1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.. 20549
FORM 10-KSB
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 2003
[ ] TRANSITIONAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 33-2775-A
TECHNICAL VENTURES INC.
(Exact name of registrant as specified in its charter)
New York State 13-3296819
(State or other Jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
3411 McNicoll Avenue, Unit 11
Scarborough, Ontario, Canada M1V 2V6
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (416) 299-9280
Securities registered pursuant to Section 12 (b) of the Act: NONE
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $.01 Par Value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB [ ]
State Issuer's revenues for its most recent fiscal year, $850,235
The appropriate aggregate market value of the voting stock of the Registrant
held by non-affiliates of the Registrant as of June 30, 2003 (based upon
the average bid and asked prices as reported by the National Association of
Securities Dealers Automatic Quotation System) was approximately $5,357,463.
The number of shares outstanding of the Registrant's common stock, as of
June 30, 2003 is 41,236,106 .
Exhibit index is located on page 23 of this Annual Report on Form 10-KSB.
Page 1 of 30
TECHNICAL VENTUES INC.
FORM 10-KSB A
Fiscal Year Ended June 30, 2003
ITEM Table of Contents PAGE
PART I
Item 1. Business 3-10
Item 2. Properties 10
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for Registrants Common Equity and Related
Stockholder Matters. 12
Item 6. Management's Discussions and Analysis of Financial
Conditions and Results of Operations. 13-20
Item 7. Financial Information and Supplementary Data 20
Item 8. Changes in Disagreements with Accountants on
Accounting and Financial Disclosure. 20
PART III
Item 9. Directors and Executive Officers of the Registrant 21
Item 10. Executive Compensation 21
Item 11. Security Ownership of Certain Beneficial Owners
and Management 22
Item 12. Certain Relationships and Related Transactions 23
PART IV
Item 13. Exhibits, Financial Statement Schedules and Reports
on Form 8 K 23
Item 14. Principal Accountant Fees and Services 24
Signatures 25
-2-
3
Item 1. Business
Introduction:
Technical Ventures Inc. (TVI) is a New York State corporation
formed on June 14, 1985 to raise capital for the purpose of
seeking business acquisition possibilities throughout North
America. The primary objective was to search for a business
which in the opinion of its management, demonstrated long-term
growth potential that would warrant involvement. On April 14,
1986, TVI acquired all the issued and outstanding shares of
common stock of Mortile Industries Ltd. (Mortile) a Canadian
corporation.
Technical Ventures Inc.'s subsidiary Mortile Industries Ltd.,
deals in the design, development, and manufacturing of
proprietary polymers, composite and specialty compounds;
additionally Mortile compounds proprietary formulations of the
customer. The application of TVI's products expands into every
area of plastics. Repetitive business is constant, because of
the technical complexity of the various products and loyalty to
TVI by it's customers.
Prior to April 1992, TVI had been considered to be in
development.
Since inception, $ 3,399,945 US has been expended in the
development of products, including $117,812 in fiscal 2003,
$69,894 in 2002 and $57,961 during fiscal 2001.
Present operations, assets and employees are primarily those of
Mortile. At June 30, 2002 there were fifteen full time
employees, all being employees of Mortile.
Having built a background in technology, coupled with
management's expertise, customers support, future planning
strategies and with financial backing; Technical Ventures and
its subsidiary Mortile Industries, Ltd. is poised for rapid
growth.
Product & Service Description:
The development of the products and service has been a lengthy
process. However, the management believes the market potential
of the products will justify the time and costs. The products
have the means to lower their client's cost of raw materials
while maintaining the product's performance. This has led to
several reputable firms taking notice of the Company's
achievements
Subsidiary, Mortile Industries Ltd., deals in proprietary
polymer/thermoplastic compounds, composite compounds (a
composition of plastic with other powdered materials), and
specialty compounds which it produces by mixing and pelletizing
proprietary formulations specified by its customers. It is
engaged in the design, development and manufacture of highly
engineered specially formulated, high performance polymer
materials. Products and services are sold to end-use
manufacturers in the industrial equipment, transportation,
electronics, munitions and process industries markets.
(3)
Some of the Company's keys to success are:
Success rate and performance of the Company's products
Technical expertise and background of scientists and engineers
Technical support provided for customers
Global patents and licenses on the technologies
Strategic alliances with large multinational firms
Timing in a market where change is needed.
Technologies:
Efforts have focused on the development of proprietary
thermoplastic compounds (plastics mixed with other solid
materials) and specialty compounding services provided by
mixing and pelletizing proprietary formulations specified by its customers.
Polymer Technologies
A polymer consists of chains of molecules, called monomers, that
combine or polymerize (normally with help from a catalyst) to
form large molecular structures. Polymers are very versatile
materials. For example, they can be cast into molds to create
intricate structures, extruded through a spinneret to make
fibers, or blended with liquids - including water - to make
coatings, adhesives and thickeners. 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, the substitution is not driven primarily
by cost, but by the increasing desirability of polymers based on
their versatility and performance characteristics.
In light of growing environmental pollution concerns, It is
expected that the plastics industry will be forced by
legislation to develop and manufacture plastics that are
recyclable or to include recycled content. The plastics industry
has undertaken extensive research to develop cost-effective
products that are both durable and flame-retardant.
Composite Technology:
The object of composite technology is to mix plastic binders
with powder materials of choice, and to prove specified strength
and durability designed for use In a variety of plastics and
foaming processes including injection, molding and extruding.
The end result is a material that is both strong and durable,
yet has flexible design options so 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.
(4)
This process reduces the cost of machining and die casting
significantly . By applying existing technology to new ideas,
TVI can successfully produce, for example, metal/plastic
compounds suited to meet demand for the replacement of lead and other
metals in many applications. Opportunities to market these
compounds exist in a variety of industries including automotive
and munitions.
Specialty Compounds Technology:
Specialty compounding may be defined as the compounding and
enhancement of the customer's proprietary formulation(s) into
pellet form, which is a semi-manufactured form. This process
involves the customer's presentation of required mix components,
the physical mixing of the components, and then pelletizing the
compound. Component raw materials for this process may be
supplied by the customer or purchased on behalf of the customer.
One aspect of this service is what is known as master batches.
This is the pre-dispersion of highly concentrated powders, which
are to be mixed and diluted by "letdown" with resins in the
final stages of manufacture. The predisposed powders are added
to the resins at the end-user extruder or molder. Typical master
batches are: foaming agents, sulfur, zinc oxide, flame
retardants, curing agents, processing aids, antioxidant
stabilizers and slip and anti block agents.
A large portion of TVI's revenue for fiscal year end 2002, and
the majority of efforts have been concentrated on specialty
compounding. The customers need to enhance and compound their
proprietary formulations into a pellet form. With the assistance
of the customer, TVI formulates the most effective and efficient
method to mix the components.
Customers who retain TVI for specialty compounding are
manufacturers of end-use plastics and plastic products.
Generally, many manufacturers of these products do not compound
component materials into a pelletized form themselves prior to
manufacturing end products. However, an increasing number of
manufacturers prefer this process because it provides for a more
perfect dispersion of component materials which are often in
powder form, thereby streamlining their thermoforming systems.
Specialty compounding is particularly useful when manufacturing
components are reactive. For example, reactive components are
used In the curing or cross-Inking of rubber or plastic.
Additionally , because powder components are difficult to work
with, manufacturers prefer to work with pelletized master
batches, as there are less environmental risks. TVI is fully
capable of providing their customers with this pelletized form
for ease of use and safety .
Research and Development
The research and development of the aforementioned technologies
is targeted to establish as much technical and test data
information needed to provide the technical sales staff and
potential customers with technical sales information. Product
technical sales brochures are developed in order to inform
potential customers and employees of the comparative benefits of
TVI products and services.
(5)
Future development of products will focus on specific problems
experienced in the marketplace and attempt to solve these
problems with potential customers. There are thousands of
injection molders and extruders operating with many different polymer and
die configurations. The trained technical staff will be called
upon to satisfy the customers' needs. Research and development will
also continue to add additional products to meet the market requirements.
Patents
TVI sold significant patented and proprietary technologies to
the Dow Chemical Company in 1998, but retained certain licenses
and rights to use these. It also has developed other
proprietary technology and trade secrets. Since all manufacturing is
"in-house" it is able to protect its technology and quality while continually
improving the product to maintain the customer loyalty.
Products
Technical Ventures, Inc. establishes a very close relationship
with its customers and their needs, which allows it to identify
areas of opportunity that may be exploited. It has developed a
range of materials, having broad applications such as fillers,
foaming agents, and pigment extenders. This product group
delivers unique user benefits, such as smaller consistent cell
size, which produces a stronger product and/or higher foaming
capability . This translates into a lower raw material cost,
which in turn reduces cost for the end-use manufacturer. The
market for the product is large with a potentially large
application in the automotive and construction market worldwide.
Polymer Compounds:
TVI has developed, conducted extensive research and testing in
the construction and transportation industries; manufactured and
sold one type of flame retardant, nontoxic, thermoplastic
compound, which minimizes the hazards of fire and can be easily
processed into end-use products. Additionally, the products
possess anti-combustion, low toxicity attributes.
Although the sale of TVI's thermoplastic products has not
represented a significant portion of revenues to date, it is
believed that these products have significant market potential.
Composite Compounds:
Using composite compounds, TVI has successfully produced
metal/plastic materials that can be used in many applications as
a replacement for lead and other metals. Presently, supplies
this product for bushings in copiers and fax machines, and is
expected to market metal replacement compounds in the
automotive, construction and firearms markets.
Many laws constraining use of lead are currently being reviewed
by governments around the globe. A replacement will be needed
for lead in munitions, fishing sinkers and lures, and various
other lead based products. TVI can provide this replacement
material with their composite compounds with none of the hazards
that lead poses to the environment.
(6)
Specialty Compounds:
TVI has been selling a reinforcing agent used to increase the
stiffness of plastics used for crates and component parts. The
product has been thoroughly tested in incubator trays for the
poultry industry and will now be offered to the industry at
large.
The development of a specialty compound called Morfoam which
acts as a chemical foaming agent, nucleating agent and
processing aid, which undergoes an endothermic chemical reaction
at processing temperatures. This reaction produces a gas
resulting in fine cell structures in extrusion and molded parts.
The Morfoam technology combines a chemical foaming agent,
nucleating agent and processing aid into one easy to use master
batch. Morfoam is a multi-component chemical concentrate
encapsulated in a polyolefin carrier. Morfoam is produced in
pellet form in order for customers to easily blend or meter into
a wide range of polymer products.
As a foaming agent Morfoam produces a uniform cell structure
that can reduce part densities by 40% or more. The fine foam
structure also increases opacity, which allows for lower
titanium dioxide levels in film and sheet The inherent fine
particles in Morfoam also act as an efficient nucleating agent
generating large quantities of fine closed cells. Morfoam also
improves cell structures and reduces voids when nitrogen is used
as the primary foaming agent. Morfoam can be used as a
processing aid in extrusion and injection molding for improved
output rates, reduced cycle times and enhanced surface
appearance. Morfoam also reduces part stresses, sink marks,
pinholes and furthermore acts as an efficient purging/cleaning
agent.
During fiscal 2003 the company finished developing it's HSF type
foaming compound. HSF is a cross-linkable - expandable plastic
compound made for direct injection processes. During a 'direct
inject' process a granular, expandable compound is being
transformed with a specialized injection molding machine into a
finished foamed part, which combines several features, such as
fine and closed cell structure, soft skin, profiled and color
surface, flexibility, buoyancy and light weight. HSF is based
on ethylene and propylene (co)polymers blends which can be
processed into a finished foamed part with commercially
available injection-molding machines. The flow properties of
the HSF foaming material have been adjusted in such a manner
that these machines are able to process it without any
modification. The most significant attribute of HSF foams is
heat stability. The heat stability has been quantified as a % of
shrinkage of a foam specimen after a 24 hr. treatment at 105 Celsius (221 F).
The shrinkage of HSF foams typically is 4% - highly competitive with industry
standards.
During fiscal year 2003, TVI continued to work closely with
three customers developing all types of compounding methodology
for each customer's proprietary component formulations;
providing compounding services for Shaw Industries formulation
for an industrial pipe wrap and coating, compounding services
for MLPC International's formulation for various proprietary
rubber curing compounds were provided and additionally, Fin
Project's proprietary formulation for the footwear industry.
Because TVI retains these and other large multinational firms as
current clients, with their large demand for the Company's
material, TVI plans on steadily increasing supply of the
Company's products to them as capacity allows, thereby
increasing revenues and profits. The reputations of these
clients provide valuable references for obtaining new customers as well.
(7)
Pricing
The pricing structure of existing competitors has been evaluated
and the products and compounding services are priced at the
median. Since our products do not form a major part in the
pricing of the finished goods, therefore performance and product
support will contribute most in the buying decision. TVI has more to offer
customers with respect to product performance and the technical support staff
that can assist customers applications.
Warranties & Service Contracts
Products are supplied with a certificate of analysis confirming
that it meets the required specifications, which is one
mandatory requirement of ISO 9000 companies. No warranties are
attached since TVI cannot monitor the processing conditions of
use. There are no service contracts necessary, however, the
Company's technical staff will assist customers if requested to do so.
Marketing
The market in which Technical Ventures operates has had
increased demand for products that meet certain requirements
whether by companies or government legislation. These demands
are met with TVI's products and services, and has entered into
a unique market niche that allows specialization in the
production of the products to meet clients needs and provide the
technical support that may be needed. Working closely with its
client base in order to maintain good customer relations and
help fully satisfy their needs, and is set apart from the
others in the industry due to the technical support staff and
direct distribution of the products. The area of applications
for the new HSF[Heat Stable Foam] compounds is unlimited, but
first of all has to be recommended for industrial applications
where heat stability is important, such as the furniture and
automotive industries. To comply with specific requirements,
besides a standard, colored form it can be made light-UV
stabilized, flame retarded, and/or resistant to chemicals and
microorganisms.
Market Niche
TVI has positioned itself to pursue niche markets where the following
standards are essential:
1. The ability to achieve superior dispersion of powders into
the resins.
2. Use of air-cooled heads for moisture sensitive materials.
3. Use of nitrogen blankets for cooling in high humidity .
4. Fast turn around of small orders.
5. Equipment designed for ease of cleaning with minimum downtime
and wastage.
In this market there are three distinct advantages: equipment, personnel,
and size. The equipment was selected to achieve good
dispersion in the proprietary polymer and composite technology.
Company personnel, consulting scientists and chemists enable it
to work closely and cooperatively with customers to meet their
specific needs. The Company's size allows it to direct immediate
attention to existing and potential customers in a cost-effective and
timely manner.
(8)
Market Research
Market research has been concentrated on the endothermic foaming
agents business and it was established that this represented the
fastest growing segment of the market. Further marketing
research pertaining to customer needs and competition is
discussed later in this section.
The results of our pre-marketing survey established that the
market was not well served. This information was obtained by
test marketing reports and meetings with potential customers.
This has convinced TVI that their timing in this market is
opportune.
Research was also conducted on product performance with specific
attention pertaining to competition, our products out perform
the competitors in most aspects. These factors give TVI the
ability to leap the barriers to entry and penetrate this market.
TVl's customer base will grow with direct proportion to the rate
can grow to suit the needs of those customers.
Market Growth
Market review indicates that growth in plastic consumption is
solid over the five years researched. The market size data shows
the diversity of the market potential as well as the size of the
opportunity.
Competition
Many competitive products have been evaluated in our laboratory
and in the field by potential customers, and TVI's performance
surpassed the competition's. TVI's products will have the
competitive edge of performance and price, with special
attention being paid to our technical support program, which
builds brand loyalty amongst customers.
The research and development effort has been geared toward a
superior product at a competitive price. The Company's own
manufacturing controls the processing cost. Therefore, as the
business becomes further developed, lower overheads and less
costly distribution channels are anticipated for TVI.
Furthermore, during test marketing it was found that the large
competitors were relying on distributors and agents that had
limited technical experience in plastics. Once again, TVI will
have the advantage over the competitors building long-term
relationships and customers directly.
Competitive Advantages
Corporations such as Exxon, DuPont, Union Carbide, Raychem and
Megalon represent the most widely recognized competition with
our polymer technology; all are substantially larger in terms of
financial, marketing and research and development resources.
Dow Chemical purchased some of TVI's technology in 1998. Lucent
Technologies assigned the product the highest quality rating,
after subjecting the product to a five year rating program. The
application of the polymer technology in wallboard is still the
only plastic in its field to pass certain fire codes for high
rise buildings. Additionally, in other applications where the
product is being tested, customers observed that TVI's polymer
technology out performs the competition.
(9)
In regard of composite technology; TVI has been able to achieve
the highest filler levels to obtain maximum specific gravity and
has no competition. There is patent protection through a
licensing agreement with duping Canada, as it pertains to
fishing sinkers and lures. The Company's composite for bushings
for copiers and fax machines provides the scenario that is
extremely difficult if not impossible to reverse engineer.
However, as the product becomes more technical compounders such
as L&P and others exist and continue to develop, as does the
company.
Compounding, Specialty (Contract); in this market there are
three distinct advantages, equipment, personnel and size. The
equipment was selected to affect good dispersion in the
proprietary polymer technology and composite technology. Company
personnel and associations with consulting scientists and
chemist enables it to work closely and cooperatively with
customers to meet their needs. The Company's size allows it to
direct immediate attention to existing and potential customers
in a cost effective and timely manner.
Efforts are directed 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,
excellent dispersion of powders into the resins and nitrogen
blankets for cooling in high humidity.
Backlog Information:
At June 30, 2003 the backlog of orders totaled $66,955 US.
Item 2. Properties
TVI currently leases 17,300 square feet of office and
production facilities at 3411 McNicoll Avenue, Scarborough,
Ontario. With a total monthly base rent of $10,621(Canadian)
through March 31, 2004 and $10,981(Canadian) through March 31,
2005. The base rents are exclusive of real estate tax
escalation's. The current two year lease expires on March 31,
2005.
(10)
Item 3. Legal Proceedings
A legal action was commenced against the Corporation, its subsidiary, Mortile
Industries Ltd., their President, Frank Mortimer and the Dow Chemical Company,
on June 4,1999 in the Ontario Superior Court of Justice (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.
Based on prior written legal opinions from its patent attorneys
that the allegations are without merit, the Corporation retained a law firm
specializing in Intellectual Property Law and is vigorously defending the
action.
After submission of the Defendants' evidence, the Plaintiffs abandoned their
claim for an interim injunction. The Defendants have moved for an expeditious
trial. The Court has ordered the parties to combine the examinations for
injunction proceedings with those for the preparation for trial.
On September 16-17, 1999, at the hearing of the interlocutory injunction
motion, the parties agreed, on consent, to adjourn the motion until trial.
The parties agreed to expedite the matter to trial with an original target
date of about December 1999.
At June 30, 2003 no further direction had been received by the company's
counsel as to when the matter might proceed to trial nor had any direction
been received at the time of filing this report.
Additionally, on October 10, 2001 Hudson Consulting Group ("Hudson")
commenced an action in the Third Judicial District Court of Salt Lake
County, State of Utah against the Company and obtained a default
judgment for payments allegedly due Hudson pursuant to a consulting agreement
between Hudson and the Company. After the court vacated the default judgment
by order dated October 23, 2002, the Company answered the complaint and
asserted a counterclaim against Hudson for fraudulently inducing the Company
to enter into the consulting agreement. In October 2003, following discovery,
the action was dismissed with prejudice and with each party bearing its own
costs.
Item 4. Submission of Matters to a Vote of Security Holders
None
(11)
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholders
Matters
Market Information:
The Company's common stock has been publicly traded since March
21, 1986 on the over-the- counter market. The following table
sets forth the quarterly high and low bid quotations as reported
by the OTC Bulletin Board, Historical Data Service:
Quarter Low High
June 2001 $0.400 $0.075
Sept. 2001 0.300 0.070
Dec. 2001 0.020 0.032
Mar. 2002 0.021 0.400
June 2002 $0.100 $0.490
Sept. 2002 0.080 0.190
Dec. 2002 0.050 0.150
Mar. 2003 0.090 0.235
June 2003 $0.070 $0.150
These prices do not reflect retail markup, mark down or
commissions and may not represent actual transactions.
Holders:
As of June 30, 2003, there were approximately 2,400 shareholders
of record.
Dividends:
To date no dividends have been paid to shareholders. The Board
of Directors will consider the payment of dividends when it
deems it appropriate to do so, taking into account current and
potential Federal and State regulatory restrictions, the
Company's income and financial condition, economic conditions
and other factors. However, no assurance can be given that
dividends will ever be paid to shareholders.
(12)
The company has 50,000,000 common shares authorized. At June
30, 2003, 41,236,106 were issued and outstanding. During
fiscal 2003, a total of 6,640,000 shares were issued.
Additionally, 1,600,000 stock are reserved for unexercised
options. Including an option to purchase 1,500,000 stock at a strike
price of $0.20 per unit or $300,000 which expires at December 31,2003.
In December of 2002 an S8 Registration was completed and filed,
registering four million shares pursuant to The 2002 Benefit
Plan. At June 30, 2003, 3,190,400 stock have been issued
pursuant to the Plan; 809,600 stock remain unissued and are
reserved as part thereof.
Included in the amount of stock issued pursuant to the plan,
1,150,000 shares were optioned and acquired by directors of the
company. [See Part III, Item 11] and 900,000 were optioned and
acquired by employees of Mortile Industries Ltd., the wholly
owned subsidiary of the company. The option strike price being
$0.05 per unit. Also included in the amount issued pursuant to
the plan, are 1,140,400 stock issued to bona fide consultants of
the corporation for services performed and expensed. The
aggregate value of stock issued to consultants was $109,400 or
an average price per share of $0.096.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
During the year ended June 30, 2003, an operating loss of
($445,546) was funded primarily by equity and subscribed
capital, by a Canadian Tax Refund, accounts receivable and an
increase in payables. However, continued operating losses and
monthly debt service requirements hinders the ability to meet
monthly cash flow requirements.
In fiscal 2003, subscribed capital of $150,000 at June 30, 2002,
was received; $320,000 investment capital was secured through
the issue of 3,250,000 common stock. Additionally, $109,040 in
operating expenses were paid by the issue of 1,140,000 common
stock and $117,500 in debt reduction was achieved by the issue
of 2,250,000 common stock.
Tax refunds of $13,869 CD were received during the current
fiscal year. The Canadian Federal tax department has changed
the tax status of the company, which in turn negates the ability
to receive cash refunds on research and development expenses,
therefore these Canadian federal refunds will not be available
for fiscal 2003. However, determination of the tax status may
be reassessed at any time and subsequently reversed, however
there can be no assurance of this happening.
During fiscal 2003 fixed assets were acquired for cash outlay of
$158,059. Two of the units were necessary for the on going development and
improvement of new and existing products. A third unit will
serve as back up for the existing compound mixing unit,
additionally, this unit could serve to double the compound mixing
capacity, if required to do so. Further acquisition of
significant property and equipment purchases and/or expansion of
facilities will only be considered if demand for
(13)
Company products warrant such expansion and the financing of
such expansion would not adversely effect the Company's
financial condition.
A long term debt financing arrangement is in arrears, as such
this debt continues to be reflected as current liability on the
June 30, 2003 balance sheet. The FBX Holdings debt amounts to
$202,056 CD, including both principal and accrued interest. The
Debtor clearly understands the cash position and as such has
verbally agreed to a moratorium on principal repayments until
financial conditions exist allowing a payment [s] or,
alternatively, suggest an acceptable method [s] of settlement.
GOING CONCERN (Note 1), Significant operating losses have been
sustained since its inception and there is substantial doubt as
to the ability to continue as a going concern. Continued
existence is dependent upon the ability to generate sufficient
cash flow to meet obligations on a timely basis. It is not
expected that cash flows from operations in the immediate future
will be sufficient to meet requirements and additional financing
is required.
We see apathy and reluctance to change as slowing our
penetration of the market at the rate we would like to achieve
our growth potential. We have three major technologies based on
our compounding knowledge and skills each of these products has
many different applications in the market place. We do not rely
on a single application to obtain sufficient market share to
provide profits and cash surpluses to pay down debt.
Our biggest risk therefore lies in our ability to be confident
that our financial house is in order and that we do not have to
direct large amounts of executive time to constantly search for
financing to grow the business. We are fully aware of the cost
of lost opportunities when we constantly cut back on the R&D
pre-production advancement due to lack of capital.
It is essential that the company raises the financing to
sustain marketing and manufacture of of it's developed
technologies and therefore TVI will continue to explore all
opportunities in respect of financial requirements.
Additionally, if it is deemed to be in the best interest of its
stockholders and serious consideration will be given to raising
additional funds through private or public equity issuance's in
the future.
(14)
Results of Operations - Comparison of Fiscal 2003 To Fiscal 2002:
For the fiscal year ending June 30, 2003, TVI incurred an
operating loss of ($602,022) on net sales of $850,235, before
other income. Net sales revenues decreased 26.5 % over fiscal
2002. The majority of the decrease taking place in contract /
specialty compounding work. Comparatively, fiscal 2002 incurred
an operating loss of ($216,491) on net sales of $1,145,087.
During fiscal 2003, the company's largest compounding customer
suffered reduced sales due to economic conditions which resulted
in a decline of 43% in sales revenues from this customer to the
company. Additionally, in late fiscal 2002, another major
compounding customer moved their compounding requirements to
their own facility off shore, this customer had represented 17%
of all revenues in fiscal 2002 and the company was unable to
replace this compounding work during the fiscal year.
However, these decreases were partially offset by an increase of
25 % in sales revenues from proprietary products.
On reflecting other income, the operating loss is $(592,913)
in fiscal 2003. Comparatively in fiscal 2002, after reflecting other income,
the operating loss became income of $139,095.
Gross margins of $5,248 in fiscal 2003, as a percentage of net
sales, decreased to 1 % from 24 % for the year ended June 30, 2002.
Decreased sales and maintaining the highly experienced work force,
installation and set up of acquired equipment and upgrading and maintenance
of existing equipment resulted in the extreme decline in margins.
Administrative expense increased 29 % during fiscal 2003, when
compared to those for the corresponding twelve month period of
the previous year as legal expense occurred relative to a claim
by a former financial consulting firm, additionally there has
been accrual for potential vacation pay expense.
Financial and Interest Expense decreased 25 % in fiscal 2003
when compared to those for the corresponding period of the
previous year. The decrease being attributable to the previous
settlement of long term debt, eliminating significant interest
expense related to the debt.
R&D Expenses increased 70 % as resources were diverted from
manufacturing and sales to develop new and also to refine existing
Company proprietary products and services.
Selling expenses decreased by 6 % in fiscal 2003 over
comparative fiscal 2002; as selling expenses were reduced and
resources diverted to product development.
A contingent expense of $39,660 was recognized in fiscal 2003.
Technical Consulting expenses related to the Endex legal
action were received and paid through the issue of stock. Additionally
a loan of $50,000 CA on a possible acquisition by the company's
subsidiary Mortile Industries was recognized as a non-refundable deposit
and expensed.
Growth is anticipated to take place in all areas of the
Company's expertise and technology. However, there can be no
assurance in this regard.
The sales launch of the new product for the rubber and plastic
industry commenced in early June of 1998 and response to the
product exceeded all expectations. This product provides not
only significant cost reductions by reducing the amount of
plastic consumed but also provided many other advantages to the
Industry. The market is not only significant in terms of
potential revenues and profits in North America but will open
many export potentials in Europe. Although there has been
widely accepted response to the product, actual sales had been
nominal, however a substantial increase occurred in these
revenues during fiscal 2003.
(15)
The company has also been involved over the last two years in a
Research & Development program involving foamed polyethylene's
at densities between 1.5 lb. and 6 lb. per cubic foot.
Although this technology has been used in the manufacturing of
"Buns" for some time the objectives were to eliminate at least
four [4] manufacturing steps and produce a finished part in a
one step manufacturing process.
The foaming products are for the plastics and rubber industry,
and are a processing aid, providing significant cost reductions
by reducing the amount of plastic consumed, but also provides
many other advantages to the industry, such as improved surface
finishes, physical properties and sink mark elimination, lower
part weight and shorter cycle times. Morfoam is a concentrate
encapsulated in an olefin binder, presented in pellet form to be
easily blended or metered into the users formulations. The
product improves cell structure and reduces voids when nitrogen
is used as the primary foaming agent. During fiscal 2002 the
company finished developing it's HSF type foaming compound. HSF
is a cross-linkable - expandable plastic compound made for
direct injection processes. During a 'direct inject' process, a
granular, expandable compound is being transformed with a
specialized injection molding machine into a finished foamed
part, which combines several features, such as fine and closed
cell structure, soft skin, profiled and color surface,
flexibility, buoyancy and light weight. HSF is based on
ethylene and propylene (co)polymers blends which can be
processed into a finished foamed part with commercially
available injection-molding machines. The flow properties of
the HSF foaming material have been adjusted in such a manner
that these machines are able to process it without any
modification. The most significant attribute of HSF foams is
heat stability. The heat stability has been quantified as a % of
shrinkage of a foam specimen after a 24 hour treatment at 105 Celsius
(221 F). The shrinkage of HSF foams typically is 4% -
highly competitive with industry standards. Additionally,
efforts in HSF foam products are advancing and there appears to
be imminent potential for use in three major markets,
automotive, services and toys.
As an example, subsidiary Mortile has manufactured prototype
disks ("Frisbees") and submitted them for response from dog food
suppliers and pet toy distributors with very positive results.
First orders could be in distribution within 2 weeks of a
production mold being made and put in place.
Lightweight Foams
Mortile has undertaken to develop and modify foam materials to
enable a manufacturer of helmet liners for the football, hockey
and other sports line industries. Development of modified
formulations is well underway and it is believed that the
manufacturer should have a suitable product within 3 months.
The currently used product is failing with enormous
consequences and the whole test protocol has been opened up for
review. It is believed that the trade off between resilience
and cushioning requirements in this application will spin-off
into orthotics where similar criterion applies.
A distributor has agreed to solicit opportunities for strategic
alliances and joint venture in the USA and Canada. This company
has the rights on a non-exclusive basis to distribute the
various compounds made by Mortile Industries. They are the
largest distributor of lightweight foam in bun stock to the
fabricators and jobbers and are very qualified to take on Mortile's product.
(37)
They introduced the manufacturer of the helmet to subsidiary Mortile
and have a number of other applications available ranging from life
vests to bicycle seats and handle bars.
An existing customer now purchases 6 different formulations made
by subsidiary Mortile for manufacturing into finished parts for
their customers. They have recently installed their third
direct-inject unit and have now invested nearly $2 million to
enter this new market place. They have strong market
representation in automotive requirements and will cover the
Mortile opportunity in this area. Once full production on
existing in-house machinery is reached, this account could be
worth over $3 million (US).
Endothermic Foaming Agents
A European distributor has spent 8 months preparing and planning
the launch of the product. The highlights from the latest
advices are as follows:
An established distribution network in over 20 European countries
with 772 representatives. They estimate the total market to
be about $45 to 50 million (US) per annum.
Mortile's Manager Of Technical Services presented a technical
paper and conducted a training seminar on Mortile's product at
a global sales force meeting in Amsterdam on the 15th & 16th of
September 2003.
The distributor advises that their first order is expected to be
placed in October, however there can be no assurance of this,
and further
That sales of $1,313,000 US in the first year are possible with a
3 year potential of $6,868,000. However there can be no assurance of
this.
MorMetal
Is a metal fill plastic material containing either stainless
steel or iron powder to provide the desired properties. One
compound with copper powder as the filler has now been in use at
Xerox, in copiers and fax machines, for 10 years. Additionally,
Mortile believes that a substantial contract, in an another
appplication, could be signed in the very near future. This
contract could be worth $4-6 million in sales a year rising to
$8 million per annum within 3 years.
Another opportunity using metal fill is with a cosmetic
manufacturer who have recently come back to ask for information
on the MorMetal. Their problem was solved 5 years ago by
subsidiary Mortile Industries but never progressed due to
reluctance for change. The MorMetal plastic is filled with
metal powder which increase the weight of units by 300%.
Thereby enabling the customer to complete with the Asian and
European suppliers by providing a superior product.
The metal fill technology has been established and proven many times over
the years. The metal fill is available in many formulations each serving
specific applications.
(17)
Development Stage Opportunities
Orthotics
The Company sees a golden opportunity to enter the orthotics
market with its products which are superior to those in use.
The environmental friendliness of Mortile's products make them a
natural "shoe-in" to this rapidly expanding market opportunity.
This is a very large market opportunity and due to the aging
population growing at a very rapid pace the benefit packages of
government and corporations cannot sustain the access to ever
increasing prices now in the $400 - $600 range. People without
insurance coverage are being left out and have to down scale to
the cheaper products.
Mortile believes that it could produce a middle range product
which would, due to price and performance, capture a large piece
of the market by creating an affordable non-custom made product
which would be suitable to a great deal of people.
The Mortile development team is headed by Dr. David Venturi, MD,
MA.Sc, B.Sc. Dr. Venturi, a practicing physician, is very
familiar with the orthotic requirement of the marketplace and
will explain the Mortile product to insurance companies
providing medical coverage in this area outlining the benefits
and cost savings of the Mortile product.
Sergeant Corporation has 30 years of representing suppliers of
materials in this market, and is versed in the market. Sargeant
Corporation has been representing suppliers to the orthotic
industries as well as manufacturers of shoes, skates and boots.
Regrettably the manufacturing moved offshore but the insert
market has very large potential.
Fishing Lures & Bobbers
The current market is being supplied with balsa wood products
which are expensive and require many steps in manufacture.
Mortile's foam can be formulated to match the properties of
balsa wood are cheaper to manufacture and need not to be painted
or vinyl dipped. The market opportunity and market potential is
under assessment. Fishing lures and bobbers plus other like
accessories is a billion dollar end use market. Therefore this
represents a very large potential for the use of Mortile
proprietary technology, formulations are in-house to match the
balsa wood now being used and once the marketing strategy is in
place prototypes will be made and a distribution channel will be
evaluated.
A marketing survey of sales revenues for finished product in that
industry has been completed and it is estimated to be in excess of
$1.5 billion + annually. There have been no major developments in
this market for over 20 years and it's time for a shake up with new
technology.
(18)
THE MARKET
The Company, with its lightweight foams, metal technology and
endothermic foaming agents, presents a very exciting and diverse
opportunities. As a supplier of compounded resin, licensing
agreements, joint ventures, technology transfers and in-house
manufacturing without digressing from its mission to develop,
sell and manufacture it's proprietary products at a price which
rewards the shareholders and management and who believed in the
philosophy that environmentally conscience companies and
products will displace the old, worn out technology accepted as
the norm years ago.
Daily you read in newspapers, trade journals, law reports and
listen to new broadcasts about law suits and class action
litigation against dispensers of environmentally unfriendly,
toxic, obsolete technology polluting the planet.
COMPETITION
Endothermic Foaming Agents - In the USA there are 10-14
endothermic suppliers at any one time. Some drop out and new
ones enter into the market. Mortile has a superior product due
to certain proprietary techniques and are very competitive. The
main competition comes from Clariant who sell color concentrates
and can offer a package, which gives them the edge. They are a
large company and offer extended credit which Mortile will not
entertain.
From the correspondence received from Europe it is obvious that
Boehringer Ingelheim is the main competition having grown from
3000 to 6000 tonnes very rapidly. They are heavy in
pharmaceuticals and will probably look for more margin than
Clariant. At this stage we do not know the European maret but
our distributors do and they remain very optimistic.
Lightweight Foams - In the commodity shoe sole product there is
competition but in the high temperature product indirect inject,
we know that we have no competition. Direct inject machines can
not mold any resins other than EVA this gives Mortile an
enormous market edge with a long R&D curve before competition is
our concern.
Mortile has enormous technology advances over the potential
competitor even if they attempt to speed their way into a
fast-track approach since there are no merger or acquisition
opportunities available.
With R&D on it's current technologies complete it is now
essential that raising financing to sustain marketing and
manufacture of its products.
TVI therefore, enters its next fiscal year [2004] with
confidence that financing can be achieved, that the
technological advantage obtained over the past years will enable
it to obtain a significant market share for its products; at
satisfactory selling prices. Enabling growth and the ability to
meet the anticipated demand for its products, although there can
be no assurance of this.
(19)
Forward Looking Statements:
This Form 10-KSB contains forward looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. The Company's actual results
could differ materially from those set forth in the forward looking
statements.
Item 7. Financial Statements and Supplementary Data
Due to cash flow circumstances the company has been unable
to initiate annual audit procedures and preparation of
audited financial statements. However, this matter will be
resolved shortly and upon completion of the audit and resultant
audited financial statements an amended Annual 10 KSB Report
will be filed incorporating the audited financial statements.
For the purposes of this filing an unaudited balance sheet and
statement of operations is included for the readers information.
Comparative values stated are audited amounts as were presented
in the company's annual report 10 KSB of June 30, 2002.
Item 8. Changes in and Disagreements on Accounting and
Financial Disclosures
None, at the date of this report.
(20)
-PART III-
Item 9. Directors and Executive Officers of the Registrant
The directors and officers at June 30, 2003 are as follows:
Name Age Position with Company
Frank Mortimer 64 Director, President
Bryan Carter 82 Director,
Vice President
Larry Leverton 64 Director,
Secretary Treasurer
Frank Mortimer has been President and a Director of since April 1986. He is
also President of Fam Tile Restoration Services Ltd. ("FAM"), a company
specializing in the restoration of acoustical ceilings. Fam is a wholly owned
subsidiary of. 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 of 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 business. 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 moulding 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 moulding industry in North America and in 1982 served
as the International President of Rotational Moulders.
Larry Leverton has been Secretary and Treasurer of since April 1986. Since
1983 he has been president of L.R. Leverton Enterprises' Inc., a transportation
consulting firm. In 1982 he was vice-president of Newman Harbour Terminals and
Transportation.
Item 10 Executive Compensation
Frank Mortimer, the Company's Principal Executive Officer,
received salary of $73,572, $70,125, $59,247 for the years
ended June 30, 2003, 2002 and 2001, respectively. These amounts
constituted Mr. Mortimer's sole compensations from. Amounts
presented are expressed in US dollars and have been converted
from Canadian dollars using the average exchange rate for the
periods presented. No executive officer of received a total
salary and bonus in excess of $100,000 during any of the three
year periods ended June 30, 2003.
(21)
Item 11 Security Ownership of Certain Beneficial Owners and Management
The following table indicates the name of each person who is
known by to be a beneficial owner of more than five-percent of
its common stock as of June 30, 2003, the ownership of
those persons on such date, and the stock ownership of all
officers and directors as a group. The address of all persons
listed is in care of Technical Ventures Inc. .
Number of Shares
Name of Beneficially Percent of
Beneficial Owner Owned (1) Common Stock
Frank Mortimer 1,918,753 (2) 4.65 %
Larry Leverton 941,448 (3) 2.3 %
Bryan Carter 415,000 (4) 1 %
G. Howland 2,830,000 6.9 %
All Officers & Directors
As A Group 3,275,201 (5) 7.9 %
(1) Unless otherwise indicated, each such beneficial owner
holds the sole voting power and investment power over the
shares beneficially owned.
(2) Includes 234,020 shares owned by Mr. Mortimers wife, Anne Mortimer
(3) Includes 591,448 shares owned by L.R. Leverton Entprs.' Inc.,
a corporation owned and controlled by Larry Leverton,
Secretary, Treasurer and Director of the Registrant.
(4) Includes 115,000 shares owned by Mr. Carter's wife, Marlene Dobson.
(5) Excludes the effects on total outstanding shares which would result
from exercise of stock purchase options and conversion of debt.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
the executive officers and directors of and persons who own
more than ten percent of the Company's Common Stock, to file
reports of ownership and changes in ownership with the
Securities and Exchange Commission. Such executive officers,
directors and greater than ten-percent stockholders are required
by SEC regulations to furnish the company with copies of all
Section 16(a) filings.
Based solely on review of the copies of such forms furnished and
other information which has been made available, management
believes that during the year ended June 30, 2003. all Section
16(a) filing requirements applicable to the executive officers
and directors and greater than ten-percent beneficial owners
were complied with.
(22)
Item 12. Certain Relationships and Related Transactions
None
Item 13. Exhibits, Financial Statements, and Reports on Form 8-K
(A) (1) Financial Information:
Due to cash flow circumstances, the company has not
been able to initiate annual audit procedures and preparation
of audited financial statements. However, it is anticipated
that this matter will be resolved shortly and upon completion
of the audit and audited financial statements an amended
Annual 10 KSB Report will be filed. For the purposes of this
filing an unaudited balance sheet and statement of operations
is included for reference.
See index to unaudited financial information on Page F-1
(3) Exhibits:
(a) Exhibit 21 Subsidiaries of the Registrant are as follows:
Mortile Industries Ltd., a Canadian Private Corporation and
wholly-owned subsidiary of the Registrant
Fam Tile Restoration Services Ltd., a Canadian Private
Corporation and wholly-owned subsidiary of Mortile Industries
Ltd.
MPI Perlite Ltd., a Canadian Private Corporation and
wholly-owned subsidiary of Mortile Industries Ltd.
(B) Item -5- Reports on Form 8K
None
(23)
Item 14. Principal Accountant Fees and Services
(1) Audit Fees
For fiscal year 2001, fees billed by principal accountant,
$30,388CA in aggregate;
For fiscal year 2002, fees billed by principal accountant,
$26,616CA in aggregate.
(2) Audit Related Fees
None
(3) Tax Fees
None
(4) All Other Fees
None
(24)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TECHNICAL VENTURES INC.
Dated: October 13,2003 By:/S/Frank Mortimer
Frank Mortimer, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated: October 13,2003 By: /S/Frank Mortimer
Frank Mortimer, President,
Principal Executive Officer and
Director
Dated: October 13,2003 By: /S/Bryan Carter
Bryan Carter, Vice President
Director
Dated: October 13,2003 By: /S/Larry Leverton
Larry Leverton, Secretary
Treasurer and Principal
Accounting Officer and Director
(25)
CERTIFICATIONS
I Frank Mortimer, certify that:
1. I have reviewed this annual report on Form 10 KSB of
Technical Ventures Inc. .
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report; and
3. Based on my knowledge, the financial statements,and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this annual report.
October 13,2003 By: /S/Frank Mortimer
Frank Mortimer, President
& Principal Executive Officer
(26)
CERTIFICATIONS
I Larry Leverton, certify that:
1. I have reviewed this annual report on Form 10 KSB of
Technical Ventures Inc. .
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report; and
3. Based on my knowledge, the financial statements,and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this annual report.
October 13,2003 By: /S/Larry Leverton
Larry Leverton, Secretary
Treasurer and Principal
Accounting Officer and Director
(27)
TECHNICAL VENTURES INC.
CONSOLIDATED BALANCE SHEET & STATEMENT OF EARNINGS
AS OF JUNE 30, 2003[UNAUDITED] AND 2002[AUDITED]
TECHNICAL VENTURES INC.
CONSOLIDATED BALANCE SHEET & STATEMENT OF EARNINGS
AS OF JUNE 30, 2003[UNAUDITED] AND 2002[Audited]
TABLE OF CONTENTS
Consolidated Balance Sheets at June 30, 2003 and 2002 F - 2
Consolidated Statements of Earnings for each
of the years ended June 30, 2003, 2002 and 2001 F - 3
F - 1
TECHNICAL VENTURES INC.
Consolidated Balance Sheets
As of June 30
(Amounts expressed in U.S. Dollars)
2003 2002
[UNAUDITED] [AUDITED]
$ $
ASSETS
CURRENT ASSETS
Cash 23,417 32,663
Accounts receivable 110,761 140,195
Inventory 67,010 69,377
201,188 242,235
DEPOSITS 15,421 49,528
PROPERTY AND EQUIPMENT 313,169 93,058
529,778 384,821
TECHNICAL VENTURES INC.
Consolidated Balance Sheets
As of June 30
(Amounts expressed in U.S. Dollars)
2003 2002
[UNAUDITED] [AUDITED]
$ $
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued expenses(note 6,2002) 681,186 531,252
Current portion of notes payable(note 7,2002) 90,000 82,357
Capital lease obligations (note 8,2002) 83,904 74,474
Loans from private lenders (note 9,2002) 67,211 66,878
Current portion of loans from stockholders,
unsecured, interest free (note 10,2002) 149,374 263,210
1,071,675 1,018,171
LONG-TERM DEBT, net of current portion
Convertible debentures (note 13 (g),2002) 41,969 -
Notes payable (note 2,2002) - 78,360
Loans from stockholders (note 10,2002) 191,124 115,980
Other (note 11,2002) 29,259 25,823
220,163
STOCKHOLDERS' DEFICIENCY
CAPITAL STOCK (note 13,2002) 412,361 345,957
ADDITIONAL PAID IN CAPITAL (note 13,2002) 6,504,456 5,874,321
ACCUMULATED OTHER COMPREHENSIVE
INCOME (note 14,2002) 289,767 344,128
DEFICIT (8,010,833) (7,417,919)
(804,249) (853,513)
529,778 384,821
F - 2
TECHNICAL VENTURES INC.
Proforma Unaudited
Consolidated Statements of Earnings
For the years ended June 30
(Amounts expressed in U.S. Dollars)
UNAUDITED AUDITED AUDITED
2003 2002 2001
$ $ $
NET SALES 850,235 1,145,086 1,281,848
COST OF SALES 844,986 865,105 1,029,605
GROSS MARGIN 5,249 279,981 252,243
EXPENSES
Administration 257,830 199,500 245,492
Interest and other 90,440 120,206 180,630
Research and development 119,143 69,894 57,961
Selling 100,197 106,812 139,975
Contingent related legal expenses 39,660 - 742
607,270 496,412 624,800
LOSS FROM OPERATIONS (602,022) (216,431) (372,557)
Recovery of contingent expenses - 10,372 -
LOSS BEFORE INCOME TAX RECOVERY (602,022) (206,059) (372,557)
Income tax recovery 9,109 157,330 44,861
LOSS BEFORE EXTRAORDINARY ITEM (592,913) (48,729) (327,696)
Gain from extinguishment of debt,
loss applicable income taxes of
$135,000 (note 7(i),2002) - 187,824 -
NET EARNINGS (LOSS) (592,913) 139,095 (327,696)
BASIC LOSS BEFORE EXTRAORDINARY
ITEM PER COMMON SHARE (0.02) 0.00 (0.01)
BASIC EARNINGS (LOSS) PER COMMON
SHARE (0.02) 0.00 (0.01)
FULLY DILUTED EARNINGS (LOSS) PER
COMMON SHARE (0.02) 0.00 (0.01)
F - 3