<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
------ ------
Commission file number 33-83526
--------
SECURFONE AMERICA, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 954453386
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5850 Oberlin Drive, Suite 220
San Diego, California 92121
----------------------------------------------------
(Address of principal executive offices)
619-677-5580
----------------------------------------------------
(Issuer's telephone number)
Material Technology, Inc.
1161 San Vicente Boulevard, Suite 707
Los Angeles, California 90049
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: COMMON STOCK, $0.001 PAR
VALUE: 5,000,000 (as of November 14, 1997)
<PAGE> 2
SECURFONE AMERICA, INC.
(Formerly Material Technology, Inc.)
(A Development Stage Corporation)
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997 and 1996
<PAGE> 3
SECURFONE AMERICA, INC.
(Formerly Material Technology, Inc.)
(A Development Stage Corporation)
TABLE OF CONTENTS
September 30, 1997 and 1996
<TABLE>
<CAPTION>
PART I--FINANCIAL STATEMENTS
<S> <C>
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
PART II--OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 11
</TABLE>
<PAGE> 4
SECURFONE AMERICA, INC.
(Formerly Material Technology, Inc.)
(A Development Stage Corporation)
CONSOLIDATED BALANCE SHEETS
September 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
(unaudited) (unaudited)
------------------ -----------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,099 $ 54,619
Accounts receivable 9,903 --
Royalties receivable 300,000 250,000
Inventory 20,641 --
Prepaid expenses 615 --
------------------ -----------------
TOTAL CURRENT ASSETS 335,258 304,619
------------------ -----------------
PROPERTY, PLANT, AND EQUIPMENT,
NET OF ACCUMULATED DEPRECIATION 257,099 147,936
------------------ -----------------
OTHER ASSETS
Investments 1 --
Note receivable, including accrued interest 87,453 205,833
Intangible assets, net of accumulated amortization 283,119 185,319
Deposits 1,225 50,000
------------------ -----------------
TOTAL OTHER ASSETS 371,798 441,152
------------------ -----------------
TOTAL ASSETS $ 964,155 $ 893,707
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of capital lease obligations $ 47,449 $ --
Accounts payable 167,007 53,369
Accrued payroll and payroll taxes 3,674 --
Other accrued liabilities 32,000 --
------------------ -----------------
TOTAL CURRENT LIABILITIES 250,130 53,369
------------------ -----------------
LONG-TERM LIABILITIES
Note payable 50,000 --
Capital lease obligations 92,260 --
------------------ -----------------
TOTAL LONG-TERM LIABILITIES 142,260 --
------------------ -----------------
DEFERRED ROYALTY REVENUE 300,000 250,000
------------------ -----------------
STOCKHOLDERS' EQUITY
Common Stock-Securfone America, Inc. 41,200 30
Common Stock-Securfone, Inc. 5,000 --
Additional paid in capital 1,054,600 975,770
Less: notes and subscriptions receivable (5,000) --
Deficit accumulated during the
development stage (824,035) (385,462)
------------------ -----------------
TOTAL STOCKHOLDERS' EQUITY 271,765 590,338
------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 964,155 $ 893,707
================== =================
</TABLE>
3
<PAGE> 5
SECURFONE AMERICA, INC.
(Formerly Material Technology, Inc.)
(A Development Stage Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
September 30, 1997 and 1996
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended From Inception
September 30, September 30, Through
1997 1996 1997 1996 September 30, 1997
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
----------- ----------- ----------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
SALES $ 33,698 $ 39,382 $ -- $ 40,047
COST OF GOODS SOLD
Cellular airtime 24,296 -- 27,067 -- 27,532
Cellular calling cards 1,832 -- 24,295 -- 24,295
----------- ----------- ----------- ----------- ------------------
TOTAL COST OF GOODS SOLD 26,128 -- 51,362 -- 51,827
----------- ----------- ----------- ----------- ------------------
GROSS PROFIT (LOSS) 7,570 -- (11,980) -- (11,780)
SELLING, GENERAL, AND
ADMINISTRATIVE 652,899 -- 1,284,805 -- 1,676,297
----------- ----------- ----------- ----------- ------------------
INCOME (LOSS) FROM OPERATIONS (645,329) -- (1,296,785) -- (1,688,077)
----------- ----------- ----------- ----------- ------------------
OTHER (INCOME) EXPENSE
Interest income (7,218) -- (7,218) -- (13,051)
Royalty revenue (550,000) -- (950,000) -- (950,000)
Interest expense-
capital leases 3,204 -- 7,758 -- 7,758
Interest expense-
letters of credit 19,771 -- 42,271 -- 42,271
Loss on Securfone New York -- -- 48,980 -- 48,980
----------- ----------- ----------- ----------- ------------------
TOTAL OTHER (INCOME) EXPENSE (534,243) -- (858,209) -- (864,042)
----------- ----------- ----------- ----------- ------------------
NET INCOME (LOSS) $ (111,086) $ -- $ (438,576) $ -- $ (824,035)
=========== =========== =========== =========== ==================
NET INCOME (LOSS) PER SHARE $ (0.02) $ (0.09)
=========== ===========
COMMON SHARES OUTSTANDING 5,000,000 5,000,000
=========== ===========
</TABLE>
4
<PAGE> 6
SECURFONE AMERICA, INC.
(Formerly Material Technology, Inc.)
(A Development Stage Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
September 30, 1997 and 1996
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended From Inception
September 30, September 30, Through
1997 1996 1997 1996 September 30, 1997
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net Loss $ (111,086) $ -- $ (438,576) $ -- $ (824,035)
----------- ----------- ----------- ----------- -----------
Adjustments to reconcile net loss to net cash used
cash used by operating activities:
Depreciation and amortization 26,411 -- 64,940 -- 65,000
Increase in accounts receivable (9,903) -- (9,903) -- (9,903)
Decrease (increase) in notes receivable
and accrued interest 68,380 287,700 118,380 (670,000) (87,453)
Decrease (increase) in royalties receivable 50,000 (250,000) (50,000) (250,000) (300,000)
Increase in inventory (20,641) -- (20,641) -- (20,641)
Increase in prepaid expenses -- -- (615) -- (615)
Increase in intangibles and other assets (39,049) (201,554) (76,822) (201,554) (312,143)
(Decrease) increase in accounts payable and
accrued expenses (3,124) 24,200 149,313 24,200 202,681
(Decrease) increase in deferred royalty revenue (50,000) 250,000 50,000 250,000 300,000
----------- ----------- ----------- ----------- -----------
Total adjustments 22,074 110,346 224,652 (847,354) (163,074)
----------- ----------- ----------- ----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (89,012) 110,346 (213,924) (847,354) (987,109)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (11,660) -- (146,305) -- (294,301)
----------- ----------- ----------- ----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (11,660) -- (146,305) -- (294,301)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from capital lease -- -- 159,649 -- 159,649
Repayments under capital lease (8,658) -- (19,940) -- (19,940)
Proceeds from sale of common stock -- -- 120,000 -- 120,000
Proceeds from note payable 50,000 50,000 50,000
Contribution of capital -- -- -- 975,800 975,800
----------- ----------- ----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 41,342 -- 309,709 975,800 1,285,509
----------- ----------- ----------- ----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS (59,330) 110,346 (50,520) 128,446 4,099
BEGINNING BALANCE-CASH AND CASH EQUIVALENTS 63,429 18,100 54,619 -- --
----------- ----------- ----------- ----------- -----------
ENDING BALANCE-CASH AND CASH EQUIVALENTS $ 4,099 $ 128,446 $ 4,099 $ 128,446 $ 4,099
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest during the period $ 22,975 $ -- $ 50,030 $ -- $ 50,030
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
Sale of common stock for note $ 5,000 $ -- $ 5,000 $ -- $ 5,000
</TABLE>
5
<PAGE> 7
SECURFONE AMERICA, INC.
(Formerly Material Technology, Inc.)
(A Development Stage Corporation)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 and 1996
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, 1996 and 1997 and the results of operations and cash flows for
the nine month periods then ended. The operating results of the Company for the
period ended September 30, 1997 may not be indicative of operating results for
the full year.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by SecurFone America, Inc. are set
forth below.
Basis of Presentation
- ---------------------
The accompanying consolidated financial statements include the accounts of
SecurFone America, Inc. and its wholly owned subsidiary, SecurFone, Inc.
(collectively referred to as the "Company"). Intercompany transactions and
balances have been eliminated in the consolidated financial statements.
Nature of Operations
- --------------------
SecurFone America, Inc. and its wholly subsidiary, SecurFone Inc., are
principally engaged in the sale and licensing of prepaid cellular phone
services. The Company has been in its development stage since its formation on
May 20, 1996. The Company directly provides these services in some markets,
and in other markets, licenses the Company's resources to unrelated parties.
When a license is sold, the Company agrees to provide certain services to the
licensor. Generally, these services include providing an understanding of the
market and assistance in promotion and advertising.
The cellular services the Company offers which provide the Company a competitive
advantage include prepaid cellular calling cards, subscriber recharges on
prepaid calling cards via an automated intelligent voice response unit,
unrestricted international calling capabilities, multi-lingual capabilities, a
uniform, flat rate for long distance service from anywhere in the United States,
capability to provides services from any cellular phone, regardless of model,
and voice mail service from both cellular and landline sources.
In addition to cellular services, the Company is also aggressively pursuing
regional and national distribution of landline prepaid calling cards.
The Company has also developed software which virtually eliminates cellular
fraud, and is assessing the feasibility of licensing this technology to other
cellular providers and carriers.
On August 1, 1997, the Company completed a reverse merger with Material
Technology, Inc. (formerly Tensiodyne Scientific Corporation) and became a
publicly traded corporation.
6
<PAGE> 8
SECURFONE AMERICA, INC.
(Formerly Material Technology, Inc.)
(A Development Stage Corporation)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 and 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash and Cash Equivalents
- -------------------------
For the purposes of the statement of cash flows, the Company considers all
highly liquid investments with an original maturity of three months or less to
be cash equivalents. The Company maintains its cash accounts in one commercial
bank. Accounts are guaranteed by the Federal Deposit Insurance Company (FDIC) up
to $100,000.
Inventory
- ---------
Inventories are valued on the first in, first out (FIFO) method, at cost.
Inventories at September 30, 1997 consist of prepaid calling cards.
Property and Equipment
- ----------------------
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets. Depreciation is calculated using accelerated
depreciation for both financial reporting and income tax purposes.
Financial Instruments
- ---------------------
As collateral for performance and advances on long-term contracts, the Company
may obtain letters of credit up to $1,000,000 from a major bank. The letter of
credit agreement is secured by assets of a major shareholder of the parent
company and by the assets of an unrelated third party.
Revenue and Expense Recognition
- -------------------------------
The Company recognizes revenue from sales of license agreements, net of an
allowance for uncollectible amounts, when substantially all significant services
to be provided by the Company have been performed. Expenses are recognized in
the period in which they are incurred.
Intangible Assets
- -----------------
Intangible assets are comprised of various costs incurred by the Company as part
of start up phase of operations. The Company began amortizing these costs over a
five year period as of January 1, 1997, using the straight-line method. As of
September 30, 1997 and 1996, $27,798 and $0 in amortization expense of
organizational costs has been charged to operations.
7
<PAGE> 9
SECURFONE AMERICA, INC.
(Formerly Material Technology, Inc.)
(A Development Stage Corporation)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 and 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates
- ----------------
In preparing the Company's financial statements, management is required to make
estimates and assumptions that effect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Income Taxes
- ------------
No provision has been made at September 30, 1997 and 1996 for federal or state
income taxes.
NOTE 3 - NOTES RECEIVABLE
The note receivable from Montpilier Holdings, Inc., is a two year note with
interest accrued at 7%. The note is secured by publicly traded securities held
by an affiliated corporation owned by a principal shareholder of Montpilier
Holdings, Inc. Montpilier Holdings, Inc., is the principal shareholder in
SecurFone America, Inc., the parent company of SecurFone, Inc.
NOTE 4 - ROYALTIES RECEIVABLE AND DEFERRED ROYALTY REVENUE
Royalties receivable and deferred royalty revenue at September 30, 1997 and 1996
represents the portion of total revenue from initial license sales attributable
to services required to be provided by the Company that have not yet been
performed. These revenues will be recognized on a pro-rata basis as these
services are provided to the licensor.
8
<PAGE> 10
SECURFONE AMERICA, INC.
(Formerly Material Technology, Inc.)
(A Development Stage Corporation)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 and 1996
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment at September 30, 1997 and 1996 is comprised of the
following:
<TABLE>
<CAPTION>
1997 1996
--------- -------
<S> <C> <C>
Office equipment $ 16,686 $ --
Computer software 88,802 --
Computer hardware 188,814 --
--------- -----
294,302 --
Accumulated depreciation (37,203) --
--------- -----
$ 257,099 $ --
========= =====
</TABLE>
At September 30, 1997 and 1996, depreciation expense of $37,142 and $0 was
charged to operations, respectively.
NOTE 6 - CAPITAL LEASE
In March, 1997, the Company entered into a sale-leaseback arrangement which is
being accounted for as a capital lease. Under the agreement, the Company sold
certain equipment and leased it back for a period of 48 months, at which time
the Company will repurchase the equipment from the lessor. Depreciation of
assets capital leases is included in depreciation expense for September 30, 1997
and 1996.
Minimum future lease payments under non-cancelable capital leases for the next
five years at September 30, 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 $ 21,454
1998 47,449
1999 47,449
2000 29,165
2001 and thereafter -
----------
Total minimum future
lease payments $ 145,517
==========
</TABLE>
9
<PAGE> 11
SECURFONE AMERICA, INC.
(Formerly Material Technology, Inc.)
(A Development Stage Corporation)
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 and 1996
NOTE 7 - LOSS CONTINGENCY
The Company is a defendant in a lawsuit filed by one of its suppliers. The suit
asks for payment of charges in the amount of $32,000. The Company is currently
trying to reach a settlement with the supplier. While the exact amount of the
settlement cannot be predicted, the Company has assessed that the settlement
will be between $20,000 and $32,000. Accordingly, a provision of $32,000 has
been charged to operations as of September 30, 1997.
NOTE 8 - COMMON STOCK
On March 5, 1997, SecurFone, Inc. authorized an additional 4,700,000 share of
common stock, bringing the total shares authorized for issuance to 5,000,000
shares. All shares of stock are the same class.
On March 6, 1997 the shareholders of SecurFone, Inc. approved a stock split of
1,333.33 to 1 shares, increasing the 3,000 shares issued, and outstanding to
4,000,000 shares with a par value of .01 per share. The amount of $39,770 was
transferred from the paid-in-capital account to common stock account to record
the split. All per share amounts have been restated to reflect this stock split.
On March 6, 1997, SecurFone, Inc. sold an additional 120,000 shares of stock at
$1.00 per share, bringing the total number of shares issued and outstanding
4,120,000. All of these shares are owned by SecurFone America, Inc.
On August 1, 1997, SecurFone America, Inc. authorized and issued 5,000,000
shares of common stock with a par value of .001 per share.
NOTE 9 - LOSS ON SECURFONE NEW YORK
In August, 1996, the Company entered into a licensing agreement with Securfone
New York, Inc. (SFNY). As part of the agreement, The Company forwarded monies to
SFNY to cover various start up costs. Shortly, SFNY fell into default under the
terms of the licensing agreement and ceased operations. The monies paid by the
Company to SFNY were written off as a one-time charge to income of $48,980.
10
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion sets forth certain factors which produced
changes in the Company's results of operations during the nine months ended
September 30, 1997 and as compared with the same period in 1996 as indicated in
the Company's consolidated financial statements. The following should be read in
conjunction with the financial statements and related notes. Historical results
of operations are not necessarily indicative of results for any future period.
All material intercompany transaction have been eliminated in the results
presented herein.
Certain matters discussed in this Quarterly Report may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act") and as such may involve risks
and uncertainties. These forward-looking statements relate to, among other
things expectations of the business environment in which the Company operates,
projections of future performance, perceived opportunities in the market and
statements regarding the Company's mission and vision. The Company's actual
results, performance or achievements may differ significantly from the results,
performance, or achievements expressed or implied in such forward-looking
statements.
GENERAL
SecurFone America, Inc. and its wholly subsidiary, SecurFone, Inc. are
principally engaged in the sale and licensing of prepaid cellular phone
services. The Company has been in its developmental stage since its formation on
May 20, 1996. The Company directly provides these services in some markets, and
in other markets, licenses the Company's resources to unrelated parties. When a
license is sold, the Company agrees to provide certain services to the licensor.
Generally, these services include providing an understanding of the market and
assistance in promotion and advertising.
In selling its prepaid airtime usage the Company has provided a unique
method to reload prepaid cellular and other communications services. Subscribers
are offered services that traditionally have been unavailable to certain
demographic audiences. Product offerings will include cellular telephones, PCS
(narrow and wide-band) telephones and a variety of accessories for wireless
services. Primary to the Company's operational strategy is the methodology
employed to recharge cellular debit accounts when depleted. The Company offers
credit, debit and cash methods of payment to its subscribers. The Company's
proprietary automated voice response system, which aligns and directs customers
to their chosen method of payment, will provide a unique advantage over existing
prepaid programs. Prepaid services include unrestricted international calling
capabilities, a flat rate for long distance service from anywhere in the United
States, which may be accessed from any cellular phone, regardless of model, and
voice mail service from both cellular and landline sources. The Company's
program is fully integrated and provides a growing base of multi-lingual
support.
In addition to cellular services, the Company is also aggressively
pursuing regional and national distribution of landline prepaid calling cards.
Currently the Company has over 500 points of distribution in various regional
markets. The Company has also contracted with cellular providers to provide its
network services to customers in several markets and has established over 3,000
points of distribution for services and products. Shipments of prepaid cellular
calling cards, landline cards and related items will commence in the first
quarter of 1998. The Company has
11
<PAGE> 13
debit platform and proprietary phone patents pending, and will also utilize
proprietary billing and distribution software.
The Company has also developed software which virtually eliminates
cellular fraud, and is assessing the feasibility of licensing this technology to
other cellular providers and carriers.
The Company has devoted, and expects to continue to devote, substantial
financial and management resources to the development of the SecurFone America
network system utilizing the Company's proprietary technology.
The Company expects to incur substantial operating losses and have a
negative cash flow from operations for the foreseeable future, mainly resulting
from operating, sales, marketing and general and administrative expenses related
to the roll-out of the SecurFone America network.
RESOURCES
Subscription loading commenced on a limited basis during the second
quarter of 1997. Subscription revenues for the nine months ended September 30,
1997 were $39,382 including $33,698 for the three months then ended.
During the nine months ended September 30, 1997 royalty income revenues
from licensees allowing them to access the SecurFone Network were $950,000
including similar sales of $550,000 for the three months then ended.
There were no revenues for the first three quarters of 1996, because
during that period the Company was engaged exclusively in developing the
SecurFone America network and has no services or products to offer to
subscribers.
COST OF GOODS SOLD
Cost of cellular airtime sold was $27,067 for the nine month period
ended September 30, 1997, including $24,296 for the three month period then
ended.
Cost of cellular calling cards includes the costs to design, print and
ship the cellular calling cards.
The cost of cellular calling cards was $24,295 for the nine month
period ending September 30, 1997, including $1,832 for the three month period
then ended.
Cost of cellular calling cards was abnormally high due to the write off
of $12,000 of obsolete cards during the second quarter of 1997.
There were no such costs during the first three quarter of 1996,
because the Company was engaged exclusively in developing its network.
OTHER OPERATING EXPENSE
12
<PAGE> 14
Selling, general and administrative expenses are primarily salaries,
travel, consultants, office rent, equipment rent and insurance to promote,
develop and manage the SecurFone network.
Selling, general and administrative expenses for the nine months ended
September 30, 1997 were $1,284,805 and $652,899 for the fiscal quarter then
ended.
Selling, general and administrative expenses for the quarter ending
September 30, 1996 were not expensed through the Statement of Operations but
were capitalized on the Balance Sheet as organizational costs, because the
Company was in its start-up period. During fiscal 1997, the Company began
amortizing these costs over a sixty month period.
DEPRECIATION AND AMORTIZATION
Depreciation of fixed assets and amortization of the intangibles
related to organizational costs were $64,940 for the nine months ended September
30, 1997 and $26,411 for the fiscal quarter ended September 30, 1997.
There was no depreciation or amortization for the period ending
September 30, 1996 due to the start-up nature of its business at that time.
OPERATING LOSSES
For the nine months ended September 30, 1997, the operating losses were
$438,576 and $111,086 for the fiscal quarter then ended. These losses are a
result of costs in excess of revenues incurred in developing the SecurFone
America network during the start-up phase of the Company.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents as of December 31, 1996 and September 30,
1997 were $54,619 and $4,099 respectively.
During 1996 the Company received $776,000 from issuance of its common
stock, the entire amount was used to fund operations or purchase equipment.
During the first quarter of 1997, the Company issued more of its common
stock in exchange for $125,000 in cash and a note receivable for $75,000 of
common stock.
These funds were and will be used to fund operations.
In the future, the Company will require capital to complete, expense
and upgrade the SecurFone America network.
13
<PAGE> 15
To fund the Company's cash needs, the Company is considering a number
of financing alternatives, including, if market conditions permit, a private
placement of its securities or a credit facility with a third party lender.
Management believes that either one of these financing alternatives or
a combination of both, will provide adequate capital to meet the Company's near
term cash needs. There can be no assurance, however, that such financings will
be completed.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On July 31, 1997 the Company (1) transferred all of its assets and
liabilities to Material Technologies, Inc., in exchange for 5,560,000 shares of
that corporation's Class A common stock and 5,000,000 of those shares were
distributed to the Company's existing shareholders; (2) effected a reverse one
for ten (1 for 10) stock split reducing the Company's outstanding shares from
5,000,000 to 500,000 shares of Class A Common Stock; (3) entered into the
reverse merger with SecurFone America, Inc., in accordance with the February 17,
1997 Stock Purchase Agreement and issued 4,500,000 shares of Class A Common
Stock to Montpilier Holdings, Inc., in exchange for all of the stock of
SecurFone America, Inc.; and (4) changed the Company's name to SecurFone
America, Inc., by amending the Company's Certificate of Incorporation. Thus,
Montpilier Holdings, Inc. became the owner of 90% of the Company's outstanding
Class A Common Stock.
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits
27 Financial Data Schedule.
B. Reports on Form 8-K.
None
14
<PAGE> 16
SIGNATURES
In accordance with the Exchange Act, the Registrant caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
SECURFONE AMERICA, INC.
Date: November 13, 1997 By: /s/ Michael R. Lee
---------------------------
Michael R. Lee
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,099
<SECURITIES> 0
<RECEIVABLES> 309,903
<ALLOWANCES> 0
<INVENTORY> 20,641
<CURRENT-ASSETS> 335,258
<PP&E> 294,302
<DEPRECIATION> 37,302
<TOTAL-ASSETS> 964,155
<CURRENT-LIABILITIES> 250,130
<BONDS> 50,000
0
0
<COMMON> 41,200
<OTHER-SE> 230,565
<TOTAL-LIABILITY-AND-EQUITY> 964,155
<SALES> 39,382
<TOTAL-REVENUES> 39,382
<CGS> 51,362
<TOTAL-COSTS> 51,362
<OTHER-EXPENSES> 1,284,805
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,029
<INCOME-PRETAX> (438,576)
<INCOME-TAX> 0
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<NET-INCOME> (438,576)
<EPS-PRIMARY> 0.09
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</TABLE>
