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: June 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 (IRS Employer
incorporation or organization) identification No.)
11661 San Vicente Boulevard
Suite 707
Los Angeles, California 90049
----------------------------------
(address of principal executive offices)
(Zip Code)
(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 July 28, 2000 was $2,053,358.
Documents incorporated by reference-None.
1
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INDEX
PAGE
----
Part 1. Financial Statements
Balance Sheets 3 - 4
Statements of Operations
Second Quarter Ended June 30, 1999 and 2000 and from
the Company's inception (October 21, 1983) through
June 30, 2000 5
Statements of Cash Flows
Second Quarter Ended June 30, 1999 and 2000 and from
the Company's inception (October 21, 1983) through
June 30, 2000 6 - 7
Statements of Comprehensive Income
Second Quarter Ended June 30, 1999 and 2000 and from
the Company's inception (October 21, 1983) through
June 30, 2000 8
Notes to Financial Statements 9
Management's Discussion and Analysis 10 - 11
2
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<TABLE>
<CAPTION>
PART 1. FINANCIAL STATEMENTS
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
December 31, June 30,
1999 2000
------------- ---------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 62,904 $ 161,248
Accounts Receivable 144,796 140,419
Employee Advance 1,500 1,500
------------- ---------
TOTAL CURRENT ASSETS 209,200 303,167
------------- ---------
FIXED ASSETS
Property and Equipment, Net
of Accumulated Depreciation 3,949 3,469
------------- ---------
OTHER ASSETS
Intangible Assets, Net of
Accumulated Amortization 14,701 13,707
Investment in Marketable Securities 20,055 -
Investment in Joint Venture - 33,000
Refundable Deposit 2,136 2,136
------------- ---------
TOTAL OTHER ASSETS 36,892 48,843
------------- ---------
TOTAL ASSETS $ 250,041 $ 355,479
============= =========
</TABLE>
See accompanying notes
3
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<TABLE>
<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
----------------------------------------
December 31, June 30,
1999 2000
-------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Legal Fees Payable $ 145,900 $ 151,550
Fees Payable to R&D Subcontractor 101,322 99,065
Consulting Fees Payable 159,000 202
Accounting Fees Payable 24,153 27,880
Other Accounts Payable 18,122 7,360
Accrued Expenses 24,269 41,636
Notes Payable - Current Portion 84,007 85,629
Loan Payable - Officer 10,270 1,831
-------------- ------------
TOTAL CURRENT LIABILITIES 567,043 415,153
Payable on Research and
Development Sponsorship 303,543 330,862
-------------- ------------
TOTAL LIABILITIES 870,586 746,015
-------------- ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, $.001 Par Value, Authorized 100,000,000
Shares, Outstanding 14,597,435 shares at December 31, 1999, and
20,184,325 shares at June 30, 2000 14,597 20,184
Class B Common Stock, $.001 Par Value, Authorized 100,000
Shares, Outstanding 60,000 Shares at December 31, 1999, and
100,000 Shares at June 30, 2000 60 100
Class A Preferred, $.001 Par Value, Authorized 900,000 Shares
Outstanding 337,471 Shares 350 337
Additional Paid in Capital 3,455,004 5,653,889
Less Notes Receivable - Common Stock (39,694) (2,052,362)
Deficit Accumulated During the Development Stage (4,052,917) (4,012,684)
Unrealized Holding Gain on Investment Securities 2,055 -
-------------- ------------
TOTAL STOCKHOLDERS' (DEFICIT) (620,545) (390,536)
-------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
(DEFICIT) $ 250,041 $ 355,479
============== ============
</TABLE>
See accompanying notes
4
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<TABLE>
<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
From Inception
For the Three Months Ended For the Six Months Ended (October 21, 1983)
June 30, June 30, Through
1999 2000 1999 2000 June 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
Income from Research Contracts 76,091 277,308 274,950 458,155 2,805,953
Test Services - - - - 10,870
------------ ------------ ------------ ------------ ---------------
TOTAL REVENUES 76,091 277,308 274,950 458,155 3,080,078
------------ ------------ ------------ ------------ ---------------
COSTS AND EXPENSES
Research and Development 26,581 260,469 34,658 351,087 2,726,286
General and Administrative 216,398 110,324 395,424 308,158 4,477,322
------------ ------------ ------------ ------------ ---------------
TOTAL COSTS AND EXPENSES 242,979 370,793 430,082 659,245 7,203,608
------------ ------------ ------------ ------------ ---------------
INCOME (LOSS) FROM OPERATIONS (166,888) (93,485) (155,132) (201,090) (4,123,530)
------------ ------------ ------------ ------------ ---------------
OTHER INCOME (EXPENSE)
Expense Reimbursed - - - - 4,510
Interest Income 107 21,440 173 22,478 64,594
Gain on Sale of Securities - - 4,396 251,798 459,295
Gain on Foreclosure - - - - 18,697
Miscellaneous Income - - - - 25,145
Loss on Sale of Equipment - - - - (12,780)
Settlement of Teaming Agreement - - - - 50,000
Modification of Royalty Agreement - - - - (7,332)
Interest Expense (13,054) (15,158) (26,401) (30,378) (215,263)
Litigation Settlement - - - - 18,095
------------ ------------ ------------ ------------ ---------------
TOTAL OTHER INCOME (12,947) 6,282 (21,832) 243,898 404,961
------------ ------------ ------------ ------------ ---------------
NET INCOME (LOSS) BEFORE EXTRAORDINARY
ITEMS AND PROVISION FOR INCOME TAXES (179,835) (87,203) (176,964) 42,808 (3,718,569)
PROVISION FOR INCOME TAXES (800) (800) (800) (2,575) (11,175)
------------ ------------ ------------ ------------ ---------------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS (180,635) (88,003) (177,764) 40,233 (3,729,744)
EXTRAORDINARY ITEMS
Forgiveness of Debt - - - - (289,940)
Utilization of Operating Loss Carry Forward - - - - 7,000
------------ ------------ ------------ ------------ ---------------
NET (LOSS) $ (180,635) $ (88,003) $ (177,764) $ 40,233 $ (4,012,684)
============ ============ ============ ============ ===============
PER SHARE DATA
Income (Loss) Before Extraordinary Item (0.017) $ (0.005) (0.017) $ 0.003
Extraordinary Items - - - -
------------ ------------ ------------ ------------
NET INCOME (LOSS) (0.017) $ (0.005) (0.017) $ 0.003
============ ============ ============ ============
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 10,860,359 17,243,600 10,524,278 16,047,454
============ ============ ============ ============
</TABLE>
See accompanying notes
5
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<TABLE>
<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
From Inception
(October 21,
For the Three Months Ended For the Six Months Ended 1983)
June 30, June 30, Through
1999 2000 1999 2000 June 30, 2000
------------ ----------- ------------ ------------ -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (180,635) (88,003) $ (177,764) $ 40,233 $(4,012,684)
------------ ----------- ------------ ------------ -------------
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided
(Used) by Operating Activities
Depreciation and Amortization 1,222 738 2,444 1,474 173,099
Interest Income Accrued on Stock Subscription Receivable - (16,715) - (17,668) (19,100)
Bad Debts - - - - 50,000
Gain on Sale of Securities - - (4,396) - (193,596)
Gain on Foreclosure - - - - (18,697)
Charge off of Deferred Offering Costs - - - - 36,480
Charge off of Long-lived Assets Due to Impairment - - - - 92,919
Loss on Sale of Equipment - - - - 12,780
Modification of Royalty Agreement - - - - 7,332
Issuance of Common Stock for Services 32,500 (3,450) 32,500 45,500 578,764
Issuance of Stock for Agreement Modification - - - - 152
Forgiveness of Indebtedness - - - - 165,000
(Increase) Decrease in Accounts Receivable 84,978 (66,469) 124,746 4,377 (191,919)
(Increase) in Employee Advances - - - - -
(Increase) Decrease in Prepaid Expense - - - - 53
Increase (Decrease) in Accounts
Payable and Accrued Expenses 36,994 112,465 17,874 13,926 925,357
Interest Accrued on Notes Payable 12,367 14,470 25,028 29,002 176,977
Increase in Research and Development
Sponsorship Payable - - - - 218,000
(Increase) in Note for Litigation Settlement - - - - (25,753)
(Increase) in Deposits - - - - (2,189)
------------ ----------- ------------ ------------ -------------
TOTAL ADJUSTMENTS 168,061 41,039 198,196 76,611 1,985,659
------------ ----------- ------------ ------------ -------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (12,574) (46,964) 20,432 116,844 (2,027,025)
------------ ----------- ------------ ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Equipment - - - - 10,250
Proceeds from Sale of Securities - - 4,396 - 283,596
Purchase of Securities - - - - (90,000)
Purchase of Property and Equipment - - - - (230,903)
Investment in Joint Venture (10,000) (15,000) (10,000) (15,000) (15,000)
Proceeds from Foreclosure - - - - 44,450
Investment in Joint Ventures - - - - (87,069)
Payment for License Agreement - - - - (6,250)
------------ ----------- ------------ ------------ -------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (10,000) (15,000) (5,604) (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 Six Months Ended (October 21, 1983)
June 30, June 30, Through
1999 2000 1999 2000 June 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 $ - $ 5,000 $ 1,112,319
Costs Incurred in Offering - - - - (31,480)
Sale of Common Stock Warrants - - - - 18,250
Payment on Proposed Reoganization - - - - (5,000)
Sale of Preferred Stock - - - - 258,500
Sale of Redeemable Preferred Stock - - - - 150,000
Capital Contributions - - - - 301,068
Loans from Officers 25,000 3,000 75,000 3,000 731,005
Repayments to Officer (9,000) (1,000) (25,000) (11,500) (427,532)
Increase (Decrease) in Loans - Other - - - - 172,069
------------ ------------ ------------ ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES: 16,000 7,000 50,000 (3,500) 2,279,199
------------ ------------ ------------ ------------- ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (6,574) (54,964) 64,828 98,344 161,248
BEGINNING BALANCE CASH AND
CASH EQUIVALENTS 71,422 216,212 20 62,904 -
------------ ------------ ------------ ------------- ------------
ENDING BALANCE CASH AND CASH
EQUIVALENTS $ 64,848 $ 161,248 $ 64,848 $ 161,248 $ 161,248
============ ============ ============ ============ ============
</TABLE>
See accompanying notes
7
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<TABLE>
<CAPTION>
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF COMPREHENSIVE INCOME
For the Three For the Six From Inception
Months Ended Months Ended (October 21, 1983)
June 30, June 30, Through
1999 2000 1999 2000 June 30, 2000
----------- ----------- ----------- ----------- ---------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
NET (LOSS) $ (180,635) $ (88,003) $ (177,764) $ 40,233 $ (4,012,684)
OTHER COMPREHENSIVE INCOME,
NET OF TAX
Unrealized Gains (Losses) on Securities - (2,055) - - (2,055)
----------- ----------- ----------- ----------- ---------------
TOTAL COMPREHENSIVE INCOME $ (180,635) $ (90,058) $ (177,764) $ 40,233 $ (4,014,739)
=========== =========== =========== =========== ===============
</TABLE>
See accompanying notes
8
<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 June 30, 2000 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.
9
<PAGE>
MATERIAL TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
-----------------------
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
The Company had no sales during the six month period ended June 30, 2000,
or during the six month period ended June 30, 1999. The Company generated
$458,155 under its research and development contracts during the first two
quarters of 2000, as compared to $274,950 which was earned during the same
period in 1999. The Company realized a $251,798 gain from the sale of
marketable securities during the first two quarter of 2000, as compared to
$4,396 during the same period in 1999. Interest earned during the first two
quarters in 2000 totaled $22,478 which mostly consisted of accrued interest
earned on promissory notes due from the Company's President and a Director
on stock purchased during the second quarter of 2000. Interest earned in
1999 amounted to $173.
During the six month period ended June 30, 2000, the Company incurred
$351,086 in development costs of which $297,198 relates to subcontract
costs . Development costs incurred during the six months ended June 30,
1999, amounted to $34,658.
General and administration costs were $308,608 and $394,356 respectively,
for the six-month periods ended June 30, 2000 and 1999. The major costs
incurred during 2000, consisted of professional fees of $74,819, consulting
fees of $75,510, officer's salary of $60,000, travel of $18,819, telephone
expense of $9,341, rent of $12,444, and office expense of $15,515. The
major costs incurred during 1999, consisted of professional fees of
$55,971, consulting fees of $159,805, officer's salary of $70,000, travel
of $27,792, telephone expense of $9,565, rent of $13,452, and office
expense of $9,317.
Interest expense for the six-months ended June 30, 2000 totaled $30,378 as
compared to $26,401 incured during the for the first six-months of 1999.
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
The Company had no sales during the three month period ended June 30, 2000
or during the three month period ended June 30, 1999. During the three
month period ending June 30, 2000, the Company earned $277,308 from its
research contract as compared to $76,091 earned during the same period in
1999. Interest earned during the three months ended June 30, 2000 totaled
$21,440 which mostly consisted of accrued interest earned on promissory
notes due from the Company's President and a Director on stock purchased
during the second quarter of 2000.
10
<PAGE>
During the three-month period ended June 30, 2000, the Company incurred
$260,469 in development costs of which $243,993 relates to subcontract
costs. Development costs incurred during the same three month period of
1999 amounted to $26,581.
General and administration costs were $110,774 and $216,398, respectively,
for the three-month periods ended June 30, 2000 and 1999. The major costs
incurred during 2000, consisted of professional fees of $28,484, consulting
fees of $10,989, officer's salary of $30,000, travel expenses of $4,018,
telephone expense of $4,551, office expense of $7,231, and rent of $6,411.
The major costs incurred during 1999, consisted of professional fees of
$29,144, consulting fees of $117,755, officer's salary of $20,000, travel
expenses of $13,128, telephone expense of $5,550, office expense of $4,381,
and rent of $5,908.
Interest expense for the three-months ended June 30, 2000, totaled $15,158
as compared to $13,054 incured during the same period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
----------------------------------
Cash and cash equivalents as of June 30, 2000 and 1999 were $161,248, and
$64,848, respectively. During 2000, the Company generated net cash from
operations of $116,844, and received $3,000 from officer advances and
$5,000 from the issuance of shares to the Company's President and a
Director (See Item 2. Changes In Securities). During 2000, the Company
invested $15,000 in a joint venture and repaid $11,500 in officer advances.
During 1999, the Company generated net cash from operations of $20,432,
received $4,396 through the sale of marketable securities, and received
$75,000 from officer advances. During 1999, the Company invested $10,000 in
a joint venture and repaid $25,000 in officer advances.
ITEM 2. CHANGES IN SECURITIES
During the three months ended June 30, 2000, the Corporation issued
5,082,529 shares of its Class A Common Stock of which 70,000 shares were
issued to several consultants, 12,529 shares were issued in cancellation of
12,529 shares of the Company's Preferred Stock, 4.650,000 shares were
issued to its President and 350,000 shares were issued to a Director. In
exhange for the 5,000,000 shares issued to its President and Director, the
Company received $5,000 cash and non-recourse promissory notes with face
values totaling $1,995,000. The notes mature in May 2005, and bear interest
at an annual rate of 8%.
11
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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. Berstein
---------------------------------------
Robert M. Bernstein, President And Chief
Financial Officer
Date: July 31, 2000
12
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