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, 2004 [ ] 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) [ ] ACCELERATED FILER [ X ] IS NOT AN ACCELERATED FILER <\R> 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, $794,634 The appropriate aggregate market value of the voting stock of the Registrant held by non-affiliates of the Registrant as of June 30, 2004 (based upon the average bid and asked prices as reported by the National Quotation Bureau Of Securities Dealers Quotation Medium was approximately $2,434,887. The number of shares outstanding of the Registrant's common stock, as of June 30, 2004 is 42,177,606 . Exhibit index is located on page 23 of this Annual Report on Form 10-KSB. Page 1 of 32 TECHNICAL VENTUES INC. FORM 10-KSB Fiscal Year Ended June 30, 2004 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. 12-13 Item 6. Management's Discussions and Analysis of Financial Conditions and Results of Operations. 14-21 Item 7. Financial Information and Supplementary Data 22 Item 8. Changes in Disagreements with Accountants on Accounting and Financial Disclosure. 22 PART III Item 9. Directors and Executive Officers of the Registrant 23 Item 10. Executive Compensation 23 Item 11. Security Ownership of Certain Beneficial Owners and Management 24 Item 12. Certain Relationships and Related Transactions 25 PART IV Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8 K 25 Item 14. Principal Accountant Fees and Services 26 Signatures 27 -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, $ 3,514,457US has been expended in the development of products, including $114,512 in fiscal 2004, $117,812 in 2003 and $68,894 during fiscal 2002. Present operations, assets and employees are primarily those of Mortile. At June 30, 2004 there were twelve 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 2004, 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. (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, 2004 the backlog of orders totaled $141,361 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 $10,981(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 referenced in previous filings 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. (USA), Endex Inernational Limited and G. Mooney And Associates and the Dow Chemical Company; was settled on June 21, 2004; with no costs of the action and terms of the settlement kept confidential. 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 2004, 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 National Quotation Bureau, Historical Data Service: Quarter Low High 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 Sept. 2003 0.055 0.115 Dec. 2003 0.020 0.070 Mar. 2004 0.020 0.060 June 2004 $0.025 $0.100 Sept. 2004 0.025 0.080 These prices do not reflect retail markup, mark down or commissions and may not represent actual transactions. Holders: As of June 30, 2004, there were approximately 2,200 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 currently has 50,000,000 common shares authorized. At June 30, 2004, 42,177,606 were issued and outstanding. Currently 609,600 stock remain unissued relative to the 2002 Benefit Plan and are reserved as part thereof. Additionally, 50,000 stock are reserved for unexercised options at a strike price of $0.50 per share. During fiscal 2004, a total of 941,500 shares were issued. Of the preceeding amount 516,500 Restricted Common Stock were issued and paid for in the aggregate amount of $41,957.50 or $0.08 per share and 425,000 stock were issued for expensed services of $22,750 at an average of $0.54 per share. In December 2002 an S8 Registration was completed and filed, registering four million shares pursuant to The 2002 Benefit Plan. At June 30, 2004 3,950,400 stock had been issued pursuant to the plan; 609,600 stock remain unissued and are reserved as part thereof. (13) Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources During the year ended June 30, 2004, an operating loss of ($561,210) was incurred; before other income was stated. The operating loss was funded, primarily by equity capital, accounts receivable, an increase in payables and stockholder loans. With continued operating losses and monthly debt service requirements, monthly cash flow requirements is greatly impeded. In fiscal 2004, $41,957 investment capital was secured through the issue of 516,500 restricted common stock. Additionally, $22,750 in operating expenses were paid by the issue of 425,000 common stock . No Canadian Tax refunds were received during the current fiscal year as 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 no Canadian federal refunds will be available for fiscal 2004. However, determination of the tax status may be reassessed at any time and subsequently changed, however there can be no assurance of this occurring. Further acquisition of significant property and equipment purchases and/or expansion of facilities will only be considered if demand for 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, 2004 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. (14) 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. In that regard, in late August, with confidence for the future, an agreement was signed by the Directors of Mortile Industries Ltd. on behalf of Mortile Industries Ltd. and by Mr. Isaac Roitman on behalf of his group. This Group owns and operates production facilities in New York State, Mexico and South America and employ over 1000 people in their manufacturing facilities. The Group will contribute in aggregate, US$4.8 million in invested property, know-how and technology in a turnkey operation including US$500,000 infusion of working capital. Mortile Industries will provide two debentures payable within 5 years; one of US$1.4 million and a second of US$500,000. The net capital investment is therefore US$2.9 million and a loan to Mortile Industries for US$1.9 million for 60% of Mortile Industries. Technical Ventures will now own 40% of Mortile Industries Ltd. The Group will also undertake to purchase materials compounded by Mortile Industries for their own consumption wherever their existing suppliers can be displaced. The investing Group has a substantial expansion in progress in their New York State plant which should come on-stream in January 2005. Mortile Industries Ltd. will be the supplier of materials and compounds for consumption in this plant. New market opportunities are expected to produce additional sales of US$8 million in the second year. The Group brings their financing, technology and raw material purchasing power to the venture which will enable Mortile to expand rapidly and effectively compete in the global market place. Mortile Industries Ltd. will also manufacture color additives for the Corporation thereby eliminating outside purchasing of these products, further contributing to Mortile's sales and profitability. Savings in raw material costs are very important in the very competitive market place we operate in. Survival against imports will depend on pricing which means access to the best possible pricing of both raw materials and capital. Mr. Isaac Roitman will become an officer of Mortile Industries Ltd. and will take an active part in the day-to-day operations, current management of Mortile Industries Ltd. remains in place. Mortile Industries Ltd. and Technical Ventures have exhausted all normal channels of financing and this agreement will enable Technical Ventures the ability to move ahead with confidence. (15) A dividend policy will be embodied in the agreement guaranteeing a percentage of the profits to be paid out each year once the loans are repaid. Technical Ventures Inc. retains it's metal technology which it will continue to develop and market through a new subsidiary. 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. (16) Results of Operations - Comparison of Fiscal 2004 To Fiscal 2003: For the fiscal year ending June 30, 2004, TVI incurred an operating loss of ($561,210) on net sales of $794,634, before other income. Net sales revenues decreased 6.5 % over fiscal 2003. The majority of the decrease taking place in contract / specialty compounding work. Comparatively, fiscal 2003 incurred an operating loss of ($602,022) on net sales of $850,235. During fiscal 2004, the company experienced an overall decline of 17% in sales revenues. It's major customer in toll compounding services experienced a major decline in sales and which resulted in the major decline in orders to the company. Increases in pricing and increased sales revenues in the foaming products offset some declines. On reflection of "other income", the operating loss becomes $(384,375) in fiscal 2004. Comparatively in fiscal 2003, after reflecting other income, the operating loss became ($592,913). Gross margins of ($38,596) (5%) in fiscal 2004, represented a decreased of 5.4% over the previous year ended June 30, 2003. The effect of decreased sales, maintaining the highly experienced work force, resulted in the decline of margins. A stronger Canadian dollar had a negative effect on US$ revenues and expenses. Administrative expense decreased 26 % during fiscal 2004, when compared to those for the corresponding twelve month period of the previous year as legal expense incurred in the previous year did not occurr again. Financial and Interest Expense increased in fiscal 2004 when compared to those for the corresponding period of the previous year as penalties for debt increased and the requirement to increase borrowing necessary to provide cash flow increased interest expense. R&D Expenses decreased 4 % as resources were diverted to manufacturing to further refine existing Company proprietary products and services. Selling expenses decreased by 19 % in fiscal 2004 over comparative fiscal 2003; as resources were diverted to refining existing products and concerted effort to control expenditures. Contingent expense decreased substantially in fiscal 2004 by 91% due to nonrecurring items which were recognized in fiscal 2003. There can be no assurance, but growth is anticipated to take place in all areas of the Company's expertise and technology. (17) PRODUCTS Mortile Foam Compounds Mortile has manufactured prototype disks ("Frisbees") and the response from dog food suppliers and pet toy distributors has been very positive. A production mold will be made and it is anticipated that the first orders should be in the distribution hands within 2 weeks of the mold being in place. Light Weight Foams - EXO Foam Under licensed formulations and in-house technology, the Company is poised to become a major supplier of cross-linked polyethylene foamable resins to a wide and diversified market at highly competitive prices. The finished product is available and being offered to a selected market segment that could fast track the product. Cross-linked polyethylene foams are used in a very broad cross section of the market providing good opportunities in the following market segments: Automotive Interiors Athletic/Recreation . Door Panels . Boat linings/seats . Side Panels . Floatation equipment . Seating . Sports equipment padding . Infant seat cushioning . Knee/elbow pads . Insulation . Golf bags . Dash trimming . Pool toys . Roof and trunk liners . Boxing/wrestling mats . Exercise mats A presentation to the automotive industry created a great deal of interest for automotive parts such as console parts, visors, arm and door rests and many other applications. Differentia The Company's key differentiates are the attributes of its products: 1. Hazardous materials have been eliminated; 2. The base material cost is lower than competing products; 3. The "pellet to part" technology permits the elimination of a number of manufacturing steps thereby reducing overall costs; 4. Labor costs are lower as a result of Mortile's "pellet to part" technology; 5. Secondary operations are eliminated; 6. Mortile's products have a color-in capability so color does not have to be added later; 7. Because of the one-step technology; there is no need for the material to be covered; 8. Mortile's products have no moisture absorption; 9. The products have a floatation capability; 10. The products have a very low specific gravity. (18) Endothermic Foaming Agents Fischer diffusion - has been appointed a European distributor to distribute it's proprietary endothermic foaming agent. They spent 8 months preparing and planning the launch of the product. The highlights from the latest advices are as follows: They have established a distribution network in over 20 European countries with 772 representatives. They estimate the market to be about 10,000 tons or $45 to 50 million (US) per annum. They arranged a global sales force meeting in Amsterdam and Mortile's Manager Technical Services presented a paper on Mortile's product as well as conduct a training seminar. They advise that they expect to sell 300-350 tons in the coming year with a 3 year target of 1600 to 1800 metric tons. The pricing is in US$4040. per ton. 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. 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 ageing 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. (19) 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 practising 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. See under Exhibit (2)a, Overview by Dr. Venturi, MD, of the Mortile potential in orthotics. The link up with P.W. Minor will greatly accelerate the demand from Prime Corporation for Mortile feed stock to supply P.W. Minor. THE MARKET The Company, with its lightweight foams, metal technology and endothermic foaming agents, presents a very exciting and diverse opportunity to enter into many areas with 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 who believed in the philosophy that environmentally conscience companies and products will displace the old, worn out technology accepted as the norm years ago. Everyday you read in papers, 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. The new Group with their operations in South America, where the market to a large degree is not as competitive as North America, should move rapidly. 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 mould any resins other than EVA this gives Mortile an enormous market edge with a long R&D curve before competition is our concern. (20) 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. REGULATIONS, TOXIC MATERIALS & KYOTO PROTOCOL Mortile Industries Ltd does not make use of chemicals classified under the Hazardess Materials Act nor does it manufacture weapons, armaments, explosives or products which emit toxic fumes under combustion. The Company's proprietary formulations are non-toxic and in all cases fall under the category G.R.A.S. (generally regarded as safe). In-house formulations emit no toxic fumes and smoke while being manufactured nor do they emit toxic emissions under combustion. Mortile's formulations contain no vinyl or urethanes, but can be substituted for these materials. Both vinyl and urethane are being phased out in Europe and are under extreme environmental pressure in North America. These material emit toxic fumes during manufacture and may no longer be incinerated or added to the waste stream. RISK & OPPORTUNITY The rising oil prices are pushing up the costs of resin and foaming is a way to reduce weight and save on resin. We do not see any risk other than apathy and reluctance to change 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 never appreciated by potential funders that a delay in placing an order for a mould can delay a project 4-6 months. 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 [2005] 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. (21) 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 for fiscal years 2003 and 2004. For the purposes of this initial filing an unaudited balance sheet and statement of operations is included for the readers information. The format and values represented are as compiled for presentation to the auditors for their review and report. Where comparative values are stated for fiscal 2002 the amounts have been previously audited and reported in the company's annual report 10 KSB of June 30, 2002. Subsequently the Company has not changed any procedures and controls during the periods that audits have not yet been performed. Item 8. Changes in and Disagreements on Accounting and Financial Disclosures None, at the date of this report. (22) -PART III- Item 9. Directors and Executive Officers of the Registrant The directors and officers at June 30, 2004 are as follows: Name Age Position with Company Frank Mortimer 65 Director, President Bryan Carter 83 Director, Vice President Larry Leverton 65 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 $81,884, $73,572, $70,125 for the years ended June 30, 2004, 2003 and 2002, 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, 2004. (23) 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, 2004, 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) 4.5 % Larry Leverton 941,448 (3) 2.2 % Bryan Carter 415,000 (4) 1.0 % G. Howland 2,830,000 6.7 % All Officers & Directors As A Group 3,275,201 (5) 7.8 % (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. (24) Item 12. Certain Relationships and Related Transactions None Item 13. Exhibits, Financial Statements, and Reports on Form 8-K (A) (1) Financial Statements: 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 (25) Item 14. Principal Accountant Fees and Services (1) Audit Fees For fiscal year 2002, fees billed by principal accountant, $26,616CA in aggregate; For fiscal year 2003, fees billed by principal accountant, none. (2) Audit Related Fees None (3) Tax Fees None (4) All Other Fees None (5) None (6) None (26) 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 29, 2004 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: November 2, 2004 By:/S/Frank Mortimer Frank Mortimer, President, Principal Executive Officer and Director Dated: November 2, 2004 By:/S/Bryan Carter Bryan Carter, Vice President Director Dated: November 2, 2004 By:/S/Larry Leverton Larry Leverton, Secretary Treasurer and Principal Accounting Officer and Director (27) TECHNICAL VENTURES INC. UNAUDITED FIANCIAL INFORMATION AT JUNE 30, 2004 AND 2003 TECHNICAL VENTURES INC. UNAUDITED FIANCIAL INFORMATION TABLE OF CONTENTS Consolidated Balance Sheets at June 30, 2004 and 2003 F - 2 Consolidated Statements of Earnings for each of the years ended June 30, 2004, 2003 and 2002 F - 3 F - 1 TECHNICAL VENTURES INC. Consolidated Balance Sheets As of June 30 (Amounts expressed in U.S. Dollars) 2004 2003 [UNAUDITED] [UNAUDITED] $ $ ASSETS CURRENT ASSETS Cash 7,675 23,417 Accounts receivable 113,041 110,761 Inventory 71,801 67,010 192,517 201,188 DEPOSITS 15,707 15,421 PROPERTY AND EQUIPMENT 268,111 313,169 [Net of Depreciation] 476,335 529,778 APPROVED ON BEHALF OF THE BOARD /S/ Frank Mortimer /S/ Larry Leverton TECHNICAL VENTURES INC. Consolidated Balance Sheets As of June 30 (Amounts expressed in U.S. Dollars) 2004 2003 [UNAUDITED] [UNAUDITED] $ $ LIABILITIES CURRENT LIABILITIES Accounts payable and accrued expenses(note 6,2002) 777,988 681,186 Current portion of notes payable(note 7,2002) 133,419 90,000 Capital lease obligations (note 8,2002) 84,763 83,904 Loans from private lenders (note 9,2002) 247,377 67,211 Current portion of loans from stockholders, unsecured, interest free (note 10,2002) 92,560 149,374 1,336,107 1,071,675 LONG-TERM DEBT, net of current portion Convertible debentures (note 13 (g),2002) 130,592 41,969 Notes payable (note 2,2002) - - Loans from stockholders (note 10,2002) 142,404 191,124 Other (note 11,2002) - 29,259 STOCKHOLDERS' DEFICIENCY CAPITAL STOCK (note 13,2002) 421,776 412,361 ADDITIONAL PAID IN CAPITAL (note 13,2002) 6,559,749 6,504,456 ACCUMULATED OTHER COMPREHENSIVE INCOME (note 14,2002) 280,915 289,767 DEFICIT (8,395,208) (8,010,833) STOCKHOLDERS DEFICIENCY (1,132,768) (804,249) 476,335 529,778 F - 2 TECHNICAL VENTURES INC. Consolidated Statements of Earnings For the years ended June 30 (Amounts expressed in U.S. Dollars) UNAUDITED UNAUDITED AUDITED 2004 2003 2002 $ $ $ NET SALES 794,634 850,235 1,145,086 COST OF SALES 833,230 844,986 865,105 GROSS MARGIN (38,596) 5,249 279,981 EXPENSES Administration 190,701 257,830 199,500 Interest and other 132,678 790,440 120,206 Research and development 114,512 119,143 69,894 Selling 81,001 100,197 106,812 Contingent related legal expenses 3,722 39,660 - 522,614 607,270 496,412 LOSS FROM OPERATIONS (561,210) (602,022) (216,431) Recovery of contingent expenses 176,385 - 10,372 LOSS BEFORE INCOME TAX RECOVERY (384,375) (602,022) (206,059) Income tax recovery - 9,109 157,330 LOSS BEFORE EXTRAORDINARY ITEM (384,375) (592,913) (48,729) Gain from extinguishment of debt, loss applicable income taxes of $135,000 (note 7(i),2002) - - 187,824 NET EARNINGS (LOSS) (384,375) (592,913) 139,095 BASIC LOSS BEFORE EXTRAORDINARY ITEM PER COMMON SHARE 0.00 (0.02) 0.00 BASIC EARNINGS (LOSS) PER COMM 0.00 (0.02) 0.00 FULLY DILUTED EARNINGS (LOSS) PER COMMON SHARE 0.00 (0.02) 0.00 F - 3