 23,415
Other assets (5,756) (4,630)
Accounts Payable and accrued expenses 76,286 (29,330)
$140,145 ($99,232)
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 nine months ended March 31, 1997 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:
March 31,
1997
Raw Materials $51,716
NOTE 3: LONG TERM DEBT:
At March 31, 1997 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 March 31, 1997 balance sheet
as current liabilities.
NOTE 4: At March 31, 1997 the Company had a note payable balance of
$135,230 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 December 31, 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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources:
During the nine months ending March 31, 1997, inventory levels decreased as
a result of reduced production. Sales revenues, particularly in the 3rd
fiscal quarter, decreased having a negative effect on cash flow from
operations. 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] have been
technically in default since Jan. 1, 1996; as such these debt's have been
reflected as current liabilities on the March 31/97 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 has submitted a Canadian R&D Tax Claim for fiscal 1995 amounting
to $24,280 (Canadian) and received approximately $3,000 (Canadian) during
April 1997 representing the Ontario portion of the the tax claim.
Additionally a claim for fiscal 1996 of approximately $17,500 (Canadian) will
also be submitted. The tax department maintains their position 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 nine months of fiscal 1997 decreased under those
for the corresponding period of the previous year with comparative gross
margins declining 8%. Both of these declines, due in part to a shift in
pricing arrangements with some of the Company's customers, e.g. provision of
raw materials or the non-provision of raw materials, when processing the
customer's order. As well, having to increase resources expended in
manufacturing and quality control areas. The Company intends to pursue an
ISO 9000 rating which has become a requirement of potential new and existing
customers in evaluating the Company's capabilities, when considering the
awarding of new business to the Company.
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.
Lucent Technologies (formerly AT & T) have increased their purchases
substantially over the previous year.
The Company continues to develop and market the specialty compounding, with
this segment representing 85% of revenue during the first nine months of
fiscal 1997 and continues to pursue several additional contracts of some
magnitude. Efforts in this regard appear promising and it is anticipated that
these efforts will initiate additional business during the 4th quarter of
the fiscal 1997. Technical Ventures Inc. through its subsidiary Mortile
Industries have concluded, in principal, agreement with a customer to provide
specialty compounding services to meet the customers entire North American
requirements. This development is the result of two and a half years of joint
product development by both parties. The final documents for signing will be
available in late May or early June 1997. However, the contract commences
immediately with the first order completed in April 1997. The contract calls
for a minimum 1,000 tons of material to be supplied during 1997 and
1,500 - 2,000 tons of material to be contracted for delivery during 1998.
In order to meet production demands required by the contract, it is
anticipated that the Company's present production facilities will be operating
near capacity. Additionally, with further increased production called for
in 1998 under the contract, a second dedicated facility, to be located in
North Carolina and funded by the customer is expected to be operational by
March 1998.
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The Company has also completed it's initial evaluation of a by-product from
the pulp and paper mill industry which we feel could be used as a low cost
filler in plastics. At present this by-product has been land-filled and new
E.P.A. rulings in place are banning this practice. We have developed the
technology to utilize this by-product at a profit in substantial quantities.
The Company has proceeded with filing for patent application in this
technology.
Gross margins decreased substantially in the third quarter, when compared with
the previous years corresponding quarter; Contributing factors being less
favourable pricing, lower sales revenues and production volumes over the nine
month period, resulting in less efficient use of production resources.
However, the new specialty compounding business referred to previously will
increase the efficient use of production resources substantially. As well,
in that regard the Company is currently involved with several other
corporations which may open additional opportunities in specialty compounding
and metal composites with the potential of substantive quantities.
Interest and other financing costs for the three and nine months ended
March 31, 1997, decreased under those for the corresponding periods of the
previous year. A major part of this decline is represented by interest
charged for the three months ending Sept. 30, 1995 and which were related to
prior years.
Administrative expenses decreased substantially over the nine month period
as non recurring costs related to procurement of I.O.C. debt, which occurred
during the previous fiscal year. Relative to the corresponding period for
the previous fiscal year, R&D expenses increased due to resources being
expended in the pursuit of enhanced and new technology; an effort to assist
in obtaining new business. Selling expenses increased, with resources being
expended in conjunction with the R&D effort, towards the acquisition of new
business. 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 March 31, 1997, 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: May 12, 1997 BY: Frank Mortimer
Frank Mortimer, President and
Chief Executive Officer
Date: May 12, 1997 BY: Larry Leverton
Larry Leverton
Chief Financial Officer