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, 1999 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 (IRS Employer
incorporation 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 No
--- ---
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, 1999 was $2,271,124.
Documents incorporated by reference-None.
1
<PAGE>
INDEX
PAGE
------
Part 1. Financial Statements
Balance Sheets 3 - 4
Statements of Operations -
First Quarter Ended March 31, 1998 and 1999 and from
the Company's inception (October 21, 1983) through
March 31, 1999 5
Statements of Cash Flows
First Quarter Ended March 31, 1998 and 1999 and from
the Company's inception (October 21, 1983) through
March 31, 1999 6 - 7
Notes to Financial Statements 8
Management's Discussion and Analysis 9
Part 2. Other Information 10
2
<PAGE>
<TABLE>
<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
- -----------------------------------------------------------------------------
ASSETS
December 31, March 31.
1998 1999
----------------- --------------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents. . . . $ 20 $ 71,422
Accounts Receivable. . . . . . . 202,737 162,969
Employee Advance . . . . . . . . 1,500 1,500
----------------- --------------------
TOTAL CURRENT ASSETS . . . . . 204,257 235,891
----------------- --------------------
FIXED ASSETS
Property and Equipment, Net
of Accumulated Depreciation. 2,712 1,987
----------------- --------------------
OTHER ASSETS
Intangible Assets, Net of
Accumulated Amortization . . 16,690 16,193
Investments. . . . . . . . . . . 8,219 8,219
Refundable Deposit . . . . . . . 1,868 1,868
----------------- --------------------
TOTAL OTHER ASSETS . . . . . . 26,777 26,280
----------------- --------------------
TOTAL ASSETS . . . . . . . . . $ 233,746 $ 264,158
================= ====================
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
- ---------------------------------------------------------------------------------------------------------------
December 31, March 31.
1998 1999
------------------ ---------------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
<S> <C> <C>
CURRENT LIABILITIES
Legal Fees Payable . . . . . . . . . . . . . . . . . . . . . . . $ 149,453 $ 121,983
Consulting Fees Payable. . . . . . . . . . . . . . . . . . . . . 101,669 20,401
Accounting Fees Payable. . . . . . . . . . . . . . . . . . . . . 23,308 28,188
Other Accounts Payable . . . . . . . . . . . . . . . . . . . . . 17,334 42,803
Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . . . 25,197 19,286
Loan Payable - Officer . . . . . . . . . . . . . . . . . . . . . 73,177 109,516
Loan Payable-Others. . . . . . . . . . . . . . . . . . . . . . . 46,273 47,434
------------------ ---------------------
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . . . . . . . 436,411 389,611
Payable on Research and
Development Sponsorship . . . . . . . . . . . . . . . . . . . 257,240 266,240
Notes Payable - Other. . . . . . . . . . . . . . . . . . . . . . 25,527 25,000
------------------ ---------------------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . 719,178 680,851
------------------ ---------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Class A Common Stock, $.001 Par Value, Authorized 10,000,000
Shares, Outstanding 10,061,897 at December 31, 1998, and
10,236,897 shares at March 31, 1999 . . . . . . . . . . . . . 10,062 10,237
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 . . . . . . . . . . . . . . . . . . . 2,996,664 3,063,156
Less Notes Receivable - Common Stock . . . . . . . . . . . . . . (14,720) (14,720)
Deficit Accumulated During the Development Stage . . . . . . . . (3,486,067) (3,483,995)
Unrealized Holding Gain on Investment Securities . . . . . . . . 8,219 8,219
------------------ ---------------------
TOTAL STOCKHOLDERS' (DEFICIT). . . . . . . . . . . . . . . . . . (485,432) (416,693)
------------------ ---------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
(DEFICIT) . . . . . . . . . . . . . . . . . . . . . . . . . $ 233,746 $ 264,158
================== =====================
</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
1998 1999 March 31, 1999
----------------- ---------------------- ---------------------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
REVENUES
Sale of Fatigue Fuses . . . . . . . . . . . . $ - $ - $ 64,505
Sale of Royalty Interests . . . . . . . . . . - - 198,750
Research and Development Revenue. . . . . . . 96,744 198,860 1,622,174
Test Services . . . . . . . . . . . . . . . . - - 10,870
----------------- ---------------------- ---------------------------------
TOTAL REVENUES. . . . . . . . . . . . . . . 96,744 198,860 1,896,299
----------------- ---------------------- ---------------------------------
COSTS AND EXPENSES
Research and Development. . . . . . . . . . . 28,202 8,077 1,847,039
General and Administrative. . . . . . . . . . 100,611 192,373 3,585,116
----------------- ---------------------- ---------------------------------
TOTAL COSTS AND EXPENSES. . . . . . . . . . 128,813 200,450 5,432,155
----------------- ---------------------- ---------------------------------
INCOME (LOSS) FROM OPERATIONS . . . . . . . (128,813) (1,590) (3,535,856)
----------------- ---------------------- ---------------------------------
OTHER INCOME (EXPENSE)
Expense Reimbursed. . . . . . . . . . . . . . - - 4,510
Interest Income . . . . . . . . . . . . . . . - 66 39,569
Gain on Sale of Stock. . . . . . . . . . . . - 4,396 207,497
Miscellaneous Income. . . . . . . . . . . . . - - 25,145
Loss on Sale of Equipment . . . . . . . . . . - - (12,780)
Gain on Foreclosure . . . . . . . . . . . . . - - 18,697
Modification of Royalty Agreement . . . . . . (7,332)
Settlement of Teaming Agreement . . . . . . . - - 50,000
Litigation Settlement . . . . . . . . . . . . - - 18,095
----------------- ---------------------- ---------------------------------
TOTAL OTHER INCOME. . . . . . . . . . . . . - 4,462 343,401
----------------- ---------------------- ---------------------------------
NET INCOME (LOSS) BEFORE EXTRAORDINARY
ITEMS AND PROVISION FOR INCOME TAXES. . . . . (32,069) 2,872 (3,192,455)
PROVISION FOR INCOME TAXES. . . . . . . . . . . - (800) (8,600)
----------------- ---------------------- ---------------------------------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS . . . . . . . . . . . (32,069) 2,072 (3,201,055)
EXTRAORDINARY ITEMS
Forgiveness of Debt . . . . . . . . . . . . . - - (289,940)
Utilization of Operating Loss Carry forward. - - 7,000
----------------- ---------------------- ---------------------------------
NET INCOME (LOSS) . . . . . . . . . . . . . $ (32,069) 2,072 (3,483,995)
================= ====================== =================================
PER SHARE DATA
Income (Loss) Before Extraordinary Item . . . $ 0.0002
Extraordinary Items . . . . . . . . . . . . . --
-----------------
NET INCOME (LOSS) . . . . . . . . . . . . . $ 0.0002
=================
COMMON SHARES OUTSTANDING . . . . . . . . . . 10,236,897
=================
</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
1998 1999 March 31, 1999
----------------- ----------------- ------------------
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Income (Loss). . . . . . . . . . . . . . . . . $ (32,069) $ 2,072 $ (3,483,995)
----------------- ----------------- ------------------
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided
(Used) by Operating Activities
Depreciation and Amortization. . . . . . . . . . . 1,195 1,222 170,605
Bad Debts. . . . . . . . . . . . . . . . . . . . . 50,000
Gain on Sale of Securities . . . . . . . . . . . . - (4,396) (193,596)
Charge off of Deferred Offering Costs. . . . . . . - - 36,480
Charge off of Long-lived Assets due to Impairmant. - - 92,919
Modification of Royalty Agreement. . . . . . . . . - - 7,332
Gain on Foreclosure. . . . . . . . . . . . . . . . - - (18,697)
(Increase) Decrease in Accounts Receivable . . . . 25,392 39,768 (214,469)
(Increase) in Employee Advances. . . . . . . . . . (848) - -
(Increase) Decrease in Prepaid Expense . . . . . . - - 321
Loss on Sale of Equipment. . . . . . . . . . . . . - - 12,780
Issuance of Common Stock for Services . . . . . . - - 410,597
Issuance of Stock for Agreement Modification . . . - - 152
Forgiveness of Indebtedness. . . . . . . . . . . . - - 165,000
Increase (Decrease) in Accounts
Payable and Accrued Expenses . . . . . . . . . . (21,811) (18,321) 670,639
Interest Accrued on Note Payable . . . . . . . . . 5,059 12,661 103,136
Increase in Research and Development
Sponsorship Payable . . . . . . . . . . . . . . - - 218,000
(Increase) in Note for Litigation Settlement . . . - - (25,753)
(Increase) in Deposits . . . . . . . . . . . . . . - - (2,189)
----------------- ----------------- ------------------
TOTAL ADJUSTMENTS. . . . . . . . . . . . . . . . 8,987 30,934 1,483,257
----------------- ----------------- ------------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES. . . . . . . . . . . . . . . (23,082) 33,006 (2,000,738)
----------------- ----------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds From Sale of Equipment. . . . . . . . . . - - 10,250
Purchase of Property and Equipment . . . . . . . . - - (229,413)
Proceeds from Sale of Securities . . . . . . . . . - 4,396 283,596
Purchase of Securirties. . . . . . . . . . . . . . - - (90,000)
Proceeds from Foreclosure. . . . . . . . . . . . . - - 44,450
(Increase) in Other Assets . . . . . . . . . . . . - - (69,069)
Payment for License Agreement. . . . . . . . . . . - - (6,250)
----------------- ----------------- ------------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES. . . . . . . . . . . . . . . - 4,396 (56,436)
----------------- ----------------- ------------------
See accompanying notes
</TABLE>
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
1998 1999 March 31, 1999
------------------ ------------------- ----------------------
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES
<S> <C> <C> <C>
Issuance of Common Stock Net of Offering Costs $ - $ - $ 957,319
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. . . . . . . . . . . . . 49,000 50,000 675,807
Repayments to Officer. . . . . . . . . . . . . - (16,000) (360,532)
Increase in Loan Payable-Others. . . . . . . . - - 164,664
------------------ ------------------- ----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:. . . . . . 49,000 34,000 2,128,596
------------------ ------------------- ----------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS . . . . . . . . . . . 25,918 71,402 71,422
BEGINNING BALANCE CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . 2,451 20 -
------------------ ------------------- ----------------------
ENDING BALANCE CASH AND CASH
EQUIVALENTS. . . . . . . . . . . . . . . . . $ 28,369 $ 71,422 71,422
================== =================== ======================
</TABLE>
7
<PAGE>
MATERIAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
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, 1999 and 1998 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 TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
During the three month period ended March 31, 1999, the Company generated
approximately $198,860 under its research and development contracts as compared
to $96,744 generated during the three-month period ended March 31, 1998.
During the three month periods ended March 31, 1999 and 1998, the Company
incurred approximately $8,077, and $28,202, respectively, in development costs
all of which related to the above indicated contracts.
General and administration costs were $192,373 and $100,611, respectively, for
the three-month periods ended March 31, 1999 and 1998. The major expenses
incurred during 1999, consisted of Officer's compensation of $50,000, consulting
fees of $42,050, professional fees of $26,827, interest expense of $13,347,
telephone expense of $4,015, rent expense of $7,544, and travel expense of
$14,663 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.
LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------
Cash and cash equivalents as of March 31, 1999 and 1998 were $71,422 and
$28,369, respectively. During the first quarter of 1999, the Company received a
total of $293,024 which consisted of $238,628 from its research and development
contracts, $50,000 in loans from its President, and $4,396 from the sale of
investment securities. Of the $293,024 received, $205,622 was used in operations
and $16,000 was repaid to its President. 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
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In February 1999, the Corporation issued 175,000 shares of its
Class A Common Stock to a consultant in exchange for the cancellation
of $66,667 of unpaid fees owed.
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
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 16896
<SECURITIES> 163200
<RECEIVABLES> 24168
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 135810
<PP&E> 93831
<DEPRECIATION> 166885
<TOTAL-ASSETS> 340165
<CURRENT-LIABILITIES> 395552
<BONDS> 0
<COMMON> 9572
150000
350
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 340165
<SALES> 0
<TOTAL-REVENUES> 48849
<CGS> 0
<TOTAL-COSTS> 273339
<OTHER-EXPENSES> 41548
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (273339)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (182942)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
