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, 2000 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)
(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 20, 2000 was approximately $866,973.
Documents incorporated by reference-None.
1
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INDEX
PAGE
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Part 1. Financial Statements
Balance Sheets 3 - 4
Statements of Operations -
Third Quarter Ended September 30, 1999 and 2000 and from
the Company's inception (October 21, 1983) through
September 30, 2000 5
Statements of Cash Flows -
Third Quarter Ended September 30, 1999 and 2000 and from
the Company's inception (October 21, 1983) through
September 30, 2000 6 - 7
Notes to Financial Statements 8
Management's Discussion and Analysis 9 - 11
Part 2. Other Information 11
2
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<TABLE>
<CAPTION>
PART 1. FINANCIAL STATEMENTS
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
December 31, September 30,
1999 2000
------------ -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 62,904 $ 54,783
Accounts Receivable - Net 144,796 5,128
Loans to Officer - 9,276
Employee Advances 1,500 -
Prepaid Expense - 50,000
------------ -------------
TOTAL CURRENT ASSETS 209,200 119,187
------------ -------------
FIXED ASSETS
Property and Equipment, Net
of Accumulated Depreciation 3,949 3,230
------------ -------------
OTHER ASSETS
Intangible Assets, Net of
Accumulated Amortization 14,701 13,209
Investment in Marketable Securities 2,055 2,055
Investment in Joint Venture 18,000 33,000
Refundable Deposit 2,136 2,136
------------ -------------
TOTAL OTHER ASSETS 36,892 50,400
------------ -------------
TOTAL ASSETS $ 250,041 $ 172,817
============ =============
</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,
1999 2000
-------------------- --------------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Legal Fees Payable $ 145,900 $ 147,072
Fees Payable to R&D Subcontractor 101,322 3,077
Consulting Fees Payable 159,000 -
Accounting Fees Payable 24,153 25,989
Accounts Payable - Other 18,122 5,325
Accrued Expenses 24,269 31,440
Notes Payable - Current Portion 25,688 86,441
Loan Payable - Officer 10,270 -
Loans Payable - Others 58,319
-------------------- --------------------
TOTAL CURRENT LIABILITIES 567,043 299,344
Payable on Research and
Development Sponsorship 303,543 344,522
-------------------- --------------------
TOTAL LIABILITIES 870,586 643,866
-------------------- --------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Class A Common Stock, $.001 Par Value, Authorized 100,000,000
Shares, Outstanding 14,597,435, at December 31, 1999, and
20,234,492 Shares at September 30, 2000 14,597 20,234
Class B Common Stock, $.001 Par Value, Authorized 100,000
Shares, Outstanding 60,000 Shares at December 31,1999, and
100,000 Shares at September 30, 2000 60 100
Class A Preferred, $.001 Par Value, Authorized 900,000 Shares
Outstanding 350,000 Shares 350 337
Additional Paid in Capital 3,455,004 5,661,289
Less Notes Receivable - Common Stock (39,694) (2,092,153)
Deficit Accumulated During the Development Stage (4,052,917) (4,062,911)
Unrealized Holding Gain on Investments in Securities 2,055 2,055
-------------------- --------------------
TOTAL STOCKHOLDERS' (DEFICIT) (620,545) (471,049)
-------------------- --------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 250,041 $ 172,817
==================== ====================
</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
1999 2000 1999 2000 September 30, 2000
------------ ------------ ------------ ------------ --------------------
(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 130,354 143,781 405,304 601,936 2,949,734
Test Services - - - - 10,870
------------ ------------ ------------ ------------ --------------------
TOTAL REVENUES 130,354 143,781 405,304 601,936 3,223,859
------------ ------------ ------------ ------------ --------------------
COSTS AND EXPENSES
Research and Development 17,044 100,051 51,702 433,445 2,808,644
General and Administrative 156,441 117,477 578,266 443,777 4,612,941
------------ ------------ ------------ ------------ --------------------
TOTAL COSTS AND EXPENSES 173,485 217,528 629,968 877,222 7,421,585
------------ ------------ ------------ ------------ --------------------
INCOME (LOSS) FROM OPERATIONS (43,131) (73,747) (224,664) (275,286) (4,197,726)
------------ ------------ ------------ ------------ --------------------
OTHER INCOME (EXPENSE)
Expense Reimbursed - - - - 4,510
Interest Income 304 39,128 477 61,606 103,722
Gain on Sale of Stock - - 4,396 251,798 459,295
Gain on Foreclosure - - - - 18,697
Miscellaneous Income - - - - 25,145
Modification of Royalty Agreement - - - - (7,332)
Loss on Sale of Equipment - - - - (12,780)
Interest Expense - - (15,158) (45,537) (230,422)
Settlement of Teaming Agreement - - - - 50,000
Litigation Settlement - - - - 18,095
------------ ------------ ------------ ------------ --------------------
TOTAL OTHER INCOME 304 23,970 4,873 267,867 428,930
------------ ------------ ------------ ------------ --------------------
NET INCOME (LOSS) BEFORE EXTRAORDINARY
ITEMS AND PROVISION FOR INCOME TAXES (42,827) (49,777) (219,791) (7,419) (3,768,796)
PROVISION FOR INCOME TAXES - - (800) (2,575) (11,175)
------------ ------------ ------------ ------------ --------------------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS (42,827) (49,777) (220,591) (9,994) (3,779,971)
EXTRAORDINARY ITEMS
Forgiveness of Debt - - - - (289,940)
Utilization of Operating Loss Carry forward - - - - 7,000
------------ ------------ ------------ ------------ --------------------
NET INCOME (LOSS) $ (42,827) $ (49,777) $ (220,591) $ (9,994) $ (4,062,911)
============ ============ ============ ============ ====================
PER SHARE DATA
Basic Income (Loss) Per Share Before
Extraordinary Item (0.003) $ (0.002) (0.019) (0.001)
Extraordinary Items - - - -
------------ ------------ ------------
NET INCOME (LOSS) (0.003) $ (0.002) (0.019) (0.001)
============ ============ ============ ============
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 13,588,239 20,324,413 11,672,184 17,483,367
============ ============ ============ ============
</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
1999 2000 1999 2000 September 30, 2000
------------ ------------ ------------ ------------ --------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (42,827) $ (49,777) $ (220,591) $ (9,994) $ (4,062,911)
------------ ------------ ------------ ------------ --------------------
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided
(Used) by Operating Activities
Depreciation and Amortization 1,222 737 3,666 2,211 173,836
Interest Income on Stock Subscriptions Receivable - (39,790) - (57,459) (58,891)
Bad Debt - - - - 50,000
Gain on Sale of Marketable Securities - - - - (193,596)
Gain on Real Estate Foreclosure - - (18,697)
Charge off of Deferred Offering Costs - - 36,480
Charge off of Long-lived Assets Due Impairment - - - - 92,919
Charge off of Deferred Offering Costs - - 12,780
Loss on Sale of Equipment - - 7,332
Issuance of Common Stock for Services 2,900 16,000 35,400 61,950 595,214
Issuance of Stock for Agreement Modification - - - - 152
Forgiveness of Indebtedness - - 165,000
(Increase) Decrease in Accounts Receivable (15,007) 136,791 109,739 141,168 (55,128)
(Increase) Decrease in Prepaid Expenses - (50,000) - (50,000) (49,947)
Increase (Decrease) in Accounts
Payable and Accrued Expenses 13,551 (123,788) 31,425 (109,863) 801,568
Interest Accrued on Note Payable 1,835 703 8,863 2,388 150,363
Increase in Research and Development -
Sponsorship Payable 9,000 13,659 27,000 40,978 258,978
(Increase) in Note for Litigation Settlement - - - - (25,753)
(Increase) in Deposits - - - - (2,189)
------------ ------------ ------------ ------------ --------------------
TOTAL ADJUSTMENTS 13,501 (45,688) 216,093 31,373 1,940,421
------------ ------------ ------------ ------------ --------------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (29,326) (95,465) (4,498) 21,379 (2,122,490)
------------ ------------ ------------ ------------ --------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds From Sale of Equipment - - - - 10,250
Proceeds from Sale of Marketable Securities - - - - 283,596
Purchase of Marketable Securities - - - - (90,000)
Investment in Joint Venture (8,000) - (18,000) (15,000) (102,069)
Purchase of Property and Equipment - - - - (230,903)
Net Proceeds from Sale of Real Estate- - - - - 44,450
Payment for License Agreement - - - - (6,250)
------------ ------------ ------------ ------------ --------------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (8,000) - (18,000) (15,000) (90,926)
------------ ------------ ------------ ------------ --------------------
</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
1999 2000 1999 2000 September 30, 2000
------------ ------------ ------------ ------------ --------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock
Net of Offering Costs $ - $ - $ - $ 5,000 $ 1,112,319
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 - 80,000 3,000 731,005
Repayments to Officer (27,500) (11,000) (52,500) (22,500) (438,532)
( Increase) in Loans - Other (5,000) - (5,000) - 172,069
------------ ------------ ------------ ------------ --------------------
CASH FLOWS FROM FINANCING ACTIVITIES: (27,500) (11,000) 22,500 (14,500) 2,268,199
------------ ------------ ------------ ------------ --------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (64,826) (106,465) 2 (8,121) 54,783
BEGINNING BALANCE CASH AND
CASH EQUIVALENTS 64,848 161,248 20 62,904 -
------------ ------------ ------------ ------------ --------------------
ENDING BALANCE CASH AND CASH
EQUIVALENTS $ 22 $ 54,783 $ 22 $ 54,783 $ 54,783
============ ============ ============ ============ ====================
</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, 1999 and 2000 and the
results of operations and cash flows for the three-month and
nine-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, 1999 AND 2000
During the nine month period ended September 30, 1999, the Company
generated approximately $410,177 in revenue, 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 period ended September 30, 2000, the Company
generated approximately $915,340 in revenue, which consisted of $601,936
under its research, and development contracts, $251,798 from the sale of
marketable securities, and $61,606 in interest. Of the $61,606 in interest
earned, $55,572 relates to interest accrued on non-recourse stock
subscription receivables due from the Company's President and a Director.
During the nine month periods ended September 30, 1999 and 2000, the
Company incurred approximately $51,702, and $433,445, respectively, in
development costs all of which related to the above indicated contracts.
General and administration costs were $578,266, and $443,777, respectively,
for the nine-month periods ended September 30, 1999, and 2000. 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.
The major expenses incurred during the nine-month period ended September
30, 2000, consisted of $84,101 in consulting fees, $90,000 in officer's
salary, $109,315 in professional fees, $18,855 in rent, $14,577 in
telephone expense, $28,187 in salaries, office expense of $21,761, and
$22,491 in travel costs.
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000
During the three month period ended September 30, 1999, the Company
generated approximately $130,658 in revenue which consisted of $130,354
under its research and development contracts, and interest earned on
savings totaling $304.
9
<PAGE>
During the three-month period ended September 30, 2000, the Company
generated approximately $182,909 in revenue, which consisted of $143,781
under its research and development contracts, and interest earned of
$39,128 the majority of which relates to interest accrued on non-recourse
stock subscription receivables due from the Company's President and a
Director.
During the three-month periods ended September 30, 1999 and 2000, the
Company incurred approximately $17,044, and $100,051, respectively, in
development costs all of which related to the above indicated contracts.
General and administration costs were $156,441 and $117,477, respectively,
for the three-month periods ended September 30, 1999 and 2000. 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 fees of
$47,177, professional services of $20,348, rent of $6,158, and travel
expense of $11,723.
The major expenses incurred in 2000, consisted of officer's salaries of
$30,000, office salaries of $8,928, consulting fees of $8,591, professional
services of $34,498, rent of $6,411, office expense of $6,246, telephone
expense of $5,236, and travel expense of $3,672.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash and cash equivalents as of September 30, 1999 and 2000 were $22, and
$54,783, respectively. 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
$5,000 was advanced to a third party.
During 2000, the Company received $841,647 through its research contracts,
$3,000 through advances from its President, $5,000 through the issuance of
Company's common stock, $251,798 through the sale of stock held for
investment, $3,990 from interest earned on savings, and other receipts
totaling $3,053. Of the $1,108,488 received, $1,070,988 was used in
operations, $15,000 was invested in a joint Venture, and $22,500 was repaid
to its President.
10
<PAGE>
PART 2. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On July 13, 2000, the Company issued 40,000 shares of its common stock to
an attorney in part payment of fees owed.
On August 13, 2000, the Company issued 10,167 shares of its Common Stock to
individuals through a reserve established by the Company to issue shares of
its Common Stock to individuals who were defrauded by a former consultant
of the Company.
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 20, 2000
11
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