As filed with the Securities and Exchange Commission on ^ April 24, 2000
Registration No. 333-75901
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. ^ 3
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TECHNICAL VENTURES INC.
(Name of Small Business Issuer as specified in its charter)
New York 13-3296819 1700
(State or other jurisdiction of (I.R.S. Employer Identification Number) (Primary Standard Industrial
incorporation or organization) Classification Code Number)
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3411 McNicoll Avenue
Unit 11
Scarborough, Ontario
Canada M1V 2V6
(416) 299-9280
(Address and telephone number of principal executive offices)
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Frank Mortimer, President
3411 McNicoll Avenue
Unit 11
Scarborough, Ontario
Canada M1V 2V6
(416) 299-9280
(Name, address and telephone number of agent for service)
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Copies of all communications to:
Gregory Sichenzia, Esq.
Richard A. Friedman, Esq.
Sichenzia Ross & Friedman, LLP
135 West 50th Street
New York, New York 10022
Telephone No.: (212) 664-1200
Facsimile No.: (212) 664-7329
Approximate date of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check
the following box.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. o
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. o
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. o
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Title of Each Offering Aggregate Amount of
Class of Securities Amount to be Price Per Offering Registration
to be Registered Registered Security(1)(2) Price(1) Fee
Common Stock, $0.01 par value ^ 8,625,512 $0.14 $1,207,572 $373.35*
*Previously paid.
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(a) of the Securities Act of 1933, as amended.
(2) Represents the closing sale price for the Registrant's common stock on
December 28, 1999.
The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
TECHNICAL VENTURES INC.
Cross Reference Sheet
Form SB-2 Item Number and Caption Captions In Prospectus
1. Front of Registration Statement and Outside Front Cover of Prospectus..................... Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus................................... Cover Page, Inside Cover Page,
Outside Back Page
3. Summary Information and Risk Factors...................................................... Prospectus Summary, Risk Factors
4. Use of Proceeds........................................................................... Use of Proceeds
*
5. Determination of Offering Price...........................................................
6. Dilution.................................................................................. Dilution
7. Selling Securityholders................................................................... Selling Shareholders, Plan of
Distribution
8. Plan of Distribution...................................................................... Prospectus Summary, Selling
Securityholders
9. Legal Proceedings......................................................................... Business
10. Directors, Executive Officers, Promoters and Control Persons.............................. Management, Principal
Stockholders
11. Security Ownership of Certain Beneficial Owners and Management............................ Principal Stockholders
12. Description of Securities................................................................. Description of Securities
13. Interest of Named Experts and Counsel..................................................... Legal Matters
14. Disclosure of Commission Position on Indemnification for Securities Act Liabilities....... Management
15. Organization Within Last Five Years...................................................... *
16. Description of Business................................................................... Prospectus Summary, Business
17. Management's Discussion and Analysis or Plan of Operation................................. Management's Discussion and
Analysis of Financial
Condition and Results of
Operations
18. Description of Property................................................................... Business
19. Certain Relationships and Related Transactions............................................ Certain Transactions
20. Market for Common Equity and Related Shareholder Matters.................................. Front Cover Page, Description of
Securities
21. Executive Compensation.................................................................... Management
22. Financial Statements...................................................................... Financial Statements
*
23. Changes in and Disagreements with Accounts on Accounting and Financial Disclosure.........
*Not Applicable
SUBJECT TO COMPLETION
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Prospectus
______, ^ 2000
Technical Ventures Inc.
^ 8,625,512 Shares of Common Stock
Technical Ventures Inc.: The Offering:
o We are engaged in the design, development, o This prospectus is prepared in connection
manufacturing of proprietary thermoplastic with the sale to the public of shares of our
compounds (plastics mixed common stock. The selling shareholders
with other solid materials) and composite are offering all of the ^ 8,625,512 shares of
compounds (compositions of plastics with common stock.
other powdered materials). We also o There is no underwriter or coordinating broker
develop specialty compounds that we acting in connection with this offering.
produce by mixing and pelletizing o We will not receive any proceeds from the shares
proprietary formulations specified by our sold by the selling shareholders.
customers. Our applications for our
products expand into every area of plastics.
o Technical Ventures Inc.
3411 McNicoll Avenue
Scarborough, Ontario, Canada M1V 2V6
o Over-the-Counter Bulletin Board Symbol: TEVT
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Investing in our common stock involves risk. See "Risk Factors"
beginning on page 6.
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The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
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The date of this prospectus is ^ April 24, 2000
The information in this preliminary prospectus is not complete and may be
changed . We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities and it is not soliciting and
offer to buy these securities in any jurisdiction where the offer or sale is not
permitted.
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Table of Contents
Page
Prospectus Summary................................................................................
Risk Factors......................................................................................
Special Note About Forward-Looking Statements.....................................................
Use of Proceeds...................................................................................
Dividends.........................................................................................
Dilution..........................................................................................
Capitalization....................................................................................
Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................................
Business..........................................................................................
Management........................................................................................
Principal Stockholders............................................................................
Certain Related Transactions......................................................................
Description of Our Securities.....................................................................
Shares Eligible for Future Sale...................................................................
Selling Shareholders.............................................................................
Plan of Distribution..............................................................................
Legal Matters.....................................................................................
Experts...........................................................................................
Where You Can Find More Information...............................................................
Index to Financial Statements..................................................................... F-1
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2
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before decoding to invest in our common stock. You should read the
entire prospectus carefully, including the Risk Factors section, financial
statements and notes thereto.
^
Technical Ventures Inc.
We are a corporation organized under the laws of the State of New York.
We were formed for the purpose of acquiring businesses which, in our opinion,
demonstrate long-term growth potential. Since our formation, we have only
acquired one business, Mortile Industries Ltd., in which we presently have a 70%
interest. Mortile is a corporation organized under the federal laws of
Canada. Through Mortile, we are engaged in the design, development, and
manufacturing of
o proprietary thermoplastic compounds (plastics mixed with other solid materials);
o composite compounds (compositions of plastics with other powdered materials); and
o specialty compounds that we produce by mixing and pelletizing proprietary formulations specified by our customers.
Our applications for our products expand into every area of plastics.
We have entered into a unique market niche that allows us to specialize
in the production of our products to meet our client needs and provide technical
support that may be needed. We have the capacity to tailor our production for
each customer's requirement. Working closely with our clients in order to
maintain good customer relations and help satisfy their needs, we set ourselves
apart from the others in the industry due to out technical support staff and
direct distribution of our products.
Since inception, we have expended a significant portion of our
resources in the development of our products. As a result, we have sustain
significant operating losses and there is substantial doubt as to our ability to
continue as a going concern. However, we are poised to fully penetrate the
market. Further we have laid the foundation to perform this goal. Due to our
technology, products, management's expertise, customer support, and future ^
planning strategies ^, we are ready for rapid growth.
3
The Offering
Common Stock Offered........................ ^ 8,625,512 shares
Common Stock Outstanding Before
this Offering......................... ^ 23,802,031 shares(1)
Common Stock Outstanding After this
Offering.............................. ^ 31,777,544 shares(2)
Use of Proceeds.............................. We will not receive any proceeds from the shares sold by the selling
shareholders. Any money we receive upon the exercise of warrants
will be used to pay for the expenses of this offering. See "Use of
Proceeds."
Risk Factors................................ You should read the "Risk Factors" section beginning on page 6, as
well as other cautionary statements throughout the entire prospectus,
to ensure you understand the risks associated with an investment in
our stock.
Over-the-Counter Bulletin Board
Symbol...................................... TEVT
The ^ 8,625,512 shares being offered includes: 1) 127,840 shares of common stock
issuable upon the exercise of warrants we previously issued; 2) ^ 7,847,673
shares of common stock issuable upon the conversion of debentures; and 3) ^
650,000 shares of common stock being offered by the selling shareholders.
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(1) Excludes (a) 50,000 shares of common stock issuable upon the conversion
of promissory notes outstanding, and (b) 50,000 shares of common stock issuable
upon exercise of outstanding options.
(2) Assumes (a) the debentures are converted into ^ 7,847,673 shares of
common stock and all of the outstanding warrants to purchase 127,840 shares of
common stock are exercised.
4
Summary Financial Information
The following is a summary of our financial information for the ^ six
months ended ^ December 31, 1999 and 1998 and fiscal years ended June 30, 1999,
1998, and 1997. You should also read our financial statements and notes to those
statements which begin at the end of this prospectus, beginning on page F-1.
Statement of Operations Data:
^ Six Months Ended
Year Ended June 30, ^ December 31
---- ----- ---- --- - -------- --
1997 1998 1999 1998 1999
---- ---- ---- ---- ----
(Unaudited)
Net sales.......................... $ 1,414,062 $ 1,185,091 $ 1,131,279 $ ^ 505,078 $ ^ 672,070
Gross profit....................... 184,160 200,192 367,358 ^ 148,676 158,625
Income (loss) from operations...... (216,843) (216,576) ^(634,248) (524,957) (360,196)
Net income (loss).................. (196,322) ^ 519,594(1) (628,590) ^(519,299) (360,196)
Earnings (loss) per share.......... (0.01) 0.04 (0.03) (0.02) (0.01)
Weighted average number of
common stock outstanding........ 14,586,341 ^ 14,676,752 20,237,097 18,430,709 23,043,263
Balance Sheet Data:
As at June 30, As at December 31, ^ 1999
-- -- ---- --- -- -- -------- --- - ----
^(Unaudited)
1998 1999 Actual ProForma
---- ---- ------ --------
Working capital ......... $ ^(1,107,228) (781,480) (946,690) (946,690)
Total assets............. ^ 411,440 431,351 ^ 439,595 439,595
Total liabilities........ ^ 1,660,550 1,581,717 ^ 1,713,358 1,509,366
Stockholders' equity
(deficiency)............. ^(1,249,110) ^(1,150,366) (1,273,763) (1,069,771)
^(1) Reflects gain from transfer of technology rights of $477,193 and
income tax recovery of ^ $258,977.
(2) Reflects the effect of the sale of 8,625,512 common shares. There are
no proceeds from the shares sold by the selling shareholders or the shares
issued in the conversion of the convertible debentures.. Any funds received upon
the exercise of warrants will be used to pay for the expenses of this offering
and will be charged against stockholders equity. Therefore, there will be no
charge in working capital, or total assets. Total liabilities and stockholders
equity will charge to reflect the conversion of the debentures in the amount
$203,992.
5
RISK FACTORS
You should carefully consider each of the following risks and all of
the other information set forth in this prospectus before deciding to invest in
shares of our common stock. Some of the following risks relate principally to
our business in general and the industry in which we operate. Other risks relate
principally to the securities markets and ownership of our stock.
If any of the following risks and uncertainties develop into actual
events, our business, financial condition or results of operations could be
materially adversely affected. In such a case, the trading price of our common
stock could decline, and you may lose all or part of your investment.
Risk Factors Relating to Our Business
Our business is subject to the following risks, which include risks
relating to the industry in which we operate.
We have had a history of ^ losses from operations, have experienced
cash flow deficiencies, and have, at times, been unable to pay many of our
obligations as they became due.
For fiscal year ended June 30, ^ 1999, we incurred losses from
operations of $634,248. For fiscal year ended June 30, 1998, we incurred losses
from operations of $216,576 before accounting for an income tax recovery and a
gain on a transfer of technology. For fiscal year ended June 30, 1997, we
incurred ^ losses from operations of $216,843. At ^ December 31, 1999, we had an
accumulated deficit of ^ $6,748,324. At times, our cash shortages have caused us
to be delinquent in paying our suppliers, and have impaired our ability to
purchase raw materials, causing production delays that resulted in back orders
and lost sales.
Further, two of our long term debt financing arrangements are currently in
arrears. The aggregate amount of principal payments currently in arrears and
outstanding^ at December 31, 1999 is $424,790. Cash shortages have hindered our
existing operations and, thus, prevented any expansion. As a result, our
auditors have noted in their report that we have experienced significant
operating losses and have an accumulated deficit which raise substantial doubt
about our ability to continue as a going concern. If we do not generate
substantial revenues from our products or achieve profitability and make
payments to creditors we may have to seek protection under the bankruptcy laws
and investors will lose their investments.
We may be unable to continue operations if we are unable to find
additional financing.
We will not receive any proceeds from the shares sold by the selling
shareholders. We intend to seek funding through public or private equity or debt
financing. We cannot assure you that financing will be available on acceptable
terms, or at all. If we are required to sell equity to raise additional funds,
our existing shareholders may incur substantial dilution to the value of their
shares, and any shares so issued may have rights, preferences and privileges
superior to the rights, preferences and privileges of our outstanding common
stock. Insufficient funds may require us to delay, scale back or eliminate some
or all of our activities or to obtain funds through arrangements with third
parties that may require us to relinquish rights to certain of its technologies,
product candidates or products that we would otherwise seek to develop or
commercialize.
Acceptance and use of our products in the marketplace is uncertain.
Part of our business is to develop innovative products which will improve
the manufacture of plastics and plastic products. To be successful, our products
must have a price-value relationship that is competitive with alternative
products and technologies. We cannot assure you that we will not experience
unforseen problems with our technology or products. Nor can we provide you with
assurance that our products or technology will be commercially accepted.
Our revenues are dependent on the continued operation of our
manufacturing facilities.
The operation of manufacturing facilities involves risk. Our
manufacturing equipment may break down, fail to operate or perform at
substandard levels. We may be effected by natural disasters which may make the
operation of our facilities impossible. Also, our manufacturing facilities must
comply with directives of government agencies. Any reduction or suspension of
manufacturing operations from any of the events listed above is likely to have a
material adverse effect on our productivity and profitability.
We may be unable to compete favorably in this highly competitive
industry.
Each of the industries in which we compete is highly competitive. We
compete with other companies primarily on the basis of price, service, product
quality and performance. We compete with some of the world's largest chemical
companies, such as Exxon Corp., E.I. DuPont De Nemours & Co., Union Carbide
Corp., and Raychem Corp. Our competitors have significantly greater financial,
technical and human resources. We cannot provide you with assurances that our
competitors will not develop products or technologies that are more effective
than any we have developed or are developing, or that our competitors will
render our products or technologies obsolete and noncompetitive. Our competitors
may succeed in obtaining market acceptance for products more rapidly than us.
Furthermore, even if our products are accepted by the marketplace, we will
compete with respect to volume manufacturing efficiency and marketing
capabilities; areas in which we have limited or no experience.
We are dependent on our key personnel for our future success.
Our future success partly depends upon key personnel and upon our
ability to continue to attract and retain such highly talented individuals.
Competition for qualified personnel is intense in our industry. We are dependent
upon the efforts and abilities of Frank Mortimer, our President, Bryan Carter,
our Vice President, and Larry Leverton, our Secretary and Treasurer. We are not
presently engaged in employment agreements with Messrs. Mortimer, Carter and
Leverton. Also, we do not maintain key man life insurance policies on any of
these individuals. The loss of the services of any of the above individuals
could adversely affect our business. We cannot assure you that we will retain
our key employees or that we will attract or assimilate such employees in the
future.
If the protection of our patents and proprietary technology is
inadequate, our business may be materially adversely affected.
Our future success will partly depend on our ability to maintain
protection for our products and manufacturing processes under United States and
foreign patent laws, to preserve its trade secrets and to operate without
infringing the proprietary rights of third parties. We currently hold patents
and trademark registrations for various products and plan to continue to
establish and protect their proprietary rights with respect to new products we
develop. U.S. patent applications are maintained in secrecy until patents issue.
Since publication of inventions in technical or patent literature tend to lag
behind inventions by several months, we cannot be certain that we are the first
creator of inventions covered by our issued patents or pending patent
applications, or that we were the first to file patent applications for such
inventions.
We also rely on trade secrets and proprietary know-how, which we seek
to protect, in part, by confidentiality agreements with our research partners,
employees, consultants, advisors and others. However, actions taken to establish
and protect proprietary rights may be inadequate to prevent imitation of such
products by others or to prevent others from claiming violations of their
proprietary rights by our company. In addition, others may assert rights in our
proprietary products and processes and other proprietary rights.
We are dependent on maintaining our supply of raw materials.
If we are unable to obtain a supply of raw materials, and we are unable
to develop alternative sources of supply quickly and on a cost-effective basis,
our ability to manufacture and deliver our products would be materially
impaired. Should demand for our products substantially exceed current
expectations, or if we experience supply problems we cannot assure you that we
would be able to obtain sufficient quantities of raw materials from our current
sources, or that alternate sources could be found without disrupting our
manufacturing process.
Our products may be subject to government regulation.
Certain end products into which our products are to be incorporated are
subject to extensive government regulation in the United States by federal,
state and local agencies including the EPA and the Food and Drug Administration.
Similar regulatory agencies exist worldwide. Our customers who incorporate our
products into consumer products will bear primary responsibility for obtaining
any required regulatory approvals. The process of obtaining and maintaining FDA
and any other required regulatory approvals for products is lengthy, expensive
and uncertain, and regulatory authorities may delay or prevent product
introductions or require additional tests prior to introduction. We cannot
assure you that changes in existing regulations or the adoption of new
regulations will not occur, which could prevent us or our customers from
obtaining approval or delay the approval of various products could adversely
affect market demand for our ^ products.
We are subject to many foreign and domestic laws and regulations
relating to the protection of human health and the environment.
These laws and regulations govern areas such as emissions to the air,
discharges to land and water and the generation, handling, storage,
transportation, treatment and disposal of waste.
We believe that our business, operations and facilities are being
operated in compliance with environmental laws and regulations. However, we are
exposed to risks relating to accidental discharges of hazardous materials,
personal injury, property damage and environmental damage. Furthermore,
environmental laws and regulations provide for substantial fines and criminal
sanctions in the event we do not comply. As such, we cannot provide you with
assurance that our ongoing operations will not be effected by material costs or
liabilities resulting from such risks.
Additionally, we believe that, in the future, environmental and health
and safety laws and regulations, including the enforcement of such laws and
regulations, will become more strict. Increased regulation of our operating
activities could involve material expenditures with respect to our handling,
manufacture, use or disposal of substances, waste or pollutants at our
facilities. To meet changing regulatory standards, we may be required to
significantly modify our operations or manufacturing sites. Such modifications
may involve substantial expenditures and reductions or suspensions of certain
operations.
We are currently in litigation with Endex Polymer Additives Inc. a former
customer.
We are named as a defendant, together with Dow Chemical Company, in a
litigation brought in the Ontario Superior Court of Justice on June 4, 1999 by
Endex Polymer Additives Inc., Endex Polymer Additives Inc. (USA), Endex
International Limited and G. Mooney And Associates (collectively "Endex"). Endex
alleges breach of secrecy agreements and fiduciary duty and the misuse of Endex
confidential information. Endex is seeking CND.$10 million in compensatory
damages, CND.$1 million in punitive damages, and a permanent injunction. We have
retained a law firm specializing in Intellectual Property Law and are vigorously
defending the action. There can be no assurances that we will be successful in
defending ourselves against these claims. If we were to lose this litigation it
would have a materially adverse effect on us and our ability to continue
operations.
We could be liable for damages in connection with product liability
claims.
Product liability claims may be asserted against us in the event that
the use of our products, or products which incorporate our products, are alleged
to have caused injury or other adverse effects. Such claims may involve large
amounts of alleged damages and significant defense costs. We do not maintain
product liability insurance. If we do obtain product liability insurance in the
future, we cannot assure you that the liability limits, or the scope of such
insurance policy, would be adequate to protect against such potential claims.
Additionally, we may not be able to obtain product liability insurance. Whether
or not we obtain such insurance, a successful claim against us could materially
affect our financial stability. In addition, our reputation could be adversely
affected by product liability claims, regardless of such claim's merit or
eventual outcome.
Our business may be affected by problems associated with the Year 2000
issue.
Many existing computer programs use only a two digit suffix to identify
a year in the date field with an assumed prefix of "19". Consequently, this
limits those systems to dates between 1900 and 1999. If not corrected, many
computer systems and applications could fail or create erroneous results at or
in connection with applications after the year 2000.
^ Although the change in date has occurred, it is not possible to
conclude that all aspects of the Year 2000 issue ^ that may affect us, including
those related to customers, suppliers, or third parties, have been fully
resolved.
Our revenues are dependent on several key customers.
We have several key customers which presently account for more than 77%
of our total revenues. For the fiscal year end 1999, Shaw Industries accounted
for 43%, MLPC International accounted for 22% and SNC Industrial Technologies
accounted for 12% of our total revenues. For the ^ six month period ended ^
December 31, 1999, Shaw industries accounted for ^ 56%, MLPC International
accounted for ^ 28%. Many of our customers operate in cyclical industries and,
as a result, their order levels have varied significantly from period to period
in the past and may vary significantly in the future. Such customer orders are
dependent upon their markets and customers and may be subject to delays or
cancellations. The loss of one or more of such customers, or a declining market
in which such customers reduce orders or request reduced prices, could have a
material adverse effect on our operations or financial condition.
We do not expect to pay dividends on our common stock.
To date, we have paid no dividends on our common stock. The payment of
any future dividends will be at the sole discretion of the board of directors.
We intend to retain earnings to finance the expansion of our business and do not
anticipate paying dividends on our common stock in the foreseeable future.
Risk Factors Relating to Securities Markets
There are risks relating to the securities market that you should
consider in connection with your investment in and ownership of our stock.
Our possible failure to comply with recent Over-the-Counter Bulletin
Board listing qualifications may affect the trading of our common stock.
NASD Regulation, Inc. has enacted rules to limit quotations on the
Over-the-Counter Bulletin Board to the securities of issuers that make current
filings pursuant to the Securities Exchange Act of 1934. Furthermore, NASD
Regulation, Inc. has enacted rules which require members to review current
issuer financial statements prior to recommending a transaction to a customer in
an Over-the-Counter Bulletin Board security and to deliver a disclosure
statement to a customer prior to an initial purchase of an Over-the- Counter
equity security. If we are unable to satisfy reporting requirements our common
stock may be de- listed from the Over-the-Counter Bulletin Board and/or may
severely limit the trading activity of our securities.
Shares of our common stock that are eligible for future sale could
adversely affect its market price.
Our common stock presently trades on the Over-the-Counter Bulletin
Board. Sales of substantial amounts of our common stock in the public market or
the prospect of such sales by existing shareholders, and holders of our
warrants, could materially reduce the market price of our common stock. As of
the date hereof, we had outstanding ^ 23,802,031 shares of common stock. This
number does not take into account shares of common stock issuable upon
conversion of the debentures or exercise of the warrants. Virtually all of our
outstanding shares of common stock are either registered, and therefore freely
tradable, or may be transferred pursuant to Rule 144(k) under the Securities
Act, unless held by our "affiliates" as that term is defined in Rule 144 under
the Securities Act.
Our common stock is currently subject to penny stock rules which may
affect its marketability.
Trading in the Over-the-Counter Bulletin Board allows market makers to
enter quotes and trade securities that do not meet listing requirements of the
Nasdaq SmallCap Market or any regional exchange. In such case, sales of our
common stock will be subject to the penny stock rules promulgated by the
Securities and Exchange Commission. The SEC's regulations generally define a
penny stock as any equity security that has a market price (as defined) of less
than $5.00 per share. The rules impose various sales practice requirements on
broker-dealers who sell securities governed by the rules to persons other than
established customers and certain accredited investors. For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to sale. The rules further require the delivery by the
broker-dealer of a disclosure schedule prescribed by the SEC relating to the
penny stock market. Disclosure must also be made about all commissions and about
current quotations for the securities. Finally, monthly statements must be
furnished to the SEC disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.
Although the regulations provide several exceptions to, or exemptions
from, the penny stock rules based on, for example, specified minimum revenues or
asset-value, we currently do not fall within any of the stated exceptions. Thus,
a transaction in our securities would subject the broker-dealer to sales
practice and disclosure requirements that make trading of the stock more
cumbersome which could materially adversely affect the marketability of the
stock.
Our common stock price may be volatile, which could result in
substantial losses for investors.
The market price of our securities may be highly volatile, as has been
the case with the securities of other companies engaged in high technology
research and development. Any announcements we or our competitors make
concerning technological innovations, new commercial products or procedures,
proposed government regulations and developments, disputes relating to patents
or proprietary rights, operating results, market conditions and economic factors
may have a significant impact on the market price of our common stock. Investors
may be unable to resell their shares of our common stock at or above the
offering price.
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus may contain forward-looking
statement. Such statement can be identified by the use of forward-looking
terminology such as "may", "will", "expect", "anticipate","estimate","continue";
or other similar words. These statements discuss future expectations, contain
projections of results of operations or financial condition or state other
"forward-looking" information. A number of important factors could cause actual
results to differ materially from those in the forward-looking statements. Some
factors include inflation, government regulations, and economic conditions and
competition in the geographic areas in which we conduct our operations. For a
discussion of factors that could cause actual results to differ please see the
discussion under "Risk Factors" contained in this prospectus generally, and in
other factors noted throughout this prospectus.
USE OF PROCEEDS
The only proceeds we expect to receive will be from the exercise of the
warrants. However, pursuant to the terms of the warrants, the holders of the
warrants have a cashless exercise option. The cashless exercise option permits
the holders of the warrants to exercise the warrants without paying to us the
exercise price of the warrant. Instead, the holders of the warrants would
receive an amount of common stock with a dollar value that is equal to the
difference between the market price of the common stock less the exercise price
of the warrant multiplied by the number of warrants owned by the holder thereof.
In such a case, we would not receive any funds. In the event the holders of all
the outstanding warrants elect to exercise the warrants by paying the exercise
price of the warrants, we will receive a maximum of $22,500. Any proceeds
received by us will be applied towards the expenses of this offering which we
estimate to be $30,000.
DIVIDENDS
To date, we have paid no dividends on our common stock and our board of
directors has no present intention to pay dividends on its common stock in the
foreseeable future. See "Description of Securities." The payment of dividends in
the future, if any, rests solely within the discretion of our board of
directors. Our future dividend policy will depend upon, among other things, our
earnings, capital requirements and financial condition, as well as other factors
deemed relevant by our board of directors. Although we are not limited to pay
dividends by any agreements, we anticipate that future agreements, if any, with
institutional lenders or others may limit our ability to pay dividends.
^ ^ CAPITALIZATION
The following table sets forth our capitalization as of ^ December 31,
1999 and as adjusted to reflect:
o the conversion of such debentures into 7,847,673 shares of common stock,
which results in the reduction of liabilities of $203,992 and an increase in
common stock par value of $78,477 and additional paid-in capital of $125,515
o the receipt of $22,500 upon the exercise of warrants into 127,840 shares
of common stock, which will be used to cover expenses associated with this
offering
This table should be reviewed in conjunction with our financial statements which
begin at the end of this prospectus on page F-1.
^ December 31, 1999
Actual (1) As Adjusted
Long-term debt, less current maturities...................... $ ^ 546,408 $ ^ 342,416
Shareholders' equity:
Common stock, $.01 par value, ^ 23,802,031
issued and outstanding; ^ 31,777,544 issued
and outstanding, as adjusted........................... ^ 237,520 ^ 317,275
Additional paid-in-capital................................... ^ 4,933,203 5,057,440
Foreign currency translation adjustment...................... ^ 303,838 303,838
Deficit...................................................... ^(6,748,324) (6,748,324)
------------ -----------
Total shareholders' equity.......................... ^(1,273,763) (1,069,771)
------------ -----------
Total capitalization....................... $ ^(727,355) $ ^(727,355)
==================== ===================
(1) The 650,000 shares of common stock exchanged for legal and advisory
services are included in the actual figures as of December 31, 1999.
(2) The number of shares to be issued is estimated based on a stock price
of $0.03. If the market price varies, the number of shares to be issued upon
conversion of the debentures will change.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our
financial statements and notes thereto included at the end of this prospectus
beginning on page F-1. This discussion contains forward- looking statements that
involve risks and uncertainties. Our actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause such a difference include but are not limited to those discussed in "Risk
Factors."
Results of Operations
^ Six Months ended ^ December 31, 1999 Compared to ^ Six Months Ended ^
December 31, 1998
Sales. Total sales increased ^ 33% to ^ $672,070 for the ^ six months
ended ^ December 31, 1999, as compared to ^ $505,078 for the ^ six months ended
^ December 31, 1998. This increase in sales was attributable to an increase in
orders from ^ core customers.
Gross Margins. Gross margins, as a percentage of ^ sales, ^ declined 6%
to 23%during the ^ six months ended ^ December 31, 1999, as compared to ^ 29%
for the ^ six months ended ^ December 31, 1998. This decrease was due to a
change in the mix of orders and related pricing from customers. ^ Some clients
provide their own raw materials for compounding and the sales amount represents
only our charge for services for compounding their materials. For other clients,
we purchase the raw materials and charge for both the raw materials and the
compounding service. The gross margin for sales which include both materials and
compounding service is lower than for sales which are only for compounding
services.
Financial and Interest Expense. Financial and interest expense
increased ^ 9% to ^ $40,466 for the ^ six months ended ^ December 31, 1999 as
compared to ^ $37,142 for the ^ six months ended ^ December 31, 1998.
Administrative Expense. Administrative expense ^ decreased 47% to
$256,777 for the ^ six months ended ^ December 31, 1999, as compared to ^
$488,687 for the six months ended December 31, 1998. This decreased is primarily
attributable to the issuance of common shares in consideration of services
rendered, and financing consulting services incurred. However, actual direct
administrative expenses, not including the issuance of common shares, increased
9% for the six months ended December 31, 1999 as compared to the six months
ended December 31, 1998. This increase is attributable in part to expenditures
on seeking financing and legal ^ expenditures relating to the current lawsuit
with Endex.
Research and Development. Research and development expenses decreased ^
68% to ^ $35,047 for the ^ six months ended ^ December 31, 1999 as compared to ^
$106,143 for the six months ended December 31, 1999. This decreased is primarily
attributable to the issuance of common shares in consideration of services
rendered. However, actual direct R&D expenses decreased 22%, when compared to
the six months ended December 31, 1998. This decrease is primarily due to our
resources being redirected to manufacturing and sales.
Selling Expenses. Selling expenses increased ^ 57% to ^ $65,482 for the
^ six months ended ^ December 31,1999 as compared to ^ $41,661 for the ^ six
months ended ^ December 31, 1998. This increase is due to our increased efforts
to introduce and market our new product Morfoam. This has included an increase
in market activity in Canada and the United States.
Fiscal Year Ended June 30, 1999 Compared to Fiscal Year Ended June 30, 1998
Sales. Total sales decreased 4.5% to $1,131,279 for fiscal year ended
1999 as compared to $1,185,091 for fiscal year ended 1998. Sales during fiscal
1999, particularly sales of proprietary products, were significantly less than
we anticipated. Furthermore, while our products were widely accepted for use in
the manufacturing of our customer's products, acceptance in the marketplace by
end-users of our customers products was slow.
Sales by geographic area for fiscal years ended 1999 and 1998 are as
follows:
Geographic Area 1999 1998
- ---------- ---- ---- ----
United States $ 120,456 $ ^ 231,646
Canada ^ 779,070 863,618
France 231,753 89,827
-------------------- -------------------
$ 1,131,279 $ 1,185,091
==================== ===================
Sales by product line for fiscal years ended 1999 and 1998 are as
follows:
Product Line 1999 1998
- ------- ---- ---- ----
Specialty Compounding $ 1,046,462 $ 1,135,971
(including Composite)
Technology)))
Polymer Technology 50,307 18,681
Miscellaneous 34,510 30,439
-------------------- ------------------
$ 1,131,279 $ 1,185,091
==================== ==================
Gross Margins. Gross margins, as a percentage of net sales, increased to
32% ^ for the fiscal year ended June 30, 1999, as compared to 17% for the fiscal
year ended June 30, 1998. This increase was due^ in part to the change in mix of
clients' orders. Some clients provide their own raw materials for compounding
and the sales amount represents only our charge for services for compounding
their materials. For other clients, we purchase the raw materials and charge for
both the raw materials and the compounding service. The gross margin for sales
which include both materials and compounding service is lower than for sales
which are only for compounding services. Additionally, order volumes increased,
improving efficiency in the manufacturing process.
Financial and Interest Expense. Financial and interest expense ^ increased
30.7%, to $139,689, for the fiscal year ended June 30, 1999 as compared to
$106,801 for the fiscal year ended June 30, 1998. The June 30, 1999 amount
includes $75,000 which represents the conversion of the debentures to common
shares. Decreases in our average indebtedness outstanding was the primary
contributing factor; however, less favorable foreign currency exchange between
the Canadian and U.S. dollars diluted the effect of decreased average
indebtedness.
Administrative Expense. Administrative expense increased ^ 329% to ^
$629,412 for fiscal year ended June 30, 1998, as compared to $146,789 for fiscal
year ended June 30, 1998. This increase is attributable to ^ $292,790 in
consulting fees for financing and $142,800 renumeration to directors, officers
and employees through the issuance of common shares.
Research and Development. Research and development expenses decreased
15.1% to $80,498 for the fiscal year ended June 30, 1999 as compared to $94,874
for fiscal year ended June 30 1998. This decrease is primarily attributable to
our resourcers being diverted to the manufacturing and sales effoprt required
for our new product Morfoam.
Selling Expenses. Selling expenses increased 26.4% to $90,746 for the
fiscal year ended June 30, 1999, as compared to $71,790 for the fiscal year
ended June 30, 1998. This increase is primarily attributed to the marketing of
our new product Morfoam and our endeavors to introduce the product to the
market.
Liquidity and Capital Resources
During the year ended June 30, 1999, our operating loss was funded
primarily by working capital provided by a Canadian Tax refund, debt financing,
equity capital and subscribed capital. We have reduced a portion of past due
balances to vendors and creditors. However, Technical Ventures has sustained
significant operating losses since its inception and their is substantial doubt
as to our ability to continue as a going concern. In addition, the continued
operating losses and monthly debt service requirements continue to leave us in a
position where we are unable to meet our monthly cash flow requirements.
Our long term debt financing arrangements with Innovation Ontario
Corporation and FBX Holdings are currently in arrears. The aggregate amount of
principal payments currently in arrears and outstanding on this debt is ^
$424,790. Both of these creditors have verbally agreed to allow a moratorium on
principal repayments until we are in a financial position to make payment(s) or
alternate arrangements can be completed. We have entered into negotiations with
Innovation Ontario to eliminate all debt, plus accrued and unpaid interest,
which totals ^ $417,670 in exchange for shares of common stock, however,
negotiations are presently stagnant. We cannot assure you that we will be
successful in reaching an agreement with Innovation Ontario Corporation;
however, Innovation Ontario Corporation has indicated it's willingness to
negotiate an equitable settlement. In the event that either one of these
creditors elect to call due their respective debt, we may have to seek
protection under the bankruptcy laws.
In June 1998, we finalized a transfer of technology in exchange for
debt agreement with Dow Chemical Canada Inc. and The Dow Chemical Company (
collectively "Dow"). We transferred to Dow title and ownership in our existing
intellectual property rights (including all proprietary knowledge, patents and
patent applications) relating to halogen free, flame retardant thermoplastic
composition technology and smelt filler technology. Dow granted us a
non-exclusive, non transferable, royalty free world-wide license for use of the
technology, pursuant to which, Dow has access on, at least, a non-exclusive
basis to improvements we make in the technology. Dow, in turn, released Mortile
from its CND$767,499.68 debt obligations to Dow, plus CND$284,873.81 accrued and
unpaid interest owed on the debt. Dow also released us and Frank Mortimer, our
President, from guarantees made by both in connection to such debt.
As a result of the transfer of technology to Dow, we realized a net gain of
$693,415, which is reflected in our financial statements for fiscal year ended
June 30, 1998.
In August 1999, we refinanced our note payable to Cooper Financial
Corp. This obligation, is guaranteed by a shareholder of the company. A
refinancing charge was assessed, increasing the principal owed to $95,999. At ^
December 31, 1999, we were current with the new loan provisions with a payable
balance of ^ $86,481. We have been maintaining monthly payments of $3,150 with a
10% per annum interest charge calculated over a 35 month period.
We have submitted a tax claim for fiscal 1998 amounting to CDN.$35,000.
Additionally, a claim of ^ CDN.$35,000 will be filed for fiscal 1999. During
fiscal 1998, we received a Canadian research and
development tax refund from fiscal year ended 1996 in the amount of CDN.$19,680.
We also submitted a claim for fiscal 1997 amounting to approximately
CDN.$34,000, for which we received a refund of CDN.$26,000. This refund was
recognized in the fiscal year ended June 30, 1998. We received an additional
provincial refund of approximately CDN.$8,000 during the first financial quarter
of fiscal 1999 in connection with our 1997 tax filing.^ Revenue Canada, the
Canadian federal tax authority, has notified us of its intent to audit all
submitted claims.
We do not consider these funds (assuming the refund claims listed above
are accepted) to be a long-term solution to our financial needs. We are ^ always
considering ways to find additional financing; however, our financial condition
has hindered us in our pursuit of acceptable financing arrangements. We will
give serious consideration to raising additional funds through private or public
equity issuances in the future if we deem that it is in our best interest and
that such financing is in the best interest of our stockholders.
In late July 1998, by amendment to our certificate of incorporation,
our capital structure was modified to increase the number of authorized common
shares from fifteen million to fifty million.
On January 11, 1999, we entered into an advisory agreement with Coleman
Capital Partners Ltd., whereby Coleman agreed to advise and assist us with,
among other things, raising capital, arranging road shows and other formal
presentations to the investing community and listing our common stock on NASDAQ
or a major stock exchange in the United States and Europe. For the services
Coleman will perform, Coleman will receive $5,000 per month, an aggregate of
550,000 shares of common stock, of which all shares have been issued, plus a
cash fee of eight percent of the total gross proceeds raised in any capital
raising transaction for our benefit. The term of the advisory agreement is for
one year and it can be renewed or restructures with the written consent of both
parties. The advisory agreement can be terminated by either party at the
following intervals:
on day 91 following the date of the advisory agreement;
on day 121 following the date of the advisory agreement;
on day 151 following the date of the advisory agreement;
on day 181 following the date of the advisory agreement;
or on day 271 following the date of the advisory agreement.
On February 5, 1999, we completed a private offering of 8% convertible
debentures and common stock purchase warrants. Pursuant to the offering, we sold
an aggregate of $225,000 of debentures and common stock purchase warrants. The
conversion price of the debentures will be equal to 75% of the Market Price. The
Market Price being defined as the average of the closing bid prices of the
common stock during the 10 trading days preceding conversion, but not more than
the "Fixed Conversion Price" which is defined as the 100% of the average of the
closing bid price during the 10 trading days prior to the closing date ("Closing
Price"). The warrants will allow the investor to acquire a number of shares
equal to the total investment divided by the Closing Price multiplied by 10%.
The aggregate gross proceeds from the offering was $225,000, of which we
received $191,520, after deducting the expenses of the offering. The net
proceeds of the offering was used for working capital purposes.
Accordingly, we have set aside the appropriate number of shares from
the authorized and unissued shares of common stock for issuance upon conversion
of the above-mentioned debentures and exercise of the above-mentioned warrants
in connection with such private offering. Further, we have issued ^ 100,000
shares of restricted common stock for legal services rendered and 50,000 shares
of restricted common stock for capital advisory services rendered in relation to
such private offering.
To date, we do not have any planned material capital expenditures in
the next twelve months.
Operating Trends and Uncertainty
Our ability to attain a profitable level of operations is dependent
upon expansion of sales volume, both domestically and internationally, and
continued development of new, advanced products. We believe that we will
increase sales with the continued release of new products, market expansion, and
the addition of new customers.
As previously discussed, we have developed a number of component
products, used in the manufacture of end-use products, that are alternatives to
hazardous component materials, such as lead. We have developed such products in
anticipation of legislation, including environmental regulations, that will ban
the use of these hazardous materials. A number of our products are poised for
tremendous success should certain legislation be enacted. For example, there are
several projects within the realm of the metal technology that we are currently
assessing which could represent major sources of revenue. One such project is
the supply of a composition to be used in the production of a metal filled
laminated sheet. The laminated sheet is being considered in the manufacture of
visual display boards, which, by applying the metal technology would allow the
use of magnetized items on the surface of the display. Other potential uses for
this product are light weight x-ray blankets, self lubricating bearings and
bushings, components for the toy industry and any lead replacement industry.
Although some of our products are more costly than more hazardous
alternatives, some manufacturers of end-use products have elected to use our
materials in the manufacture of their products. For example, ^ we presently
manufacture a product for a munitions manufacturer that is used in lieu of lead.
We believe that there are indications that there has been a recent increase in
public pressure to ban the use of certain hazardous materials, particularly
lead. However, in the absence of specific legislation banning the use of such
materials, the growth in sales of certain of our products may be slow or certain
of our products may never achieve market acceptance.
Specialty (Contract) Compounding represented 98% of our revenues during
1998. We continue to submit bids and quotes on further contract work, and we
actively look for suitable applications for our compounding technologies. We
expect an increase in future sales of masterbatch powders and plastics. See the
section "Business-Specialty Compounding" for a discussion of masterbatch powders
and plastics.
We have worked very closely for over two years with a few major
customers, including MLPC International, on the development of technology
relating to the compounding of masterbatch powders and plastics. Each of these
customers has appointed us as the compounder in connection with their
masterbatch compounding needs. We expect substantial orders over a long period
in connection with our efforts. We have entered into a three year contract with
MLPC for the supply of masterbatch compounds. The term of this agreement is from
January 1, 1998 to December 31, 2001. Either party may terminate the agreement
with 12 months written notice. We commenced manufacturing for MLPC in early
March 1998. Should specialty compounding sales to MLPC increase substantially,
we will need to expand our manufacturing facilities.
Effect of the Declining Value of the Canadian Dollar on Our Business
We do not anticipate that recent declines in the value of the Canadian
dollar, as compared to the U.S. dollar, will have a material adverse effect on
our business operations or financial results. Nearly all of our raw materials
and operating costs are realized in Canada, and nearly all of our sales are to
customers in Canada. Should we be required to purchase raw materials in the
United States or other foreign countries, we incorporate any price increase into
invoiced sales.
Effect of the Year 2000 Issue on the 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 us, including those
related to customers, suppliers, ^ or other third parties, have been fully
resolved.
BUSINESS
Introduction
We were formed on June 14, 1985 in the state of New York. Our
primary purpose was to search for a business which, in the opinion of
management, demonstrated long-term growth potential that would warrant
involvement. Presently, our only operating subsidiary is Mortile Industries
Ltd., a Canadian corporation which we have a 70% interest. Our present
operations, assets and employees are primarily those of Mortile.
Through Mortile,we are engaged in the design, development, and
manufacturing of proprietary thermoplastic compounds (plastics mixed with other
solid materials) and composite compounds (compositions of plastics with other
powdered materials). We also develop specialty compounds that we produce by
mixing and pelletizing proprietary formulations specified by our customers. Our
applications for our products expand into every area of plastics. We focus on
niche markets and applications for which we can provide our customers
application-specific product solutions based on our polymer based materials
technology, engineering expertise and production technology. Our products and
technologies are sold to manufacturers and industrial aftermarket equipment and
maintenance providers in the industrial equipment, transportation, electronics,
munitions and process industries markets.
Our business is comprised of three distinct industrial units:
o Specialty compounding
o Polymer technologies
o Composite technology
Specialty Compounding
Over 98% of our revenues for fiscal year end ^ 1999, and the majority
of our efforts, to date, have been concentrated on specialty compounding. In
this business unit, our customers retain us to enhance and compound its
proprietary formulations into a pellet form. To complete the compounding
process, a customer would designate the mix components it requires. With the
assistance of our customer, we formulate the most effective and efficient method
to mix the components. Once a method for mixing is determined, we physically mix
the components. The end-product of mixed components is called a masterbatch, and
in certain cases, we convert the masterbatch into a pelletized form. Typical
masterbatches are: foaming agents, sulphur, zinc oxide, flame retardants, curing
agents, processing aids, antioxidant stabilizers and slip and anti block agents.
Customers who retain us for specialty compounding are, typically,
manufacturers of plastics and plastic products. Generally, it is not necessary
for manufacturers of these products to compound component materials into a
pelletized form prior to manufacturing end-products. However, an increase number
of manufacturers prefer this process because it provides for a more perfect
dispersion of component materials which are often in powder form. Specialty
compounding is particularly useful when manufacturing components are reactive.
Reactive components are used in the curing or cross-linking of rubber or
plastic. Additionally, because powder components are difficult to work with,
manufactures prefer to work with masterbatches as there are less environmental
risks when working with components in a pelletized form.
During fiscal year 1998, we worked closely with three customers
developing compounding methodology for each customer's proprietary component
formulations. We provided compounding services for Shaw Industries Ltd. in
connection with Shaw's formulation for a variety of proprietary formulations for
industrial pipe wrap and coating. We provide compounding services for MLPC
International in connection with MLPC's formulation for various proprietary
rubber curing compounds, and for FinProject in connection with FinProject's
proprietary formulation for the footwear industry. For the six month period
ended December 31, ^ 1999, we continued to provide compounding services for
these customers.
The following table lists amount of revenues in Canadian dollars
generated by each of these customers, and the revenues as a percentage of our
total revenues for the ^ six month period ended ^ December 31, 1999 and for
fiscal year ended June 30, 1999:
^ Six Months Ended Fiscal Year Ended
Customer ^ December 31, 1999 June 30, 1999
- -------- - -------- --- ---- ---- --- ----
Shaw Industries ^ $554,780 56% $705,283 43%
MLPC International ^ $281,290 28% $341,794 21%
SNC Industrial ^ $5,832 1% $200,005 12%
Technologies
Composite Technology
We are also engaged in sale of products that are developed and
manufactured using composite technology. The object of composite technology is
to mix plastic binders with fine granulated material, such as fine metal
powders. The end result is a material that is both strong and durable, yet has
flexible design options as it can be used in injection molding applications.
Injection molding is a process by which a compound is heated to a fluid state
and injected into a cavity mold in the shape or form and density required. The
fluid compound flows to the shape of the mold and is cooled to a solid state and
then removed. Injection molding is a significantly less expensive alternative to
machining and die casting.
Using composite technology, we have successfully produced metal/plastic
compounds that can be used in many applications as a replacement for lead. We
presently supply this product for use in munitions, fishing sinkers and lures,
and for bushings in copiers and fax machines. We also expect to market lead
replacement compounds in the automotive, construction and additional areas of
the firearms markets. Currently, we have only a minimal volume of sales from
composite technology.
Polymer Technologies
A polymer consists of chains of chemicals, called monomers, that
combine or polymerize (normally with help from a catalyst) to form large
molecular structures. Polymers are very versatile materials. They can be cast
into molds to create intricate structures, extruded through a spinneret to make
fibers, blended with liquids including water to make coatings, adhesives and
thickeners and generally bonded to other materials or each other with adhesives.
As a result, polymers have replaced, and continue to replace, natural products
such as metal, wood, paper, cotton and glass in a broad range of applications.
Moreover, substitution is not
driven primarily by cost, but by the increasing desirability of polymers based
on their versatility and performance characteristics. Two common types of
polymers are thermoplastics and thermosets which, collectively, are referred to
as plastics. Currently, we have only a nominal volume in polymer technologies.
Thermoplastics are the most common synthetic polymers. They are
relatively inexpensive, light and durable, but not particularly strong.
Thermoplastics can be melted at relatively low temperatures and recrystallized,
thus making them recyclable. They are used in structural applications where
exposure to high stresses and heat are concerns. Common thermoplastics include
polyethylene, polypropylene, polystyrene, polyvinyl chloride and most polyester.
Thermosets polymerize at relatively high temperatures, normally through
mixing with an initiation compound. During polymerization they are cross-linked,
a process that increases their strength and durability relative to
thermoplastics. They are generally stronger, more heat resistant and more
difficult to process than thermoplastics. Common thermosets include epoxies,
most polyurethanes, unsaturated polyester, melamine and phenolics. Thermosets,
however, cannot be remelted or recycled.
In light of growing environmental pollution concerns, we expect that
the plastics industry will be forced by legislation to develop and manufacture
plastics that are recyclable. The plastics industry has undertaken extensive
research to develop cost-effective thermoplastic products which are both durable
and flame retardant; particularly for applications in the wire cable and
construction industries.
Flame resistant polymer compositions have been available for many
years. However, such compositions relied on the presence of halogens to yield
flame retardancy. Halogens are gases which, on combustion, emit toxins,
including cyanide, bromide, sulphur and phosphoric gas. Concerns by
environmentalists world-wide have resulted in increased pressure on
manufacturers of polymer-based products to eliminate plastics with such
potential dangers.
We develop, manufacture and sell a flame retardant, non-toxic,
thermoplastic compound that is corrosion resistant, minimizes the hazards of
fire and can be easily processed into end-use products. We have conducted
extensive research and testing with regard to the use of this product in the
construction and transportation industries, because of their greater ease of use
in fabrication and their ability to be recycled, and trimmed into scrap. In
addition, we have researched and tested this compound and for use in
applications such as wire cable, fiber optics, injection and rotational molding,
and petrochemical containment.
Our performance test results have concluded that our thermoplastic
products, when burned, emit none of the aforementioned toxins. Additionally, our
products possess anticombustion, low toxicity and anticorrosive attributes
considered to be superior to other products presently available. Although the
sale of our thermoplastic products has not represented a significant portion of
our revenues to date, we believe that these products have significant market
potential.
In June 1998, we entered into an agreement with Dow Chemical Canada and
Dow Chemical to transfer the rights to the technology we developed with regard
to the production of flame retardant thermoplastics and smelt fillers in
exchange for satisfaction of a debt we owed to Dow. However, pursuant to this
agreement, we continue to enhance, manufacture and market this technology,
royalty free. See the section "Management's Discussion and Analysis of Financial
Condition and Results of Operations" beginning on page ^ 14, and the section
"Certain Transactions" for a discuss relating to our agreement with Dow.
MORFOAM. During the fourth quarter of fiscal 1998, we commenced
supplying samples of our new product MORFOAM. MORFOAM is a chemical foaming
agent, pigment extender and a nucleating agent which reacts with process
temperatures to produce a fine cell structure in extrusion molded parts. This
product technology combines chemical foaming and a nucleating agent in to one
easy to use masterbatch concentrate which is encapsulated in an olefin binder,
presented in pellet form to be easily blended or metered in to various polymers.
MORFOAM's fine particle size acts as a nucleating agent to form fine cell
structures in polymers. The product improves cell structure and reduces voids
when nitrogen is used as the primary foaming agent. This provides for improved
surface finishes, physical properties, and sink mark elimination, lower part
weight and shorter cycle times.
The product was developed for use in the following applications:
o Injection Molding
o Structural Foam Molding
o Blow Molding
o Extrusion (film, sheet, profiles)
Research and Development
Since inception, we have expended ^ $3,103,541 in the development of
our products. During fiscal year ended June 30, 1999, we expended ^ $141,758 on
research and development. Our research and development efforts have led to the
development and manufacture of our composite and polymer related products, and
the development of our specialty compounding technologies. We maintain
continuous dialogue with our customers and technology partners to ensure that
our products and technologies incorporate features that are essential for our
customers' rapidly evolving requirements.
Licenses
In June 1998, The Dow Chemical Company has granted us a
non-exclusive, non transferable, royalty free world-wide license for use of
technology, pursuant to which, Dow has access on, at least, a non-exclusive
basis to improvements we make relating to halogen free, flame retardant
thermoplastic composition technology and smelt filler technology for an
indefinite period. This license was granted to us in connection with our
agreement to transfer this technology to Dow in exchange for being release from
certain debts owed by us to Dow. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" beginning on page ^ 14 .
Employees
As of ^ December 31, 1999, we employed thirteen full time employees
of which seven were engaged in manufacturing and quality control, three in
general administration and executive activities and two in engineering and
research and development. We are not a party to any collective bargaining
agreement and consider our relationships with our employees to be good.
Environmental Consideration
Technical Ventures has not incurred any significant environmental
compliance cost, and compliance with environmental regulation has not had a
material effect in our operation of financial condition. Our primary waste
products are non-toxic and non-corrosive and are disposed of by a private
sanitation company in accordance with all appropriate regulations.
Competition in Our Industry
We compete with some of the world's largest chemical companies, such as
Exxon Corp., E.I. DuPont De Nemours & Co., Union Carbide Corp., and Raychem
Corp. Our competitors are substantially larger than us in terms of financial,
marketing, and research and development resources.
Our Competitive Advantages
Polymer Technology. Dow Chemical and Lucent Technologies, have licensed our
technology after subjecting our product to a five year rating program, has
assigned our product the highest quality rating based on their internal rating
procedures. The application of our polymer technology in wallboard is still the
only plastic in its field to pass certain fire codes for high rise buildings.
Composite Technology. We have achieved the highest filler levels to obtain
maximum specific gravity and have no competition. Our composite for bushings for
copiers and fax machines is extremely difficult, if not impossible, to reverse
engineer.
Specialty Compounding. We believe we have three distinct advantages,
equipment, personnel and size. Our equipment was selected to allow for superior
dispersion in connection with proprietary polymer technology and composite
technology. The Our personnel and our associations with consulting scientists
and chemist enables us to work closely and co-operatively with our customers to
meet their needs. Our size allows us to direct immediate attention to existing
and potential customers in a cost effective and timely manner. We direct our
efforts to niche markets where the following criterion is essential: fast turn
around of small orders; equipment designed for ease of cleaning at minimum
downtime and wastage; air cooled die heads for moisture sensitive materials and
excellent dispersion of powders into the resins and nitrogen blankets for
cooling in high humidity.
Property
We lease our headquarters, an 8,500 square foot office space and production
facility, located at 3411 McNicoll Avenue, Scarborough, Ontario, Canada. In July
1997, we leased an additional 8,800 square feet of space for storage of raw
materials. We pay monthly rent of CDN.$6,397, exclusive of real estate tax
escalations. The lease on the 8,500 square foot facility expires on March 31,
1999, and the lease on the additional 8,800 square foot facility expires on June
30, 1999.
Legal Proceedings
A legal action has been commenced against Technical Ventures, 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
(Commercial 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.
^ After submission of the Defendant's evidence, the Plaintiff 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.
Based on prior written legal opinion from its patent attorneys that the
allegations are without merit, Technical Ventures has retained a law firm
specializing in Intellectual Property Law and is vigorously defending the
action.
On September 16-17, 1999, at the hearing of interlocutory injunction
motion, the parties agreed, on consent, to adjourn the motion until trial. The
parties agreed to expedite the matter to trial with a trial date of December
1999, however at the request of the plaintiff this time frame was not achieved.
As of March 2000, a trial date has not been set.
Address
Our principal executive offices are located at 3411 McNicoll Avenue, Unit
11, Scarborough, Ontario, Canada M1V 2V6.
MANAGEMENT
The following table sets forth certain information regarding our
executive officers and directors. There are no family relationships among our
directors and executive officers.
Name Age Position
Frank Mortimer ^ 61 President and Director
Bryan Carter ^ 79 Vice President and Director
Larry Leverton ^ 61 Secretary, Treasurer and Director
Frank Mortimer has been President and a Director since April 1986. He is
also President of Fam Tile Restoration Services Ltd., a company specializing in
the restoration of acoustical ceilings. FAM is one of Mortile's wholly owned
subsidiaries and is presently inactive. From 1967 to 1982, Mr. Mortimer managed
several export companies in South Africa. Mr. Mortimer is an associate member of
the Institute of Materials Handling (London UK).
Bryan Carter has been a Director since April 1986. In 1982, he formed Bryan
Carter and Associates, a firm which offers international consulting and
marketing services to the plastics industry and small businesses. From 1954 to
1962, he was in charge of the North American base of Rosedale Assoc.
Manufacturers of London (UK) in Toronto, Canada. From 1962 to 1982, he was
President and part owner of Rosedale Plastics, a rotational molding company. Mr.
Carter has extensive international business experience including work in
Lebanon, Haiti and Australia, on behalf of various organizations. Mr. Carter
pioneered the rotational molding industry in North America and in 1982 served as
the International President of Rotational Moulders.
Larry Leverton has been Secretary and Treasurer since April 1986. Since
1983, he has been President of L.R. Leverton Enterprises Inc., a transportation
consulting firm which is currently inactive. In 1982, he was Vice-President of
Newman Harbour Terminals and Transportation.
Directors serve until the next annual meeting of stockholders or until
their successors are elected and qualified. Officers serve at the discretion of
the board of directors. Directors do not currently receive fees for their
services as directors, but are reimbursed for travel expenses.
Executive Compensation
The following table sets forth certain summary information with
respect to the compensation paid ^ to the Company's President, and Executive
Officers for services rendered in all capacities to ^ the Company for the fiscal
^ period ended December 31, 1999. Other than as listed below, ^ the Company had
no executive officers whose total annual salary and bonus exceeded $100,000 for
that fiscal year:
^
POSITION
^
YEAR
^
^ ANNUAL COMPENSATION ^ LONG-TERM COMPENSATION
AWARDS PAYOUTS
NAME AND PRINCIPAL Year Salary ($) Bonus ($) Other Restricted Securities All Other
POSITION Annual Stock Underlying LTIP Payouts ($) Compensation
Compen- Award Options/SARs (#) ($)
sation
($)
Frank Mortimer,
President 1999 $59,400 0 0 1,450,000(1) 0 0 0
1998 $62,100 0 0 0 0 0 0
Larry Leverton,
Secretary
and Treasurer 1999 $52,800 0 0 250,000(2) 0 0 0
1998 $56,200 0 0 0 0 0 0
- ----------------
(1) Represents shares purchased by Mr. Mortimer for par value in
consideration that no salary increases have taken place since 1991, except in
promotional circumstances, and in recognition of long term employment.
(2) Represents shares purchased by Mr. Leverton for par value in
consideration that no salary increases have taken place since 1991, except in
promotional circumstances, and in recognition of long term employment.
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the
beneficial ownership of our outstanding common stock known by us as of ^
December 31, 1999 after giving effect to:
o the sale of 50,000 shares of common stock upon exercise of options which
are outstanding
o the sale of 50,000 shares of common stock upon the conversion of debt
which is outstanding
o the sale of ^ our common stock offered^
Also, the following table sets forth the information with respect to:
o each person or entity known by us to be the beneficial owner of more than
5% of our common stock
o each of our directors who owns any shares of our common stock
o each of our named executive officers set forth in the Executive
Compensation table above who beneficially owns any shares of our common stock
o all of our directors and named executive officers as a group.
Except as otherwise indicated, the persons listed below have sole voting and
investment power with respect to all shares of our common stock owned by them,
except to the extent such power may be shared with a spouse.
Approximate
Number of Shares Percentage of
Name Beneficially Owned Common Stock
- ---- ------------------ ------------
Frank Mortimer (1) ^ 1,199,153 5.1%
Larry Leverton (2) 591,448 ^ 2.5%
Bryan Carter 165,000 ^ 0.6%
All Officers and
Directors as a group ^ 2,756,201 ^ 8.2%
(3)
- ------------------
Except as noted above, the address for the above identified officers
and directors is care of Technical Ventures Inc., 3411 McNicoll Avenue, Unit 11,
Scarborough, Ontario, Canada M1V 2V6.
(1) Includes 453,020 shares owned by Mr. Mortimer's wife ^. Does not
include 200,000 shares owned by Roger Mortimer, Mr. Mortimer's son.
(2) All shares are owned in the name of L.R. Leverton Enterprises Inc., a
corporation owned and controlled by Larry Leverton.
(3) Presently, none of our officers or directors own options, warrants or
other securities which are convertible into the common stock, nor do we have a
plan for the issuance of options or securities to purchase shares of our common
stock.
RELATED TRANSACTIONS
In June 1998, we finalized a transfer of technology in exchange for
debt agreement with Dow Chemical Canada Inc. and The Dow Chemical Company. We
transferred to Dow title and ownership in our existing intellectual property
rights (including all proprietary knowledge, patents and patent applications)
relating to halogen free, flame retardant thermoplastic composition technology
and smelt filler technology. Dow granted us a non-exclusive, non transferable,
royalty free world-wide license for use of the technology, pursuant to which,
Dow has access on, at least, a non-exclusive basis to improvements we make in
the technology. Dow, in turn, released Mortile from its CND$767,499.68 debt
obligations to Dow, plus CND$284,873.81 accrued and unpaid interest owed on the
debt. Dow also released us and Frank Mortimer, our President, from guarantees
made by both in connection with this debt.
This transaction was not made on terms less favorable to Technical
Ventures than those from third parties.
In October 1998, the Registrant issued a total of 2,100,000 shares of
common stock for par value to its officers, directors and employees in
consideration that no salary increases have taken place since 1991, except in
promotional circumstances, and in recognition of long term employment. The
transaction was exempt from registration under Section 4(2) of the Act.
DESCRIPTION OF OUR SECURITIES
The following description of our securities and selected provisions of
our certificate of incorporation and bylaws is a summary and is qualified in its
entirety by reference to such documents and New York Law.
Common Stock
Our authorized capital stock consists of 50,000,000 shares of common
stock, $.01 par value per share. As of the date of this Prospectus, ^ 23,802,031
shares of our common stock are issued and outstanding. Holders of our common
stock will have the right to cast one vote for each share held of record on all
matters submitted to a vote of our stockholders, including the election of
directors. There is no right to cumulate votes for the election of directors.
Stockholders holding a majority of the voting power of the capital stock issued
and outstanding and entitled to vote, represented in
person or by proxy, are necessary to constitute a quorum at any meeting of our
stockholders, and the vote by the holders of a majority of such outstanding
shares is required to effect certain fundamental corporate changes such as
liquidation, merger or amendment of our Certificate of Incorporation.
Holders of our common stock are entitled to receive dividends pro rata
based on the number of shares held, when, as and if declared by our board of
directors, from funds legally available therefor. In the event of the
liquidation, dissolution or winding up of our affairs, all of our assets and
funds remaining after the payment of all debts and other liabilities, shall be
distributed, pro rata, among holders of our common stock. Holders of our common
stock are not entitled to preemptive or subscription or conversion rights, and
there are no redemption or sinking fund provisions applicable to our common
stock. All outstanding shares of our common stock are, and the shares of our
common stock offered hereby will be when issued, fully paid and non-assessable.
Warrants
On January 27, 1999, we issued warrants representing the right to
purchase shares of our common stock. There will be 127,840 shares of common
stock underlying the warrants at an exercise price of $.176 per share. The
expiration date of the warrants is January 31, 2002. All of the shares of common
stock underlying the warrants are being registered pursuant to the registration
statement filed in connection with this prospectus.
The exercise prices of the warrants were determined by negotiation and
should not be construed to imply that any price increases in our securities will
occur. We have reserved from its authorized but unissued shares a sufficient
number of shares of our common stock for issuance upon the exercise of the
warrants. Upon notice to the warrant holders, we have the right to reduce the
exercise price or extend the expiration date of the warrants.
The warrants do not confer upon the warrant holder any voting or other
rights of a stockholder of our company. The warrants provide for customary
anti-dilution provisions in the event of certain events which may include
mergers, consolidations, reorganizations, recapitalizations, stock dividends,
stock splits and other changes in our capital structure.
The foregoing is a summary of the terms generally applicable to the
warrants as of the date of this prospectus. The terms of the individual warrants
may vary according to negotiation between us and the various warrant holders.
Options
Presently, there are options outstanding to purchase 50,000 shares of
our common stock at an exercise price of $.50 per share. All of such options are
presently exercisable and there is no termination date on the options.
Debentures
On January 27, 1999, we issued an aggregate of $225,000 principal
amount in 8% convertible debentures. Interest on the debentures is payable
quarterly and the principal on the debentures is due on January 31, 2002. From
and after the time that such principal amount on the debentures shall have
become due and payable (whether at maturity or by acceleration), interest shall
be payable, to the extent permitted by law, at the rate equal to the lesser of
(i) eighteen percent (18%) per annum or (ii) the maximum rate permitted by law,
on the entire unpaid principal amount of this debenture.
Unpaid principal plus all accrued and unpaid interest and penalties on
the debentures is convertible at a conversion price that is the lesser of $.176
per share or 75% of the average closing bid price of our common stock on the 10
days prior to when a debenture is presented for conversion. In the event the
registration statement (for which this prospectus forms a part) covering the
shares of common issuable upon conversion of the debentures is not declared
effective by June 8, 1999, we shall pay to the holders of the debentures a
penalty of one-fifteenth of one percent of the principal amount of the notes for
each day beyond such date until such registration statement is declared
effective.
Convertible Promissory Notes
^ In January 1990, Technical Ventures borrowed $25,000 from Fibrex
pursuant to a promissory note in the principal amount of $25,000, bearing
interest at an annual rate of 10%, and payable upon demand of the holder
thereof. Such note is convertible, at any time, at the option of the holder
thereof, into 50,000 shares of our common stock at a price of $0.50 per share.
Trading Information
Our common stock is publicly traded on the Over-the-Counter Bulletin
Board, a regulated quotation service that captures and displays real-time quotes
and/or indications of interest in securities not listed on The NASDAQ Stock
Market or any U.S. exchange. As of December 28, 1999, the closing price for our
common stock was $0.12 and the 52 week high and low prices were $.52 and $0.08,
respectively. Information as to trading volumes, and bid and asked prices, for
our common stock may be obtained directly from the Over-the-Counter Electronic
Bulletin Board.
The following table sets forth the high and low bid (price which a
market maker is willing to pay for our common stock) quotations for our common
stock, as reported to us by the Over-the- Counter Bulletin Board. These
quotations are between dealers, do not include retail mark-ups, markdowns or
other fees and commissions, and may not represent actual transactions.
Quarter Low Bid High Bid
- ------- --- --- ---- ---
September 30, 1996................................. $0.125 $0.070
December 31, 1996.................................. $0.045 $0.070
March 31, 1997..................................... $0.060 $0.070
June 30, 1997...................................... $0.165 $0.210
September 30, 1997................................. $0.200 $0.230
December 31, 1997.................................. $0.250 $0.280
March 31, 1998..................................... $0.150 $0.190
June 30, 1998...................................... $0.300 $0.380
September 30, 1998................................. $0.110 $0.493
December 31, 1998.................................. $0.080 $0.342
March 31, 1999..................................... $0.150 $0.300
June 30, 1999......................................... $0.105 $0.330
September 30, 1999.................................... $0.125 $0.330
December 31, 1999..................................
As of ^ December 31, 1999, there were ^ approximately 1,000
holders of our Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
If we sell all 7,263,731 shares offered under this prospectus, ^
31,777,544 shares of our common stock will be outstanding, all of which will be
freely tradable without restriction or further
registration under the Securities Act, unless purchased or held by our
"affiliates," as defined in Rule 144 of the Securities Act ("Rule 144").
SELLING STOCKHOLDERS
The following table sets forth the holders of our common stock who are
offering their shares of common stock pursuant to this prospectus, and the
number of shares of common stock being offered by each person:
Shares Owned Prior to the Offering Shares Owned
After the Offering
Number of
Selling Stockholders Shares
Offered
Number Percent Number Percent
Gene Howland......................... ^ 6,912,111(1) 6,912,111(1) 21.8% --- ---%
William Hoops........................ ^ 1,063,402(2) 1,063,402(2) 3.3% --- ---
Coleman Capital Partners
Ltd.................................. 550,000(3) 550,000(3) ^ 1.7% --- ---
Sichenzia, Ross &
Friedman LLP......................... ^ 100,000(4) ^ 100,000(4) * --- ---
* Indicates less than one percent of the total outstanding common stock.
- -----------------------
(1) On January 27, 1999, Gene Howland purchased an 8% convertible debenture
which is convertible into an estimated ^ 6,801,316 shares of common stock. The
funds for such purchase were received on February 5, 1999. Additionally, Mr.
Howland was issued warrants to purchase 110,795 shares of common stock at an
exercise price of $.176 per share.
(2) On January 27, 1999, William Hoops purchased an 8% convertible
debenture which is convertible into an estimated ^ 1,046,357 shares of common
stock. The funds for such purchase were received on February 5, 1999.
Additionally, Mr. Hoops was issued warrants to purchase 17,045 shares of common
stock at an exercise price of $.176 per share.
(3) Represents 550,000 shares of common stock issued to Coleman Capital
Partners Ltd., pursuant to its advisory agreement with us, dated January 11,
1999, in consideration for consulting services rendered. Coleman acquired the
common shares on the ordinary course of business and at the time of acquisition
of the securities to be resold, Coleman had no agreements or understandings,
directly or indirectly, with any person to distribute the securities.
(4) Represents shares of common stock issued to Sichenzia, Ross & Friedman
LLP, our counsel in the United States, in consideration for legal services
rendered on our behalf.
PLAN OF DISTRIBUTION
Each stockholder selling securities pursuant to this offering is free
to offer and sell his or her shares of common stock at such times, in such
manner and at such prices as he or she shall determine. Such common shares may
be offered by selling stockholders in one or more types of transactions, which
may or may not involve brokers, dealers or cash transactions. The selling
stockholders may also use Rule 144 under the Securities Act, to sell such
securities, if they meet the criteria and conform to the requirements of such
Rule.
There is no underwriter or coordinating broker acting in connection
with the proposed sale of common stock by the selling stockholders. The selling
stockholders have advised us that sales of common stock may be effected from
time to time in by the following events:
o transactions in the Over-the-Counter Bulletin Board, including block
transactions
o negotiated transactions
o through the writing of options on the common stock
o a combination of such methods of sale at fixed prices which may be
changed, at market prices prevailing at the time of sale, or at negotiated
prices
The selling stockholders may effect such transactions by selling
common stock directly to purchasers or to or through broker/dealers which may
act as agents or principals. Such broker/dealers may receive compensation in the
form of discounts, concessions, or commissions from the selling stockholders .
The selling stockholders and any broker/dealers that act in connection
with the sale of the common stock might be deemed to be "underwriters" within
them meaning of Section 2(11) of the Securities Act, and any commissions
received by them and any profit on the resale of the common stock as principal
might be deemed to be underwriting discounts and commissions under the
Securities Act. The selling stockholders may agree to indemnify any agent,
dealer or broker/dealer that participates in transactions involving sales of the
shares against certain liabilities, including liabilities arising under the
Securities Act. Because selling stockholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities, they will be subject to
prospectus delivery requirements under the Securities Act.
Furthermore, in the event of a distribution of his or her common
stock, any selling stockholder, any selling broker/dealer and any affiliated
purchasers may be subject to Regulation M which prohibits any "stabilizing bid"
or "stabilizing purchase" for the purpose of pegging, fixing or stabilizing the
price of the common stock in connection with the offering.
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed
upon for us by our counsel, Sichenzia, Ross & Friedman LLP, 135 West 50th
Street, 20th Floor, New York, New York, 10020. Sichenzia, Ross & Friedman LLP
owns ^ 100,000 shares of common stock of Technical Ventures, Inc.
EXPERTS
Our financial statements for each of the three fiscal years in the
period ended June 30, 1999, 1998 and 1997, appearing in this prospectus have
been audited by Schwartz Levitsky Feldman, Chartered Accountants, to the extent
and for the periods set forth in their reports appearing elsewhere herein and in
the Registration Statement and are included in reliance upon such reports given
upon the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement with the SEC on Form SB-2 relating
to the shares offered in this prospectus. This prospectus does not contain all
of the information included in the registration statement. For further
information about us and the shares we are offering in this prospectus, refer to
the registration statement and its exhibits. The statements we make in this
prospectus regarding the content of any contract or other document are
necessarily not complete, and you may examine the copy of the contract or other
document that we filed as an exhibit to the registration statement. All our
statements about those contracts or other documents are qualified in their
entirety by referring you to the exhibits to the registration statement.
You should rely only on the information contained in this document or
that we have referred you to. We have not authorized anyone to provide you with
information that is different. The information contained in this document is
current as of the date this document was filed with the SEC. If any material
changes occur after such date, then we will notify you of the changes by an
amendment to this document. We are not offering to sell you securities if you
live in a jurisdiction where such an offer would be unlawful.
After the effective date of this offering, we intend to furnish to our
stockholders annual reports containing audited financial statements and interim
reports. We currently file annual, quarterly and special reports, proxy
statements and other information with the SEC. Such reports, proxy statements
and other information can be inspected and copied at the public reference
facility of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's Regional Offices located at Seven World
Trade Center, Suite 1300, New York, New York 10048, and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials can be obtained by
mail from the Public Reference Section of the SEC at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Our common
stock is traded in the over-the-counter market and is quoted on the
Over-the-Counter Bulletin Board and such reports, proxy statements and other
information concerning us may be inspected and copied at the offices of the
National Association of Securities Dealers, Inc., 9801 Washingtonian Boulevard,
Gaithersburg, Maryland 20878. In addition, we are required to file electronic
versions of these documents with the SEC through the SEC's Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system. The SEC maintains a World
Wide Web site at http://www.sec.gov that contains reports, proxy statements and
other information regarding registrants that file electronically with the SEC.
^ 8,625,512 Shares
of Common Stock
TECHNICAL VENTURES INC.
---------------
Prospectus
---------------
Until _______, 1999 (25 days after the date
of this Prospectus), all dealers effecting
transactions in the Common Stock, whether or
not participating in this distribution, may be __________, 1999
required to deliver a Prospectus. This is in
addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with
respect to their unsold allotments or
subscriptions.
TECHNICAL VENTURES INC.
REVISED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1999 AND 1998
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
(Unaudited)
TOGETHER WITH REPORT OF INDEPENDENT AUDITORS
TECHNICAL VENTURES INC.
REVISED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1999 AND 1998
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
(Unaudited)
TOGETHER WITH REPORT OF INDEPENDENT AUDITORS
TABLE OF CONTENTS
Report of Independent Auditors F - 2
Revised Consolidated Balance Sheets at June 30, 1999 and 1998 F - 3
and at December 31, 1999 and 1998
Revised Consolidated Statements of Operations for the years ended June 30, 1999,
1998 and 1997 and for the six-month periods ended December 31, 1999
and 1998 F - 4
Revised Consolidated Statements of Changes in Stockholders' Equity (Deficiency)
for the years ended June 30, 1999, 1998 and 1997 and for the six-month
periods ended December 31, 1999 and 1998 F - 5 - F - 6
Revised Consolidated Statements of Cash Flows for the years ended June 30, 1999,
1998 and 1997 and for the six-month periods ended December 31, 1999
and 1998 F - 7 - F - 8
Notes to Revised Consolidated financial statements F - 9 - F - 35
F - 1
Schwartz Levitsky Feldman llp
CHARTERED ACCOUNTANTS
TORONTO, MONTREAL, OTTAWA
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Technical Ventures Inc.
We have audited the accompanying revised consolidated balance sheets of
Technical Ventures Inc. (incorporated in New York State) as of June 30,
1999 and 1998 and the related revised consolidated statements of income,
cash flows and changes in stockholders' equity (deficiency) for each of
the years ended June 30, 1999, 1998 and 1997. These revised consolidated
financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these revised consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards required that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above,
revised as described in note 1, present fairly, in all material respects,
the financial position of Technical Ventures Inc. as of June 30, 1999 and
1998 and the results of its operations and its cash flows for each of the
years ended June 30, 1999, 1998 and 1997 in conformity with generally
accepted accounting principles in the United States of America.
The company has sustained significant operating losses since its
inception as indicated in Note 2. There is substantial doubt as to the
company's ability to continue as a going concern if additional financing
is not obtained. Management's plans in regard to these matters are also
described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Toronto, Ontario
October 12, 1999, Chartered Accountants
except for note 1 as to
which the date is October 26, 1999
1167 Caledonia Road
Toronto, Ontario M6A 2X1
Tel: 416 785 5353
Fax: 416 785 5663
F - 2
TECHNICAL VENTURES INC.
Revised Consolidated Balance Sheets (note 1)
As of June 30 and December 31
(Amounts expressed in U.S. Dollars)
December 31, December 31, June 30, June 30,
1999 1998 1999 1998
$ $ $ $
(Unaudited) (Unaudited)
ASSETS
CURRENT ASSETS
Cash 21,835 - 13,883 17,605
Accounts receivable (note 4) 145,656 77,538 124,435 118,140
Inventory (note 5) 48,699 49,639 45,143 34,664
Prepaid expenses 4,070 665 - -
------- ------- ------- -------
220,260 127,842 183,461 170,409
DEPOSITS 13,835 10,887 29,415 26,931
ADVANCES TO STOCKHOLDERS (note 6) 63,361 57,357 62,392 35,904
PROPERTY AND EQUIPMENT (note 7) 141,648 154,912 155,437 177,231
INTANGIBLE ASSETS (note 8) 491 769 646 965
------- ------- ------- -------
439,595 351,757 431,351 411,440
======= ======= ======= =======
APPROVED ON BEHALF OF THE BOARD
Director
--------------------------------------------------------
Director
--------------------------------------------------------
TECHNICAL VENTURES INC.
Revised Consolidated Balance Sheets (note 1)
As of June 30 and December 31
(Amounts expressed in U.S. Dollars)
December 31, December 31, June 30, June 30,
1999 1998 1999 1998
$ $ $ $
(Unaudited) (Unaudited)
LIABILITIES
CURRENT LIABILITIES
Bank overdraft - 8,460 - -
Accounts payable and accrued expenses
(note 9) 462,612 311,669 283,965 384,888
Current portion of notes payable (note 10) 376,975 433,493 371,278 496,834
Capital lease obligations (note 11) 78,341 77,050 77,046 77,594
Loans from private lenders (note 12) 62,022 61,316 61,859 138,458
Current portion of loans from shareholders
unsecured, interest free
(note 13) 187,000 187,431 170,793 179,863
--------- --------- ------- ---------
1,166,950 1,079,419 964,941 1,277,637
--------- --------- ------- ---------
LONG-TERM DEBT, net of current portion
Convertible debentures (note 16 (h)) 203,992 - 220,490 -
Notes payable (note 10) 55,955 - 64,049 -
Shareholders (note 13) 259,298 302,817 305,442 330,022
Other (note 14) 27,163 35,398 26,795 52,891
--------- --------- ------- ---------
546,408 338,215 616,776 382,913
--------- --------- ------- ---------
MINORITY INTEREST (note 15) - - - -
--------- --------- ------- ---------
STOCKHOLDERS' DEFICIENCY
CAPITAL STOCK (note 16) 237,520 219,480 221,980 147,113
ADDITIONAL PAID IN CAPITAL (note 16) 4,933,203 4,645,340 4,702,463 4,056,744
ACCUMULATED OTHER COMPREHENSIVE
INCOME (note 17) 303,838 348,140 313,319 306,571
DEFICIT (6,748,324) (6,278,837) (6,388,128) (5,759,538)
--------- --------- ------- ---------
(1,273,763) (1,065,877) (1,150,366) (1,249,110)
--------- --------- ------- ---------
439,595 351,757 431,351 411,440
========= ========= ======= =========
See notes to revised consolidated financial statements.
F - 3
TECHNICAL VENTURES INC.
Revised Consolidated Statements of Operations (note 1)
For the years ended June 30 and for the six-month periods ended December 31
(Amounts expressed in U.S. Dollars)
Six-month period
ended Year ended
December 31 June 30
--------------------------- ----------------------------------
1999 1998 1999 1998 1997
$ $ $ $ $
(Unaudited) (Unaudited)
NET SALES 672,070 505,078 1,131,279 1,185,091 1,414,062
COST OF SALES 513,445 356,402 763,922 984,899 1,229,902
-------- -------- --------- --------- ---------
GROSS MARGIN 158,625 148,676 367,357 200,192 184,160
-------- -------- --------- --------- ---------
EXPENSES
Administration 256,777 488,687 629,412 146,789 137,373
Interest and other 40,556 37,142 139,689 106,801 119,456
Research and development 35,047 106,143 141,758 94,874 82,225
Selling 65,482 41,661 90,746 71,790 61,949
Contingent related legal
expenses 120,959 - - - -
Gain from disposal - - - (3,486) -
-------- -------- --------- --------- ---------
518,821 673,633 1,001,605 416,768 401,003
-------- -------- --------- --------- ---------
LOSS FROM OPERATIONS
BEFORE INCOME TAX
RECOVERY AND
EXTRAORDINARY ITEM (360,196) (524,957) (634,248) (216,576) (216,843)
Income tax recovery (note 18) - 5,658 5,658 258,977 20,521
-------- -------- --------- --------- ---------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM (360,196) (519,299) (628,590) 42,401 (196,322)
Gain from transfer of
technology
rights (note 10(i)) - - - 477,193 -
-------- -------- --------- --------- ---------
NET INCOME (LOSS) (360,196) (519,299) (628,590) 519,594 (196,322)
======== ======== ========= ========= =========
BASIC INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM PER
COMMON SHARE (note 19) (0.02) (0.03) (0.03) 0.00 (0.01)
======== ======== ========= ========= =========
BASIC INCOME (LOSS) PER
COMMON SHARE
(note 19) (0.02) (0.03) (0.03) 0.04 (0.01)
======== ======== ========= ========= =========
FULLY DILUTED INCOME
(LOSS) PER COMMON
SHARE (note 19) (0.02) (0.03) (0.03) 0.04 (0.01)
======== ======== ========= ========= =========
See notes to revised consolidated financial statements.
F - 4
TECHNICAL VENTURES INC.
Revised Consolidated Statements of Changes in Stockholders' Equity (Deficiency)
(note 1)
For the years ended June 30 and for the six-month periods ended December 31
(Amounts expressed in U.S. Dollars)
Common
Stock
Issued and
Outstanding Additional Cumulative
Number of Paid in Translation
Shares Amount Capital Deficit Adjustments
----------- ----------- ------- ----------- ------------
$ $ $ $
Balance, June 30, 1996 14,586,341 145,863 4,048,994 (6,082,810) 199,256
Net loss - - - (196,322) -
Cumulative translation
adjustment - - - - 22,588
---------- ------- --------- ---------- -------
Balance, June 30, 1997 14,586,341 145,863 4,048,994 (6,279,132) 221,844
Common shares issued (note 16) 125,000 1,250 7,750 - -
Net Income - - - 519,594 -
Cumulative translation
adjustment - - - - 84,727
---------- ------- --------- ---------- -------
Balance, June 30, 1998 14,711,341 147,113 4,056,744 (5,759,538) 306,571
Common shares issued (note 16) 7,486,670 74,867 623,986 - -
Issuance of warrants
(note 16) - - 21,733 - -
Net loss - - - (628,590) -
Cumulative translation
adjustment - - - - 6,748
---------- ------- --------- ---------- -------
Balance, June 30, 1999 22,198,011 221,980 4,702,463 (6,388,128) 313,319
========== ======= ========= ========== =======
See notes to revised consolidated financial statements.
F - 5
TECHNICAL VENTURES INC.
Revised Consolidated Statements of Changes in Stockholders' Equity (Deficiency)
(note 1)
For the years ended June 30 and for the six-month periods ended December 31
(Amounts expressed in U.S. Dollars)
Common
Stock
Issued and
Outstanding Additional Cumulative
Number of Paid in Translation
Shares Amount Capital Deficit Adjustments
----------- ----------- ------- ----------- ------------
$ $ $ $
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Balance, June 30, 1998 14,711,341 147,113 4,056,744 (5,759,538) 306,571
Common shares issued (note 16) 7,236,670 72,367 588,596 - -
Net loss - - - (519,299) -
Cumulative translation
adjustment - - - 41,569
---------- ------- --------- ----------- -------
Balance, December 31, 1998 21,948,011 219,480 4,645,340 (6,278,837) 348,140
========== ======= ========= =========== =======
Balance, June 30, 1999 22,198,011 221,980 4,702,463 (6,388,128) 313,319
Common shares issued (note 16) 1,554,020 15,540 230,740 - -
Net loss - - - (360,196) -
Cumulative translation adjustment - - - - (9,481)
---------- ------- --------- ----------- -------
Balance, December 31, 1999 23,752,031 237,520 4,933,203 (6,748,324) 303,838
========== ======= ========= =========== =======
See notes to revised consolidated financial statements.
F - 6
TECHNICAL VENTURES INC.
Revised Consolidated Statements of Cash Flows (note 1)
For the years ended June 30 and for the six-month periods ended December 31
(Amounts expressed in U.S. Dollars)
Six-month period
ended Year ended
December 31 June 30
--------------------------- ----------------------------------
1999 1998 1999 1998 1997
$ $ $ $ $
(Unaudited) (Unaudited)
CASH FLOW FROM
OPERATING ACTIVITIES
Net income (loss) (360,196) (519,299) (628,590) 519,594 (196,322)
Adjustments to reconcile
net income (loss) to net
cash used by operating
activities:
Depreciation and
amortization 16,433 15,213 30,079 10,874 33,832
Gain on disposition of
property and equipment - - (1,373) - -
Discounts on convertible
debentures (note 16 (h)) - - 75,000 - -
- -
Gain on transfer of
Technology Rights - - - (682,278) -
Issuance of Common Stock
for Services 190,838 479,930 515,320 9,000 -
(Increase) decrease in
accounts receivable (19,510) 35,440 (6,035) 38,765 (57,025)
(Increase) decrease in
inventory (2,935) (16,491) (10,404) (610) 34,940
Increase (decrease) in
accounts payable and
accrued expenses 174,770 (58,587) (101,661) (75,427) 135,968
------- -------- --------- -------- --------
(600) (63,794) (127,664) (180,082) (48,607)
------- -------- --------- -------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Increase in deposits 11,915 14,213 (2,472) (19,471) (849)
(Increase) decrease in advances
to stockholders (111) (28,241) (31,582) 2,994 (5,964)
Property and equipment
Acquisition - (484) (9,565) (8,035) (2,586)
Proceeds from sale of
property and equipment - - 3,321 - -
------- -------- --------- -------- --------
11,804 (14,512) (40,298) (24,512) (9,399)
------- -------- --------- -------- --------
See notes to revised consolidated financial statements.
F - 7
TECHNICAL VENTURES INC.
Revised Consolidated Statements of Cash Flows (note 1)
For the years ended June 30 and for the six-month periods ended December 31
(Amounts expressed in U.S. Dollars)
Six-month period
ended Year ended
December 31 June 30
--------------------------- ----------------------------------
1999 1998 1999 1998 1997
$ $ $ $ $
(Unaudited) (Unaudited)
CASH FLOW FROM FINANCING ACTIVITIES
Increase in bank overdraft - 8,460 - - -
Repayments of note payable
to Cooper Financial Crop. (7,097) (13,144) (26,960) (14,692) (5,152)
Proceeds from (repayments of)
note payable to Dow
Chemical Canada - (33,755) (35,375) 14,555 6,217
Proceeds from (repayments of)
capital lease obligations 235 2,848 (718) 2,164 (19,592)
Proceeds from (repayments of)
other loans payable - (15,182) (26,212) 4,706 -
Proceeds from (repayments of)
private lenders - (15,899) (14,061) 66,820 -
Proceeds from (repayments of)
stockholders' loans 18,957 30,660 (9,352) 135,962 87,835
Proceeds from issue of common
stock - 98,232 100,732 - -
Proceeds from issue of convertible
debentures and warrants, net of
issuance costs (16,500) - 167,223 - -
------- -------- --------- -------- --------
(4,405) 62,220 155,277 209,515 69,308
------- -------- --------- -------- --------
EFFECT OF EXCHANGE
RATE ON CASH 1,153 (1,519) 8,963 (11,088) 4,918
------- -------- --------- -------- --------
NET INCREASE (DECREASE) IN
CASH BALANCE FOR THE
PERIOD 7,952 (17,605) (3,722) (6,167) 16,220
Cash balance, beginning
of period 13,883 17,605 17,605 23,772 7,552
------- -------- --------- -------- --------
Cash balance, end of period 21,835 - 13,883 17,605 23,772
======= ======== ========= ======== ========
PAYMENTS MADE DURING
THE PERIOD FOR INTEREST 7,699 10,685 19,745 15,203 19,751
======= ======== ========= ======== ========
INCOME TAXES PAID - - - - -
======= ======== ========= ======== ========
See notes to revised consolidated financial statements.
F - 8
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
1. REVISIONS TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements as at June 30, 1999 have been
revised in order to:
i) provide additional information to readers;
ii) reclassify financial statement amounts to provide more precise
information and better comparison with prior years;
iii) reflect the issuance of common shares at estimated fair market value;
and
iv) recognize discounts given by the company in relation to the issuance of
convertible debentures
Earnings
Net income per share
--------------- ---------------
$ $
As previously reported (38,270) (.00)
Adjustment of common share issuances to fair market value
(note 16) (515,320) (.01)
Discount on convertible debentures (75,000) (.03)
--------- -----
As adjusted (628,590) (.04)
========= =====
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.
The Company continues to assess completing a private or public stock
offering.
F - 9
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Principles 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.
b) Organization and Operations
Mortile, a Canadian corporation, which was organized on February
12, 1985, is involved primarily in the development and
manufacture of plastic compounds. On April 14, 1986, the Company
acquired all of the issued and outstanding common stock of
Mortile. The Company's other two subsidiaries, Fam Tile
Restoration Services Ltd. and MPI Perlite Ltd. are currently
inactive.
c) Revenue Recognition
Sales are recognized when goods and services are delivered.
d) Inventory
Inventory is stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.
e) Property and Equipment
Property and equipment are recorded at cost and are depreciated
or amortized over their estimated useful lives or related lease
terms using the straight-line and accelerated methods. The
estimated useful lives for property and equipment range from 5
to 8 years.
f) Investment Tax Credits
Refundable foreign investment tax credits related to research
and development activities are recognized as income in the year
they are received.
g) 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 each period end, 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 judgment 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 - 10
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
h) Intangible Assets
Cost of intangible assets is being amortized using the
straight-line method over periods ranging from 5 to 17 years.
i) Income taxes
The company accounts for income tax under the provisions of
Statement of Financial Accounting Standards No. 109, which
requires recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been
included in the financial statements or tax returns. Deferred
income taxes are provided using the liability method. Under the
liability method, deferred income taxes are recognized for all
significant temporary differences between the tax and financial
statement bases of assets and liabilities.
j) Net Income (Loss) Per Share
Basic income (loss) per share is computed based on the average
number of common shares outstanding during each period.
Fully diluted 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.
k) 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.
F - 11
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
l) Foreign Currency Translation
Mortile maintains its books and records in Canadian dollars.
Foreign currency transactions are reflected using the temporal
method. Under this method, all monetary items are translated
into Canadian funds at the rate of exchange prevailing at
balance sheet date. Non-monetary items are translated at
historical rates. Income and expenses are translated at the rate
in effect on the transaction dates. Transaction gains and losses
are included in the determination of earnings for the year.
The translation of the financial statements of this wholly-owned
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 other comprehensive income in
stockholders' deficiency.
m) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
n) Contingent Liability Costs
The company reflects legal costs incurred for any contingencies
as a charge to operations of the year in which the expenditures
are determined and invoices receieved. The legal costs unaccrued
as at June 30, 1999 and December 31, 1999 was not material.
o) Unaudited Comparatives
The financial statements and related notes thereto as of
December 31, 1999 and for the six-month periods ended December
31, 1998 and 1999 have been prepared by management and are
unaudited. Though they have been prepared on the same basis as
the audited financial statements included herein, they do not
form part thereof as no audit opinion has been expressed
thereon. In the opinion of management, such unaudited interim
financial statements include all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the
information set forth herein. The interim results are not
necessary indicative of the results for any future period.
F - 12
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
4. ACCOUNTS RECEIVABLE
December 31, December 31, June 30, June 30,
1999 1998 1999 1998
$ $ $ $
(Unaudited) (Unaudited)
Accounts receivable 145,656 77,538 124,435 118,140
Less: Allowance for doubtful accounts - - - -
------- ------ ------- -------
Accounts receivable, net 145,656 77,538 124,435 118,140
======= ====== ======= =======
5. INVENTORY
Inventory at June 30, 1999, 1998 and 1997 and at December 31, 1999
and 1998 are comprised entirely of raw materials.
6. ADVANCES TO STOCKHOLDERS
The advances to stockholders are unsecured, are non-interest bearing
and are not subject to specified terms of repayments.
7. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1999 and 1998 are comprised as
follows:
December 31, December 31, June 30, June 30,
1999 1998 1999 1998
$ $ $ $
(Unaudited) (Unaudited)
Equipment under capitalized
leasing arrangements 230,250 178,988 230,360 204,981
Equipment 375,631 386,667 375,811 442,819
Furniture and fixtures 46,644 41,917 37,502 35,341
Leasehold improvements 4,275 4,024 4,217 4,208
------- ------ ------- -------
656,800 611,596 647,890 687,349
Less accumulated depreciation and
amortization 515,152 456,684 492,453 510,118
------- ------ ------- -------
141,648 154,912 155,437 177,231
======= ====== ======= =======
F - 13
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
8. INTANGIBLE ASSETS
December 31, December 31, June 30, June 30,
1999 1998 1999 1998
$ $ $ $
(Unaudited) (Unaudited)
Patents, at cost 6,181 5,818 6,098 6,084
Less: Accumulated amortization 5,690 5,049 5,452 5,119
------- ------ ------- -------
491 769 646 965
======= ====== ======= =======
9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
December 31, December 31, June 30, June 30,
1999 1998 1999 1998
$ $ $ $
(Unaudited) (Unaudited)
Trade payable 236,142 108,736 57,946 189,833
Accrued expenses 226,470 202,933 226,019 195,055
------- ------ ------- -------
462,612 311,669 283,965 384,888
======= ====== ======= =======
F - 14
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
10. NOTES PAYABLE
December 31, December 31, June 30, June 30,
1999 1998 1999 1998
$ $ $ $
(Unaudited) (Unaudited)
Notes payable consist of the followings:
Dow Chemical Canada, Inc. (Dow),
re-capitalization of line of credit and
accrued interest to April 30, 1996.
Payable in monthly instalments of
$4,100 including interest at a rate
of 10.75% (i) - - - 35,297
Ontario Development Corporation
outstanding balance is repayable
in quarterly instalments of
$20,675 including interest at 8%.
The Company is in default and the
entire balance is past due (ii) 346,449 326,099 341,749 340,999
Cooper Financial Corp.'s note, repayable
$3,150 monthly plus interest at 10%,
due August, 2002 (iii) 86,481 107,394 93,578 120,538
------- ------ ------- -------
432,930 433,493 435,327 496,834
Less: Current portion (376,975) (433,493) (371,278) (496,834)
------- ------ ------- -------
55,955 - 64,049 -
======= ========= ======== ========
F - 15
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
10. NOTES PAYABLE (cont'd)
i) In March 1998, the company reached an agreement with Dow to
settle the company's certain indebtedness to Dow by the transfer
of technology rights to Dow. The agreement transferred to Dow,
the title and ownership of the patents and intellectual rights
which relate to the halogen free, flame retardant thermoplastic
composition technology. In turn, Dow would provide Mortile with
a non-exclusive, non-transferable and royalty free world-wide
license for Mortile's use of the said technology. The company
recorded the transaction as follows:
Note payable to Dow settled $ 531,570
Accrued interest on note payable settled 197,304
Less: net book value of patents and intellectual rights (24,681)
---------
Gain on transfer before income taxes 704,193
Less: income taxes 227,000
---------
Gain on transfer, net of income taxes $ 477,193
=========
In June, 1998 the Company reached an agreement with Dow Chemical
of Canada to repay the outstanding principal of $35,297 on the
Company's line of credit; the obligation in regard of the
outstanding line of credit was fulfilled in August 1998.
ii) In accordance with the Ontario Development Corporation loan
provisions, they acquired a 15% interest in Mortile in March
1995 and an additional 15% interest in July 1995. Mortile had
previously been a wholly owned subsidiary of the Company. The
Ontario Development Corporation (O.D.C.) is a successor entity
to Innovation Ontario Corporation. Their investment in Mortile
is reflected in the financial statements as a minority interest.
The Company has been unable to meet payments in respect of this
loan. Accordingly the outstanding balance is reflected as a
current liability in these financial statements. This note is
collateralized by all previously unsecured assets of the
Company.
F - 16
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
10. NOTES PAYABLE (cont'd)
iii) In June 1997 the Company had received agreement from Cooper
Financial Corp. of its willingness to refinance the promissory
note. The new payment schedule of the note is based on 57 months
at a fixed interest rate of 10%. A re-financing charge was
assessed increasing the principal to $143,000 at July 1, 1997.
The term of the new promissory note is 24 months with a balloon
payment of $91,208 due June 30, 1999.
At June 30, 1998 the Company had a note payable balance of
$120,538 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. The
note is shown as a current liability on the Company's balance
sheet at June 30, 1998.
In August 1999, the company refinanced its obligation to Cooper
Financial Corp. A refinancing charge was assessed, increasing
the then outstanding principal balance of $91,208 to $95,999.
The terms of the refinancing require 35 monthly payments of
$3,150 and a final payment of $954. Interest is at 10%. The
Company is current with its obligation under this new agreement.
This obligation is included in the balance sheet with long-term
debt under the terms of the refinancing arrangement.
Notes payable mature as follows:
2000 $ 371,278
2001 32,621
2002 31,428
---------
$ 435,327
=========
F - 17
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
11. CAPITAL LEASE OBLIGATIONS
December 31, December 31, June 30, June 30,
1999 1998 1999 1998
$ $ $ $
(Unaudited) (Unaudited)
Capital lease obligations consist of the following:
Obligations under capitalized leasing
arrangements payable
in monthly instalments of $9,981 net
of amount representing
interest of $2,790 at June 30; the
company is in default and the entire
balance is past due 78,341 77,050 77,046 76,993
Others - - - 601
------- ------ ------- --------
78,341 77,050 77,046 77,594
======= ====== ======= ========
At June 30, 1999 accrued interest of $60,647 (1998 - $60,647) was
outstanding.
12. LOANS FROM PRIVATE LENDERS
December 31, December 31, June 30, June 30,
1999 1998 1999 1998
$ $ $ $
(Unaudited) (Unaudited)
Loans from private lenders are due on demand and consist of the
following:
Private investors:
Equipment financing - interest at 10% 12,022 11,316 11,859 11,833
Unsecured demand loans:
Interest free 25,000 25,000 25,000 85,000
Interest at 10%, convertible into
50,000 shares of common stock 25,000 25,000 25,000 25,000
Interest at 15% - - - 16,625
------- ------ ------- --------
62,022 61,316 61,859 138,458
======= ====== ======= ========
F - 18
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
13. LOANS FROM SHAREHOLDERS
Current Non-Current Total
$ $ $
Loans from shareholders as at June 30, 1999
and 1998 consist of the following:
a) June 30, 1999
Interest free-notes and loans 170,793 - 170,793
Unsecured shareholders notes, loans and
other payable balances:
Subordinate to notes payable to Cooper
Financial Corp. interest at the greater
of prime or 10 % - 23,395 23,395
Subordinate to note payable, O.D.C.:
Interest bearing loan - 10,253 10,253
Interest free - Notes and loans - 17,250 17,250
Accrued interest - 99,150 99,150
Accrued compensation - 155,394 155,394
-------- ------- -------
170,793 305,442 476,235
======== ======= =======
b) June 30, 1998
Interest free-notes and loans 179,863 - 179,863
Unsecured shareholders notes, loans and
other payable balances:
Subordinate to notes payable to Cooper
Financial Corp. interest at the greater
of prime or 10 % - 23,870 23,870
Subordinate to note payable, O.D.C.:
Interest bearing loan - 10,230 10,230
Interest free - Notes and loans - 52,200 52,200
Accrued interest - 88,668 88,668
Accrued compensation - 155,054 155,054
-------- ------- -------
179,863 330,022 509,885
======== ======= =======
F - 19
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
13. LOANS FROM SHAREHOLDERS (cont'd)
Current Non-Current Total
$ $ $
(unaudited) (unaudited) (unaudited)
Loans from shareholders as at December 31,
1999 and 1998 consist of the following:
c) December 31, 1999
Interest free-notes and loan 187,000 - 187,000
Unsecured shareholders notes, loans and
other payable balances:
Subordinate to notes payable to Cooper
Financial Corp. interest at the greater
of prime or 10 % - 23,717 23,717
Subordinate to note payable, O.D.C.:
Interest free - Notes and loans - 17,487 17,487
Accrued interest - 60,564 60,564
Accrued compensation - 157,530 157,530
------- ------- --------
187,000 259,298 446,298
======= ======= ========
d) December 31, 1998
Interest free-notes and loan 187,431 - 187,431
Unsecured shareholders notes, loans and
other payable balances:
Subordinate to notes payable to Cooper
Financial Corp. interest at the greater
of prime or 10 % - 22,324 22,324
Subordinate to note payable O.D.C.:
Interest bearing loan - 783 9,783
Interest free - Notes and loans - 32,721 32,721
Accrued interest - 89,711 89,711
Accrued compensation - 148,278 148,278
------- ------- --------
187,431 302,817 490,248
======= ======= ========
As at June 30, 1999, loans from shareholders mature as follows:
2000 $ 170,793
2001 -
2002 -
2003 -
After 2004 305,442
--------
$ 476,235
========
F - 20
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
14. OTHER LOANS
December 31, December 31, June 30, June 30,
1999 1998 1999 1998
$ $ $ $
(Unaudited) (Unaudited)
Other loans consist of the following:
Unsecured loans, private investor,
interest at 10%,
not subject to specified terms
of repayments 27,163 25,568 26,795 26,736
Note payable customer, interest at prime
plus 1%, repayment based on volume
of materials processed by the company
on behalf of the customer - 9,830 - 26,155
------ ------ ------ ------
27,163 35,398 26,795 52,891
====== ====== ====== ======
15. MINORITY INTEREST
Innovation Ontario Corp. has a 30% interest in Mortile (see note 10).
As Mortile was in a capital deficiency position as at June 30, 1999
and 1998, and as at December 31, 1999 and 1998, the minority interest
was $nil as at June 30, 1999 and 1998, and as at December 31, 1999
and 1998.
16. CAPITAL STOCK
a) Authorized
50,000,000 Common stock
$0.01 par value (note 16 (b))
Issued Shares Amount
$
December 31, 1999 (unaudited) 23,752,031 237,520
December 31, 1998 (unaudited) 21,948,011 219,480
June 30, 1999 22,198,011 221,980
June 30, 1998 14,711,341 147,113
F - 21
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
16. CAPITAL STOCK (cont'd)
b) On July 22, 1998, stockholders of the company approved an
amendment increasing the authorized common shares from
15,000,000 to 50,000,000.
c) Common shares have been issued in consideration of services
rendered and consulting services for financing incurred. The
shares have been valued at their estimated fair market value.
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 dates.
The share issuances for the years ended June 30, 1998, 1999 and
December 31, 1998, 1999 are summarized as follows:
Additional
Number of Paid-Up Paid-In Subscription
Nature of Payments Shares Capital Capital Proceeds Expense
------------------ ------------- ------------- -------------- ------------- -------------
$ $ $ $
For the six months
ended June 30, 1998
Consulting fees 125,000 1,250 7,750 - 9,000
========= ====== ======== ======= =========
For the year ended
June 30, 1999
Directors, officers
and employees
remuneration 2,100,000 21,000 142,800 21,000 142,800
Research and
development
services 500,000 5,000 66,072 6,812 64,260
Consulting fees
for financing 3,850,000 38,500 292,790 55,420 275,870
In exchange for
loans and accounts
payable 670,000 6,700 73,101 79,801 -
Issued for cash 116,670 1,167 13,833 15,000 -
--------- ------ -------- ------- ---------
Six months ended -
December 31, 1998 7,236,670 72,367 588,596 178,033 482,930
Consulting fees
for financing 250,000 2,500 35,390 - 37,890
--------- ------ -------- ------- ---------
Year ended
June 30, 1999 7,486,670 74,867 623,980 180,533 520,820
========= ====== ======== ======= =========
F - 22
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
16. CAPITAL STOCK (cont'd)
Additional
Number of Paid-Up Paid-In Subscription
Nature of Payments Shares Capital Capital Proceeds Expense
------------------ ------------- ------------- -------------- ------------- -------------
$ $ $ $
For the six months ended
December 31, 1999
Consulting fees for
financing 1,050,000 10,500 180,338 - 190,838
In exchange for
loans payable 504,020 5,040 50,402 55,442 -
--------- ------ -------- ------- ---------
1,554,020 15,540 230,740 55,442 190,838
========= ====== ======== ======= =========
The expense amounts indicated above have been included in the following:
December 31, December 31, June 30, June 30,
1999 1998 1999 1998
$ $ $ $
(Unaudited) (Unaudited)
Administration 190,838 418,670 456,560 9,000
Research and development - 64,260 64,260 -
------ -------- ------- ---------
190,838 482,930 520,820 9,000
======= ======== ======= =========
The company does not have a formal stock-based compensation
plan. Stock-based compensation was negotiated on an individual
basis.
F - 23
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
16. CAPITAL STOCK (cont'd)
d) The company 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 [see note 16 (h) (ii)]; additionally as part thereof,
Non-Redeemable Warrants of a three year term [see note 16 (i)]
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, in accordance with the Private
Offering, with the Securities Exchange Commission, on April 8,
1999, a Registration Statement on Form SB-2. In total an
aggregate of 6,893,141 shares of the company's common stock are
being registered and sold to the public by certain shareholders
and purchasers of our debentures which are convertible into our
common stock and which, additionally, bear warrants to purchase
our common stock.
This SB-2 Registration filed in April has received comments from
the S.E.C. and requires an amended filing; therefore the SB-2
Registration has not been declared effective. The company filed
the amendment early in September 1999 and has subsequently
received, on October 8, 1999, additional comments from S.E.C.
which must be responded to and will require a further amendment
to the SB-2 Registration.
e) The numbers of common shares reserved for convertible debt,
stock purchase options and warrants are as follows:
June 30, June 30,
1999 1998
For convertible debt 50,000 50,000
For common stock purchase options 50,000 50,000
For convertible debentures 6,535,888 -
For warrants 127,840 -
--------- -------
6,763,728 100,000
========= =======
F - 24
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
16. CAPITAL STOCK (cont'd)
f) Stock Purchase Option
In January, 1990, the company granted a stock purchase option to
a convertible debtholder, which would allow the debtholder to
purchase 50,000 shares of the company's common stock at an
exercise price at the then fair market value of $0.50 per share.
There is no termination date on the options.
The company does not have a formal stock purchase option plan
other than the above.
g) Convertible Debt
Since January 27, 1990, the company has outstanding a $25,000
principal amount promissory note which is payable upon demand of
the holder thereof. Such note is convertible, at any time, at
the option of the holder thereof, into 50,000 shares of the
company's common stock at the then fair market value of $0.50
per share.
h) Convertible Debentures
On February 8, 1999, the company issued an aggregate of $225,000
of 8% convertible debentures. Interest on the debentures is
payable quarterly and the principal on the debentures is due on
January 31, 2002. From and after the time that such principal
amount on the debentures shall have become due and payable
(whether at maturity or by acceleration), interest shall be
payable, to the extent permitted by law, at the rate equal to
the lesser of (I) eighteen percent (18%) per annum or (ii) the
maximum rate permitted by law, on the entire unpaid principal
amount of this debenture. Unpaid principal plus all accrued and
unpaid interest and penalties on the debentures is convertible
at a conversion price that is the lesser of $.176 per share or
75% of the average closing bid price of the common stock on the
10 days prior to when a debenture is presented for conversion.
Thus, the debentures are convertible into a minimum of 1,704,545
shares of common stock. In the event the registration statement
covering the shares of common issuable upon conversion of the
debentures is not declared effective by June 8, 1999, the
company shall pay to the holders of the debentures a penalty of
one-fifteenth of one percent of the principal amount of the
notes for each day beyond such date until such registration
statement is declared effective.
As the conversion feature of the convertible debentures
represented a minimum of $75,000 discounts to the
debentureholders, the company had recorded the transaction as
follows:
Face value of debentures $ 225,000
Discounts 75,000
Less: value assigned to warrants (see note 16 (i)) (21,733)
Less: issuance costs (57,777)
--------
$ 220,490
========
The discounts were expensed in the year.
F - 25
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
16. CAPITAL STOCK (cont'd)
i) Warrants
On February 8, 1999, the company issued warrants representing
the right to purchase common stock [see note 16(h)]. There will
be 127,840 shares of common stock underlying the warrants at an
exercise price of $.176 per share. The expiration date of the
warrants is January 31, 2002. Using the Black-Scholes method,
the company has calculated and assigned a value of $21,733 to
the warrants.
The company has reserved from its authorized but unissued shares
a sufficient number of shares of our common stock for issuance.
The exercise price of the warrants were determined by
negotiation and, upon notice to warrant holders, the company has
the right to reduce the exercise price or extend the expiration
date of the warrants. The warrants do not confer upon the
warrant holder any voting or other rights of a stockholder of
the company. The warrants provide for customary anti-dilution
provisions in the event of certain events which may include
mergers, consolidations, reorganizations, recapitalizations,
stock dividends, stock splits and other changes in our capital
structure.
17. COMPREHENSIVE INCOME (LOSS)
The company has adopted Statement of Financial Accounting Standards
No. 130 "Reporting Comprehensive Income" as of January 1, 1998 which
requires standards for reporting and display of comprehensive income
and its components in the financial statements. However, it does not
affect net income (loss) or total stockholders' deficiency. The
components of comprehensive income are as follows:
December 31, December 31, June 30, June 30,
1999 1998 1999 1998
$ $ $ $
(Unaudited) (Unaudited)
Net income (loss) (360,196) (519,299) (628,590) 519,594
Other comprehensive income:
foreign currency translation
adjustments (9,481) 41,569 6,748 84,727
--------- --------- --------- -------
Comprehensive income (loss) (369,677) (477,730) (621,842) 604,321
========= ========= ========= =======
F - 26
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
17. COMPREHENSIVE INCOME (LOSS) (cont'd)
The components of accumulated
other comprehensive income as at June
30, 1997, 1998 and 1999 are as follows:
Accumulated other comprehensive
income, June 30, 1996 $ 199,256
Foreign currency translation adjustments
for the year ended June 30, 1997 22,588
-------
Accumulated other comprehensive income,
June 30, 1997 221,844
Foreign currency translation adjustments
for the year ended June 30, 1998 84,727
-------
Accumulated other comprehensive income,
June 30, 1998 306,571
Foreign currency translation adjustments
for the year ended June 30, 1999 6,748
-------
Accumulated other comprehensive income,
June 30, 1999 $ 313,319
=======
The components of accumulated other comprehensive income as at
December 31, 1998 and 1999 are as follows:
December 31, December 31,
1999 1998
$ $
(Unaudited) (Unaudited)
Accumulated other comprehensive income, June 30 313,319 306,571
Foreign currency translation adjustments for the
six-month periods ended December 31 (9,481) 41,569
------- -------
Accumulated other comprehensive income, December 31 303,838 348,140
======= =======
The foreign currency translation adjustments are not currently
adjusted for income taxes since the company is situated in Canada and
the adjustments relate to the translation of the financial statements
from Canadian dollars into United States dollars is done only for the
convenience of the reader as disclosed in note 3 (l).
F - 27
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
18. INCOME TAXES
Six-month period
ended Year ended
December 31 June 30
--------------------------- ----------------------------------
1999 1998 1999 1998 1997
$ $ $ $ $
(Unaudited) (Unaudited)
a) Current - 5,658 5,658 258,977 20,521
Deferred 215 - - - -
------ ------ ----- ------- --------
215 5,658 5,658 258,977 20,521
====== ====== ===== ======= ========
b) Current income tax recovery
consists of:
Amount calculated at basic
U.S. Federal state and local
rates of 43% (155,000) (221,000) (270,000) (94,000) (94,000)
Increase (decrease) resulting
from:
Valuation allowance for
losses carried forward 155,000 221,000 270,000 94,000 94,000
Losses applied against
extraordinary gain in the
year [10(i)] - - - 227,000 -
Others - (272) (272) 7,977 (3,479)
Research and development
refundable tax credits - 5,930 5,930 24,000 24,000
------ ------ ----- ------- --------
- 5,658 5,658 258,977 20,521
====== ====== ===== ======= ========
During the year ended June 30, 1999, the Company received $5,930
resulting from research and development refundable tax credits
claims filed for the year ended June 30, 1997. A claim for
approximately $24,000 has been submitted for 1998. The Company
having received notice from the tax department that the claim
had been approved and the amount would be remitted shortly. A
claim for approximately $24,000 will be filed for 1999. It is
anticipated that the claim for 1999 will be subject to audits
and there can be no assurance that they will be honoured and, if
they are, the amount of the refunds may be substantially less
than the claim amount.
F - 28
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
18. INCOME TAXES (cont'd)
Recovery of income taxes for the year then ended June 30, 1999
consists entirely of a current recovery of Canadian income taxes
resulting from a reduction in the Company's deferred tax asset
valuation allowance. The aforementioned tax refund was the primary
factor contributing to the decrease in the valuation allowance.
The following is a summary of the tax effects of significant
temporary differences which comprise the Company's deferred tax asset
at June 30, 1999.
U.S. State &
Federal Local Foreign
at 34% at 9% at 43%
------------- ------------- -------------
$ $ $
Loss carry forwards 531,000 140,000 276,403
Credit carry forwards:
Non-refundable credits - - 6,201
Refundable credits - - 23,923
Valuation allowance (531,000) (140,000) (306,527)
--------- --------- ---------
- - -
========= ========= =========
Aggregate net operating loss carry forwards and tax credit carry
forwards and their expirations are summarized as follows:
Net Operating Loss Carry forward
Foreign
Research &
Expiring Development
June 30, US Federal State & Local Foreign Tax Credits
------------- -------------- ------------- --------------
$ $ $ $
2000 - - 244,115 3,294
2001 3,000 3,000 260,898 -
2002 225,000 225,000 - 1,018
2003 21,000 21,000 44,550 1,889
2004 150,000 150,000 93,235 -
Thereafter 1,165,000 1,162,000 - -
--------- --------- ------- -----
TOTAL 1,564,000 1,561,000 642,798 6,201
========= ========= ======= =====
F - 29
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
19. NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per share has been calculated as follows:
December 31 June 30
--------------------------- ----------------------------------
1999 1998 1999 1998 1997
$ $ $ $ $
(Unaudited) (Unaudited)
Basic income (loss) before
extraordinary item per share:
Income (loss) before
extraordinary item (360,196) (508,999) (628,590) 42,401 (196,322)
---------- ---------- ---------- ---------- ----------
Weighted average number
of common shares
outstanding 23,043,263 18,430,709 20,237,097 14,678,752 14,586,341
---------- ---------- ---------- ---------- ----------
Income (loss) before
extraordinary item
per common share (0.02) (0.03) (0.03) 0.00 (0.01)
========== ========== ========== ========== ==========
Basic income (loss) per share:
Net income (loss) per
common stock (360,196) (508,999) (628,590) 519,594 (196,322)
---------- ---------- ---------- ---------- ----------
Weighted average number
of common shares
outstanding 23,043,263 18,430,709 20,237,097 14,678,752 14,586,341
---------- ---------- ---------- ---------- ----------
Net income (loss)
per common share (0.02) (0.03) (0.03) 0.04 (0.01)
========== ========== ========== ========== ==========
F - 30
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
19. NET INCOME (LOSS) PER COMMON SHARE (cont'd)
Net income (loss) per share has been calculated as follows:
December 31 June 30
--------------------------- ----------------------------------
1999 1998 1999 1998 1997
$ $ $ $ $
(Unaudited) (Unaudited)
Diluted income (loss) per share:
Net income (loss) per
common share (360,196) (508,999) (628,590) 519,594 (196,322)
Interest on dilutive
convertible debt - - - - -
Interest on dilutive
stock purchase options - - - - -
Interest on dilutive
convertible debentures - - - - -
Interest on dilutive
warrants - - - - -
---------- ---------- ---------- ---------- ----------
Net income (loss)
attributable to common
stock assuming dilution (360,196) (508,999) (628,590) 519,594 (196,322)
---------- ---------- ---------- ---------- ----------
Weighted average
number of common
shares outstanding 23,043,263 18,430,709 20,237,097 14,678,752 14,586,341
Assumed conversion of
dilutive convertible debt - - - - -
Assumed conversion of
dilutive stock purchase
options - - - - -
Assumed conversion of
dilutive convertible
debentures - - - - -
Assumed exercise of
dilutive warrants - - - - -
---------- ---------- ---------- ---------- ----------
Weighted average number
of common shares
outstanding, assuming
dilution 23,043,263 18,430,709 20,237,097 14,678,752 14,586,341
---------- ---------- ---------- ---------- ----------
Net income (loss) per common
share assuming dilution (0.02) (0.03) (0.03) 0.04 (0.01)
========== ========== ========== ========== ==========
F - 31
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
20. SEGMENTED INFORMATION
The company operates in Canada through Mortile a controlled
subsidiary and this entity represents the only operating segment
of the company. Mortile performs services in the areas of
specialty compounding, composite technology, polymer technology
and Morfoam (a chemical foaming agent). During the six month
periods ended December 31, 1999 and 1998, specialty compounding
represented 95% and 85% of gross revenue respectively.
Mortile derives its revenue from customers located in the
U.S., Canada and France. The products produced are delivered to
enterprises located in Canada and the U.S.
US France Canada Consolidated
------------- -------------- ------------- -------------
$ $ $ $
Year ended June 30, 1999
Revenue from unaffiliated customers 120,456 231,753 779,070 1,131,279
======== ========= ========= =========
Loss from operations (66,931) (128,772) (432,887) (628,590)
======== ========= ========= =========
Identifiable assets at end of year - - 431,351 431,351
======== ========= ========= =========
Year ended June 30, 1998
Revenue from unaffiliated customers 231,646 89,827 863,618 1,185,091
======== ========= ========= =========
Income from operations 8,288 3,214 30,899 42,401
======== ========= ========= =========
Identifiable assets at end of year - - 411,440 411,440
======== ========= ========= =========
Year ended June 30, 1997
Revenue from unaffiliated customers 150,174 - 1,263,888 1,414,062
======== ========= ========= =========
Loss from operations (20,850) - (175,472) (196,322)
======== ========= ========= =========
Identifiable assets at end of year - 505,776 505,776
======== ========= ========= =========
F - 32
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
20. SEGMENTED INFORMATION (cont'd)
US France Canada Consolidated
------------- -------------- ------------- -------------
$ $ $ $
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Six-month period ended
December 31, 1999
Revenue from unaffiliated customers 58,551 189,293 424,226 672,070
======== ========= ========= =========
Loss from operations (31,380) (101,452) (227,364) (360,196)
======== ========= ========= =========
Identifiable assets at end of year 439,595 439,595
========= =========
Six-month period ended
December 31, 1998
Revenue from unaffiliated customers 65,944 109,937 329,197 505,078
======== ========= ========= =========
Loss from operations (67,801) (113,032) (338,466) (519,299)
======== ========= ========= =========
Identifiable assets at end of year 351,757 351,757
========= =========
F - 33
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
21. MAJOR CUSTOMERS
One customer accounted for 43% and 41% of the Company's consolidated
revenues for fiscal 1999 and 1998, respectively; another customer,
with whom the company is currently involved in a lawsuit (see note
23), accounted for 1% and 18% of consolidated revenues for these
respectively periods. Two new customers accounted for 34% of
consolidated revenues for fiscal 1999.
Two customers accounted for 84% and 71% of the company's consolidated
revenue for the six months ended December 31, 1999 and 1998,
respectively.
The loss of one or more of these customers would have a detrimental
effect on the Company's operating results.
22. CONTINGENT LIABILITY
The company is contingently liable under a breach secrecy agreements,
fiduciary duty and misuse of confidential information lawsuit by one
of its major customers (see note 21). Management of the company is of
the opinion that this legal action would not have significant adverse
effect on the company's future sales. 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.
23. RELATED PARTY TRANSACTIONS
Included in the common shares issued, as detailed in note 16,
6,050,000 common shares were issued to company stockholders,
directors, officers and employees for service rendered and consulting
fees for financing.
The company has recorded these shares at fair market value with a
corresponding charge to expenses for the difference between the fair
market value and the issuance price proceeds received.
24. COMITTMENTS
The company has an agreement with a customer to provide compounding
services at a fixed price during the term of the contract which will
expire on December 31, 2000. The agreement may be renewed.
F - 34
TECHNICAL VENTURES INC.
Notes to Revised Consolidated Financial Statements
(Amounts expressed in U.S. Dollars)
24. LEASES
At June 30, 1999, under a real property lease classified as an
operating lease which expires in March, 2002, the company's future
annual minimum rental payments (excluding real estate taxes) are as
follows:
2000 $ 64,228
2001 65,219
2002 49,640
-------
$ 179,087
=======
Rent expense was $49,965, $58,061 and $46,833 for 1999, 1998 and 1997
respectively.
25. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
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. The
effects of the Year 2000 Issue may be experienced before, on, or
after January 1, 2000, and, if not addressed, the impact on
operations and financial reporting may range from minor errors to
significant systems failure which could affect a company's ability to
conduct normal business operations. It is not possible to be certain
that all aspects of the Year 2000 Issue affecting the company,
including those related to the efforts of customers, suppliers, or
other third parties, will be fully resolved.
26. COMPARATIVE FIGURES
Certain figures in the June 30, 1998 and 1997 revised consolidated
financial statements have been reclassified to conform with the basis
of presentation used in 1999.
F - 35
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Article Seventh of our certificate of incorporation provide that
Technical Ventures may indemnify directors and officers of Technical Ventures to
the fullest extent permitted by Section 721 through 726 of the Business
Corporation Law of New York.
See Number 4. of Item 28 below for information regarding the position
of the Securities and Exchange Commission with respect to the effect of any
indemnification for liabilities arising under the Securities Act of 1933, as
amended.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the securities offered hereby.
SEC registration fee............................................................... $373.35
NASD registration fee.............................................................. 0.00
Printing and engraving............................................................. $5,000.00
Accountants' fees and expenses..................................................... $5,000.00
Legal fees......................................................................... $10,000.00
Transfer agent's fees and expenses................................................. 0.00
Blue Sky fees and expenses......................................................... 0.00
Miscellaneous...................................................................... $9,626.65
Total..................................................................... $30,000.00
Item 26. Recent Sales of Unregistered Securities
In the past three years the Registrant has issued securities to a
limited number of persons as described below. Except as indicated, there were no
underwriters involved in the transactions and there were no underwriting
discounts or commissions paid in connection therewith.
In September 1998, the Registrant issued a total of 3,950,000 shares of
common stock for par value to its certain shareholders in consideration for
their long term personal assistance and support of the Registrant. The
transaction was exempt from registration under Section 4(2) of the Act.
In October 1998, the Registrant issued a total of 2,100,000 shares of
common stock for par value to its officers, directors and employees in
consideration that no salary increases have taken place since 1991, except in
promotional circumstances, and in recognition of long term employment. The
transaction was exempt from registration under Section 4(2) of the Act.
In January 1999, the Registrant sold to two investors, Gene Howland and
William Hoops, an aggregate of $225,000 principal amount of 8% convertible
debentures, and common stock purchase warrants to purchase 127,840 shares of
common stock. This sale of securities was exempt from registration pursuant to
Rule 506 under Section 4(2) of the Act.
In ^ January 1999, the Registrant issued to Coleman Capital Partners
Ltd. ^ 550,000 shares of common stock in consideration for consulting services
rendered pursuant to an advisory agreement between the Registrant and Coleman,
dated January 11, 1999. The transaction was exempt from registration under
Section 4(2) of the Act.
In July ^ 1999, the Registrant issued 50,000 shares of its common stock
to Sichenzia, Ross & Friedman LLP ("SRF"), United States legal counsel to the
Registrant, in consideration of certain legal services performed by SRF for the
benefit of the Registrant. The issuance of securities was exempt from
registration pursuant to Section 4(2) of the Act. The Registrant has valued
these 50,000 shares of stock at $10,000.
In February, 2000, the Registrant issued 50,000 shares of its common
stock to SRF, United States legal counsel to the Registrant, in consideration of
certain legal services performed by SRF for the benefit of the Registrant. The
issuance of securities was exempt from registration pursuant to Section 4(2) of
the Act.
Item 27. Exhibits
3.1 Certificate of Incorporation, as amended to date**
3.2 By-Laws**
4.1 Form of Common Stock Certificate**
4.2 Form of 8%Convertible Debenture issued to Messrs. Howland and Hoops*
4.3 Form of Warrant issued to Messrs. Howland and Hoops**
5.1 Opinion of Sichenzia, Ross & Friedman, LLP**
10.1 Lease of premises located at 3411 McNicoll Ave, Unit 11, Scarborough, Ontario,
Canada**
10.2 Advisory Agreement, dated January 11, 1999, between the Registrant and Coleman Capital Partners Ltd.**
10.3 MLPC Processing Agreement
21.1 Subsidiaries of the Registrant*
24.1 Consent of Schwartz Levitsky Feldman, Chartered Accountants, the Registrant's Independent Auditors
24.2 Consent of Sichenzia, Ross & Friedman, LLP (Included in Exhibit 5.1).
25.1 Powers of Attorney (see Page II-5)
27.1 Financial Data Schedule*
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* Previously filed.
** To be filed by amendment.
Item 28. Undertakings
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
a. To include any prospectus required by Section 10(a)(3) of the
Securities Act;
b. To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
c. To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
2. For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
3. To remove from the registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
4. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities
Act, and is therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
5. For determining any liability under the Securities Act, to treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the issuer under Rule 424(b)(1), or (4) or 497(h) under the
Securities Act as part of this registration statement as of the time the
Commission declared it effective.
6. For determining any liability under the Securities Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe it meets all the
requirements of filing on Form SB-2 and authorized this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
Province of Ontario, Canada, ^ April 24, 2000.
TECHNICAL VENTURES INC.
By: /s/ Larry Leverton
-------------------------------------------------
Larry Leverton, Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Larry Leverton his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits and schedules thereto, and
all other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in- fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully ratifying and confirming all that said attorney-in-fact and
agent or their substitutes or substitute may lawfully do or cause to be done by
virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on ^ April 24, 2000.
Signature Title
/s/ Frank Mortimer President (Principal
Frank Mortimer Executive Officer) and
Director
/s/ Larry Leverton Secretary and Treasurer
Larry Leverton (Principal Financial and
Accounting Officer) and
Director
/s/ Bryan Carter
Bryan Carter Vice President and
Director