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: September 30, 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 (IRS Employer
of incorporation or organization) identification No.)
11661 San Vicente Boulevard
Suite 707
Los Angeles, California 90049
----------------------------------------
(address of principal executive offices)
(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 October 28, 1999 was approximately $6,019,492
Documents incorporated by reference-None.
1
<PAGE>
<TABLE>
<CAPTION>
INDEX
PAGE
------
Part 1. Financial Statements
<S> <C>
Balance Sheets 3 - 4
Statements of Operations -
Third Quarter Ended September 30, 1998 and 1999 and from
the Company's inception (October 21, 1983) through
September 30, 1999 5
Statements of Cash Flows -
Third Quarter Ended September 30, 1998 and 1999 and from
the Company's inception (October 21, 1983) through
September 30, 1999 6 - 7
Notes to Financial Statements 8
Management's Discussion and Analysis 9 - 11
Part 2. Other Information 11
</TABLE>
2
<PAGE>
PART 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
December 31, September 30,
1998 1999
------------- --------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents. . . . . . $ 20 $ 22
Accounts Receivable - Net. . . . . . 202,737 92,998
Receivable - Other . . . . . . . . . - 5,000
Employee Advances. . . . . . . . . . 1,500 1,500
------------- --------------
TOTAL CURRENT ASSETS . . . . . . . 204,257 99,520
------------- --------------
FIXED ASSETS
Property and Equipment, Net
of Accumulated Depreciation. . . 2,712 537
------------- --------------
OTHER ASSETS
Intangible Assets, Net of
Accumulated Amortization . . . . 16,690 15,199
Investment in Marketable Securities. 8,219 8,219
Investment in Joint Venture. . . . . - 18,000
Refundable Deposit . . . . . . . . . 1,868 1,868
------------- --------------
TOTAL OTHER ASSETS . . . . . . . . 26,777 43,286
------------- --------------
TOTAL ASSETS . . . . . . . . . . . $ 233,746 $ 143,343
============= ==============
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
----------------------------------------
December 31, September 30,
1998 1999
------------ -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Legal Fees Payable. . . . . . . . . . . . . . . . . . . . . . . $ 149,453 $ 150,986
Consulting Fees Payable . . . . . . . . . . . . . . . . . . . . 101,669 75,000
Accounting Fees Payable . . . . . . . . . . . . . . . . . . . . 23,308 24,481
Accounts Payable - Other. . . . . . . . . . . . . . . . . . . . 17,334 2,234
Wages Payable . . . . . . . . . . . . . . . . . . . . . . . . . - 4,266
Accrued Payroll Taxes . . . . . . . . . . . . . . . . . . . . . 25,197 24,752
Loan Payable - Officer. . . . . . . . . . . . . . . . . . . . . 73,177 6,059
Loan Payable-Others . . . . . . . . . . . . . . . . . . . . . . 46,273 49,754
------------ -------------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . 436,411 337,532
Payable on Research and
Development Sponsorship . . . . . . . . . . . . . . . . . . . 257,240 284,240
Note Payable - Other. . . . . . . . . . . . . . . . . . . . . . . 25,527 25,527
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . 719,178 647,299
------------ -------------
STOCKHOLDERS' EQUITY (DEFICIT)
Class A Common Stock, $.001 Par Value, Authorized 30,000,000
Shares, Outstanding 10,061,897, at December 31, 1998, and
13,617,102 Shares at September 30, 1999. . . . . . . . . . . 10,062 13,617
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 3,195,176
Less Notes Receivable - Common Stock. . . . . . . . . . . . . . (14,720) (14,720)
Deficit Accumulated During the Development Stage. . . . . . . . (3,486,067) (3,706,658)
Unrealized Holding Gain on Investments in Securities. . . . . . 8,219 8,219
------------ -------------
TOTAL STOCKHOLDERS' (DEFICIT) . . . . . . . . . . . . . . . . . (485,432) (503,956)
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' . . . . . . . . . . . . . $ 233,746 $ 143,343
============ =============
</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 For the Nine Months Ended (October 21, 1983)
September 30, September 30, Through
1998 1999 1998 1999 September 30, 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES
Sale of Fatigue Fuses $ - $ - $ - $ - $ 64,505
Sale of Royalty Interests - - - - 198,750
Research and Development Revenue 13,000 130,354 158,594 405,304 1,828,618
Test Services - - - - 10,870
------------ ------------ ------------ ------------ --------------------
TOTAL REVENUES 13,000 130,354 158,594 405,304 2,102,743
------------ ------------ ------------ ------------ --------------------
COSTS AND EXPENSES
Research and Development 46,993 17,044 141,907 51,702 1,890,664
General and Administrative 191,044 156,441 507,282 578,266 3,844,419
------------ ------------ ------------ ------------ --------------------
TOTAL COSTS AND EXPENSES 238,037 173,485 649,189 629,968 5,735,083
------------ ------------ ------------ ------------ --------------------
INCOME (LOSS) FROM OPERATIONS (225,037) (43,131) (490,595) (224,664) (3,632,340)
------------ ------------ ------------ ------------ --------------------
OTHER INCOME (EXPENSE)
Expense Reimbursed - - - - 4,510
Rental Income - - - - 39,503
Interest Income - 304 - 477 203,578
Gain on Sale of Marketable Securities 115,371 - 169,250 4,396 23,093
Gain on Sale of Real Estate - - - - 25,145
Gain on Foreclosure of Real Estate - - - - (12,780)
Miscellaneous Income - - - - 50,000
Loss on Sale of Equipment - - - - (7,332)
Settlement of Teaming Agreement - - - - (126,590)
Cancellation of Royalty - - (12,332) - 18,095
------------ ------------ ------------ ------------ --------------------
TOTAL OTHER INCOME 115,371 304 156,918 4,873 217,222
------------ ------------ ------------ ------------ --------------------
NET INCOME (LOSS) BEFORE EXTRAORDINARY
ITEMS AND PROVISION FOR INCOME TAXES (109,666) (42,827) (333,677) (219,791) (3,415,118)
PROVISION FOR INCOME TAXES - - - (800) (8,600)
------------ ------------ ------------ ------------ --------------------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS (109,666) (42,827) (333,677) (220,591) (3,423,718)
EXTRAORDINARY ITEMS
Forgiveness of Debt - - - - (289,940)
Utilization of Operating Loss Carry forward - - - - 7,000
------------ ------------ ------------ ------------ --------------------
NET INCOME (LOSS) $ (109,666) $ (42,827) $ (333,677) $ (220,591) $ (3,706,658)
============ ============ ============ ============ ====================
PER SHARE DATA
Basic Income (Loss) Per Share Before
Extraordinary Item (0.011) $ (0.003) (0.040) $ (0.019)
Extraordinary Items - - - -
------------ ------------ ------------ ------------
NET INCOME (LOSS) (0.011) $ (0.003) (0.040) $ (0.019)
============ ============ ============ ============
WEIGHTED AVERAGE
============ ============ ============ ============
COMMON SHARES OUTSTANDING 9,792,549 13,588,239 8,315,734 11,672,184
============ ============ ============ ============
</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 For the Nine Months Ended (October 21, 1983)
September 30, September 30, Through
1998 1999 1998 1999 September 30, 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------- ------------- ------------ ----------- ------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) . . . . . . . . . . . . . . $ (109,666) $ (42,827) $ (333,677) $ (220,591) $ (3,706,658)
------------- ------------- ------------ ----------- ------------------
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided
(Used) by Operating Activities
Depreciation and Amortization . . . . . . . . 1,195 1,222 3,585 3,666 173,049
Bad Debt. . . . . . . . . . . . . . . . . . . 50,000 - 50,000 50,000
Gain on Sale of Marketable Securities . . . . (115,371) - (169,250) (189,200)
Gain on Real Estate Foreclosure . . . . . . . - - - (18,697)
Gain on Sale of Real Estate . . . . . . . . . - - - 36,480
Charge off of Deferred Offering Costs . . . . 92,919
Charge off of Deferred Offering Costs . . . . - - - 12,780
Loss on Sale of Equipment . . . . . . . . . . - - - 7,332
Issuance of Common Stock for Services. . . . 2,000 2,900 7,617 35,400 445,997
Issuance of Stock for Agreement Modification. - - 7,332 152
Forgiveness of Indebtedness . . . . . . . . . - - - 165,000
(Increase) Decrease in Accounts Receivable. . (4,454) (15,007) 48,284 109,739 (144,498)
Decrease in Prepaid Expenses. . . . . . . . . - - - 321
Increase (Decrease) in Accounts . . . . . . . -
Payable and Accrued Expenses. . . . . . . . 2,930 13,551 54,858 31,425 720,385
Interest Accrued on Note Payable. . . . . . . - 1,835 5,695 8,863 99,338
Increase in Research and Development. . . . . -
Sponsorship Payable. . . . . . . . . . . . 9,000 9,000 27,000 27,000 245,000
(Increase) in Note for Litigation Settlement. - (25,753)
(Increase) in Deposits. . . . . . . . . . . . - (2,189)
------------- ------------- ------------ ----------- ------------------
TOTAL ADJUSTMENTS . . . . . . . . . . . . . (54,700) 13,501 35,121 216,093 1,668,416
------------- ------------- ------------ ----------- ------------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES . . . . . . . . . . . . (164,366) (29,326) (298,556) (4,498) (2,038,242)
------------- ------------- ------------ ----------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds From Sale of Equipment . . . . . . . - - - - 10,250
Proceeds from Sale of Marketable Securities . 133,321 - 250,200 - 279,200
Purchase of Marketable Securities . . . . . . - - (90,000) - (90,000)
Investment in Joint Venture . . . . . . . . . (8,000) (18,000) (18,000)
Purchase of Property and Equipment. . . . . . - - - - (229,413)
Net Proceeds from Sale of Real Estate . . . . - - - - 44,450
(Increase) in Other Assets. . . . . . . . . . - - - - (69,069)
Payment for License Agreement . . . . . . . . - - - - (6,250)
------------- ------------- ------------ ----------- ------------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES . . . . . . . . . . . . 133,321 (8,000) 160,200 (18,000) (78,832)
------------- ------------- ------------ ----------- ------------------
</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 For the Nine Months Ended (October 21, 1983)
September 30, September 30, Through
1998 1999 1998 1999 September 30, 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
-------------- ------------- ------------ ----------- ------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock
Net of Offering Costs. . . . . . . $ 125,000 $ - $ 125,000 $ - $ 957,319
Costs incurred in Offering . . . . . - - - - (31,480)
Sale of Common Stock Warrants. . . . - - - - 18,250
Payment on Proposed Reorganization . (5,000)
Sale of Preferred Stock. . . . . . . - - - - 258,500
Sale of Redeemable Preferred Stock . - - - - 150,000
Capital Contributions. . . . . . . . - - - - 301,068
Loans From Officers. . . . . . . . - 5,000 106,500 80,000 705,807
Repayments to Officer. . . . . . . . (13,100) (27,500) (13,100) (52,500) (397,032)
(Increase) in Loans - Other. . . . . (5,000) (5,000) 159,664
-------------- ------------- ------------ ----------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:. 111,900 (27,500) 218,400 22,500 2,117,096
-------------- ------------- ------------ ----------- ------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS . . . . . . 80,855 (64,826) 80,044 2 22
BEGINNING BALANCE CASH AND
CASH EQUIVALENTS . . . . . . . . 1,640 64,848 2,451 20 -
-------------- ------------- ------------ ----------- ------------------
ENDING BALANCE CASH AND CASH
EQUIVALENTS. . . . . . . . . . . . $ 82,495 $ 22 $ 82,495 $ 22 22
============== ============= ============ =========== ==================
</TABLE>
See accompanying notes.
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 September 30, 1998 and 1999 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 NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
During the nine month period ended September 30, 1998, the Company generated
approximately $327,844 which consisted of $158,594 under its research and
development contract, and $169,250 from the sale of marketable securities.
During the nine month period ended September 30, 1999, the Company generated
approximately $410,177, which consisted of $405,304 under its research and
development contracts, $4,396 from the sale of marketable securities, and $477
in interest earned from savings.
During the nine month periods ended September 30, 1998 and 1999, the Company
incurred approximately $141,907, and $51,702, respectively, in development costs
all of which related to the above indicated contracts.
General and administration costs were $507,282, and $578,266, respectively, for
the nine-month periods ended September 30, 1998, and 1999. The major expenses
incurred during the nine-month period ended September 30, 1998, consisted of
$121,455 in consulting fees, $67,500 in officer's salary, $50,000 charged off as
a bad debt, $33,933 in interest expense, $130,996 in professional fees, $15,161
in telephone expense, $16,562 in salaries, and $11,582 in travel costs.
The major expenses incurred during the nine-month period ended September 30,
1999, consisted of $206,982 in consulting fees, $90,000 in officer's salary,
$60,100 in interest expense, $92,308 in professional fees, $19,610 in rent,
$14,818 in telephone expense, $20,956 in salaries, and $39,514 in travel costs.
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
During the three month period ended September 30, 1998, the Company generated
approximately $128,371, which consisted of $13,000 under its research and
development contracts, and a net gain of $115,371 from the sale of marketable
securities.
9
<PAGE>
During the three month period ended September 30, 1999, the Company generated
approximately $130,658 which consisted of $130,354 under its research and
development contracts, and interest earned on savings totaling $304.
During the three month period ended September 30, 1998, the Company incurred
approximately $46,993 in development costs, all of which related to the
above-indicated contracts.
During the three month period ended September 30, 1999, the Company incurred
approximately $17,044 in development costs, all of which related to the
above-indicated contract.
General and administration costs were $191,044 and $156,441, respectively, for
the three-month periods ended September 30, 1998 and 1999. The major expenses
incurred in 1998, consisted of bad debt of $50,000, $22,500 in officer's salary,
$9,625 in interest expense, $49,224 in consulting fees, and $26,101 in
professional fees.
The major expenses incurred in 1999, consisted of officer's salaries of $30,000,
interest expense of $11,523, office salaries of $3,456, consulting of $47,177,
professional services of $20,348, rent of $6,158, and travel expense of $11,723.
LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------
Cash and cash equivalents as of September 30, 1998 and 1999 were $82,495, and
$22, respectively. During 1998, the Company received $125,000 through the
issuance of its common stock, $106,500 through advances made by its President,
$205,391 from its research and development contracts, and $250,200 from the sale
of marketable securities. Of the $687,091 received in 1998, $503,947 was used
in operations, $90,000 was used to purchase marketable securities, and $13,100
was used to pay down loans made by the Company's President.
During 1999, the Company received $295,565 through its research contracts,
and $80,000 through advances from its President. Of the $375,565 received,
$300,063 was used in operations, $18,000 was invested in a joint Venture,
$52,500 was repaid to its President, and the $5,000 was loaned to a third party.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On July 7, 1999, the Company issued 672,205 shares of its common stock to the
University of Pennsylvania. These shares are issued pursuant to the 1998
agreement whereby the Company agreed to issue 5% of the Company's total
outstanding shares to the University.
On August 24, 1999, the Company issued 50,000 shares of its Common Stock to a
consultant for services.
On September 30, 1999, the Company issued 8,000 shares of its Common Stock to a
consultant for services.
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
DATE: OCTOBER 28, 1999
11
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE QUARTER ENDED SEPTEMBER 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 22
<SECURITIES> 8219
<RECEIVABLES> 92998
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 99520
<PP&E> 121957
<DEPRECIATION> (121420)
<TOTAL-ASSETS> 143343
<CURRENT-LIABILITIES> 337532
<BONDS> 0
0
0
<COMMON> 13677
<OTHER-SE> (517633)
<TOTAL-LIABILITY-AND-EQUITY> 143343
<SALES> 0
<TOTAL-REVENUES> 405304
<CGS> 0
<TOTAL-COSTS> 629968
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37924
<INCOME-PRETAX> (219791)
<INCOME-TAX> (800)
<INCOME-CONTINUING> (220591)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (220591)
<EPS-BASIC> (.01)
<EPS-DILUTED> 0
</TABLE>
