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: March 31, 2001 Commission file number: 33-23617
MATERIAL TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-4622822
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(State or other jurisdiction of incorporation (IRS Employer
or organization) identification No.)
11661 San Vicente Boulevard
Suite 707
Los Angeles, California 90049
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(address of principal executive offices)
(Zip Code) 90064
(310) 208-5589
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(Registrant's telephone number including area code)
Securities Registered pursuant to Section 12(g) of the Act:
Common
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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 May 10, 2001 was $952,593.
Documents incorporated by reference-None.
1
INDEX
PAGE
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Part 1. Financial Statements
Balance Sheets 3 - 4
Statements of Operations -
First Quarter Ended March 31, 2000 and 2001 and from
the Company's inception (October 21, 1983) through
March 31, 2001 5
Statements of Cash Flows
First Quarter Ended March 31, 2000 and 2001 and from
the Company's inception (October 21, 1983) through
March 31, 2001 6 - 7
Notes to Financial Statements 8
Management's Discussion and Analysis 9
Part 2. Other Information 10
2
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
================================================================================
December 31, March 31.
2000 2001
----------------- --------------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 1,954 $ 781
Receivable Due on Research Contract 33,932 157,917
Receivable from Officer 22,052 28,422
----------------- --------------------
TOTAL CURRENT ASSETS 57,938 187,120
----------------- --------------------
FIXED ASSETS
Property and Equipment, Net
of Accumulated Depreciation 2,990 2,750
----------------- --------------------
OTHER ASSETS
Intangible Assets, Net of
Accumulated Amortization 12,712 12,215
Investments 33,000 33,000
Refundable Deposit 2,136 2,136
----------------- --------------------
TOTAL OTHER ASSETS 47,848 47,351
----------------- --------------------
TOTAL ASSETS $ 108,776 $ 237,221
================= ====================
See accompanying notes
3
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
==============================================================================================================
December 31, March 31.
2000 2001
------------------ --------------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Legal Fees Payable $ 209,306 $ 233,548
Fees Payable to R&D Subcontractor 20,474 117,920
Consulting Fees Payable 50,000 50,000
Accounting Fees Payable 26,288 35,508
Other Accounts Payable 10,157 10,718
Accrued Expenses 24,982 36,795
Accrued Officer Wages 40,000 70,000
Notes Payable - Current Portion 25,688 25,688
Loans Payable - Others 54,160 55,169
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TOTAL CURRENT LIABILITIES 461,055 635,346
Payable on Research and
Development Sponsorship 358,181 374,299
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TOTAL LIABILITIES 819,236 1,009,645
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STOCKHOLDERS' EQUITY (DEFICIT)
Class A Common Stock, $.001 Par Value, Authorized 100,000,000
Shares, Outstanding 24,618,167 at December 31, 2000, and
31,068,167 shares at March 31, 2001 24,618 31,068
Class B Common Stock, $.001 Par Value, Authorized 100,000
Shares, Outstanding 100, 000 Shares at December 31, 2000, and
March 31, 2001 100 100
Class A Preferred, $.001 Par Value, Authorized 900,000 Shares
Outstanding 337,471 Shares at December 31, 2000 and March
31, 2001 337 337
Additional Paid in Capital 5,909,782 6,345,832
Less Notes Receivable - Common Stock (2,133,251) (2,173,731)
Deficit Accumulated During the Development Stage (4,512,046) (4,976,030)
------------------ ---------------------
TOTAL STOCKHOLDERS' (DEFICIT) (710,460) (772,424)
------------------ ---------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
(DEFICIT) $ 108,776 $ 237,221
================== =====================
See accompanying notes
4
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
=============================================================================================================
From Inception
For the Three Months Ended (October 21, 1983)
March 31, Through
2000 2001 March 31, 2001
----------------- ------------------- ---------------------
(Unaudited) (Unaudited) (Unaudited)
REVENUES
Sale of Fatigue Fuses $ - $ - $ 64,505
Sale of Royalty Interests - - 198,750
Research and Development Revenue 180,847 264,760 3,248,426
Test Services - - 10,870
----------------- ------------------- ----------------------
TOTAL REVENUES 180,847 264,760 3,522,551
----------------- ------------------- ----------------------
COSTS AND EXPENSES
Research and Development 90,617 210,616 3,082,316
General and Administrative (Note 2) 198,809 540,664 5,350,309
----------------- ------------------- ----------------------
TOTAL COSTS AND EXPENSES 289,426 751,280 8,432,625
----------------- ------------------- ----------------------
INCOME (LOSS) FROM OPERATIONS (108,579) (486,520) (4,910,074)
----------------- ------------------- ----------------------
OTHER INCOME (EXPENSE)
Expense Reimbursed - - 4,510
Interest Income 1,038 41,150 186,685
Interest Expense (15,220) (17,814) (263,333)
Gain on Sale of Stock 251,798 - 207,497
Miscellaneous Income - - 25,145
Loss on Sale of Equipment - - (12,780)
Gain on Foreclosure - - 18,697
Modification of Royalty Agreement - - (7,332)
Settlement of Teaming Agreement - - 50,000
Litigation Settlement - - 18,095
----------------- ------------------- ----------------------
TOTAL OTHER INCOME 237,616 23,336 227,184
----------------- ------------------- ----------------------
NET INCOME (LOSS) BEFORE EXTRAORDINARY
ITEMS AND PROVISION FOR INCOME TAXES 129,037 (463,184) (4,682,890)
PROVISION FOR INCOME TAXES (800) (800) (10,200)
----------------- ------------------- ----------------------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS 128,237 (463,984) (4,693,090)
EXTRAORDINARY ITEMS
Forgiveness of Debt - - (289,940)
Utilization of Operating Loss Carry forward - - 7,000
----------------- ------------------- ----------------------
NET INCOME (LOSS) $ 128,237 $ (463,984) (4,976,030)
================= =================== ======================
PER SHARE DATA
Basic Income (Loss) Before Extraordinary Item $ n/a $ n/a
Basic Extraordinary Items - -
----------------- -------------------
BASIC NET INCOME (LOSS) PER SHARE $ n/a $ n/a
================= ===================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 14,791,730 27,685,389
================= ===================
See accompanying notes
5
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
======================================================================================================================
From Inception
For the Three Months Ended (October 21, 1983)
March 31, Through
2000 2001 March 31, 2001
----------------- -------------- ----------------------
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 128,237 $ (463,984) (4,976,030)
----------------- -------------- ----------------------
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided
(Used) by Operating Activities
Depreciation and Amortization 737 737 175,310
Interest Income Accrued on Stock Subscription Receivable (954) (41,150) (141,139)
Bad Debts - - 50,000
Gain on Sale of Securities (251,798) - (196,596)
Charge off of Deferred Offering Costs - - 36,480
Charge off of Long-lived Assets due to Impairment - - 92,919
Modification of Royalty Agreement - - 7,332
Gain on Foreclosure - - (18,697)
(Increase) Decrease in Accounts Receivable 70,846 (123,985) (204,917)
(Increase) Decrease in Prepaid Expense - - 53
Loss on Sale of Equipment - - 12,780
Issuance of Common Stock for Services 48,950 442,500 1,063,897
Issuance of Stock for Agreement Modification - - 152
Forgiveness of Indebtedness - - 165,000
Increase (Decrease) in Accounts
Payable and Accrued Expenses (98,540) 173,282 1,093,154
Interest Accrued on Note Payable 14,532 17,127 222,164
Increase in Research and Development
Sponsorship Payable - - 218,000
(Increase) in Note for Litigation Settlement - - (25,753)
(Increase) in Deposits - - (2,189)
----------------- -------------- ----------------------
TOTAL ADJUSTMENTS (216,227) 468,511 2,547,950
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NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (87,990) 4,527 (2,428,080)
----------------- -------------- ----------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds From Sale of Equipment - - 10,250
Purchase of Property and Equipment - - (230,903)
Proceeds from Sale of Securities 251,798 - 283,596
Purchase of Securities - - (90,000)
Proceeds from Foreclosure - - 44,450
Investment in Joint Venture - - (102,069)
Payment for License Agreement - - (6,250)
----------------- -------------- ----------------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 251,798 - (90,926)
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See accompanying notes
6
MATERIAL TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
=============================================================================================================
From Inception
For the Three Months Ended (October 21, 1983)
March 31, Through
2000 2001 March 31, 2001
---------------- ------------------ ----------------------
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock Net of Offering Costs $ - $ - $ 1,381,607
Costs incurred in Offering - - (31,480)
Sale of Common Stock Warrants - - 18,250
Sale of Preferred Stock - - 258,500
Sale of Redeemable Preferred Stock - - 150,000
Capital Contributions - - 301,068
Payment on Proposed Reorganization - - (5,000)
Loans From Officers - 1,600 737,605
Repayments to Officer (10,500) (7,300) (462,832)
Increase in Loan Payable-Others - - 172,069
---------------- ------------------ ----------------------
CASH FLOWS FROM FINANCING ACTIVITIES: (10,500) (5,700) 2,519,787
---------------- ------------------ ----------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 153,308 (1,173) 781
BEGINNING BALANCE CASH AND
CASH EQUIVALENTS 62,904 1,954 -
---------------- ------------------ ----------------------
ENDING BALANCE CASH AND CASH
EQUIVALENTS $ 216,212 $ 781 781
================ ================== ======================
See accompanying notes
7
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 March 31, 2001, and the results of its
operations and cash flows for the three-month periods ended March 31,
2001 and 2000. The operating results of the Company on a quarterly
basis may not be indicative of operating results for the full year.
NOTE 2. During the first quarter of 2001, the Company issued its President
6,000,000 shares of its common stock in lieu of cash payment of
accrued salary owed him for the years 1991 through 1995. According to
the Board resolution that authorized the retroactive accrual of this
compensation, the payment was contingent on the Company's financial
position and its ability to pay such amounts. The shares were valued
at $420,000.
8
MATERIAL TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
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During the three-month period ended March 31, 2001, the Company generated
approximately $264,760 under its research and development contracts as
compared to $180,847 generated during the three-month period ended March
31, 2000.
During the three-month periods ended March 31, 2001 and 2000, the Company
incurred approximately $210,616 and $90,617, respectively, in development
costs all of which related to the above-indicated contracts.
General and administration costs were $540,664 and $198,809, respectively,
for the three-month periods ended March 31, 2001 and 2000. The major
expenses incurred during 2001 consisted of Officer's salary of $450,000,
office salaries of $9,903, consulting of $5,998, professional fees of
$43,636, telephone of $2,060, and travel of $5,009. Officer's salary
consists of $30,000 of accrued wages and the issuance of 6,000,000 shares
of common stock valued at $420,000 for the amount of accrued compensation
for the years 1991 through 1995.
The major expenses incurred during 2000, consisted of consulting fees of
$64,521, professional fees of $71,333, officer's compensation of $30,000,
travel expenses of $14,800, rent expense of $6,033 and office expense of
$8,285.
Interest credited to operations for 2001 and 2000 were $41,150 and $1,038,
respectively. Significantly all interest income credited to operations has
been accrued on non-recourse notes due from the Company's president and a
director amounting to $1,995,000.
LIQUIDITY AND CAPITAL RESOURCES
----------------------------------
Cash and cash equivalents as of March 31, 2001 and 2000 were $781 and $216,212,
respectively. During the first quarter of 2001, the Company received a total of
$141,669, which consisted of $140,069 from its research and development
contracts, and advances from its President totaling $1,600. Of the $141,669
received, $137,142 was used in operations and $7,300 was paid to the Company's
President.
During the first quarter of 2000, the Company received a total of $503,491,
which consisted of $251,693 from its research and development contracts, and net
proceeds from the sale of investment securities totaling $251,798. Of the
$503,491 received, $339,683 was used in operations and $10,500 was repaid to the
Company's President.
9
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In January 2001, the Company issued 250,000 shares of its common stock
to consultants for services rendered, 100,000 shares of common stock
to Mr. John Goodman, a Director, for services rendered, and 100,000
shares to an attorney for legal services.
Under a 1998 resolution, the Board of Directors retroactively adjusted
its President's salary to $150,000 a year commencing in 1991. Under
the resolution, the payment of the amount accrued each year was
contingent on the Company's financial position and its ability to pay
such amounts without causing undue hardship to the Company. In March
2001, the Company issued 6,000,000 shares of its common stock to its
President as payment for the amount of accrued compensation for the
years 1991 through 1995. The shares issued have certain restrictions
that must lapse prior to the President being able to sell or transfer
the shares. The shares issued were valued at $420,000.
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.
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Registrant
s/s/ Robert M. Bernstein
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Robert M. Bernstein, President and Chief
Financial Officer
10