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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 December 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 December 31, 1997.
14,711,341 shares of common stock, $.01 par value
____________________________________________________________________________
__
Page 1 of 12
Pages
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
DECEMBER 31,
1997
(UNAUDITED)
CURRENT ASSETS
Cash $10,120
Accounts Receivable 139,365
Inventory (Note 2) 42,952
Advances 39,128
Other Current Assets 14,571
Total Current Assets 245,776
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation of $508,128 191,490
INTANGIBLE ASSETS, net of accumulated amortization of
$15,804 26,760
$464,026
LIABILITIES & SHAREHOLDERS DEFICIENCY
CURRENT LIABILITIES
Notes Payable (Note 4) $133,044
Current Portion of long term debt: (Note 3)
Capital lease obligations 78,859
Other 1,114,221
Loans & advances:
Private lenders 127,211
Shareholders 22,719
Accounts payable and accrued expenses 531,623
Total Current Liabilities 2,007,677
LONG-TERM DEBT, net of current portion: (Note 3)
Shareholders 310,735
Other 58,862
MINORITY INTEREST 0
SHAREHOLDERS' DEFICIENCY:
Common stock, $.01 par value, 15,000,000 shares authorized:
Issued and outstanding, 14,711,341 shares 147,113
Additional Paid In Capital 4,056,744
Deficit (6,396,257)
Foreign currency translation adjustment 279,152
Total Shareholders' deficiency (1,913,248)
$464,026
See notes to condensed consolidated financial statements.
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED
DECEMBER 31,
1997 1996
SALES $671,949 $669,176
COST OF SALES 578,839 601,169
GROSS MARGIN 93,110 68,007
GENERAL EXPENSE
Administration 66,575 69,712
Financial
-Interest & Other 63,247 62,054
Research & Development 57,529 36,131
Selling 36,884 26,561
224,235 194,458
LOSS BEFORE INCOME TAX RECOVERY (131,125)
(126,451)
OTHER INCOME
IncomeTax Refund 14,000
NET LOSS ($117,125)
($126,451)
NET INCOME [LOSS] PER COMMON SHARE ($0.01)
($0.01)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,711,341 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
DECEMBER 31,
1997 1996
SALES $277,024 $328,645
COST OF SALES 227,777 284,199
GROSS MARGIN 49,247 44,446
GENERAL EXPENSE
Administration 30,958 36,063
Financial
-Interest & Other 30,353 29,126
Research & Development 29,863 16,565
Selling 19,094 11,987
110,268 93,741
LOSS BEFORE INCOME TAX RECOVERY (61,021)
(49,296)
OTHER INCOME
Income Tax Refund 10,548
NET LOSS ($50,473)
($49,296)
NET LOSS PER COMMON SHARE ($0.00)
($0.00)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,711,341
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)
SIX MONTHS ENDED
DECEMBER 31,
1997 1996
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss ($117,125)
($126,451)
Issue of Stock For Services 8,999
Adjustments to reconcile net Income (Loss) to net cash
Provided (Used) by operating activities:
Depreciation and amortization 6,959
17,052
Interest Expense Charged To Debt Principal
11,545
Net Change in non-cash operating assets
and liabilities 68,993
102,255
Net Cash Used By Operating Activities (32,174)
4,401
CASH FLOWS FROM INVESTING ACTIVITIES:
Property & Equipment Acquisition (3,322)
(2,606)
Net Cash Used By Investing Activities (3,322)
(2,606)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) loans,
notes and advances:
Line of Credit (11,429)
(14,755)
Long Term Debt 30,221
Shareholders (14,865)
14,377
Bank Note (2,186)
(5,152)
Private Lenders 20,080)
Net Cash (Used) Provided by Financing Activities 21,821
(5,530)
EFFECT OF EXCHANGE RATE ON CASH 23
1,054
CHANGE IN CASH BALANCE FOR THE PERIOD (13,652)
(2,681)
CASH, BEGINING OF PERIOD 23,772
7,552
CASH, END OF PERIOD $10,120
$4,871
See notes to condensed consolidated financial statements.
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TECHNICAL VENTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
DECEMBER 31,
1997 1996
PAYMENTS MADE FOR INTEREST $8,807
$8,663
NET CHANGE IN NON-CASH OPERATING ASSETS
AND LIABILITIES:
Decreases (increases) in operating assets
and increases (decreases) in operating
liabilities:
Accounts Receivable $21,463
$16,489
Inventory (7,688)
16,489
Other assets (6,182)
(1,851)
Accounts Payable and accrued expenses 61,400
(71,568)
$68,993
$102,255
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-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
December 31, 1997 are not necessarily indicative of the results that may be
expected for the year ended June 30, 1998. 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, 1997.
NOTE 2: INVENTORY:
Inventory is comprised of the following:
December 31,1997
Raw Materials $42,592
NOTE 3: LONG TERM DEBT:
At December 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 December 31, 1997 balance
sheet
as current liabilities.
NOTE 4: At December 31, 1997 the Company had tentatively refinanced it's
note payable due to Cooper Financial Corp. This obligation, is guaranteed
by
a shareholder of the Company. A refinancing charge was assessed,
increasing
the principal owed to $143,000 US. At December 31, 1997 the Company was
current with the new loan provisions; with a payable balance of $133,044
US.
The Company has been maintaining monthly payments of $3,150 US. Interest
charged is 10% per annum calculated over a period of 57 months. The term
of the obligation, however, is twenty four months with a balloon payment
of $91,208 US, due June 30, 1999.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
Liquidity and Capital Resources:
Continued operating losses and significant monthly debt service
requirements
continue to leave the Company in a position where it is unable to meet its
monthly cash flow requirements. Acquisition of property and equipment,
necessary to improve production, resulted in an increase in past due
balances
to vendors. Cash flows resulting from private lenders and shareholders,
enabled the Company to remain current on the Dow line of credit and the
bank
note.
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 December 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. Negotiations
which
took place with Dow in regard of the Company reducing it's long term
obligation were not successful, however, it was amiably agreed that the
Company would seek financing enabling it to pay off the debt as quickly as
possible. The Company is proceeding on this basis and is currently in the
midst of negotiations to meet not only the Dow obligation but also the IOC
obligation. Currently these negotiations are positive with the possibility
of achieving the required result. However, there can be no assurance as to
the results of the current negotiations.
The Company received $4,771 (Canadian) during September 1997 representing
the Ontario portion of the 1996 R&D tax claim. A further $14,910
(Canadian)
was received during the 2nd fiscal quarter of the current financial year.
Additonally a claim for fiscal 1997 of approximately $30,000 (Canadian)
will
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. The Company continues to assess and investigate
all avenues in respect of it's financial requirements. If it is deemed to
be
in the best
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interests 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.
No significant capital expenditures are anticipated in during the remainder
of
this fiscal year.
Results of Operations:
Sales revenues for the first six months of fiscal 1998 increased marginally
over those for the corresponding period of the previous year with
comparative
gross margins increasing 4%, this increase 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. The Company continues to pursue an ISO 9000 rating which
has become an important requirement necessary to secure new customers and
also maintain existing customers.
Efforts in the sale of the Company's proprietary products continues. Lucent
Technologies, having specified the use of the Company's material for use in
their fiber optics, continue to purchase the Company's product.
The Company continues to develop and market the specialty compounding, with
this segment representing 95% of revenue during the first six months of
fiscal 1998 and continues to pursue several additional contracts of some
magnitude. 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. 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 in late calender year 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 is felt 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 and has been granted a patent
application in Canada on this technology.
Gross margins increased 4% during the first two quarters of fiscal 1998,
when
compared with the previous years corresponding quarter; Contributing
factors
being increased sales revenues with more favourable pricing. With the new
specialty compounding business referred to previously and acquisition of
equipment providing the more efficient use of production resources. As
well,
and in that regard, the Company is currently involved with several other
corporations which may open additional opportunities in specialty
compounding
and metal composites.
Administrative expenses decreased minimally and interest and other
financing
costs increased slightly for the six months ended December 31, 1997, when
compared to those for the corresponding period of the previous 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. However, the Company still
continues
to take measures to contain all areas of expense.
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 21B 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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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 December 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: February 14, 1996 BY: Frank Mortimer
Frank Mortimer, President
and
Chief Executive Officer
Date: February 14, 1996 BY: Larry Leverton
Larry Leverton
Chief Financial Officer