<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934,
for the Quarter Ended March 31, 2000.
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934, for the Transition Period from October 1, 1999 to December 31, 1999
Commission file number 1-9748
AMERICAN FILM TECHNOLOGIES, INC.
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(Exact name of registrant as specified its charter)
Delaware 23-2359277
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporated or organization)
300 Park Avenue, 17th Floor, New York, New York 10022
(Address of principal executive offices)
Registrant's telephone number including area code: (212) 572-6370
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 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
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS. Indicate by check mark whether the registrant has filed
all documents and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. Yes No X
As of March 31, 2000, there were 142,719,437 shares of common stock outstanding
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Part 1 - FINANCIAL INFORMATION.
American Film Technologies, Inc.
Condensed Consolidated Balance Sheet
<TABLE>
<CAPTION>
March 31
1999 June 30,
(Unaudited) 1999
----------- ----
<S> <C> <C>
Assets
Current Assets:
Cash $ 36,600 $ 27,528
Other current assets 22,500 4,320
Total current assets 59,100 31,848
Equipment and software, at cost, net 93,057 163,338
Other long-term assets
Notes receivable 160,000 --
Cash-Escrow 22,400 --
$ 334,557 $ 195,186
Liabilities and stockholders' equity (deficit)
Current Liabilities:
Notes payable: current portion $ 1,886,770 $ 1,880,770
Accounts payable and accrued expenses 923,412 769,347
Total current liabilities 2,810,182 2,650,117
Long -Term notes payable 750,000 49,000
Total Liabilities 3,560,182 2,699,117
Stockholders' Equity (Deficit)
Common stock, $0.02 par value:
Authorized shares - 225,000,000; issued
and outstanding shares 142,719,437
and 92,902,770 at March 31, 2000 and
June 30, 1999, respectively 285,439 185,806
Capital in excess of par value 17,583,649 17,147,782
Deferred compensation (682,000) (862,000)
Accumulated deficit (20,412,713) (18,975,519)
Total stockholders' equity (deficit) (3,225,625) (2,503,931)
Total Liabilities & Stockholder's Equity (deficit) $ 334,557 $ 195,186
</TABLE>
See accompanying notes to financial statements.
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American Film Technologies, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues: $ -- $ -- $ -- $ --
-- -- -- --
Expenses:
Compensation and benefits -
administrative and officers 60,000 60,000 180,000 196,182
Selling, general and administrative 30,070 62,376 369,118 185,631
Interest expense 22,283 22,246 67,725 68,605
Depreciation and amortization 23,427 23,427 70,281 107,781
Change of control expense -- -- 750,000 --
135,780 168,049 1,437,124 558,199
Net loss $ (135,780) $ (168,049) $ (1,437,124) $ (558,199)
------------- ------------- ------------- -------------
Net loss per share- basic $ (0.00) $ (0.00) $ (0.01) $ (0.01)
Net loss per share - diluted $ (0.00) $ (0.00) $ (0.01) $ (0.00)
Shares used in the calculation of net
income (loss) per common share:
Basic 142,719,437 89,236,101 142,719,437 89,236,101
Diluted 213,707,814 162,816,100 184,541,147 160,361,800
</TABLE>
See accompanying notes to financial statements.
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American Film Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the nine
months ended
March 31,
2000 1999
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $(1,437,124) $ (558,199)
Adjustments to reconcile net (loss) to net cash
(used) by operating activities:
Depreciation and Amortization 70,281 107,781
Amortization of Deferred Compensation 180,000 180,000
Changes in Assets and liabilities:
Other current assets and liabilities (18,250) 5,292
Other long-term assets (182,400) --
Accounts payable and accrued expenses 154,065 131,414
Issuance of senior secured debt 750,000 --
Net cash used by operating activities (483,428) (133,712)
Cash Flows From Financing Activities:
Principal payments on notes payable - other (93,000) --
Proceeds from sale of common stock 535,500 93,000
Proceeds from sale of convertible debentures 50,000 33,000
Net cash provided by financing activities 492,500 126,000
Net increase (decrease) in cash 9,072 (7,712)
Cash - beginning of period 27,528 23,336
Cash - end of period $ 36,600 $ 15,624
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ -- $ 880
</TABLE>
See accompanying notes to financial statements.
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AMERICAN FILM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
1. The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. It is suggested that
these consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's latest annual report on Form 10-K.
The accompanying unaudited consolidated financial statements contain all
adjustments (consisting of only normal recurring items) necessary to present
fairly the financial position as of March 31, 2000 and June 30, 1999, and the
results of operations and cash flows for the nine months ended March 31, 2000
and 1999. The results of operations for the nine months ended March 31, 2000 and
1999, are not necessarily indicative of the results to be expected for the full
year.
2. REORGANIZATION UNDER CHAPTER 11
On October 16, 1993, the Company filed for protection from its creditors under
Chapter 11 of the United States Bankruptcy Code. The Chapter 11 filing was the
result of continuing defaults related to the Company's loans, recurring
operating losses and cash flow problems. The filing of a Chapter 11 petition
operates as a stay of, among other actions, the commencement or continuation of
a judicial administrative or other action or proceeding against a debtor that
was or could have been initiated before the commencement of a Chapter 11 case or
the enforcement against the debtor or against the property of the estate or a
judgment obtained before the commencement of the case. Under Chapter 11,
substantially all prepetition liabilities of debtors are subject to settlement
under a plan of reorganization. The consummation of a plan of reorganization is
dependent upon the satisfaction of numerous conditions, including, among other
things, the acceptance by several classes of interests and confirmation by the
Bankruptcy Court.
The Company's Plan of Reorganization (the "Plan") was approved by the Bankruptcy
on October 6, 1995, Court and became effective on October 17, 1995.
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AMERICAN FILM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
The Company's business is the production of color versions of motion pictures
and television programs originally produced in black and white. The Company has
produced colorized films for its own library and owns the copyrights on eleven
such films. These films are available for sale and or distribution.
Consolidation
The consolidated financial statements include the accounts of Midtech de Mexico,
S.A., the Company's wholly-owned inactive Mexican subsidiary. All intercompany
transactions have been eliminated in consolidation.
Depreciation and Amortization
Depreciation and amortization are provided over the estimated useful lives of
the underlying assets using primarily the straight-line method over a five-year
period. The Film Library is being amortized over a three-year period. Leasehold
improvements are amortized over the life of the lease or the estimated useful
life of the assets.
Loss per Share
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share". SFAS 128 replaced
the previously reported primary and fully diluted earnings per share with basic
and diluted earnings per share. Basic earnings per share are calculated
utilizing weighted average shares outstanding and exclude any dilutive effects
of options, warrants and convertible securities. Diluted earnings per share
include the effect of dilutive securities outstanding. All earnings per share
amounts for all period presented, where necessary, have been restated to conform
to the SFAS 128 requirements.
Stock Options
The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25) and related interpretations in
accounting for its employee stock options. Under APB 25, for those Company
employee stock options issued with an exercise price not less than the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.
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AMERICAN FILM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This discussion should be read in conjunction with the consolidated financial
statements, related notes and management's discussion and analysis of financial
conditions and results of operations included in the Company's annual report on
Form 10-K for the year ended June 30, 1999.
Overview and Reorganization.
As stated previously, the Company's Plan of Reorganization (the "Plan") was
approved by the Bankruptcy Court and became effective October 17, 1995. Success
of the Company will, among other things, depend upon the resumption of
production in Mexico. That will require reemployment of selected former Mexican
employees. Since the Mexican operation was suspended in October 1993, the
Company believes most of the former employees have found other jobs. If the
Company is unable to rehire certain former employees, it will have to recruit
and train a new work force. That would delay the resumption of production and
increase the cost of production. As such, it could have a materially adverse
effect on the Company. Although the Company expects to benefit from the
devaluation of the peso, there is no assurance of how long those expected
benefits will last.
Since emerging from bankruptcy, the Company has actively pursued new product
development and opportunities, as well as strategic alliances, partners and
other sources of financing. The Company is in discussions with other potential
investors regarding the purchase of equity securities or other investments in
the Company, however, there can be no assurance that any transaction can be
negotiated or, if negotiated, that such a transaction can be consummated.
Results of Operations.
The financial results of the Company for each of the periods addressed by this
report do not reflect the earnings capacity of the Company. The financial data
for the periods ending December 31, 1999 and 1998 reflects the adoption of Fresh
Start Accounting. As such, the financial data is considered that of a Successor
Company and is not comparable to prior periods.
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AMERICAN FILM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
Since the filing under Chapter 11 in October, 1993, the Company has not
generated any income from film colorization, animation or fee for service
orders. For the quarter ended March 31, 2000 the Company recorded net interest
expense of approximately $23,000 as compared to $23,000 for the period ended
March 31, 1999.
For the quarters ended March 31, 2000 and 1999, the Company recorded
compensation and benefits for its administration and officers of approximately
$60,000 and $60,000 respectively.
For the quarters ended March 31, 2000 and 1999, the Company recorded selling,
general and administrative expenses of approximately $30,000 and $62,000
respectively.
For the quarters ended March 31, 2000 and 1999, the Company recorded
depreciation and amortization expense of approximately $23,000 and $23,000
respectively.
For the quarters ended March 31, 2000 and 1999, the Company had a net loss of
approximately $1,440,000 and $560,000 respectively, or less than $0.01 cent per
share for each period.
Liquidity and Capital Resources.
During fiscal 1999, the Company's operations were financed almost entirely
through the sale of its securities in private placements to accredited
investors. During this period $49,000 in secured convertible notes were issued
in a private placement. Between July 1, 1999 and May 12, 2000 an additional
$50,000 in secured convertible notes were issued in a private placement.
The Company is continuing to experience cash flow difficulties at this time. The
Company was required to make payments in October 1998 and October 1999, each of
approximately $405,000 plus interest, to unsecured creditors in connection with
its 1995 bankruptcy reorganization but has not made such payment. No creditor
has filed a complaint or objections or instituted any legal action to date
because of such failure. The Rudy Group invested $250,000 in or about September
1999. This amount is being used to fund the operations of the company and to pay
certain of the Company's expenses. This amount is not sufficient to pay off a
significant portion of the Company's debt, and these funds will be substantially
exhausted after the payment of past due expenses and other fees due and owing by
the Company. To the extent outside financing is not obtained in the immediate
future, the Company may be liquidated or the Company may seek further relief in
the previously instituted bankruptcy proceeding. In the event of liquidation,
the shareholders in all likelihood will receive nothing with respect of their
stock.
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AMERICAN FILM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
In addition, the Company needs funding sufficient to enable it to become
operational again. The amount of funding required is contingent on a number of
variables, such as the speed of the start up and initial production capacity
required. The Company believes that the minimum amount of funding required
(including working capital) would be approximately $4,000,000.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
On December 6, 1999, a Judgment was entered against the Company in the amount of
$45,724.46. In addition, an arbitration award was granted against the Company in
the amount of $36,693.41 in January, 2000. The plaintiff in the arbitration has
commenced an action in New York State seeking confirmation of that award. The
Company will attempt to negotiate a settlement of this Judgment and arbitration
award and to arrange for a reasonable payout.
Item 2. Changes In Securities
Sale of Unregistered Securities - Between July 1, 1999 and May 12, 2000, an
additional $50,000 in Secured Convertible Notes were issued in a private
placement. The Notes were issued without the benefit of an effective
registration statement under the Securities Act of 1933, as amended (the "Act")
in reliance upon the private placement exemptions under Section 4(2) of the Act.
Issuance of Unregistered Securities
On September 13, 1999, Mr. Gerald Wetzler received a $750,000 Senior Secured
promissory note (convertible at $.03 per share into 25,000,000 shares of common
stock) in lieu of cash, payable upon a change in control as defined in Mr.
Wetzler's Employment Agreement dated January 1, 1996.
Exercise of Options - On July 8, 1999, Gerald M. Wetzler, Chairman and Chief
Executive Officer, exercised an option to purchase 20,000,000 shares of Common
Stock, $.002 per value at a price of $0.01 per share by paying $40,000 cash and
a promissory note for $160,000. As of May 12, 2000 the payment on the promissory
note has been postponed in agreement by both parties. No default by either party
has occurred.
Subsequent Events
None.
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AMERICAN FILM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
As a result of the Plan, as of the Effective Date of the Plan, the Company
adopted "fresh start" accounting, which reflects the payment or discharge of
certain debts in accordance with the plan. "Fresh start accounting" allows a
reorganized entity to reflect its reorganization value, which approximates its
fair value at the date of reorganization. In addition, the accumulated deficit
of the Company is eliminated and its capital structure is recast in conformity
with the Plan.
Item 6. Exhibits and Reports on Form 8-K
(a) NONE
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Signatures
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN FILM TECHNOLOGIES, INC.
Date: May 12, 2000
By: /s/ Fred Rudy May 12, 2000
----------------------------------------
Fred Rudy,
Chairman and Chief Executive Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 36,600
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 59,100
<PP&E> 510,987
<DEPRECIATION> 417,924
<TOTAL-ASSETS> 334,557
<CURRENT-LIABILITIES> 2,810,182
<BONDS> 0
0
0
<COMMON> 285,439
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 334,557
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 1,437,124
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,725
<INCOME-PRETAX> (1,437,124)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,437,124)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
