UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: March 31, 1998 Commission file number: 33-23617
MATERIAL TECHNOLOGIES, INC.
----------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-4622822
-------------------------------------------- --------------------
(State or other jurisdiction of incorporation (IRS Employer
or organization) identification No.)
11661 San Vicente Boulevard
Suite 707
Los Angeles,
----------------------
California 90049
------------
(address of principal executive offices)
(Zip Code) 90064
(310)208-5589
-------------------------------
(Registrant's telephone number including area code)
Securities Registered pursuant to Section 12(g) of the Act:
Common
------
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
-
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 or Regulation S-K is not contained herein, and will not 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-K or any
amendment of this form 10-K. [ ]
The aggregate market value of the voting stock held by Non-affiliates of
the registrant at May 1, 1998 was $828,255.
Documents incorporated by reference-None.
1
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Part 1. Financial Statements
Balance Sheets 3 - 4
Statements of Operations -
First Quarter Ended March 31, 1998 and 1997 and from
the Company's inception (October 21, 1983) through
March 31, 1998 5
Statements of Cash Flows -
First Quarter Ended March 31, 1998 and 1997 and from
the Company's inception (October 21, 1983) through
March 31, 1998 6 - 7
Notes to Financial Statements 8
Management's Discussion and Analysis 9
Part 2. Other Information 10
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
December 31, March 31.
1997 1998
----------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 2,451 $ 28,369
Accounts Receivable 62,332 36,940
Employee Advance 1,500 2,348
----------------- -----------------
TOTAL CURRENT ASSETS 66,283 67,657
----------------- -----------------
FIXED ASSETS
Property and Equipment, Net
of Accumulated Depreciation 95,227 94,529
----------------- -----------------
OTHER ASSETS
Note Receivable 50,000 50,000
Intangible Assets, Net of
Accumulated Amortization 18,679 18,182
Investment in Tensiodyne Corporation 55,200 55,200
Refundable Deposit 1,868 1,868
----------------- -----------------
TOTAL OTHER ASSETS 125,747 125,250
----------------- -----------------
TOTAL ASSETS $ 287,257 $ 287,436
================= =================
</TABLE>
See accompanying notes
3
<PAGE>
<TABLE>
<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
----------------------------------------
December 31, March 31.
1997 1998
------------------ -----------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Legal Fees Payable $ 103,757 $ 75,659
Consulting Fees Payable 67,778 68,062
Other Accounts Payable 17,108 21,837
Accrued Payroll Taxes 24,269 24,907
Loan Payable - Officer 118,863 3,558
Loan Payable-Others 68,807 68,807
------------------ -----------------
TOTAL CURRENT LIABILITIES 400,582 262,830
Payable on Research and
Development Sponsorship 218,000 218,000
------------------ -----------------
TOTAL LIABILITIES 618,582 480,830
------------------ -----------------
REDEEMABLE PREFERRED STOCK
Class B Preferred Stock, $.001 Par Value
Authorized 15 Shares, Outstanding 15 Shares at December
31, 1997 and March 31, 1998; Redeemable at $10,000 Per Share
After January 31, 2004 150,000 150,000
------------------ -----------------
STOCKHOLDERS' EQUITY (DEFICIT)
Class A Common Stock, $.001 Par Value, Authorized 10,000,000
Shares, Outstanding 5,787,000 at December 31, 1997, and
at 8,217,000 Shares March 31, 1998 5,787 8,217
Class B Common Stock, $.001 Par Value, Authorized 100,000
Shares, Outstanding 60,000 Shares 60 60
Class A Preferred, $.001 Par Value, Authorized 900,000 Shares
Outstanding 350,000 Shares 350 350
Additional Paid in Capital 2,436,445 2,604,015
Less Notes Receivable - Common Stock (14,720) (14,720)
Deficit Accumulated During the Development Stage (2,964,447) (2,996,516)
Unrealized Holding Gain on Investment Securities 55,200 55,200
------------------ -----------------
TOTAL STOCKHOLDERS' (DEFICIT) (481,325) (343,394)
------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
(DEFICIT) $ 287,257 $ 287,436
================== =================
</TABLE>
See accompanying notes
4
<PAGE>
<TABLE>
<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
From Inception
For the Three Months Ended (October 21, 1983)
March 31, Through
1997 1998 March 31, 1998
----------------- ----------------- --------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
REVENUES
Sale of Fatigue Fuses $ - $ - $ 64,505
Sale of Royalty Interests - - 198,750
Research and Development Revenue 4,555 96,744 1,145,734
Test Services - - 10,870
----------------- ----------------- --------------
TOTAL REVENUES 4,555 96,744 1,419,859
----------------- ----------------- --------------
COSTS AND EXPENSES
Research and Development 4,555 28,202 1,614,907
General and Administrative 83,094 100,611 2,686,341
----------------- ----------------- --------------
TOTAL COSTS AND EXPENSES 87,649 128,813 4,301,248
----------------- ----------------- --------------
INCOME (LOSS) FROM OPERATIONS (87,649) (128,813) (2,881,389)
----------------- ----------------- --------------
OTHER INCOME (EXPENSE)
Expense Reimbursed 1,135 - 4,510
Interest Income - - 39,495
Gain on Sale of Stock - - 31,651
Miscellaneous Income - - 25,145
Loss on Sale of Equipment - - (12,780)
Gain on Foreclosure - - 18,697
Settlement of Teaming Agreement - - 50,000
Litigation Settlement - - 18,095
----------------- ----------------- --------------
TOTAL OTHER INCOME 1,135 - 174,813
----------------- ----------------- --------------
NET INCOME (LOSS) BEFORE EXTRAORDINARY
ITEMS AND PROVISION FOR INCOME TAXES (81,959) (32,069) (2,706,576)
PROVISION FOR INCOME TAXES - - (7,000)
----------------- ----------------- --------------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS (81,959) (32,069) (,713,576)
EXTRAORDINARY ITEMS
Forgiveness of Debt - - (289,940)
Utilization of Operating Loss Carry forward - - 7,000
NET INCOME (LOSS) $ (81,959) $ (32,069) (2,996,516)
================= ================= ==============
PER SHARE DATA
Income (Loss) Before Extraordinary Item $ (0.004)
Extraordinary Items --
-----------------
NET INCOME (LOSS) $ (0.004)
=================
COMMON SHARES OUTSTANDING 8,217,000
=================
</TABLE>
See accompanying notes
5
<PAGE>
<TABLE>
<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
From Inception
For the Three Months Ended (October 21, 1983)
March 31, Through
1997 1998 March 31, 1998
----------------- ---------------- -------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (81,959) $ (32,069) (2,996,516)
----------------- ---------------- -------------------
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided
(Used) by Operating Activities
Depreciation and Amortization 1,194 1,195 165,689
Gain on Sale of Tensiodyne Corporation
Common Stock - - (17,750)
Charge off of Deferred Offering Costs - - 36,480
Gain on Foreclosure - - (18,697)
(Increase) Decrease in Accounts Receivable (4,555) 25,392 (88,440)
(Increase) in Employee Advances - (848) (848)
(Increase) Decrease in Prepaid Expense 625 - 321
Loss on Sale of Equipment - - 12,780
Issuance of Common Stock for Services 2,000 - 298,435
Issuance of Stock for Agreement Modification - - 152
Forgiveness of Indebtedness - - 165,000
Increase (Decrease) in Accounts
Payable and Accrued Expenses 53,644 (21,811) 563,100
Interest Accrued on Note Payable - 5,059 44,876
Increase in Research and Development
Sponsorship Payable - - 218,000
(Increase) in Note for Litigation Settlement - - (25,753)
(Increase) in Deposits - - (2,189)
----------------- ---------------- -------------------
TOTAL ADJUSTMENTS 52,908 8,987 1,351,156
----------------- ---------------- -------------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (29,051) (23,082) (1,645,360)
----------------- ---------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds From Sale of Equipment - - 10,250
Proceeds from Sale of Tensiodyne Corporation
Common Stock - - 17,750
Purchase of Property and Equipment - - (226,109)
Proceeds from Foreclosure - - 44,450
(Increase) in Other Assets - - (69,069)
Payment for License Agreement - - (6,250)
----------------- ---------------- -------------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES - - (228,978)
----------------- ---------------- -------------------
</TABLE>
See accompanying notes
6
<PAGE>
<TABLE>
<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
From Inception
For the Three Months Ended (October 21, 1983)
March 31, March 31, Through
1997 1998 March 31, 1998
------------------ ------------ ------------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock
Net of Offering Costs $78,256 $ - $832,319
Costs incurred in Offering - - (31,480)
Sale of Common Stock Warrants - - 18,250
Sale of Preferred Stock - - 258,500
Sale of Redeemable Preferred Stock - - 150,000
Capital Contributions - - 301,068
Proceeds from Note Payable - - (5,000)
Loans From Officers 19,000 49,000 524,307
Repayments to Officer (63,000) - (309,921)
Increase in Loan Payable-Others - - 164,664
------------------ ------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES: 34,256 49,000 1,902,707
------------------ ------------ ------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 5,205 25,918 28,369
BEGINNING BALANCE CASH AND
CASH EQUIVALENTS (2,422) 2,451 -
------------------ ------------ ------------------
ENDING BALANCE CASH AND CASH
EQUIVALENTS $ 2,783 $ 28,369 $ 28,369
================== ============ ==================
</TABLE>
See accompanying notes
7
<PAGE>
MATERIAL TECHNOLOGY, INC.
(FORMERLY TENSIODYNE SCIENTIFIC CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL ACCOUNTANTS
NOTE 1. In the opinion of the Company's management, the accompanying unaudited
----------------------------------------------------------------------
financial statements contain all adjustments (consisting of normal
----------------------------------------------------------------------
recurring accruals) necessary to present fairly the financial position
----------------------------------------------------------------------
of the Company as of March 31, 1998 and 1997 and the results of
----------------------------------------------------------------------
operations and cash flows for the three month periods then ended. The
----------------------------------------------------------------------
operating results of the Company on a quarterly basis may not be
----------------------------------------------------------------------
indicative of operating results for the full year.
--------------------------------------------------
8
<PAGE>
MATERIAL TECHNOLOGY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
- --------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
During the three month period ended March 31, 1998, the Company generated
approximately $96,744 under its research and development contract with
Southwest Research Institute, Inc.
During the three month period ended March 31, 1997, the Company generated
approximately $5,690 of which $4,555 was used for research and development
contract with Southwest Research Institute, Inc. and $1,135 was a
reimbursement for rent and other expenses.
During the three month periods ended March 31, 1998 and 1997, the Company
incurred approximately $28,202, and $4,555, respectively, in development
costs all of which related to the above indicated contract with Southwest
Research Institute, Inc
General and administration costs were $100,666 and $83,094, respectively,
for the three-month periods ended March 31, 1998 and 1997. The major
expenses incurred during 1998, consisted of Officer's compensation of
$22,500, consulting fees of $19,631, professional fees of $23,879, interest
expense of $5,739, telephone expense of $5,876, rent expense of $4,244, and
travel expense of $2,333. The major expenses incurred in 1997, consisted of
officer's salaries of $45,000, professional fees of $21,643, telephone
expense of $2,800, office expense of $1,869, and rent expense of $3,563.
LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------
Cash equivalents as of March 31, 1998 and 1997 were $28,369 and $2,783,
respectively. During the first quarter of 1998, the Company received
$49,000 from officer loans. Of the $49,000 borrowed, $23,082 was used in
operations During the first quarter of 1997, the Company received $19,000
from officer loans and $78,256 from the sale of its common stock. Of the
$97,256 received in 1997, $29,051 was used in operations and $63,000 was
used to pay down officer's loans.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On March 26, 1998, the Corporation issued 2,430,000 shares of its
Class A Common Stock to its President in exchange for the cancellation
of indebtedness owed him by the Corporation in the amount of $170,000.
On April 30, 1998, the Corporation authorized the issuance of
2,077,060 of its Class A Common Stock including 302,190 shares as
compensation to Joel Freedman, a Director, 712,163 shares in the
renegotiating of the licensing agreement with the University of
Pennsylvania 33,280 shares as consideration for the reduction in a
royalty interest on the fatigue fuse from 20% to 5%, and 259,427
shares for services rendered.
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Material Technologies, Inc.
---------------------------
Registrant
/s/ Robert M. Bernstein
----------------------------------------
Robert M. Bernstein, President and Chief
Financial Officer
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTH PERIOD ENDED MARCH
31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 28369
<SECURITIES> 0
<RECEIVABLES> 39288
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 67657
<PP&E> 211572
<DEPRECIATION> (117043)
<TOTAL-ASSETS> 287436
<CURRENT-LIABILITIES> 262830
<BONDS> 0
<COMMON> 8277
0
150000
<OTHER-SE> (351671)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 96744
<CGS> 0
<TOTAL-COSTS> 128813
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<INCOME-PRETAX> (32069)
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<INCOME-CONTINUING> (32069)
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<CHANGES> 0
<NET-INCOME> (32069)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
