matech10ka123107.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-KSB/A
(AMENDMENT
NO. 2 )
x ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the fiscal year ended December 31, 2007
o TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from _______________ to _______________.
Commission
file number: 33-23617
Material Technologies,
Inc.
(Name of
small business issuer in its charter)
Delaware
(State
or other jurisdiction of
incorporation
or organization)
|
95-4622822
(I.R.S.
Employer
Identification
No.)
|
|
|
11661
San Vicente Boulevard, Suite 707
Los Angeles,
California
(Address
of principal executive offices)
|
90049
(Zip
Code)
|
Issuer’s
telephone number: (310)
208-5589
Securities
registered under Section 12(g) of the Exchange Act:
Common stock, par value
$0.001
(Title of
class)
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 o
Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o
No x
For the
year ended December 31, 2007, our revenue was $201,917.
As of
July 22, 2008, the number of shares of Class A common stock outstanding was
186,828,995. As of July 21, 2008, the aggregate market value of our
common stock held by non-affiliates was approximately $1,568,784.97 (based upon
156,878,497 shares at $0.01 per share).
DOCUMENTS
INCORPORATED BY REFERENCE
The
following documents are incorporated herein by reference: (i) Registration
Statement on Form S-1, filed April 30, 1997; (ii) Annual Report on Form 10-KSB
for the fiscal year December 31, 2000, filed March 30, 2001; (iii) Annual Report
on Form 10-KSB for the fiscal year December 31, 2003, filed April 9, 2004; (iv)
Current Report on Form 8-K, filed August 24, 2006; (v) Current Report on
Form 8-K, filed November 8, 2006; (vi) Current Report on Form 8-K, filed
February 6, 2007; (vii) Registration Statement on Form S-1, filed January 19,
1996; (viii) Quarterly Report on Form 10-QSB for the quarterly period ended
September 30, 2005, filed November 14, 2005; (ix) Current Report on Form 8-K/A,
filed January 5, 2006; (x) Current Report on Form 8-K, filed May 17, 2006; (xi)
Current Report on Form 8-K, filed June 8, 2006; (xii) Current Report on Form
8-K/A, filed June 15, 2006; (xiii) Registration Statement on Form SB-2, filed
June 15, 2006; (xiv) Current Report on Form 8-K, filed June 9, 2006; (xv)
Current Report on Form 8-K, filed November 2, 2006; (xvi) Current Report on Form
8-K, filed November 28, 2006; (xvii) Current Report on Form 8-K, filed January
3, 2007; and (xviii) Annual Report on Form 10-KSB for the fiscal year December
31, 2006, filed April 3, 2007, are incorporated in Part III, Item
13.
Transitional
Small Business Disclosure Format (check one): Yes o No x
EXPLANATORY
NOTE
This
Amendment No. 2 on Form 10-K/A (the “Amendment”) amends the annual report of
Material Technology, Inc. (the “Company”) for the year ended December 31, 2007
as filed with the Securities and Exchange Commission on April 14, 2008 and as
amended on July 29, 2008 (the “Original Filing”). This Amendment corrects
clerical errors in the financial statements of our Original Filing and adds a
discussion concerning the restatement of our 2005 and 2006 financial statements
in the notes to our consolidated financial statements. In addition,
as required by Rule 12b-15 under the Exchange Act, new certifications by the
Company’s principal executive officer and principal financial officer are filed
as exhibits to this Amendment.
For
the convenience of the reader, this Amendment sets forth the Original Filing in
its entirety. This Amendment does not reflect events occurring after
the date of the Original Filing or modify or update any disclosures that may
have been affected by subsequent events. Except as described above,
all other information included in the Original Filing remains
unchanged.
Development
of Business
We were
formed as a Delaware corporation on March 4, 1997. We are the successor to
the business of Material Technology, Inc., a Delaware corporation, also doing
business as Tensiodyne Scientific, Inc. Material Technology, Inc. was the
successor to the business of Tensiodyne Corporation that began developing the
Fatigue Fuse in 1983. Our two predecessors, Tensiodyne Corporation and
Material Technology, Inc. were engaged in developing and testing our Fatigue
Fuse and, beginning in 1993, developing our Electrochemical Fatigue
Sensor.
Our
Business
Over the
last several years, we were engaged in research and development of metal fatigue
detection, measurement, and monitoring technologies. We have now developed
several monitoring devices for metal fatigue detection and measurement. We
are currently marketing our technology.
Our
efforts have been dedicated to developing devices and systems that indicate the
true status of fatigue damage in a metal component. We have developed two
products. The first is a small, simple device that continuously integrates
the effect of fatigue loading in a structural member, called a Fatigue
Fuse. The second is an instrument that detects very small growing fatigue
cracks in metals, the Electrochemical Fatigue Sensor. The
Electrochemical Fatigue Sensor has demonstrated in the laboratory that it can
detect cracks as small as 10 microns (0.0004 inches), which we believe is
smaller than any other practical crack detection technology. The
Company holds the patents on the Fatigue Fuse and the license on the technology
on the Electrochemical Fatigue Sensor from the University of Pennsylvania and
licenses both of those technologies to us.
We have
completed the technology to the point where we are now performing real world
bridge inspections.
On
September 25, 2007, the Federal Highway Administration (FHA) has signed a
$347,500 contract with us to purchase equipment and training as part of their
Steel Bridge Testing Program. They will use our EFS system in the
laboratory and on actual bridges to find growing fatigue
cracks. Following the completion of this program, the FHA will
recommend technologies for use on bridges for specific bridge
problems.
Our
on-call contract with the Pennsylvania Department of Transportation (PennDOT) is
continuing to produce good results. Since May 2007, we have used the
EFS on 12 bridges in Pennsylvania, totaling over $100,000 so far. We
anticipate further work orders to be issued for the next inspection
season. We have also received interest from several inspection
companies in Pennsylvania to purchase EFS equipment, as well as training and
licensing, in order to execute these further work orders, with licensing fees
payable to us for each bridge inspected. One such company
has
already
been trained at their cost to help us execute on-call contracts in
2008.
We
completed a contract with Massachusetts (MassHighway) for $24,290. We
then met with MassHighway representatives who hired us to conduct additional
bridge inspections during 2008.
New York
State contracted with us to provide EFS inspection services on a high profile
fracture critical bridge for $9,630. As a result of this initial
inspection for the New York State Department of Transportation, we will be
performing a follow up inspection. Additionally, they are evaluating
purchase of equipment, training for their engineers, and licensing in
2008.
We have
completed an inspection of a fracture critical bridge in West Sacramento,
California, and are also in the process of analyzing and reporting the
results. At the same time we have met with several high-ranking state
and national officials in California, with more meetings planned, all discussing
the use of EFS across the state.
We have
also formed a strategic alignment with a California-based independent testing
laboratory called Smith Emery Company. Smith Emery Company is over
100 years old and has over 400 employees in California as well as an office in
China. They perform weld testing, building façade testing, and
metallurgical failure analysis. Engineers and technicians have
already been trained at their cost to execute contracts in the western U.S.
region.
We have
signed a contract with the Canadian National Railway to inspect a bridge in
Wisconsin. The Canadian National Railway owns a number of bridges in
the United States.
We have
completed and sent PennDOT a report on the nine bridges we inspected in
Pennsylvania. We hope to meet with PennDOT in the near future to
discuss the use of EFS on their remaining steel bridges.
We met
with the U.S. Army Corps of Engineers to present at the U.S. Secretary of
Defense’s office on May 1 and 2, 2008. The U.S. Army Corps of
Engineers owns all of the bridges over U.S. federal waterways.
We have
scheduled inspections in 2008 for the following entities so far:
·
|
Virginia
Department of Transportation
|
·
|
Canadian
National Railway
|
·
|
Alabama
Department of Transportation
|
·
|
New
York Department of Transportation
|
We have
been hired to perform inspections with the following entities which have not yet
been scheduled:
·
|
New
Jersey Department of Transportation
|
Our
Technologies
The Fatigue
Fuse
The
Fatigue Fuse is designed to be affixed to a structure to give warnings at
pre-selected percentages of the fatigue life that have been used up (i.e., how
close to failure the structure has progressed). It warns against a
condition of widespread generalized cracking due to fatigue.
The
Fatigue Fuse is a thin piece of metal similar to the material being
monitored. It consists of a series of parallel metal strips connected to a
common base, much as fingers are attached to a hand. Each “finger” has a
different geometric pattern, called “notches,” defining its boundaries.
Each finger incorporates an application-specific notch near the base. By
applying the laws of physics and fracture mechanics to determine the geometric
contour of each notch, the fatigue life of each finger is finite and
predictable. When the fatigue life of a finger (Fuse) is reached, the Fuse
breaks.
By
implementing different geometry for each finger notch in the array, different
increments of fatigue life are observable. Typically, notches will be
designed to facilitate observing increments of fatigue life of 10% to
20%. By mechanically attaching or bonding these devices to
different areas of the structural member of concern, the Fuse undergoes the same
fatigue history (strain cycles) as the structural member. Therefore,
breakage of a Fuse indicates that an increment of fatigue life has been reached
for the structural member. The notch and the size and shape of the notch
concentrate energy on each finger. The Fuse is intimately attached to the
structural member of interest. Therefore, the Fuse experiences the same
strain and wear history as the member. Methods are available for remote
indication of Fuse fracturing.
In a new
structure, we generally assume there is no fatigue and can thus design the
Fatigue Fuse for 100% of its life potential. But in an existing structure,
one that has experienced loading and wear, we must determine the fatigue status
of that structural member so we can design the Fatigue Fuse to monitor the
remaining fatigue life potential.
We
believe that the Fatigue Fuse is of value in monitoring aircraft, ships,
bridges, conveyor systems, mining equipment, cranes, etc. Little special
training is needed to qualify individuals to report any broken segments of the
Fatigue Fuse to the appropriate engineering authority for necessary
action. The success of the device is contingent upon our successful
marketing of the Fatigue Fuse, and no assurance can be given that we will be
able to overcome the obstacles relating to introducing a new product to the
market. To implement our ability to produce and market the Fatigue Fuse,
we need substantial additional capital and no assurance can be given that this
needed capital will be available.
The Electrochemical Fatigue
Sensor (EFS”)
The EFS
is a device that employs the principle of electrochemical/mechanical interaction
of
metals
under repeated loading to find growing cracks. It is an instrument that
detects very small cracks and has the potential to determine crack growth
rates. The Electrochemical Fatigue Sensor has demonstrated in the
laboratory that it can detect cracks as small as 10 microns (0.0004 inches),
which we believe is smaller than any other practical technology. We
believe that nothing comparable to this instrument currently exists in materials
technology. We have inspected approximately 33 bridges to date using this
technology.
The EFS
functions by treating the location of interest (the target) associated with the
structural member as an electrode of an electrochemical cell (similar to a
battery). By imposing a constant voltage-equivalent circuit as the control
mechanism for the electrochemical reaction at the target surface, current flows
as a function of stress action. The EFS is always a dynamic process;
therefore stress action is required, e.g., to measure a bridge structural member
it is necessary that cyclic loads be imposed, such as normal traffic on the
bridge would do. The results are a specific set of current waveforms and
amplitudes that characterize and indicate fatigue damage i.e., growing fatigue
cracks.
Status
of our Technologies
Currently,
our primary focus is on the commercialization of the EFS.
Status of the
EFS
From May
2007 through June 2008, we have successfully used EFS on 23 highway
and railroad bridges. We are now actively marketing the EFS for
bridges.
Status of the Fatigue
Fuse
To date,
certain organizations have included our Fatigue Fuse in test programs. We
have already completed the tests for welded steel civil bridge members conducted
at the University of Rhode Island. In 1996, Westland Helicopter, a British
firm, tested the Fatigue Fuse on helicopters. That test was successful
with the legs of the Fatigue Fuses failing in sequence as predicted. At the
present time, we are applying Fatigue Fuses to several portable aluminum bridges
for the U.S. Army.
The
Fatigue Fuse has been at this stage for the past several years as we have not
had the necessary financial resources to finalize our development and commence
marketing. At the present time we have elected to defer future development
of the Fatigue Fuse and apply our resources to pursue the EFS
technology.
Commercial
Markets for our Products and Technologies
Our
technology is applicable to many market sectors such as bridges and aerospace as
well as ships, cranes, railways, power plants, nuclear facilities, chemical
plants, mining equipment, piping systems, and heavy iron.
Application of Our
Technologies For Bridges
Our EFS
and Fatigue Fuse products primarily address the detection of fatigue in
structures such as bridges. In the United States alone, there are more
than 610,000 bridges of which over 260,000 are rated by the Federal Highway
Administration as requiring major repair, rehabilitation, or replacement.
Our EFS and Fatigue Fuse products can be effectively used as fatigue detection
devices for all metal bridges located within the United States. Our
detection devices also address maintenance problems associated with bridge
structures.
Although
there are normal business imperatives, the bridge market is essentially
macro-economically and government policy driven. In our opinion, only
technology can provide the solution. The need for increased spending
accelerates significantly each year as infrastructure ages. The Federal
government has mandated bridge repair and detection through the passage of the
Intermodal Surface Transportation and Efficiency Act in 1991 and again in the
$200 billion, 1998 Transportation Equity Act. We have completed several
contracts to install our fatigue detection products on bridge structures within
the United States, and are in negotiations for several others.
Our
Patent Protections
We are
the owner and/or assignee of eight patents as follows:
Title
|
|
USPTO
No.
|
|
|
|
Devise
for Monitoring Fatigue Life
|
|
4,590,804
|
|
|
|
Method
of Making a Device
for
Monitoring Fatigue Life
|
|
4,639,997
|
|
|
|
Metal
Fatigue Detector
|
|
5,237,875
|
|
|
|
Device
for Monitoring the
Fatigue
Life of a Structural
Member
and a Method of
Making
Same
|
|
5,319,982
|
|
|
|
Device
for Monitoring the
Fatigue
Life of a Structural
Member
and a Method of
Making
Same
|
|
5,425,274
|
|
|
|
Methods
and Devices for
Electro
Chemically
Determining
Metal Fatigue
Status
|
|
5,419,201
|
|
|
|
Apparatus
for and Method for
Interrogating
a Fatigue Fuse
|
|
Provisional
|
|
|
|
Indicator
for Fatigue Fuse
|
|
Provisional
|
Our Patents are
Encumbered
The
patents described in the preceding section are pledged as collateral to secure
the repayment of loans extended to us or indebtedness that we currently
owe. On August 30, 1986, we entered into a funding agreement with the
Advanced Technology Center, whereby ATC paid $45,000 to us for the
purchase of a royalty of 3% of future gross sales and 6% of sublicensing
revenue. The royalty is limited to the $45,000 plus an 11% annual rate of
return. The payment of future royalties was secured by equipment we used
in the development of technology as specified in the funding agreement, however,
no lien against our equipment or our patents in favor of ATC vested until we
generated royalties from product sales.
On May 4,
1987, we entered into a funding agreement with ATC whereby ATC provided $63,775
to us for the purchase of a royalty of an additional 3% of future gross sales
and 6% of sublicensing revenue. The agreement was amended August 28, 1987,
and as amended, the royalty cannot exceed the lesser of (1) the amount of the
advance plus a 26% annual rate of return or, (2) total royalties earned for a
term of 17 years. As with our first agreement with ATC, no lien or
encumbrance against our assets, including our patents, vested in favor of ATC
until we generated royalties from product sales.
On
September 28, 2006, we entered into an agreement with Ben Franklin Technology,
the successor to ATC, to give Ben Franklin 3,334 shares of our common stock,
valued at $40,000, in exchange for a general release of the above
liabilities.
On May
27, 1994, we borrowed $25,000 from Sherman Baker, one of our shareholders.
We gave Mr. Baker a promissory note due May 31, 2002 and we pledged our patents
as collateral to secure the repayment of this note. As of December 31,
2007, there is a first priority security interest in our patents as collateral
for the repayment of the amounts we owe to Mr. Baker. As additional
consideration for this loan, we granted to Mr. Baker a 1% royalty interest in
the Fatigue Fuse and a 0.5% royalty interest in the Electrochemical Fatigue
Sensor. We are in default of the repayment terms of the note held by Mr.
Baker, and at December 31, 2007, we owe Mr. Baker $56,761 in principal and
accrued interest. Mr. Baker has not taken any action to foreclose his
interest in the collateral and we are in discussions with Mr. Baker, with the
expectation that we will cure any default in the note he holds and avoid any
foreclosure of his security interest held in our patents. We believe that
although we have not yet cured our defaults on the loans to Mr. Baker, our
current communications with him suggest that Mr. Baker does not have the present
intention of foreclosing on the patents as collateral or the pursuit of legal
action against us to collect the balance due under our note.
Distribution
of our Products
Subject
to available financing, we have and continue to exhibit the Electrochemical
Fatigue Sensor, and to a lesser extent the Fatigue Fuse, at various trade shows
and intend to also market
our
products directly to end users including certain state regulatory agencies
charged with overseeing bridge maintenance, companies engaged in manufacturing
and maintaining large ships and tankers, and the military. Although we
intend to undertake marketing, dependent on the availability of funds, within
and without the United States, no assurance can be given that any such marketing
activities will be implemented.
Competition
Other
technologies exist which identify cracks which may be the result of fatigue
damage. Single cracks larger than a minimum size can be found by
nondestructive inspection methods such as dye penetrant, radiography, eddy
current, acoustic emission, and ultrasonics. Tracking of load and strain
history, to subsequently estimate fatigue damage by computer processing, is
possible with recording instruments such as strain gauges and counting
accelerometers. These methods have been used for over 40 years and also
offer the advantage of having been accepted in the market, whereas our products
remain largely unproven. Companies marketing these alternate technologies
include Magnaflux Corporation, Kraut-Kramer-Branson, Dunegan-Endevco, and Micro
Measurements. These companies have more substantial assets, greater
experience, and more resources than us, including, but not limited to,
established distribution channels and an established customer base. The
familiarity and loyalty to these technologies may be difficult to
dislodge. Because we are still in the development stage, we are unable to
predict whether our technologies will be successfully developed and commercially
attractive in potential markets.
Employees
We have
six full-time employees. In addition, we retain consultants on an
independent contractor basis for specialized work.
We lease
an office at 11661 San Vicente Blvd., Suite 707, Los Angeles, California, 90049.
The space consists of 830 square feet and will be adequate for our current
and foreseeable needs. The total rent is payable at $2,582 per month on a
month-to-month basis. Either party may cancel the lease on 30 days
notice.
Stephen
Beck
In July
2002, we settled a lawsuit related to a contract dispute with Mr. Stephen Beck.
In March 2006, Mr. Beck filed a lawsuit against us alleging breach of
contract related to the lawsuit settlement and sought approximately $135,000 in
damages, plus the issuance of 12,989 shares of our common stock plus interest.
In
December 2006, we entered into a settlement and release agreement, as well as
irrevocable escrow instructions, to settle the lawsuit Mr. Beck filed in March
2006. As consideration under
the
settlement, we issued 5,000,000 shares of our common stock to Mr. Beck, with the
shares to be held by an escrow agent and distributed to Mr. Beck monthly with a
trading limit equal to 8% of the previous month’s trading volume of our common
stock, until Mr. Beck has received a total of $800,000. As we have
guaranteed this debt to Mr. Beck in the amount of $800,000, we have recorded a
liability as of December 31, 2007 for this amount. As Mr. Beck receives
proceeds from the sale of his shares into the market and 7.5% (net of any
expenses incurred by us) of any cash raised by us from the sale of equity, we
will reduce our guarantee by that amount. We have paid a total of $285,182 to
Mr. Beck in cash as part of the settlement. Mr. Beck also had
anti-dilution rights on those shares to maintain his percentage ownership
through September 27, 2008. We issued another 5,000,000 shares to Mr. Beck
to be held in escrow until the conditions are met with respect to the
anti-dilution shares. As of the date of this Report, we have issued a
total of 1,393,617 shares of common stock to Mr. Beck pursuant to the
anti-dilution provision in the settlement arrangement. In or about
February 2008, Mr. Beck reached the $800,000 guarantee from the sale of our
common stock and the cash received from us for 7.5% of the capital we
raised. Therefore, as of the date of this Report, we have no further
liability to Mr. Beck.
On
September 12, 2007, we filed a complaint for declaratory relief against Mr. Beck
in the Superior Court of the State of California, County of Los Angeles, Central
Judicial District, seeking a judicial determination as to the respective rights
and duties of us and Mr. Beck with respect to certain terms and conditions of
the settlement agreement and escrow instructions.
On
October 1, 2007, Mr. Beck served us with a Motion for Enforcement of Settlement
and Entry of Judgment (Motion”). Mr. Beck’s motion was
denied.
On
February 7, 2008, we filed a first amended complaint in our action against Mr.
Beck for declaratory relief which now also seeks to have the settlement
agreement and escrow instructions rescinded. On March 6, 2008, Mr.
Beck filed a cross-complaint against us and Robert M. Bernstein, our President
and a Director, for breach of contract, specific performance, declaratory
relief, conversion, intentional interference with contract (against Mr.
Bernstein only) and, in the alternative, equitable restitution.
Gem
Advisors, Inc., GEM Global Emerging Markets, and Global Emerging Markets of
North America, Inc.
On June
15, 2005, we filed a Complaint in the Los Angeles Superior Court, State of
California, case number BC336689, against Gem Advisors, Inc., GEM Global
Emerging Markets, and Global Emerging Markets of North America, Inc., seeking a
declaration regarding certain agreements we entered into with the parties.
We did not seek monetary damages. On November 16, 2005, Gem Advisors, Inc.
filed an Answer and Cross-Complaint, seeking approximately $1.9 million in
damages arising out of finders fees for certain transactions. On November
30, 2005, default judgments were entered against the other defendants who failed
to respond to our Complaint. In September 2006, this case was dismissed as
to all parties because the parties thought they could agree on the terms of a
written settlement agreement. However, the parties failed to reach a
settlement and no formal settlement agreement was ever executed.
On
November 30, 2007, Gem Advisors, Inc. filed a lawsuit
against us, Robert M. Bernstein, and Lawrence I. Washor (who
represented us in the lawsuit against Gem Advisors, Inc. filed on June
15, 2005), for breach of contract (settlement), breach of contract (for transfer
to Gem Advisors, Inc. of 585,000 shares we held in another company), breach of
covenant of good faith and fair dealing, and fraud and deceit – promise made
without intention to perform (the only cause of action asserted against Robert
M. Bernstein and Lawrence I. Washor). Gem Advisors, Inc. is seeking
damages in excess of $250,000. On April 10, 2008, the Court dismissed
Lawrence I. Washor from the lawsuit.
None.
PART
II
Market
Information
Our
common stock is quoted on the OTC Bulletin Board under the symbol
MTTG. The following table sets forth the high and low bid prices per
share of common stock for the last two fiscal years. These prices
represent inter-dealer quotations without retail markup, markdown, or commission
and may not necessarily represent actual transactions.
|
High
|
|
Low
|
|
|
|
|
Fiscal
year ended December 31, 2006:
|
|
|
|
First
quarter
|
$0.29
|
|
$0.09
|
Second
quarter
|
$0.35
|
|
$0.08
|
Third
quarter
|
$0.10
|
|
$0.03
|
Fourth
quarter
|
$13.80
|
|
$0.03
|
|
|
|
|
Fiscal
year ended December 31, 2007:
|
|
|
|
First
quarter
|
$3.70
|
|
$0.41
|
Second
quarter
|
$1.65
|
|
$1.01
|
Third
quarter
|
$1.97
|
|
$0.55
|
Fourth
quarter
|
$0.75
|
|
$0.40
|
The
closing price of our common stock on July 21, 2008 was $0.01.
Holders
As of the
date of this Report, we had 186,828,995 shares of our Class A common stock
issued and outstanding and held by approximately 1,727 holders of
record. The number of record holders was determined from the records
of our transfer agent and does not include beneficial owners of common stock
whose shares are held in the names of various security brokers, dealers, and
registered clearing agencies. The transfer agent for our Class A common
stock is Interwest Transfer Company, Inc., 1981 East 4800 South, Suite 100, Salt
Lake City, Utah 84117.
Dividends
We have
never declared or paid any cash dividends on our common stock. We do not
anticipate paying any cash dividends to stockholders in the foreseeable future.
In addition, any future determination to pay cash dividends will be at the
discretion of the Board of Directors and will be dependent upon our financial
condition, results of operations, capital requirements, and such other factors
as the Board of Directors deem relevant.
Securities
Authorized for Issuance under Equity Compensation Plans
On April
18, 2006, our Board of Directors approved the 2006 Non-Qualified Stock Grant and
Option Plan (the 2006 Plan”) with 100,000 shares of our common stock available
for issuance under the plan. The plan offers selected employees,
directors, and consultants an opportunity to acquire our common stock, and
serves to encourage such persons to remain employed by us and to attract new
employees. As of the date of this Report, we have issued all 100,000
shares of common stock under the plan.
On
December 1, 2006, our Board of Directors approved the 2006/2007 Non-Qualified
Company Stock Grant and Option Plan (the 2006/2007 Plan”) with 3,000,000 shares
of our common stock available for issuance under the plan. The plan offers
selected employees, directors, and consultants an opportunity to acquire our
common stock, and serves to encourage such persons to remain employed by us and
to attract new employees. As of the date of this Report, we have not
issued any options or shares of common stock under the 2006/2007
Plan.
On April
22, 2008, our Board of Directors approved the 2008 Incentive and Nonstatutory
Stock Option Plan (the “2008 Plan”) with 100,000,000 shares of our common stock
available for issuance under the plan. On May 23, 2008, our Board of
Directors amended the 2008 Plan increasing the number of shares of our common
stock available for issuance under the plan to 400,000,000. The 2008
Plan offers selected employees, directors, and consultants an opportunity to
acquire our common stock, and serves to encourage such persons to remain
employed by us and to attract new employees. As of the date of this
Report, we have issued all 400,000,000 stock options to employees under the 2008
Plan.
Recent
Sales of Unregistered Securities
On
September 28, 2007, we issued 400,000 shares of common stock to an employee
subject to vesting, which were ultimately forfeited due to the employee’s
termination.
On
October 2, 2007, we issued 76,300 shares of common stock to one entity in
consideration for services.
On
October 8, 2007, we issued 1,430,400 shares of common stock to three entities
and one individual under Regulation S in consideration for prior
investments.
On
October 8, 2007, we sold 770,000 shares of common stock to one entity at $0.65
per share for total
gross proceeds of $505,000 under Regulation S.
On
October 12, 2007, we issued 4,000,000 shares of common stock to an entity in
exchange for certain of their shares. However, the exchange was
cancelled and each side returned the other’s shares.
On
December 3, 2007, we sold 2,027,900 shares of common stock to 42 individuals and
entities at $0.24 per share for total gross proceeds of $486,696.
On
December 6, 2007, we sold 62,500 shares of common stock to one entity at $0.40
per share for total gross proceeds of $25,000 under Regulation S.
On
December 10, 2007, we issued 250,000 shares to one individual in exchange for
services.
On
January 9, 2008, we issued 425,000 shares of common stock to one individual in
exchange for consulting services.
On
January 14, 2008, we issued a total of 7,000,000 shares of common stock to two
entities for investor relations services.
On
January 21, 2008, we issued 425,000 shares of common stock to one individual in
exchange for services.
On
February 19, 2008, we issued 200,000 shares of common stock to one individual in
exchange for services.
On
February 25, 2008, we issued 150,000 shares of common stock to one individual in
exchange for consulting services.
On
February 27, 2008, we issued 150,000 shares of common stock to one individual in
exchange for consulting services.
On
February 27, 2008, we issued 200,000 shares of common stock to one individual in
exchange for consulting services.
On
February 27, 2008, we issued 25,000 shares of common stock to one individual in
exchange for consulting services.
On April
9, 2008, we issued options to purchase a total of 15,390,546 shares of Class A
common stock to two individuals at an exercise price of $0.025 per
share.
On April
9, 2008, we issued options to purchase a total of 48,000 shares of Class B
common stock to two individuals at an exercise price of $0.50 per
share.
On April
11, 2008, we issued 77,600 shares of common stock to four individuals under
Regulation S for total gross proceeds of $18,624.
On July
11, 2008, we issued a total of 8,577,907 shares of common stock to two entities
pursuant to their conversion of Series E Convertible Preferred
Stock.
Unless
otherwise indicated, we relied on the exemption from registration relating to
offerings that do not involve any public offering pursuant to Section 4(2) under
the Securities Act of 1933 (the “Act”) and/or Rule 506 of Regulation D of the
Act. We believe that each investor had adequate access to information
about us through the investor’s relationship with us.
Disclaimer
Regarding Forward Looking Statements
Our
Management’s Discussion and Analysis contains not only statements that are
historical facts, but also statements that are forward-looking (within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934). Forward-looking statements are, by their
very nature, uncertain and risky. These risks and uncertainties include
international, national and local general economic and market conditions;
demographic changes; our ability to sustain, manage, or forecast growth; our
ability to successfully make and integrate acquisitions; raw material costs and
availability; new product development and introduction; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; the loss of significant customers
or suppliers; fluctuations and difficulty in forecasting operating results;
changes in business strategy or development plans; business disruptions; the
ability to attract and retain qualified personnel; the ability to protect
technology; and other risks that might be detailed from time to time in our
filings with the Securities and Exchange Commission.
Although
the forward-looking statements in this Annual Report reflect the good faith
judgment of our management, such statements can only be based on facts and
factors currently known by them. Consequently, and because forward-looking
statements are inherently subject to risks and uncertainties, the actual results
and outcomes may differ materially from the results and outcomes discussed in
the forward-looking statements. You are urged to carefully review and
consider the various disclosures made by us in this Report and in our other
reports as we attempt to advise interested parties of the risks and factors that
may affect our business, financial condition, and results of operations and
prospects.
Overview
We
research and develop technologies that detect and measure metal fatigue.
We have developed two products. Our two products are the Fatigue Fuse and
Electrochemical Fatigue Sensor. We generate very little revenue from the
sale and licensing of our products, and thus we are a development stage
company.
Our
biggest challenge is funding the continued research and development and
commercialization of our products until we can generate sufficient revenue to
support our operations. We try to
keep our
overhead low and utilize outside consultants as much as possible in order to
reduce expenses, and thus far we have been successful in raising enough capital
through loans and financing to fund operations. For the foreseeable
future, we will continue to raise capital in this manner.
Our
consolidated financial statements are prepared using the accrual method of
accounting in accordance with accounting principles generally accepted in the
United States of America and have been prepared on a going concern basis, which
contemplates the realization of assets and the settlement of liabilities in the
normal course of business. We have sustained operating losses since
our inception (October 21, 1983). In addition, we have used substantial
amounts of working capital in our operations. Further, at December 31,
2007, the deficit accumulated during the development stage amounted to
approximately $313,208,402.
In view
of these matters, realization of a major portion of the assets in the
accompanying consolidated balance sheet is dependent upon our ability to meet
our financing requirements and the success of our future operations.
During 2007, we received approximately $4,000,000 in private financing,
primarily from the sale of equity and debt securities. We plan to
continue to raise funds through the sale of our securities for the foreseeable
future. In addition in 2007, we received contracts to inspect certain
bridges with nine states which generated gross revenue of approximately
$201,917. We have begun marketing our current technologies while
continuing to develop new methods and applications. We will need to raise
additional capital to finance future activities and no assurances can be made
that current or anticipated future sources of funds will enable us to finance
future operations. In light of these circumstances, substantial doubt
exists about our ability to continue as a going concern. The consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets or liabilities that might
be necessary should we be unable to continue as a going concern.
Results
of Operations for the Year Ended December 31, 2007 as Compared to the Year Ended
December 31, 2006
Introduction
In 2007,
we had revenues from bridge testing. Our revenues for 2007 totaled
$201,917. We continued to fund the majority of our operations through the
issuance of our stock, resulting in large expenses in the areas of research and
development and consulting. The amount of cash used in our operations was
approximately $2,664,630 in 2007 compared to approximately $1,779,256 in
2006. We anticipate that we will continue to fund a substantial portion of
our operations through the sale of our securities until such time as we can
begin to generate substantial revenue from the sale of our products, and we do
not have an estimate of when such revenues will begin.
Revenues and Loss from
Operations
Our
revenue, research and development costs, general and administrative expenses,
and loss from operations for the year ended December 31, 2007 as compared to the
year ended December 31, 2006 are as follows:
|
|
Year
Ended
December
31,
2007
|
|
|
Year
Ended
December
31,
2006
|
|
|
Percentage
Change
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
201,917 |
|
|
$ |
39,446 |
|
|
|
411.89 |
% |
Research
and development costs
|
|
|
3,701,966 |
|
|
|
902,446 |
|
|
|
310.21 |
% |
General
and administrative expenses
|
|
|
98,557,941 |
|
|
|
138,892,926 |
|
|
|
(29.04 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
$ |
102,057,990 |
|
|
$ |
139,755,926 |
|
|
|
(26.74 |
)% |
Our
revenues for both 2007 and 2006 were derived exclusively from bridge
testing.
Of the
$3,701,966 in research and development costs for 2007, $197,005 was incurred in
salaries to our in-house engineering staff which included an officer and
director, $359,861 was paid to outside consultants and for related expense
reimbursements, and we valued the issuance of 2,116,000 shares of our common
stock that were issued to various consultants at $3,145,100. Of the
$1,013,969 in research and development costs for 2006, $111,523 was incurred in
salaries to our in-house engineering staff which included an officer and
director, $ 271,279 was paid to outside consultants and for related expense
reimbursements, and we valued the issuance of 36,028 shares of our common stock
that were issued to various consultants at $631,167.
General
and administrative expenses were $98,557,941 and $138,781,403, respectively, for
the years ended December 31, 2007 and 2006. The major expenses incurred
during each of the years were:
|
Year
Ended
December
31,
2007
|
|
Year
Ended
December
31,
2006
|
|
|
|
|
|
|
Consulting
services
|
$ |
16,855,747 |
|
$ |
125,332,072 |
|
Officer’s
salary
|
|
284,916 |
|
|
211,574 |
|
Officer’s
stock based compensation
|
|
60,048,000 |
|
|
6,575,342 |
|
Secretarial
salaries
|
|
132,754 |
|
|
114,561 |
|
Professional
Fees
|
|
1,053,280 |
|
|
974,704 |
|
Office
expense
|
|
97,459 |
|
|
52,855 |
|
Rent
|
|
139,173 |
|
|
28,176 |
|
Impairment
loss
|
|
19,294,875 |
|
|
1,913,445 |
|
Payroll
taxes
|
|
42,334 |
|
|
28,255 |
|
Telephone
|
|
27,929 |
|
|
17,375 |
|
Of the
$16,855,747 in consulting expense for the year ended December 31, 2007,
$12,394,888 was related to the issuance of 8,926,724 shares of common
stock. In addition, we charged
$1,100,000
in consulting fees through an increase in convertible debt of $1,100,000 and
charged $2,845.000 to consulting in connection with the acquisition of shares of
Rocket City Automotive. Of the $125,332,072 in consulting expense for the year
ended December 31, 2006, $124,543,689 was related to the issuance of 35,021,248
shares of common stock.
Other Income and Expenses
and Net Loss
Our gain
on modification of convertible debt, modification of research and development
sponsorship agreement, loss on subscription receivables, interest expense,
other-than-temporary impairment of marketable securities, change in fair value
of derivative and warrant liabilities, loss on settlement of lawsuits, and net
loss for the year ended December 31, 2007 as compared to the year ended December
31, 2006 are as follows:
|
|
Year
Ended
December
31,
2007
|
|
|
Year
Ended
December
31,
2006
|
|
|
Percentage
Change
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on modification of convertible debt
|
|
$ |
-0- |
|
|
$ |
1,033,479 |
|
|
|
(100 |
)% |
Interest
expense
|
|
|
(2,374,032 |
) |
|
|
(1,625,592 |
) |
|
|
46.04 |
% |
Net
unrealized and realized loss of marketable securities
|
|
|
(3,986,553 |
) |
|
|
(3,798,516 |
) |
|
|
4.95 |
% |
Change
in fair value of derivative and warrant liabilities
|
|
|
34,962,617 |
|
|
|
(33,780,874 |
) |
|
|
(196.5 |
)% |
Interest
income
|
|
|
60,179 |
|
|
|
37,120 |
|
|
|
62.12 |
% |
Other
|
|
|
-0- |
|
|
|
7,008 |
|
|
|
(100 |
)% |
Provision
for income taxes
|
|
|
(800 |
) |
|
|
(800 |
) |
|
|
|
|
Net
loss
|
|
$ |
(73,396,579 |
) |
|
$ |
(177,884,101 |
) |
|
|
(58.74 |
)% |
Our loss
of the gain on modification of convertible debt of $1,033,479 from 2006 is
related to our modification of the Palisades debt and removal of associated
derivative liability. Our interest expense includes amortization of
debt discounts totaling $2,041,213 in 2007 and $968,716 in 2006. The
change in fair value of derivative and warrant liabilities represents the change
in derivative values related to warrants and convertible debt with Palisades and
Golden Gate.
Liquidity
and Capital Resources
Introduction
During
the year ended December 31, 2007, as with 2006, we did not generate positive
cash flow. As a result, we funded our operations through the private sale
of equity and debt securities, the
issuance of our securities in exchange for services, and
loans.
Our cash,
investments in marketable securities held for trading, investments in marketable
securities available for sale, accounts receivable, prepaid services, prepaid
expenses and other current assets, total current assets, total assets, total
current liabilities, and total liabilities as of December 31, 2007, as compared
to December 31, 2006, were as follows:
|
|
December
31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$ |
809,710 |
|
|
$ |
129,296 |
|
Marketable
securities – trading
|
|
|
300,000 |
|
|
|
135,136 |
|
Marketable
securities – available-for-sale
|
|
|
1,009,267 |
|
|
|
-0- |
|
Accounts
receivable
|
|
|
108,661 |
|
|
|
116,707 |
|
Inventories
|
|
|
62,216 |
|
|
|
-0- |
|
Prepaid
expenses and other
|
|
|
47,962 |
|
|
|
40,006 |
|
Total
current assets
|
|
|
2,337,546 |
|
|
|
421,145 |
|
Total
assets
|
|
|
2,425,280 |
|
|
|
432,780 |
|
Total
current liabilities
|
|
|
691,380 |
|
|
|
542,802 |
|
Total
liabilities
|
|
|
14,240,655 |
|
|
|
46,986,215 |
|
Cash
Requirements
For the
year ended December 31, 2007, our net cash used in operations was $(2,664,630)
compared to $(1,779,256) for the year ended December 31,
2006.
Negative
operating cash flows during the year ended December 31, 2007 were primarily
created by a net loss from operations of $(73,396,579), offset by impairment
losses of $19,257,375 incurred in connection with the acquisition of three
subsidiaries, the issuance of stock for services of $16,195,289,
other-than-temporary impairment of marketable securities available for sale of
amortization of discount on convertible debentures of $3,986,200 and an increase
in officer stock based compensation of $60,000,000. There was also an
increase in the fair value of derivative and warrant liabilities of
$34,962,617.
Negative
operating cash flows during the year ended December 31, 2006 were primarily
created by a net loss from operations of $(177,884,101), offset by impairment
losses of $1,913,445 incurred in connection with the acquisition of a
subsidiary, a loss on write off of subscription receivables of $1,346,010, the
issuance of stock for services of $126,199,122, other-than-temporary impairment
of marketable securities available for sale of $3,798,516, amortization of
discount on convertible debentures of $968,716, a increase in the fair value of
derivative and warrant liabilities of $33,780,874 and an increase in accounts
payable and accrued expenses of $1,197,776, and an increase in officer stock
based compensation 6,575,342. There was also a gain on modification of
convertible debt of $1,033,479.
Because
of our need for cash to fund our continuing research and development, we do not
have an opinion as to how indicative these results will be of future
results.
Sources and Uses of
Cash
Net cash
provided by (used in) investing activities for the years ended December 31, 2007
and 2006, were $(648,543) and $236,372, respectively. For the years ended
December 31, 2007 and 2006, the net cash came primarily from the sale of
securities in the amount of $537,174 and $242,506, respectively, offset by the
amount for purchase of securities of $(1,702,038) and $(7,307),
respectively. Net cash from investment activities in 2007 was further
increased by the $600,000 cash we received in connection with the acquisition of
three subsidiaries, and $400,000 in redemptions of certificate of
deposits.
Net cash
provided by financing activities for the years ended December 31, 2007 and 2006,
were $3,993,588 and $1,630,734, respectively. For the year ended December
31, 2007, the net cash came primarily from the sale of common stock and warrants
of $4,566,631 and proceeds from convertible debentures and other notes payable
of $20,000. For the year ended December 31, 2006, the net cash came
primarily from the sale of common stock and warrants of $1,680,553 and proceeds
from convertible debentures and other notes payable of $50,000.
We are
not generating sufficient cash flow from operations to fund growth. We
cannot predict when we will begin to generate revenue from the sale of our
products, and until that time, we will need to raise additional capital through
the sale of our securities. If we are unsuccessful in raising the required
capital, we may have to curtail operations.
Critical
Accounting Policies
The
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses. In consultation with our Board of Directors, we
have identified the following accounting policies that it believes are key to an
understanding of its financial statements. These are important accounting
policies that require management’s most difficult, subjective
judgments.
The first
critical accounting policy relates to revenue recognition. Income
from our research is recognized at the time services are rendered and
billed.
The
second critical accounting policy relates to research and development
expense. Costs incurred in the development of our products are expensed as
incurred.
The third
critical accounting policy relates to the valuation of non-monetary
consideration issued for services rendered. We value all services rendered in
exchange for our common stock at the quoted price of the shares issued at date
of issuance or at the fair value of the services rendered, which ever is more
readily determinable. All other services provided in exchange for other
non-monetary consideration is valued at either the fair value of the services
received or the fair value of the consideration relinquished, whichever is more
readily determinable.
Our
accounting policy for equity instruments issued to consultants and vendors in
exchange for goods and services follows the provisions of EITF 96-18, “Accounting for Equity Instruments
That are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services ” and EITF 00-18, Accounting Recognition for Certain
Transactions Involving Equity Instruments Granted to Other Than
Employees.” The measurement date for the fair value of the
equity instruments issued is determined at the earlier of (i) the date at which
a commitment for performance by the consultant or vendor is reached or (ii) the
date at which the consultant or vendor’s performance is complete. In the
case of equity instruments issued to consultants, the fair value of the equity
instrument is recognized over the term of the consulting agreement. In
accordance to EITF 00-18, an asset acquired in exchange for the issuance of
fully vested, nonforfeitable equity instruments should not be presented or
classified as an offset to equity on the grantor’s balance sheet once the equity
instrument is granted for accounting purposes. Accordingly, we record the fair
value of nonforfeitable common stock issued for future consulting services as
prepaid services in our consolidated balance sheet.
The
fourth critical accounting policy is our accounting for conventional convertible
debt. When the convertible feature of the conventional convertible debt
provides for a rate of conversion that is below market value, this feature is
characterized as a beneficial conversion feature (BCF”). We record a BCF
as a debt discount pursuant to EITF Issue No. 98-5 (EITF 98-05”), Accounting for Convertible
Securities with Beneficial Conversion Features or Contingency Adjustable
Conversion Ratio,” and EITF Issue No. 00-27, Application of EITF Issue No. 98-5
to Certain Convertible Instrument(s).” In those circumstances, the
convertible debt will be recorded net of the discount related to the BCF.
We amortize the discount to interest expense over the life of the debt using the
effective interest method.
The fifth
critical account policy relates to the accounting for non-conventional
convertible debt and the related stock purchase warrants. In the case of
non-conventional convertible debt, we bifurcate our embedded derivative
instruments and records them under the provisions of SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities,” as amended, and EITF
Issue No. 00-19, Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company’s Own Stock. ” These embedded derivatives include the
conversion feature, liquidated damages related to registration rights and
default provisions. The accounting treatment of derivative financial
instruments requires that we record the derivatives and related warrants at
their fair values as of the inception date of the agreement and at fair value as
of each subsequent balance sheet date. In addition, under the provisions
of EITF Issue No. 00-19, as a result of entering into the non-conventional
convertible debenture, we are required to value and classify all other
non-employee stock options and warrants as derivative liabilities at that date
and mark them to market at each reporting date thereafter. Any change in
fair value will be recorded as non-operating, non-cash income or expense at each
reporting date. If the fair value of the derivatives is higher at the
subsequent balance sheet date, we will record a non-operating, non-cash
charge. If the fair value of the derivatives is lower at the subsequent
balance sheet date, we will record non-operating, non-cash income. We
value our derivatives primarily using the Black-Scholes Option Pricing
Model. The derivatives are classified as long-term
liabilities.
The sixth
critical accounting policy relates to the recording of marketable securities
held for trading and available-for-sale. Marketable securities purchased
with the intent of selling them in the near term are classified as trading
securities. Trading securities are initially recorded at cost and are adjusted
to their fair value, with the change in fair value during the period included in
earnings as unrealized gains or losses. Realized gains or losses on
dispositions are based upon the net proceeds and the adjusted book value of the
securities sold, using the specific identification method, and are recorded as
realized gains or losses in the consolidated statements of operations.
Marketable securities that are not classified as trading securities are
classified as available-for-sale securities. Available-for-sale securities
are initially recorded at cost. Available-for-sale securities with quoted
market prices are adjusted to their fair value, subject to an impairment
analysis (see below). Any change in fair value during the period is
excluded from earnings and recorded, net of tax, as a component of accumulated
other comprehensive income (loss). Any decline in value of
available-for-sale securities below cost that is considered to be other than
temporary is recorded as a reduction of the cost basis of the security and is
included in the statement of operations as a write down of the market value (see
below).
The
seventh critical accounting policy is our accounting for the fair market value
of non-marketable securities we have acquired. Non-marketable securities
are originally recorded at cost. In the case of non-marketable
securities we acquired with our common stock, we value the securities at a
significant discount to the stated per share cost based upon our historical
experience with similar transactions as to the amount ultimately realized from
the sale of the shares. Such investments are reduced when we have
indications that a permanent decline in value has occurred. At such time
as quoted market prices become available, the net cost basis of these securities
will be reclassified to the appropriate category of marketable securities.
Until that time, the securities will be recorded at their net cost basis,
subject to an impairment analysis (see below).
In
accordance with the guidance of EITF 03-1, The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments, we assess any decline in
value of available-for-sale securities and non-marketable securities below cost
as to whether such decline is other than temporary. If a decline is
determined to be other than temporary, the decline is recorded as a reduction of
the cost basis of the security and is included in the statement of operations as
an impairment write down of the investment.
The
financial statements required to be filed pursuant to this Item 7 begin on page
F-1 of this Report.
Effective
September 11, 2007, KMJ/Corbin and Company, LLP (“KMJ”) resigned as our
independent registered public accounting firm for the fiscal year ended December
31, 2007.
We
engaged KMJ on January 21, 2005. For the last two fiscal years, KMJ’s
reports on our financial statements did not contain an adverse opinion or a
disclaimer of opinion, nor were the reports qualified or modified as to audit
scope, or accounting principles, but they were modified as to uncertainty about
our ability to continue as a going concern. For the last two fiscal
years and any subsequent interim period preceding the dismissal, there were no
disagreements with KMJ on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which, if not
resolved to the satisfaction of KMJ would have caused KMJ to make reference to
the matter in their reports.
We
engaged Weinberg & Company, P.A. (hereinafter “Weinberg”) as our principal
accountants to audit our financial statements effective as of September 11,
2007. Effective November 5, 2007, we dismissed Weinberg as our independent
registered public accounting firm for the fiscal year ended December 31,
2007. Weinberg never issued a report on our financial
statements. During their engagement, there were no disagreements with
Weinberg on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
the satisfaction of Weinberg would have caused Weinberg to make reference to the
matter in their reports.
We
engaged Kabani & Company, Inc. (hereinafter “Kabani”) as our principal
accountants to audit our financial statements effective as of November 5, 2007.
Effective March 13, 2008, we dismissed Kabani as our independent
registered public accounting firm for the fiscal year ended December 31,
2008. Kabani’s services were limited to a review of our Quarterly
Report on Form 10-QSB for the quarter ended September 30,
2007. During their engagement, there were no disagreements with
Kabani on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which, if not resolved to the
satisfaction of Kabani would have caused Kabani to make reference to the matter
in their reports.
We
engaged Gruber & Co. LLC (hereinafter “Gruber”) as the principal accountants
to audit our financial statements effective as of March 13, 2008. We,
during our most recent fiscal year and any subsequent interim period to the date
hereof, did not have discussions nor have we consulted with Gruber regarding the
following: (i) the application of accounting principles to a specified
transaction, either completed or proposed or the type of audit opinion to be
rendered on the our financial statements, and neither a written report was
provided to us nor oral advice was provided that Gruber concluded was an
important factor considered by us in reaching a decision as to the accounting,
auditing or financial reporting issue; or (ii) any matters that were the subject
of a “disagreement,” as that term is defined in Item 304(a)(1)(iv) of Regulation
S-B and the related instructions to Item 304 of Regulation S-B, or a reportable
event.
Evaluation
of Disclosure Controls and Procedures
Our
President and Chief Financial Officer (the “Certifying Officers”) are
responsible for establishing and maintaining our disclosure controls and
procedures. The Certifying Officers have designed such disclosure
controls and procedures to ensure that material information is made known to
them, particularly during the period in which this report was
prepared. The
Certifying
Officers have evaluated the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this Report. Based
on that evaluation, the Certifying Officers have concluded that our disclosure
controls and procedures were not effective at the reasonable assurance level due
to the material weaknesses described below.
Management’s
Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rule 13a- l5(f) under the
Exchange Act) and for assessing the effectiveness of our internal control over
financial reporting. Our internal control system is designed to provide
reasonable assurance to our management and board of directors regarding the
preparation and fair presentation of published financial statements in
accordance with United States’ generally accepted accounting
principles.
Our
internal control over financial reporting is supported by written policies and
procedures that pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of our
assets; provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with generally
accepted accounting principles and that our receipts and expenditures are being
made only in accordance with authorizations of our management and our board of
directors; and provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of our assets that
could have a material effect on our financial statements.
Our
management has assessed the effectiveness of our internal control over financial
reporting as of the end of our most recent fiscal year. Management’s
assessment included an evaluation of the design of our internal control over
financial reporting and testing of the operational effectiveness of our internal
control over financial reporting. Based on this assessment, our management has
concluded that our internal control over financial reporting was not effective
at the reasonable assurance level due to the material weaknesses described
below.
In light
of the material weaknesses described below, we performed additional analysis and
other post-closing procedures to ensure our consolidated financial statements
were prepared in accordance with generally accepted accounting principles.
Accordingly, we believe that the consolidated financial statements
included in this Report fairly present, in all material respects, our financial
condition, results of operations and cash flows for the periods
presented.
A
material weakness is a control deficiency (within the meaning of the Public
Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 2) or
combination of control deficiencies, that result in more than a remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected. The Certifying Officers have
identified the following three material weaknesses which have caused the
Certifying Officers to conclude that our disclosure controls and procedures were
not effective at the reasonable assurance level:
1. We
do not yet have written documentation of our internal control policies and
procedures. Written documentation of key internal controls over financial
reporting is a
requirement
of Section 404 of the Sarbanes-Oxley Act and will be applicable to us for the
year ending December 31, 2008. The Certifying Officers evaluated the
impact of our failure to have written documentation of our internal controls and
procedures on our assessment of our disclosure controls and procedures and has
concluded that the control deficiency that resulted represented a material
weakness.
2. We
do not have sufficient segregation of duties within accounting functions, which
is a basic internal control. Due to our size and nature, segregation of
all conflicting duties may not always be possible and may not be economically
feasible. However, to the extent possible, the initiation of transactions,
the custody of assets and the recording of transactions should be performed by
separate individuals. The Certifying Officers evaluated the impact of our
failure to have segregation of duties on our assessment of our disclosure
controls and procedures and has concluded that the control deficiency that
resulted represented a material weakness.
3. We
had a significant number of audit adjustments last fiscal year. Audit
adjustments are the result of a failure of the internal controls to prevent or
detect misstatements of accounting information. The failure could be due
to inadequate design of the internal controls or to a misapplication or override
of controls. The Certifying Officers evaluated the impact of our
significant number of audit adjustments last year and have concluded that the
control deficiency that resulted represented a material weakness.
On
November 27, 2007, the Certifying Officers concluded that in valuing previous
periods’ non-cash security transactions, we utilized discounts to the respective
share’s trading prices as well as its derivative liabilities which they have
determined are without foundation.
As a
result of this evaluation and conclusion, the Certifying Officers in conjunction
with our Board of Directors, concluded that previously issued consolidated
financial statements included in our Annual Report on Form 10-KSB for the fiscal
years ended December 31, 2005 and December 31, 2006, as well as all of our
quarterly reports on Form 10-QSB during the 2005 and 2006 fiscal years, can no
longer be relied upon. In this regard, we will amend and restate our
financial statements to eliminate all discounts and will refile our Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2006 and its Form
10-QSB for the quarters ended March 31, 2007 and June 30, 2007. The net
effect of the restatements will be to increase the accumulated deficit at June
30, 2007 from $100,909,477 to $292,944,478.
The
Certifying Officers have discussed this matter with our current independent
registered public accounting firm.
To
remediate the material weaknesses in our disclosure controls and procedures
identified above, in addition to working with our independent auditors, we have
continued to refine our internal procedures to begin to implement segregation of
duties and to reduce the number of audit adjustments.
This
Report does not include an attestation report of our independent registered
public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our
independent registered public accounting firm pursuant to temporary
rules of the SEC that permit the Company to provide only management’s report in
this Annual Report.
Changes
in Internal Control Over Financial Reporting
There
were no changes in our internal control over financial reporting that occurred
during our most recent fiscal quarter that have materially affected, or
reasonably likely to materially affect, our internal control over financial
reporting.
None.
PART
III
Directors
and Executive Officers
The
following table sets forth the names, positions, and ages of our current
directors and executive officers. Our executive officers are appointed by
the Board of Directors. The directors serve one-year terms until their
successors are elected. The executive officers serve until their death,
resignation or removal by the Board of Directors. Unless described below,
there are no family relationships among any of the directors and officers, and
none of our officers or directors serves as a director of another reporting
issuer.
Name
|
Age
|
Position(s)
|
|
|
|
Robert
M. Bernstein
|
74
|
Chief
Executive Officer, President, Chief
Financial
Officer, Director
|
Marybeth
Miceli Newton
|
31
|
Chief
Operating Officer
|
Joel
R. Freedman
|
47
|
Secretary
and Director
|
William
I. Berks
|
77
|
Vice
President and Director
|
Brent
Phares
|
36
|
Chief
Engineer
|
Robert M. Bernstein, President, CEO,
Chief Financial Officer, and Director. Mr. Bernstein received a
Bachelor of Science degree from the Wharton School of the University of
Pennsylvania in 1956. From August 1959 until his certification expired in
August 1972, he was a Certified Public Accountant licensed in Pennsylvania.
From 1961 to 1981, he was a consultant specializing in mergers,
acquisitions, and financing. From 1981 to 1986, Mr. Bernstein was Chairman
and Chief Executive Officer of Blue Jay Enterprises, Inc. of Philadelphia,
Pennsylvania, an oil and gas exploration company. In December 1985, Mr.
Bernstein formed a research and development partnership for our company, funding
approximately $750,000 for research on the Fatigue Fuse. In October 1988,
Mr. Bernstein became our President, CEO, and Chief Financial
Officer.
Joel R. Freedman, Secretary and
Director. From October 1989 and continuing through the present, Mr.
Freedmen has been our Secretary and a Director. From 1983 through 1999,
Mr. Freedmen was President of Genesis Advisors, Inc., an investment advisory
firm in Bala Cynwyd, Pennsylvania. From January 2000 through December
2002, Mr. Freedmen was a Senior Vice President of PMG Capital Corp., a
securities brokerage and investment advisory firm in West Conshohocken,
Pennsylvania. From December 2002 and continuing through the present, Mr.
Freedmen has been Senior Vice President of Wachovia Securities, LLC, a
securities brokerage and investment advisory firm in Conshohocken,
Pennsylvania.
William Berks, Vice President and
Director. Mr. Berks joined us as our Vice President and Director in
June 1997. Mr. Berks holds six patents and has over 30 years experience in
spacecraft mechanical systems engineering. Mr. Berks has a Bachelor of
Science in
Aeronautical Engineering and a Master of Science in Applied Mechanics from
Polytechnic Institute of New York, as well as a Master of Science in Industrial
Engineering from Stevens Institute of Technology. Prior to joining us, Mr.
Berks was with TRW Incorporated for 26 years in a variety of management
positions, where his duties included flight hardware fabrication and testing and
where he was responsible for overseeing 350 employees.
Marybeth Miceli, Chief Operating Officer.
Ms. Miceli has over 12 years experience in nondestructive evaluation and
testing of civil infrastructure. Ms. Miceli joined us as our Chief
Operating Officer in July 2007. From June 2005 through August 2007, Ms.
Miceli was Director of Marketing for Sam Schwartz, LLC, Engineering and Planning
Consultants, New York, in the areas of infrastructure management,
non-destructive testing, and fatigue testing. From January 2001 through
May 2005, Ms. Miceli was with Lucius Pitkin, Inc., Engineering Consultants,
where Ms. Miceli’s responsibilities included Quality Assurance Manager, and
Assistant Radiation Safety Officer. Among Ms. Miceli’s duties was the
supervision and performance of failure analysis investigations, fatigue testing
investigations, and interfacing with government agencies on testing,
regulations, and safety. Ms. Miceli is currently in the first year of a
three year term serving as a director of the American Society of Non-destructive
Testing, and Chairman in 2003 of the Metropolitan New York Chapter. Ms.
Miceli is a graduate of Johns Hopkins University and has a Master of
Science in Materials Science and Engineering, from Virginia Polytechnic
Institute. Ms. Miceli is a member of the American Society of Metals and
has published several papers on non-destructive testing of bridge components and
other related subjects.
Brent M. Phares, Chief
Engineer. Dr. Phares has over 15 years of management, inspection,
research, and testing experience related to bridge structures. From
October 2001 and continuing through the present, Dr. Phares has been the
Associate Director for Bridges and Structures at
Iowa State University. In this position, Dr. Phares is
responsible for the development and deployment of innovative bridge evaluation
and techniques and for the development of applications for innovative materials
in bridge engineering. From June 2001 through October 2004, Dr. Phares
served as President and CEO of MGPS, Inc., an engineering firm specializing in
the evaluation of civil infrastructure based on innovative sensors and
monitoring strategies. Dr. Phares has served as a consulting Research
Engineer at the Federal Highway Administration’s
Nondestructive Evaluation Validation Center where he led the
execution of
several
validation and developmental studies. Dr. Phares is a registered
professional engineer and serves as a voting member of many national and
international technical committees. Dr. Phares joined us in June
2007.
Committees
of the Board Of Directors
We
presently do not have an audit committee, compensation committee, nominating
committee, an executive committee of our board of directors, stock plan
committee or any other committee of our board of directors.
Advisory
Board
Since
1987, we and our predecessors have had an Advisory Board consisting of very
senior experienced businessmen and technologists, most of whom are nationally
prominent. These individuals consult with us on an as needed
basis. Members of the Advisory Board serve at will. The
Advisory Board advises our management on technical, financial, and business
matters and may in the future be additionally compensated for these services.
A brief biographical description of the members of the advisory board is
as follows:
Campbell Laird. Campbell Laird, age
64, received his Ph.D. in 1963 from the University of Cambridge. His Ph.D.
thesis title was Studies of High Strain Fatigue.” He is presently
Professor and graduate group Chairman in the Department of Materials, Science
& Engineering at the University of Pennsylvania. His research has
focused on the strength, structure, and fatigue of materials, in which areas he
published in excess of 250 papers. He is co-inventor of the
EFS.
Samuel I. Schwartz. Samuel I.
Schwartz, age 50, is presently President of Sam Schwartz Co., consulting
engineers, primarily in the bridge industry. Mr. Schwartz received his BS
in Physics from Brooklyn College in 1969, and his Masters in Civil
Engineering from the University of Pennsylvania in 1970. From February
1986 to March 1990, he was the Chief Engineer/First Deputy Commissioner, New
York City Department of Transportation and from April 1990 to the present acted
as a director of the Infrastructure Institute at the Cooper Union College, New
York City, New York. From April 1990 to 1994 he was a Senior Vice
President of Hayden Wegman Consulting Engineers, and is a columnist for the New
York Daily News.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section
16(a) of the Securities Exchange Act of 1934 requires the Company’s directors
and executive officers and persons who own more than ten percent of a registered
class of the Company’s equity securities to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than ten
percent shareholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
During
the most recent fiscal year, to the Company’s knowledge, the following
delinquencies occurred:
Name
|
No.
of Late
Reports
|
No.
of
Transactions
Reported
Late
|
No.
of
Failures
to
File
|
Robert
M. Bernstein
|
3
|
3
|
-0-
|
William
Berks
|
1
|
1
|
-0-
|
Brent
Phares
|
2
|
2
|
-0-
|
Marybeth
Miceli
|
1
|
1
|
-0-
|
Code
of Ethics
We have
adopted a corporate code of ethics. We believe our code of ethics is reasonably
designed to deter wrongdoing and promote honest and ethical conduct; provide
full, fair, accurate, timely and understandable disclosure in public reports;
comply with applicable laws; ensure prompt internal reporting of code
violations; and provide accountability for adherence to the code. A copy of the
Code of Ethics is attached hereto.
Terms
of Office
Our
directors are appointed for a one year term to hold office until the next annual
general meeting of the holders of our Common Stock or until removed from office
in accordance with our by-laws. Our officers are appointed by our board of
directors and hold office until removed by our board of directors.
On
November 17, 2006, we entered into an indemnification agreement with each of our
directors. Under the terms of the indemnification agreements, we agreed to
indemnify each director to the fullest extent permitted by law if the director
was or is a party or threatened to be made a party to any action or lawsuit by
reason of the fact that he is or was a director. The indemnification shall
cover all expenses, penalties, fines and amounts paid in settlement, including
attorneys’ fees. A director will not be indemnified for intentional
misconduct for the primary purpose of his own personal benefit.
Summary
Compensation Table
Set forth
below is a summary of compensation for our principal executive officer and our
two most highly compensated officers other than our principal executive officer
(collectively, the “named executive officers”) for our last two fiscal years.
There have been no annuity, pension or retirement benefits ever paid to our
officers, directors or employees.
With the
exception of reimbursement of expenses incurred by our named executive officers
during the scope of their employment and unless expressly stated otherwise in a
footnote below, none of the named executive officers received other
compensation, perquisites and/or personal benefits in excess of
$10,000.
Name
and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards ($)
|
|
|
Option
Awards ($)
|
|
|
Non-equity
Incentive Plan Compensation ($)
|
|
|
All
Other Compensation ($)
|
|
|
Total
($)
|
|
Robert
M. Bernstein, CEO,
|
|
2007
|
|
|
$ |
250,000 |
|
|
$ |
-0- |
|
|
$ |
-0- |
|
|
$ |
-0- |
|
|
$ |
-0- |
|
|
$ |
-0- |
|
|
$ |
250,000 |
|
President,
CFO |
|
2006
|
|
|
$ |
206,500 |
|
|
$ |
-0- |
|
|
$ |
180,000,000 |
|
|
$ |
-0- |
|
|
$ |
-0- |
|
|
$ |
-0- |
|
|
$ |
180,206,500 |
|
Marybeth
Miceli Newton, COO
|
|
|
2007
|
1 |
|
$ |
52,083.33 |
|
|
$ |
-0- |
|
|
$ |
-0- |
|
|
$ |
-0- |
|
|
$ |
-0- |
|
|
$ |
-0- |
|
|
$ |
52,083.33 |
|
Brent
Phares, Chief Engineer
|
|
|
2007
|
2 |
|
$ |
65,625 |
|
|
$ |
-0- |
|
|
$ |
-0- |
|
|
$ |
-0- |
|
|
$ |
-0- |
|
|
$ |
-0- |
|
|
$ |
65,625 |
|
Employment
Agreements
On
October 1, 2006, we entered into an Employment Agreement with Robert M.
Bernstein, our Chief Executive Officer, President and Chief Financial Officer,
which provides certain terms and conditions with respect to Mr. Bernstein’s
employment. The Employment Agreement is for a three year term. Under
the Employment Agreement, Mr. Bernstein will be paid an annual salary of
$250,000, with one year of paid severance if he is terminated without good cause
prior to the expiration of the employment term.
Other
Compensation
There are
no annuity, pension or retirement benefits proposed to be paid to officers,
directors, or employees of our company in the event of retirement at normal
retirement date as there was no existing plan as of December 31, 2007 provided
for or contributed to by our company.
Director
Compensation
Our
directors are not compensated for their services, but are entitled for
reimbursement of expenses incurred in attending board of directors
meetings.
Grants
of Plan Based Awards
There
were no grants of plan based awards made in 2007.
1 Joined us July 6, 2007.
2 Joined us June 1, 2007.
Outstanding
Equity Awards at Fiscal Year-End
There
were no outstanding equity awards as of December 31, 2007.
The
following table sets forth certain information regarding our shares of
outstanding common stock beneficially owned as of the date hereof by (i) each of
our directors and executive officers, (ii) all directors and executive officers
as a group, and (iii) each other person who is known by us to own beneficially
more than 5% of our common stock based upon 186,828,995 shares of Class A common
stock outstanding.
|
|
Class A Common
Stock
|
|
|
Class B Common
Stock
|
|
Name
and Address of
|
|
Amount
and Nature of Beneficial Ownership
|
|
|
Percent
Ownership
|
|
|
Amount
and Nature of Beneficial Ownership
|
|
|
Percent
Ownership of Class
|
|
Robert
M. Bernstein, President, CEO, CFO, and Director
|
|
|
400,767,177 |
3 |
|
|
68.29 |
% |
|
|
597,000 |
4 |
|
|
99.5 |
% |
William
Berks, Vice President and Director
|
|
|
2,710,048 |
5 |
|
|
1.45 |
% |
|
|
0 |
|
|
|
0 |
% |
Joel
R. Freedman, Secretary and Director
|
|
|
3,700,501 |
6 |
|
|
1.98 |
% |
|
|
0 |
|
|
|
0 |
% |
Marybeth
Miceli, Chief Operating Officer
|
|
|
2,237,501 |
7 |
|
|
1.19 |
% |
|
|
0 |
|
|
|
0 |
% |
1 C/o our address, 11661 San Vicente Blvd.,
Suite 707, Los Angeles, CA 90049, unless otherwise noted.
2 Except as otherwise indicated, we believe that
the beneficial owners of common stock listed above, based on information
furnished by such owners, have sole investment and voting power with respect to
such shares, subject to community property laws where
applicable. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock
subject to options or warrants currently exercisable, or exercisable within 60
days, are deemed outstanding for purposes of computing the percentage of the
person holding such options or warrants, but are not deemed outstanding for
purposes of computing the percentage of any other person.
3 Includes 30,000,000 options to purchase shares
of Class A common stock at $0.011 per share expiring on April 22, 2018;
70,000,000 options to purchase shares of Class A common stock at $0.007 per
share expiring on May 6, 2018; and 300,000,000 options to purchase shares of
Class A common stock at $0.00462 per share expiring on May 23,
2008.
4 Each share of Class B common stock has 2,000
votes on any matter which is brought for shareholders vote. As a result,
Mr. Bernstein holds 1,194,000,000 votes represented by the Class B common stock,
and 89.25% of the overall votes.
5 Includes 200,000 options to purchase shares of
Class A common stock at $0.011 per share expiring on April 30,
2016.
6 Includes 200,000 options to purchase shares of
Class A common stock at $0.011 per share expiring on April 30,
2016.
7 Includes 200,000 options to purchase shares of
Class A common stock at $0.011 per share expiring on April 30,
2016.
Brent
Phares, Chief Engineer
|
|
|
3,513,334 |
8 |
|
|
1.89 |
% |
|
|
0 |
|
|
|
0 |
% |
All
executive officers and directors as a group (five persons)
|
|
|
412,928,561 |
|
|
|
70.27 |
% |
|
|
597,000 |
|
|
|
99.5 |
% |
UTEK
Corporation
2109
Palm Avenue
Tampa,
FL 33605
|
|
|
17,821,937 |
|
|
|
9.54 |
% |
|
|
0 |
|
|
|
0 |
% |
None.
8 Includes 200,000 options to purchase shares of
Class A common stock at $0.011 per share expiring on April 30,
2016.
3.1
|
Certificate
of Incorporation of Material Technologies, Inc., dated March 4, 19971
|
|
|
3.2
|
Certificate
of Amendment to Articles of Incorporation, dated February 16, 20002
|
|
|
3.3
|
Certificate
of Amendment to Articles of Incorporation, dated July 12, 20002
|
|
|
3.4
|
Certificate
of Amendment to Articles of Incorporation, dated July 31, 20002
|
|
|
3.5
|
Amended
and Restated Certificate of Incorporation, dated September 12, 20033
|
|
|
3.6
|
Certificate
of Amendment to Certificate of Incorporation of Material Technologies,
Inc., dated May 31, 20064
|
|
|
3.7
|
Certificate
of Amendment to Certificate of Incorporation of Material Technologies,
Inc., dated October 25, 20064
|
|
|
3.8
|
Bylaws of Material Technologies, Inc. 1
|
|
|
4.1
|
Class
A Convertible Preferred Stock Certificate of Designation1
|
|
|
4.2
|
Class
B Convertible Preferred Stock Certificate of Designation1
|
|
|
4.3
|
Class
E Convertible Preferred Stock Certificate of Designation5
|
|
|
10.1
|
License
Agreement between Tensiodyne Scientific Corporation and the Trustees of
the University of Pennsylvania, dated August 26, 19931
|
|
|
10.2
|
Sponsored
Research Agreement between Tensiodyne Scientific Corporation and the
Trustees of the University of Pennsylvania, dated August 31, 19931
|
|
|
10.3
|
Amendment
No. 1 to the License Agreement between Tensiodyne Scientific Corporation
and the Trustees of the University of Pennsylvania, dated October 15,
19931
|
|
|
10.4
|
Repayment
Agreement between Tensiodyne Scientific Corporation and the Trustees of
the University of Pennsylvania, dated October 15, 19931
|
1Incorporated by reference from our registration statement
on Form S-1 filed with the Commission on April 30, 1997.
2Incorporated by reference from our Annual Report on Form
10-KSB filed with the Commission on March 30, 2001.
3Incorporated by reference from our Annual Report on Form
10-KSB filed with the Commission on April 9, 2004.
4Incorporated by reference from our Current Report on Form
8-K filed with the Commission on November 8, 2006.
5Incorporated by reference from our Current Report on Form
8-K filed with the Commission on February 6, 2007.
|
|
10.5
|
Teaming
Agreement between Tensiodyne Scientific Corporation and Southwest Research
Institute, dated August 23, 19961
|
|
|
10.6
|
Letter
Agreement between Tensiodyne Scientific Corporation, Robert M. Bernstein,
and Stephen Forrest Beck and Handwritten modification, dated February 8,
19951
|
|
|
10.7
|
Agreement
between Tensiodyne Corporation and Tensiodyne 1985-1 R&D
Partnership6
|
|
|
10.8
|
Amendment
to Agreement between Material Technologies, Inc. and Tensiodyne 1985-1
R&D Partnership6
|
|
|
10.9
|
Agreement
between Advanced Technology Center of Southeastern Pennsylvania and
Material Technologies6
|
|
|
10.10
|
Addendum
to Agreement between Advanced Technology Center of Southeastern
Pennsylvania and Material Technologies, Inc. 6
|
|
|
10.11
|
Class
A Senior Preferred Convertible Debenture issued to Palisades Capital, LLC,
dated September 23, 20033
|
|
|
10.12
|
Stock
Purchase Agreement, dated April 7, 2005, with Birchington Investments
Ltd. 7
|
|
|
10.13
|
Escrow
Agreement with Birchington Investments Ltd, dated April 7, 20057
|
|
|
10.14
|
Workout
Agreement with the Trustees of the University of Pennsylvania, dated
August 15, 20057
|
|
|
10.15
|
Securities
Purchase Agreement with Golden Gate Investors, Inc., dated December 16,
20058
|
|
|
10.16
|
Convertible
Debenture issued to Golden Gate Investors, Inc., dated December 16,
20058
|
|
|
10.17
|
Common
Stock Purchase Warrant issued to Golden Gate Investors, Inc., dated
December 16, 20058
|
|
|
10.18
|
Registration
Rights Agreement for Golden Gate Investors, Inc., dated December 16,
20058
|
6Incorporated by reference from our registration statement
on Form S-1 which became effective on January 19, 1996.
7Incorporated by reference from our Quarterly Report on
Form 10-QSB filed with the Commission on November 14, 2005.
8Incorporated by reference from our Current Report on Form
8-K/A filed with the Commission on January 5, 2006.
|
|
10.19
|
Letter
Agreement with Golden Gate Investors, Inc., dated December 16, 20058
|
|
|
10.20
|
Letter
Agreement with Golden Gate Investors, Inc., dated December 16, 20058
|
|
|
10.21
|
Addendum
to Convertible Debenture, Warrant to Purchase Common Stock and Securities
Purchase Agreement with Golden Gate Investors, Inc., dated December 16,
20058
|
|
|
10.22
|
Addendum
to Convertible Debenture and Warrant to Purchase Common Stock with Golden
Gate Investors, Inc., dated December 16, 20058
|
|
|
10.23
|
Addendum
to Convertible Debenture, Warrant to Purchase Common Stock and Securities
Purchase Agreement, dated May 2, 2006, with Golden Gate Investors,
Inc.9
|
|
|
10.24
|
Securities
Purchase Agreement, dated May 30, 2006, with La Jolla Cove Investors,
Inc.10
|
|
|
10.25
|
Warrant
to Purchase Common Stock issued to La Jolla Cove Investors, Inc., dated
May 30, 200610
|
|
|
10.26
|
Addendum
to Warrant to Purchase Common Stock, dated as of June 12, 2006, issued to
La Jolla Cove Investors, Inc. 11
|
|
|
10.27
|
Addendum
to Convertible Debenture, Warrant to Purchase Common Stock and Securities
Purchase Agreement dated as of May 2, 200612
|
|
|
10.28
|
Regulation
S Distribution Agreement and Instruction of Escrow, dated May 31,
200613
|
|
|
10.29
|
Acquisition
Agreement with UTEK Corporation and Materials Monitoring Technologies,
Inc., dated August 18, 200614
|
|
|
10.30
|
License
Agreement between Material Monitoring Technologies, Inc. and North
Carolina A&T State University, dated August 18,
200614
|
|
|
10.31
|
Consulting
Agreement with Mannur J. Sundaresan, PhD, dated August 18, 200614
|
9Incorporated by reference from our Current Report on Form
8-K filed with the Commission on May 17, 2006.
10Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on June 8, 2006
11Incorporated by reference from our Current Report on
Form 8-K/A filed with the Commission on June 15, 2006.
12Incorporated by reference from our registration
statement on Form SB-2 filed with the Commission on June 15, 2006.
13Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on June 9, 2006.
14Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on August 24, 2006.
|
|
10.32
|
Settlement
Agreement and General Release, dated August 23, 2006, with Ben Franklin
Technology Partners of Southeastern Pennsylvania15
|
|
|
10.33
|
Settlement
Agreement and General Release, dated October 27, 200616
|
|
|
10.34
|
Warrant
Agreement, dated October 27, 2006, with Palisades Capital, LLC16
|
|
|
10.35
|
Warrant
Agreement, dated October 27, 2006, with Hyde Investments, Ltd. 16
|
|
|
10.36
|
Warrant
Agreement, dated October 27, 2006, with Livingston Investments, Ltd. 16
|
|
|
10.37
|
Warrant
Agreement, dated October 27, 2006, with Palisades Capital, LLC16
|
|
|
10.38
|
Warrant
Agreement, dated October 27, 2006, with GCH Capital, Ltd. 16
|
|
|
10.39
|
Amendment
to Class A Senior Secured Convertible Debenture, dated October 27, 2006,
with Palisades Capital, LLC16
|
|
|
10.40
|
Amendment
to Class A Senior Secured Convertible Debenture, dated October 27, 2006,
with Hyde Investments, Ltd. 16
|
|
|
10.41
|
Amendment
to Class A Senior Secured Convertible Debenture, dated October 27, 2006,
with Livingston Investments, Ltd. 16
|
|
|
10.42
|
Stockholder
Lockup Agreement, dated October 27, 2006 with Robert M. Bernstein16
|
|
|
10.43
|
Escrow
Agreement, dated October 27, 200616
|
|
|
10.44
|
Employment
Agreement with Robert M. Bernstein, dated October 1, 200617
|
|
|
10.45
|
Stock
Grant and General Release Agreement with Robert M. Bernstein, dated
November 21, 200617
|
|
|
10.46
|
Settlement
Agreement and Release with Stephen F. Beck, dated as of December 27,
200618
|
|
|
10.47
|
Irrevocable
Escrow Instructions with Stephen F. Beck, dated as of December 27,
200618
|
15Incorporated by reference from our Quarterly Report on
Form 10-QSB filed with the Commission on November 14, 2006.
16Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on November 2, 2006.
17Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on November 28, 2006
18Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on January 3, 2007.
|
|
10.48
|
Promissory
Note, dated March 30, 2007, with Nathan J. Esformes19
|
|
|
10.49
|
Acquisition
Agreement with UTEK Corporation and Damage Assessment Technologies, Inc.,
dated May 3, 200720
|
|
|
10.50
|
Acquisition
Agreement with UTEK Corporation and Non-Destructive Assessment
Technologies, Inc., dated June 28, 200721
|
|
|
10.51
|
Agreement
with Livingston Investments, Ltd., dated as of July 3, 200722
|
|
|
10.52
|
Amendment
No. 2 to Class A Senior Secured Convertible Debenture, dated October 11,
2007, with Palisades Capital, LLC22
|
|
|
10.53
|
Acquisition
Agreement with Brent Phares and Bridge Testing Concepts, Inc., dated
September 28, 200723
|
|
|
10.54
|
Amendment
to Consulting Agreement with Strategic Advisors, Ltd., dated April 9,
200822
|
|
|
10.55
|
Consulting
Agreement with Bud Shuster, dated April 9, 200822
|
|
|
10.56
|
Consulting
Agreement with Kelly Shuster, dated April 9, 200822
|
|
|
10.57
|
Class
A Common Stock Option Agreement with Bud Shuster, dated April 9, 200822
|
|
|
10.58
|
Class
A Common Stock Option Agreement with Kelly Shuster, dated April 9,
200822
|
|
|
10.59
|
Class
B Common Stock Option Agreement with Bud Shuster, dated April 9, 200822
|
|
|
10.60
|
Class
B Common Stock Option Agreement with Kelly Shuster, dated April 9,
200822
|
|
|
14.1
|
Code
of Ethics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32 |
|
19Incorporated by reference from our Annual Report on
Form 10-KSB filed with the Commission on April 3, 2007.
20Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on May 4, 2007.
21Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on July 3, 2007.
22Incorporated by reference from our Annual Report on
Form 10-KSB filed with the Commission on April 14, 2008.
23Incorporated by reference from our Current Report on
Form 8-K filed with the Commission on October 29, 2007.
KMJ/Corbin
and Company, LLP, Weinberg & Company, P.A., and Kabani & Company, Inc.
(the “Independent Auditors”) were each, at various times, our independent
auditor and examined our financial statements for the years ended December 31,
2007 and 2006. The Independent Auditors performed the services listed
below and were as paid the aggregate fees listed below for the years ended
December 31, 2007 and 2006.
Audit
Fees
The
Independent Auditors were paid aggregate fees of approximately $40,000 for the
fiscal year ended December 31, 2007 and approximately $106,750 for the fiscal
year ended December 31, 2006 for professional services rendered for the audit of
our annual financial statements and for the reviews of the financial statements
included in our quarterly reports on Form 10-QSB during these
periods.
Audit
Related Fees
The
Independent Auditors were not paid additional fees for either the year ended
December 31, 2007 or the fiscal year ended December 31, 2006 for assurance and
related services reasonably related to the performance of the audit or review of
our financial statements.
Tax
Fees
The
Independent Auditors were not paid fees for the year ended December 31, 2007 or
the fiscal year ended December 31, 2006 for professional services rendered for
tax compliance, tax advice and tax planning during this fiscal year
period.
All
Other Fees
The
Independent Auditors were not paid any other fees for professional services
during the year ended December 31, 2007 or the fiscal year ended December 31,
2006.
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated:
August 19 , 2008 |
Material
Technologies, Inc. |
|
|
|
/s/
Robert M. Bernstein |
|
By:
Robert M. Bernstein
|
|
Its:
Chief Executive Officer, President, and Chief Financial
Officer
(Principal
Executive Officer, Principal Financial Officer and Principal Accounting
Officer)
|
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board
of Material Technologies, Inc.
We have
audited the accompanying balance sheets of Material Technologies, Inc.(A
Development Stage Company) as of December 31, 2007 and 2006 and the related
statements of operations, stockholders deficit and cash flows for the years
then ended and for the period of inception October 21, 1983 to December 31,
2007. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform our audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as at December
31, 2007 and 2006 and the results of its’ operations and its’
stockholders deficit and cash flows for the years then ended and for
the period of inception October 21, 1983 to December 31, 2007 in conformity with
accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As discussed in the notes to these financial
statements the Company has incurred losses. This raises substantial doubt about
its ability to continue as a going concern. These financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Gruber &
Company LLC
Gruber
& Company LLC
Lake
Saint Louis, Missouri
July
24, 2008
MATERIAL
TECHNOLOGIES, INC.
|
(A
Development Stage Company)
|
|
|
|
|
|
|
|
CONSOLIDATED
BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
DECEMBER
31,
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(Restated)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
129,296 |
|
|
$ |
809,710 |
|
Investments
in marketable securities held for trading
|
|
|
135,136 |
|
|
|
300,000 |
|
Investment in certificate of deposits and commercial paper
|
|
|
- |
|
|
|
1,009,267 |
|
Accounts
receivable
|
|
|
116,707 |
|
|
|
108,661 |
|
Inventories
|
|
|
- |
|
|
|
62,216 |
|
Prepaid
expenses and other current assets
|
|
|
40,006 |
|
|
|
47,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
421,145 |
|
|
|
2,337,546 |
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
5,371 |
|
|
|
82,546 |
|
Intangible
assets, net
|
|
|
3,916 |
|
|
|
2,840 |
|
Deposit
|
|
|
2,348 |
|
|
|
2,348 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
432,780 |
|
|
$ |
2,425,280 |
|
|
|
|
|
|
|
|
|
|
MATERIAL
TECHNOLOGIES, INC.
|
|
(A
Development Stage Company)
|
|
|
|
|
|
|
|
|
CONSOLIDATED
BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(Restated)
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$ |
427,664 |
|
|
$ |
599,619 |
|
Current portion of research and development sponsorship
payable
|
|
|
25,000 |
|
|
|
25,000 |
|
Notes payable
|
|
|
90,138 |
|
|
|
66,761 |
|
Total current liabilities
|
|
|
542,802 |
|
|
|
691,380 |
|
|
|
|
|
|
|
|
|
|
Accrued legal settlenent
|
|
|
1,050,000 |
|
|
|
480,000 |
|
Research and development sponsorship payable, net of current
portion
|
|
|
747,713 |
|
|
|
760,650 |
|
Notes payable, long-term
|
|
|
- |
|
|
|
213,508 |
|
Convertible debentures and accrued interest payable, net of
discount
|
|
|
169,160 |
|
|
|
1,981,194 |
|
Derivative and warrant liabilities
|
|
|
44,476,540 |
|
|
|
10,113,923 |
|
|
|
|
46,443,413 |
|
|
|
13,549,275 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
46,986,215 |
|
|
|
14,240,655 |
|
|
|
|
|
|
|
|
|
|
Minority interest in consolidated subsidiary
|
|
|
825 |
|
|
|
825 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit:
|
|
|
|
|
|
|
|
|
Class A preferred stock, $0.001 par value, liquidation
preference
|
|
|
|
|
|
|
|
|
of $720 per share; 350,000 shares authorized; 337 shares
issued
|
|
|
|
|
|
|
|
|
and
outstanding as of December 31, 2006 and 2007
|
|
|
- |
|
|
|
- |
|
Class B preferred stock, $0.001 par value, liquidation preference
of
|
|
|
|
|
|
|
|
|
$10,000 per share; 15 shares authorized; none issued
and
|
|
|
|
|
|
|
|
|
outstanding as of December 31, 2006 and 2007
|
|
|
- |
|
|
|
- |
|
Class C preferred stock, $0.001 par value, liquidation preference
of
|
|
|
|
|
|
|
|
|
$0.001 per share; 25,000,000 shares authorized; 1,517 shares
issued
|
|
|
|
|
|
|
|
|
and
outstanding as of December 31, 2006 and 2007
|
|
|
1 |
|
|
|
1 |
|
Class D preferred stock, $0.001 par value, liquidation preference
of
|
|
|
|
|
|
|
|
|
$0.001 per share; 20,000,000 shares authorized; 0 shares
issued
|
|
|
|
|
|
|
|
|
and
outstanding as of December 31, 2006 and 2007
|
|
|
- |
|
|
|
- |
|
Class E convertible preferred stock, $0.001 par value, no
liquidation
|
|
|
|
|
|
|
|
|
preference; 60,000 shares authorized; 55,000 shares issued
and
|
|
|
|
|
|
|
|
|
outstanding
as of December 31, 2007
|
|
|
- |
|
|
|
55 |
|
Class
A Common Stock, $0.001 par value, 1,699,400,000 shares
|
|
|
|
|
|
|
|
|
authorized;
99,785,276 shares issued and 72,425,587 shares
|
|
|
|
|
|
|
|
|
outstanding as of December 31, 2006; 546,173,718 shares
issued
|
|
|
|
|
|
|
|
|
and
126,347,453 outstanding as of December 31, 2007
|
|
|
72,426 |
|
|
|
126,348 |
|
Class B Common Stock, $0.001 par value, 600,000 shares
authorized,
|
|
|
|
|
|
|
|
|
issued
and outstanding as of December 31, 2006 and 2007
|
|
|
600 |
|
|
|
600 |
|
Warrants
subscribed
|
|
|
10,000 |
|
|
|
10,000 |
|
Additional
paid-in-capital
|
|
|
193,188,217 |
|
|
|
301,348,331 |
|
Deficit
accumulated during the development stage
|
|
|
(239,811,823 |
) |
|
|
(313,208,402 |
) |
Treasury
stock ( 2,076 shares at cost at December 31,2006 and
|
|
|
|
|
|
|
|
|
85,977
shares at cost at December 31, 2007
|
|
|
(13,681 |
) |
|
|
(93,133 |
) |
|
|
|
|
|
|
|
|
|
Total stockholders' deficit
|
|
|
(46,554,260 |
) |
|
|
(11,816,200 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
432,780 |
|
|
$ |
2,425,280 |
|
See report
of independent registered public accounting firm
and
accompanying notes to the consolidated financial statement
F-3
MATERIAL
TECHNOLOGIES, INC.
|
|
(A
Development Stage Company)
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
October 21, 1983
|
|
|
|
For
the Year
|
|
|
(Inception)
|
|
|
|
Ended
|
|
|
through
|
|
|
|
2006
|
|
|
2007
|
|
|
December
31, 2007
|
|
|
|
(Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
5,392,085 |
|
Revenue
from bridge testing
|
|
|
39,446 |
|
|
|
201,917 |
|
|
|
318,624 |
|
Other
|
|
|
- |
|
|
|
- |
|
|
|
274,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
|
39,446 |
|
|
|
201,917 |
|
|
|
5,984,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
1,013,969 |
|
|
|
3,701,966 |
|
|
|
20,562,989 |
|
General
and administrative
|
|
|
138,781,403 |
|
|
|
98,557,941 |
|
|
|
303,495,241 |
|
Modification
of research and development sponsorship agreement
|
|
|
- |
|
|
|
- |
|
|
|
5,963,120 |
|
Loss
on settlement of lawsuits
|
|
|
- |
|
|
|
- |
|
|
|
1,267,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
costs and expenses
|
|
|
139,795,372 |
|
|
|
102,259,907 |
|
|
|
331,288,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(139,755,926 |
) |
|
|
(102,057,990 |
) |
|
|
(325,303,760 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on modification of convertible debt
|
|
|
1,033,479 |
|
|
|
- |
|
|
|
586,245 |
|
Loss
on subcription receivable
|
|
|
|
|
|
|
|
|
|
|
(1,368,555 |
) |
Interest
expense
|
|
|
(1,625,592 |
) |
|
|
(2,374,032 |
) |
|
|
(11,740,193 |
) |
Other-than-temporary
impairment of marketable
|
|
|
|
|
|
|
|
|
|
|
|
|
securities
available for sale
|
|
|
|
|
|
|
- |
|
|
|
(9,785,947 |
) |
Net
unrealized and realized loss of marketable securities
|
|
|
(3,798,516 |
) |
|
|
(3,986,553 |
) |
|
|
(9,398,218 |
) |
Change
in fair value of investments derivative liability
|
|
|
- |
|
|
|
- |
|
|
|
(210,953 |
) |
Change
in fair value of derivative and warrant liabilities
|
|
|
(33,780,874 |
) |
|
|
34,962,617 |
|
|
|
43,587,089 |
|
Interest
income
|
|
|
37,120 |
|
|
|
60,179 |
|
|
|
466,882 |
|
Other
|
|
|
7,008 |
|
|
|
- |
|
|
|
(25,992 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expense, net
|
|
|
(38,127,375 |
) |
|
|
28,662,211 |
|
|
|
12,110,358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before provision for income taxes
|
|
|
(177,883,301 |
) |
|
|
(73,395,779 |
) |
|
|
(313,193,402 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
(800 |
) |
|
|
(800 |
) |
|
|
(15,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(177,884,101 |
) |
|
$ |
(73,396,579 |
) |
|
$ |
(313,208,402 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss per share
|
|
$ |
(40.10 |
) |
|
$ |
(0.68 |
) |
|
|
|
|
Weighted
average Class A common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding
- basic and diluted
|
|
|
4,435,708 |
|
|
|
107,708,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See report
of independent registered public accounting firm
and
accompanying notes to the consolidated financial
statement
F-4
MATERIAL
TECHNOLOGIES, INC.
|
|
(A
Development Stage Company)
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
October 21, 1983
|
|
|
|
For
the Year Ended
|
|
|
(Inception)
|
|
|
|
December
31,
|
|
|
through
|
|
|
|
2006
|
|
|
2007
|
|
|
December
31, 2007
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
(Restated)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(177,884,101 |
) |
|
$ |
(73,396,579 |
) |
|
$ |
(313,208,402 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary
increase (decrease) in market
|
|
|
|
|
|
|
|
|
|
|
|
|
value
of securities available for sale
|
|
|
- |
|
|
|
|
|
|
|
- |
|
Reclassification
to other-than-temporary
|
|
|
|
|
|
|
|
|
|
|
|
|
impairment
of marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
available
for sale
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
comprehensive loss
|
|
$ |
(177,884,101 |
) |
|
$ |
(73,396,579 |
) |
|
$ |
(313,208,402 |
) |
See report
of independent registered public accounting firm
and
accompanying notes to the consolidated financial
statement
F-5
MATERIAL
TECHNOLOGIES, INC.
|
(A
Development Stage Company)
|
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' (DEFICIT))
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
Class
A Common
|
|
|
Class
B Common
|
|
|
Class
A Preferred Stock
|
|
|
Class
B Preferred Stock
|
|
|
Class
C Preferred Stock
|
|
|
Class
D Preferred Stock
|
|
|
Class
E Preferred Stock
|
|
|
Additional
|
|
|
During
the
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Paid-in
|
|
|
Development
|
|
|
|
Outstanding
|
|
|
Amount
|
|
|
Outstanding
|
|
|
Amount
|
|
|
Outstanding
|
|
|
Amount
|
|
|
Outstanding
|
|
|
Amount
|
|
|
Outstanding
|
|
|
Amount
|
|
|
Outstanding
|
|
|
Amount
|
|
|
Outstanding
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial
Issuance of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October
21, 1983
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
2,500 |
|
|
$ |
- |
|
Adjustment
to give effect
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to
recapitalization on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
15, 1986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation
of shares
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,496 |
|
|
|
- |
|
Balance
- October 21, 1983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued By Tensiodyne
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporation
in connection
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with
pooling of interests
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,342 |
|
|
|
- |
|
Net
(loss), year ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 1983
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,317 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1983
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,838 |
|
|
|
(4,317 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
contribution
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
21,755 |
|
|
|
- |
|
Issuance
of common stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,700 |
|
|
|
- |
|
Costs
incurred in connection
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with
issuance of stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,849 |
) |
|
|
- |
|
Net
(loss), year ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 1984
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(21,797 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1984
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
36,444 |
|
|
|
(26,114 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
contribution
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
200,555 |
|
|
|
- |
|
Sale
of 12,166 warrants at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.50
Per Warrant
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
18,250 |
|
|
|
- |
|
Shares
cancelled
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
(loss), year ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 1985
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(252,070 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1985
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
255,249 |
|
|
|
(278,184 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Loss), Year Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 1986
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(10,365 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1986
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
255,249 |
|
|
|
(288,549 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock upon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of Warrants
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
27,082 |
|
|
|
- |
|
Net
(Loss), Year Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 1987
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(45,389 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1987
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
282,331 |
|
|
|
(333,938 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of Stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
101,752 |
|
|
|
- |
|
Services
Rendered
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
70,600 |
|
|
|
- |
|
Net
(Loss), Year Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 1988
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(142,335 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1988
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
454,683 |
|
|
|
(476,273 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of Stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,000 |
|
|
|
- |
|
Services
Rendered
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
18,000 |
|
|
|
- |
|
Net
(Loss), Year Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 1989
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(31,945 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1989
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
474,683 |
|
|
|
(508,218 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of Stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
59,250 |
|
|
|
- |
|
Services
Rendered
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
32,400 |
|
|
|
- |
|
Net
Income, Year Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 1990
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
133,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1990
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
566,333 |
|
|
|
(374,324 |
) |
See
accompanying notes and independent accountants' report.
F-6
Issuance
of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of Stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
350 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
273,686 |
|
|
|
- |
|
Services
Rendered
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
64,884 |
|
|
|
- |
|
Conversion
of Warrants
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
Conversion
of Stock
|
|
|
- |
|
|
|
- |
|
|
|
60,000 |
|
|
|
60 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(6 |
) |
|
|
- |
|
Net
(Loss), Year Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 1991
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(346,316 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1991
|
|
|
- |
|
|
|
- |
|
|
|
60,000 |
|
|
|
60 |
|
|
|
350 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
904,897 |
|
|
|
(720,640 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of Stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16,000 |
|
|
|
- |
|
Services
Rendered
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,520 |
|
|
|
- |
|
Conversion
of Warrants
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,000 |
|
|
|
- |
|
Sale
of Class B Stock
|
|
|
- |
|
|
|
- |
|
|
|
60,000 |
|
|
|
60 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
14,940 |
|
|
|
- |
|
Issuance
of Stock to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated
Subsidiary
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
71,664 |
|
|
|
- |
|
Conversion
of Stock
|
|
|
- |
|
|
|
- |
|
|
|
(60,000 |
) |
|
|
(60 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6 |
|
|
|
- |
|
Cancellation
of Shares
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
(Loss), Year Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 1992
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(154,986 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1992
|
|
|
- |
|
|
|
- |
|
|
|
60,000 |
|
|
|
60 |
|
|
|
350 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,038,027 |
|
|
|
(875,626 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensing
Agreement
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,250 |
|
|
|
- |
|
Services
Rendered
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
13,913 |
|
|
|
- |
|
Warrant
Conversion
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
304,999 |
|
|
|
- |
|
Cancellation
of Shares
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(7,569 |
) |
|
|
- |
|
Net
(Loss) for Year Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 1993
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(929,900 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1993
|
|
|
- |
|
|
|
- |
|
|
|
60,000 |
|
|
|
60 |
|
|
|
350 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,355,620 |
|
|
|
(1,805,526 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment
to Give Effect to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recapitalization
on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February
1, 1994
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
385,424 |
|
|
|
- |
|
Issuance
of Shares for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
Rendered
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
223 |
|
|
|
- |
|
Sale
of Stock
|
|
|
5 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
24,786 |
|
|
|
- |
|
Issuance
of Shares for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
the
Modification of Agreements
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
(Loss) for the Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
December 31, 1994
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(377,063 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1994
|
|
|
6 |
|
|
|
- |
|
|
|
60,000 |
|
|
|
60 |
|
|
|
350 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,766,053 |
|
|
|
(2,182,589 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
Consideration for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modification
of Agreement
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
153 |
|
|
|
- |
|
Net
(Loss) for the Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
December 31, 1995
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(197,546 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1995
|
|
|
6 |
|
|
|
- |
|
|
|
60,000 |
|
|
|
60 |
|
|
|
350 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,766,206 |
|
|
|
(2,380,135 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Shares for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
Rendered
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16,466 |
|
|
|
- |
|
Sale
of Stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
174,040 |
|
|
|
- |
|
Issuance
of Shares for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
the
Modification of Agreements
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Cancellation
of Shares Held
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
Treasury
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(154,600 |
) |
|
|
- |
|
Net
(Loss) for the Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
December 31, 1996
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(450,734 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1996
|
|
|
8 |
|
|
|
- |
|
|
|
60,000 |
|
|
|
60 |
|
|
|
350 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,802,112 |
|
|
|
(2,830,869 |
) |
See
accompanying notes and independent accountants' report.
F-7
Sale
of Stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
100,000 |
|
|
|
- |
|
Conversion
of Indebtedness
|
|
|
3 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
166,000 |
|
|
|
- |
|
Class
A Common Stock Issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
Cancellation of $372,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
Wages Due Officer
|
|
|
5 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
372,000 |
|
|
|
- |
|
Issuance
of Shares for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
Rendered
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,471 |
|
|
|
- |
|
Adjustment
to Give Effect
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to
Recapitalization on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9-Mar-97
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
(Loss) for the Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
December 31, 1997
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(133,578 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1997
|
|
|
18 |
|
|
|
- |
|
|
|
60,000 |
|
|
|
60 |
|
|
|
350 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,442,583 |
|
|
|
(2,964,447 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
Issued in Cancellation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
Indebtedness
|
|
|
8 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
170,000 |
|
|
|
- |
|
Conversion
of Options
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
125,000 |
|
|
|
- |
|
Issuance
of Shares for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
Rendered
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
112,162 |
|
|
|
- |
|
Shares
Issued in Cancellation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
Redeemable Preferred Stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
150,000 |
|
|
|
- |
|
Shares
Returned to Treasury
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Cancelled
|
|
|
(2 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Modification of
Royalty Agreement
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,332 |
|
|
|
- |
|
Issuance
of Warrants to Officer
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
27,567 |
|
|
|
- |
|
Net
(Loss) for the Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
December 31, 1998
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(549,187 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1998
|
|
|
32 |
|
|
|
- |
|
|
|
60,000 |
|
|
|
60 |
|
|
|
350 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,034,644 |
|
|
|
(3,513,634 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
Issued in Cancellation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
Indebtedness
|
|
|
7 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
166,667 |
|
|
|
- |
|
Issuance
of Shares for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
Rendered
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
95,099 |
|
|
|
- |
|
Shares
Issued in Modification
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
Licensing Agreement
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Sale
of Stock
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
173,540 |
|
|
|
- |
|
Net
(Loss) for the Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
December 31, 1999
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(539,283 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1999
|
|
|
47 |
|
|
|
- |
|
|
|
60,000 |
|
|
|
60 |
|
|
|
350 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,469,950 |
|
|
|
(4,052,917 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Shares for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
Rendered - as restated
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
824,516 |
|
|
|
- |
|
Shares
Issued to Investors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pursuant
to Settlement Agreement
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Shares
Issued for Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Non-Recourse Promissory Notes
|
|
|
17 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,995,000 |
|
|
|
- |
|
Shares
Issued for Cash
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
281,694 |
|
|
|
- |
|
Shares
Issued in Cancellation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
Indebtedness
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
100,000 |
|
|
|
- |
|
Shares
Issued as Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pursuant
to Escrow Agreement
|
|
|
14 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,184 |
|
|
|
- |
|
Shares
Returned from Escrow
|
|
|
(1 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Common
Shares Converted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
into
Class B Common
|
|
|
- |
|
|
|
- |
|
|
|
40,000 |
|
|
|
40 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(40 |
) |
|
|
- |
|
Preferred
Shares Converted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
into
Common
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(13 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Net
(Loss) for the Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
Ended
December 31, 2000
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,199,695 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2000
|
|
|
80 |
|
|
|
- |
|
|
|
100,000 |
|
|
|
100 |
|
|
|
337 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,675,304 |
|
|
|
(5,252,612 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Shares for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
Rendered
|
|
|
21 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
804,336 |
|
|
|
- |
|
Shares
Issued for Cash
|
|
|
16 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
286,567 |
|
|
|
- |
|
Shares
Issued in Connection
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with
Private Offering
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Shares
Issued to Officer
|
|
|
20 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,128,000 |
|
|
|
- |
|
Net
(Loss) for the Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
December 31, 2001
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,548,559 |
) |
See
accompanying notes and independent accountants' report.
F-8
Balance
December 31, 2001
|
|
|
140 |
|
|
|
- |
|
|
|
100,000 |
|
|
|
100 |
|
|
|
337 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,894,207 |
|
|
|
(8,801,171 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Shares for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
Rendered
|
|
|
73 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,185,631 |
|
|
|
- |
|
Issuance
of Shares to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
University
of Pennsylvania
|
|
|
4 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
Shares
issued in settlement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
lawsuit
|
|
|
5 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
40,000 |
|
|
|
- |
|
Shares
Issued for Cash
|
|
|
93 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
143 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,153,736 |
|
|
|
- |
|
Offering
costs
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(200,412 |
) |
|
|
- |
|
Shares
issued in cancellation of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President's
interest in patents
|
|
|
- |
|
|
|
- |
|
|
|
200,000 |
|
|
|
200 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Cancellation
of shares in stock grant
|
|
|
(4 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Shares
issued to Company's president
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
past compensation
|
|
|
43 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
260,000 |
|
|
|
- |
|
Shares
Issued in Connection
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with
Private Offering
|
|
|
9 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
(Loss) for the Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
December 31, 2002
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,852,296 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2002
|
|
|
362 |
|
|
|
- |
|
|
|
300,000 |
|
|
|
300 |
|
|
|
337 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
143 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,333,162 |
|
|
|
(12,653,467 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Shares for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
Rendered
|
|
|
25,934 |
|
|
|
26 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
484,308 |
|
|
|
- |
|
Issuance
of Shares to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
University
of Pennsylvania
|
|
|
14 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Shares
purchased for cancellation
|
|
|
(4 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(24,432 |
) |
|
|
- |
|
Shares
issued in settlement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
lawsuit
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Shares
issued for cash
|
|
|
113 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,074 |
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
235,194 |
|
|
|
- |
|
Offering
costs
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(81,975 |
) |
|
|
- |
|
Shares
issued in cancellation of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
legal
fee note payable
|
|
|
73,333 |
|
|
|
73 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,583,054 |
|
|
|
- |
|
Shares
issued to Company's president
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
past compensation
|
|
|
106,667 |
|
|
|
107 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
319,893 |
|
|
|
- |
|
Shares
issued to Company's president
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
consideration for note receivable
|
|
|
16,667 |
|
|
|
17 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
49,983 |
|
|
|
- |
|
Officer's
compensation relating to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cancellation
of Oct. 27, 2000 escrow
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agreement
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19,617 |
|
|
|
- |
|
Shares
issued in cancellation of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
indebtedness
due on legal fees
|
|
|
3 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
- |
|
Shares
returned to treasury by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
officers in consideration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
the cancellation of notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
due
the Company by them on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
past
stock purchases
|
|
|
(17 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(769,823 |
) |
|
|
- |
|
Exchange
of Class A Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock
for Class B Common
|
|
|
(1 |
) |
|
|
- |
|
|
|
300,000 |
|
|
|
300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(300 |
) |
|
|
- |
|
Exchange
of Class A Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock
for Class D Preferred
|
|
|
(24,800 |
) |
|
|
(25 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,440,000 |
|
|
|
5,440 |
|
|
|
- |
|
|
|
- |
|
|
|
(5,415 |
) |
|
|
- |
|
Shares
Issued in Connection
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with
Private Offering
|
|
|
23,355 |
|
|
|
23 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(23 |
) |
|
|
- |
|
Adjustment
for equity in uncolsolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
subsidiary
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
37,597 |
|
|
|
- |
|
Net
(Loss) for the Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
December 31, 2003
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,885,728 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2003
|
|
|
221,628 |
|
|
$ |
221 |
|
|
|
600,000 |
|
|
$ |
600 |
|
|
|
337 |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
4,217 |
|
|
$ |
4 |
|
|
|
5,440,000 |
|
|
$ |
5,440 |
|
|
|
- |
|
|
$ |
- |
|
|
|
13,190,840 |
|
|
$ |
(14,539,195 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
services
rendered
|
|
|
22,406 |
|
|
|
22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
14,252,173 |
|
|
|
- |
|
Shares
purchased and canceled
|
|
|
(4 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,167 |
) |
|
|
- |
|
Issuance
of shares for cancelation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
legal and accounting fees payable
|
|
|
250 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
64,467 |
|
|
|
- |
|
Exercise
of Warrants
|
|
|
11 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,550 |
|
|
|
|
|
Shares
issued in exchange for shares in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Langely
Park Investments PLC
|
|
|
28,889 |
|
|
|
29 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12,973,484 |
|
|
|
- |
|
Benificial
conversion feature
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
convertible debenture
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
1,125,000 |
|
|
|
|
|
See
accompanying notes and independent accountants' report.
F-9
Shares
issued for cash
|
|
|
4,025 |
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
207,471 |
|
|
|
- |
|
Offering
costs
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(13,713 |
) |
|
|
- |
|
Exchange
of Class A Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares
for Class C Preferred shares
|
|
|
9 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,700 |
) |
|
|
(3 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3 |
|
|
|
- |
|
Exchange
of Class A Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares
for Class D Preferred shares
|
|
|
11,733 |
|
|
|
12 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,520,000 |
) |
|
|
(3,520 |
) |
|
|
- |
|
|
|
- |
|
|
|
3,508 |
|
|
|
- |
|
Net
(loss) for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ended
December 31, 2004
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(25,495,291 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2004
|
|
|
288,947 |
|
|
|
288 |
|
|
|
600,000 |
|
|
$ |
600 |
|
|
|
337 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,517 |
|
|
|
1 |
|
|
|
1,920,000 |
|
|
|
1,920 |
|
|
|
- |
|
|
|
- |
|
|
|
41,803,616 |
|
|
|
(40,034,486 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
services
rendered
|
|
|
111,913 |
|
|
|
112 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,105,322 |
|
|
|
- |
|
Exercise
of Options
|
|
|
333 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,100 |
|
|
|
- |
|
Shares
issued in exchange for shares in
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
Birchington
Investments PLC
|
|
|
39,500 |
|
|
|
40 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,582,560 |
|
|
|
- |
|
Shares
issued to University of Pennslvania |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
pursuant
to agreement modification
|
|
|
15,173 |
|
|
|
15 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,963,105 |
|
|
|
- |
|
Shares
issued in connection with
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Birchington
stock acquisition
|
|
|
3,950 |
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4 |
) |
|
|
- |
|
Shares
issued for cash
|
|
|
7,329 |
|
|
|
7 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
313,132 |
|
|
|
- |
|
Offering
costs
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(19,140 |
) |
|
|
- |
|
Shares
issued on conversion of Class D |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Shares
|
|
|
1,667 |
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(500,000 |
) |
|
|
(500 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Elimination
of discount on converted Class D |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Shares
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,125,000 |
) |
|
|
- |
|
Net
(loss) for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ended
December 31, 2005
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(21,893,236 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
468,813 |
|
|
|
468 |
|
|
$ |
600,000 |
|
|
$ |
600 |
|
|
$ |
337 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,517 |
|
|
$ |
1 |
|
|
$ |
1,420,000 |
|
|
$ |
1,420 |
|
|
|
- |
|
|
$ |
- |
|
|
|
54,625,691 |
|
|
$ |
(61,927,722 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
services
rendered
|
|
|
35,199,295 |
|
|
|
35,200 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
126,163,933 |
|
|
|
- |
|
Shares
issued in exchange for Notes
|
|
|
21,500 |
|
|
|
22 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
257,978 |
|
|
|
- |
|
Shares
issued Beck settlement
|
|
|
3,416 |
|
|
|
3 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
173,063 |
|
|
|
- |
|
Shares
issued in cancellation of royalty
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
obligation
|
|
|
3,333 |
|
|
|
3 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
39,997 |
|
|
|
- |
|
Shares
issued in cancellation of indebtedness
|
|
|
208,333 |
|
|
|
208 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
119,792 |
|
|
|
- |
|
Shares
issued for cash
|
|
|
49,689 |
|
|
|
50 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
379,646 |
|
|
|
- |
|
Shares
subscribed
|
|
|
83,333 |
|
|
|
83 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,649,517 |
|
|
|
|
|
Shares
returned in cancellation of note payable
|
|
|
(6,300 |
) |
|
|
(6 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(62,575 |
) |
|
|
|
|
Shares
issued in connection with various |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
private
offerings
|
|
|
19,693 |
|
|
|
20 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
384,796 |
|
|
|
|
|
Offering
costs
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(410,952 |
) |
|
|
- |
|
Shares
issued for Class D Preferred shares
|
|
|
4,733 |
|
|
|
5 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,420,000 |
) |
|
|
(1,420 |
) |
|
|
- |
|
|
|
- |
|
|
|
1,415 |
|
|
|
- |
|
Shares
purchased for cancellation
|
|
|
(929 |
) |
|
|
(1 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(45,642 |
) |
|
|
- |
|
Shares
issued in acquisition of Monitoring
|
|
|
119,164 |
|
|
|
119 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,502,326 |
|
|
|
- |
|
Shares
issued to Utek per agreement
|
|
|
6,245,664 |
|
|
|
6,246 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(6,246 |
) |
|
|
- |
|
Shares
issued to Birchington per agreement
|
|
|
5,850 |
|
|
|
6 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(6 |
) |
|
|
|
|
Shares
issued to Officer pursuant to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
settlement
and employment agreement
|
|
|
30,000,000 |
|
|
|
30,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(30,000 |
) |
|
|
|
|
Recognized
officer's stock based compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,575,342 |
|
|
|
|
|
Benificial
conversion feature
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
convertible debenture
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
450,697 |
|
|
|
|
|
Recognized
derivative liability
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
419,445 |
|
|
|
|
|
Net
(loss) for the year
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
ended
December 31, 2006
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(177,884,101 |
) |
|
|
|
72,425,587 |
|
|
|
72,426 |
|
|
|
600,000 |
|
|
|
600 |
|
|
|
337 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,517 |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
193,188,217 |
|
|
|
(239,811,823 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash
|
|
|
12,686,300 |
|
|
|
12,686 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,712,410 |
|
|
|
- |
|
Preferred
shares issued in acquisition of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
subsidiaries
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
55,000 |
|
|
|
55 |
|
|
|
1,072,445 |
|
|
|
- |
|
Common
shares issued in acqusistion of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
subsidiaries
|
|
|
15,412,500 |
|
|
|
15,413 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
18,866,963 |
|
|
|
- |
|
Common
shares issued in purchase of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares
in Rocket City Automotive
|
|
|
10,000,000 |
|
|
|
10,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
13,822,000 |
|
|
|
- |
|
Shares
issued in connection with various |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
private
offerings
|
|
|
1,570,000 |
|
|
|
1,570 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,812,641 |
|
|
|
- |
|
Shares
issued pursuant to anti-dilution provisions
|
|
|
2,583,456 |
|
|
|
2,583 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,583 |
) |
|
|
- |
|
See
accompanying notes and independent accountants' report.
F-10
Shares
cancelled and returned to treasury
|
|
|
(418,114 |
) |
|
|
(418 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
418 |
|
|
|
- |
|
Shares
issued for services
|
|
|
12,037,724 |
|
|
|
12,038 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16,183,251 |
|
|
|
- |
|
Shares
returned in cancellation of note payable
|
|
|
10,050,000 |
|
|
|
10,050 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
994,950 |
|
|
|
- |
|
Offering
costs
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(6,861,793 |
) |
|
|
- |
|
Reduction
on contigient liability on settlement
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
501,412 |
|
|
|
- |
|
Return
of shares in recission of purchase of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rocket
City Automotive shares
|
|
|
(10,000,000 |
) |
|
|
(10,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(6,990,000 |
) |
|
|
- |
|
Recognized
officer's stock based compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
60,048,000 |
|
|
|
- |
|
Net
(loss) for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ended
December 31, 2007
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(73,396,579 |
) |
|
|
|
126,347,453 |
|
|
$ |
126,348 |
|
|
|
600,000 |
|
|
$ |
600 |
|
|
|
337 |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
1,517 |
|
|
$ |
1 |
|
|
|
- |
|
|
$ |
- |
|
|
|
55,000 |
|
|
$ |
55 |
|
|
$ |
301,348,331 |
|
|
|
(313,208,402 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes and independent accountants' report.
F-11
MATERIAL
TECHNOLOGIES, INC.
|
|
(A
Development Stage Company)
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
October 21, 1983
|
|
|
|
For
the Year Ended
|
|
|
(Inception)
|
|
|
|
December
|
|
|
through
|
|
|
|
2006
|
|
|
2007
|
|
|
December
31, 2007
|
|
|
|
(Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(177,884,101 |
) |
|
$ |
(73,396,579 |
) |
|
$ |
(313,208,402 |
) |
Adjustments
to reconcile net loss to net cash used in
|
|
|
|
|
|
|
|
|
|
|
|
|
in
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on modification of convertible debt
|
|
|
(1,033,479 |
) |
|
|
- |
|
|
|
(586,245 |
) |
Impairment
loss
|
|
|
1,913,445 |
|
|
|
19,257,375 |
|
|
|
21,391,528 |
|
Loss
on charge off of subscription receivables
|
|
|
1,346,010 |
|
|
|
|
|
|
|
1,368,555 |
|
Issuance
of common stock for services
|
|
|
126,199,122 |
|
|
|
16,195,289 |
|
|
|
206,484,840 |
|
Increase
in debt for services and fees
|
|
|
462,826 |
|
|
|
3,993,799 |
|
|
|
4,456,625 |
|
Officer's
stock based compensation
|
|
|
6,575,342 |
|
|
|
60,000,000 |
|
|
|
66,575,342 |
|
Issuance
of common stock for modification of
|
|
|
|
|
|
|
|
|
|
|
|
|
research
and development sponsorship agreement
|
|
|
|
|
|
|
- |
|
|
|
7,738,400 |
|
Change
in fair value of derivative and warrant liabilities
|
|
|
|
|
|
|
(34,962,617 |
) |
|
|
(41,351,889 |
) |
Net
realized and unrealized loss on marketable securities
|
|
|
3,798,516 |
|
|
|
3,986,200 |
|
|
|
7,895,705 |
|
Other-than-temporary
impairment of marketable
|
|
|
|
|
|
|
|
|
|
|
|
|
securities
available for sale
|
|
|
- |
|
|
|
|
|
|
|
9,785,946 |
|
Legal
fees incurred for note payable
|
|
|
|
|
|
|
|
|
|
|
1,456,142 |
|
Accrued
interest expense added to principal
|
|
|
615,988 |
|
|
|
328,891 |
|
|
|
1,495,005 |
|
Amortization
of discount on convertible debentures
|
|
|
968,716 |
|
|
|
2,041,213 |
|
|
|
10,106,277 |
|
Change
in fair value of investments derivative liability
|
|
|
33,780,874 |
|
|
|
- |
|
|
|
3,223,323 |
|
Accrued
interest income added to principal
|
|
|
(22,559 |
) |
|
|
(1,177 |
) |
|
|
(304,998 |
) |
Depreciation
and amortization
|
|
|
8,219 |
|
|
|
7,581 |
|
|
|
227,784 |
|
Other
non-cash adjustments
|
|
|
66,341 |
|
|
|
- |
|
|
|
(114,730 |
) |
(Increase)
decrease in trade receivables
|
|
|
(45,883 |
) |
|
|
8,046 |
|
|
|
(158,989 |
) |
(Increase)
decrease in inventories
|
|
|
- |
|
|
|
(62,216 |
) |
|
|
(62,216 |
) |
(Increase)
decrease in prepaid expenses and other
|
|
|
|
|
|
|
|
|
|
|
- |
|
current
assets
|
|
|
273,591 |
|
|
|
9,225 |
|
|
|
242,573 |
|
Increase
in deposits
|
|
|
|
|
|
|
|
|
|
|
(2,348 |
) |
(Decrease)
increase in accounts payable and accrued
|
|
|
|
|
|
|
|
|
|
|
- |
|
expenses
|
|
|
1,197,776 |
|
|
|
(69,660 |
) |
|
|
2,508,896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(1,779,256 |
) |
|
|
(2,664,630 |
) |
|
|
(10,832,876 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from the sale of marketable securities
|
|
|
242,506 |
|
|
|
137,174 |
|
|
|
3,458,476 |
|
Purchase
of marketable securities
|
|
|
(7,307 |
) |
|
|
(302,038 |
) |
|
|
(2,206,379 |
) |
Investment
in certificate of deposits and commerical paper
|
|
|
- |
|
|
|
(1,400,000 |
) |
|
|
(1,400,000 |
) |
Redemptions
of certificate of deposits and commercial paper
|
|
|
- |
|
|
|
400,000 |
|
|
|
400,000 |
|
Payment
received on officer loans
|
|
|
(5,000 |
) |
|
|
- |
|
|
|
876,255 |
|
Funds
advanced to officers
|
|
|
- |
|
|
|
- |
|
|
|
(549,379 |
) |
Proceeds
received in acquisition of consolidated subsidiaries
|
|
|
|
|
|
|
600,000 |
|
|
|
600,000 |
|
Purchase
of property and equipment
|
|
|
(2,827 |
) |
|
|
(83,679 |
) |
|
|
(356,252 |
) |
Investment
in joint ventures
|
|
|
- |
|
|
|
- |
|
|
|
(102,069 |
) |
Proceeds
from foreclosure
|
|
|
- |
|
|
|
- |
|
|
|
44,450 |
|
Proceeds
from the sale of property and equipment
|
|
|
9,000 |
|
|
|
- |
|
|
|
19,250 |
|
Payment
for license agreement
|
|
|
- |
|
|
|
- |
|
|
|
(6,250 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by investing activities
|
|
|
236,372 |
|
|
|
(648,543 |
) |
|
|
778,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MATERIAL
TECHNOLOGIES, INC.
|
(A
Development Stage Company)
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
October 21, 1983
|
|
|
|
For
the Year Ended
|
|
|
(Inception)
|
|
|
|
December
|
|
|
through
|
|
|
|
2006
|
|
|
2007
|
|
|
December
31, 2007
|
|
|
|
(Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds
from the sale of common stock and warrants
|
|
$ |
1,680,553 |
|
|
$ |
4,566,631 |
|
|
$ |
9,445,953 |
|
Proceeds
from convertible debentures and other
|
|
|
|
|
|
|
|
|
|
|
|
|
notes
payable
|
|
|
50,000 |
|
|
|
200,000 |
|
|
|
2,047,766 |
|
Proceeds
from the sale of preferred stock
|
|
|
- |
|
|
|
- |
|
|
|
473,005 |
|
Costs
incurred in offerings
|
|
|
(22,530 |
) |
|
|
(643,591 |
) |
|
|
(1,130,932 |
) |
Capital
contributions
|
|
|
- |
|
|
|
- |
|
|
|
301,068 |
|
Purchase
of treasury stock
|
|
|
(33,188 |
) |
|
|
(79,452 |
) |
|
|
(167,375 |
) |
Principal
reduction on notes payable
|
|
|
(50,000 |
) |
|
|
(50,000 |
) |
|
|
(100,000 |
) |
Payment
on proposed reorganization
|
|
|
- |
|
|
|
- |
|
|
|
(5,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
1,624,835 |
|
|
|
3,993,588 |
|
|
|
10,864,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
81,951 |
|
|
|
680,415 |
|
|
|
809,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
47,345 |
|
|
|
129,296 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$ |
129,296 |
|
|
$ |
809,711 |
|
|
$ |
809,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid during the period
|
|
$ |
2,669 |
|
|
$ |
3,838 |
|
|
|
|
|
Income
taxes paid during the period
|
|
$ |
800 |
|
|
$ |
800 |
|
|
|
|
|
Supplemental
disclosures of non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
the year ended December 31, 2007, the Company issued 12,037,724 shares of
its Class A common stock
|
for
consulting and other services valued at $16,195,289. Included
in the 12,037,724 shares issued, 2,970,000 shares were
|
issued
to current officers of the company which were valued at
$4,398,500.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2007, the Company received $1,000,000 in consideration of issuing
2,500,000 units.
|
|
|
Each
unit consists of one share of the Company's Class A common stock and a
warrant to purchase
|
|
|
one
share of the Company's common stock at a price of $.60 per share. In
connection with the private offering
|
the
Company paid $239,065 in fees and issued warrants to purchase 2,118,334
shares of the Company's
|
|
common
stock at a price of $.60 per share. In other private offerings, the
Company received $1,634,154
|
|
|
through
the issuance of 5,686,300 shares of common stock and warrants. Also during
2007,
|
|
|
4,500,000
of common stock were issued through the exercise of the 4,500,000
warrants. Through the exercise
|
of
the warrants, the Company received $2,171,542 net of $528,458 in closing
costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
connection with the above indicated private offering and related exercise
of the warrants, , the Company issued
|
1,570,000
shares of its Class A common stock. The 1,570,000 shares were valued at
$1,814,213 and charged against the
|
proceeds
received.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2007, the Company issued 50,000 shares its Class E Series convertible
preferred stock
|
|
|
in
exchange for recieiving all of the outstanding shares of Stress Analysis
Technologies, Inc. ("SATI")
|
|
The
Company valued the acquisition at $975,000 and charged off $875,000 as it
deemed the intangible
|
|
|
assets
acquired to be fully impaired. In connection with this
transaction, the Company issued an additional
|
5,000
preferred shares valued at $97,500 for fees in connection with the
purchase. The $97,500 was
|
|
|
was
charged to equity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2007, the Company issued 13,912,500 shares its common stock in the
acquisition of two subsidiaries.
|
The
assets acquired included $500,000 cash and licenses originally valued at
$18,380,875. The Company
|
|
charged
of the full costs assigned to the licenses as being
impaired.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
report of independent registered public accounting firm
and
accompanying notes to the consolidated financial statements.
F-13
During
2007, the Company issued 10,000,000 shares its common stock in exchange
for 3,000,000 shares in
|
|
a
company whose shares are traded on the OTO exchange. pink sheets). The
Company valued the shares received
|
at
$10,986,000. In October2007, the Company and the other party to the share
exchange decided to return
|
|
the
shares received. The Company received the 10,000,000 shares it orignally
issued and cancelled them.
|
|
The
Company recognized a loss of $3,986,000 which was charged to operations on
the return of the shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2007, the Company issued 10,800,000 shares in escrow pursuant to an
agreement it has with its Convertible debenture
|
holders.
During 2007, 10,050,000 shares of Class A common stock was
issued to certain debenture holders in the conversion
of
|
$1,005,000
of indebtedness. In addition, for services rendered by certain debenture
holders, the amount due on the debentures
|
was
increased by $1,100,000.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2007, the Company received 418,114 shares of prior issued common stock
which was subsequently cancelled.
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2007, the Company acquired all of the outstanding shares of Bridge Concept
Inc, a corporation wholy owned by to its chief
engineer.
|
In
consideration for the shares received in Bridge, the Company issued
1,500,000 of its common stock and $37,500 which was paid
in
|
October
2007. The Company treated the acqusition as a related party transaction
and valued the entire acquisition at $39,000. The
$39,000
|
was
assigned to the intellectial property of Bridge which was charged off to
operations as being impaired.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2007, the Company issued 2,583,456 shares of its common stock pursuant to
anti-dilution provisions in two
|
agreements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
November 2006, the Company authorized a 1 for 300 reverse stock split. All
issuances of shares have been restated to reflect the
|
impact
of reverse stock split.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2006, the Company issued 35,190,742 shares of its Class A
common stock for consulting services valued at
$126,199,125
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2006, the Company issued 3,416 shares of its Class A common stock in
connection with a legal settlment. The shares
were
|
valued
at $173,066.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2006. the Company issued 4,733 shares of its Class A common stock through
the conversion of 1,420,000 shares of
|
Class
D preferred stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
2006, the Company issued 12,000,0000 Class A common shares in connection
with proposed financing. In addition 10,000,000
|
shares
were placed in escrow pursuant ot the Beck Settlement agreement. In
addiiton, the Company issued 40,000,000 shares to
|
current
shareholders for services rendered, of the 40,000,000 shares, 5,358,689
shares were not issued, but held by the Company
|
at
December 31, 2006. These 27,358,689 share are considered issued, but not
outstading as of December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
Duirng
2006, the Company issued 229,833 shares in exchange for the cancellation
for $378,000 of indebtedness.
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2006, the Company issued 3,333 shares of its common stock in exchange for
the cancellation of its obligation to
|
pay
royalties on future sales to Advances Technology Center (See Note 10). The
3,333 shares were valued at $40,000.
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2006, the Company agreed to increase the obligation to the debtholder from
$1,331,860 to $2,000,000.
|
The
increase in the amount due pertained to services rendered by the debt
holder and for other consideration
|
and
was charged to interest expense during the period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2006, the company recorded a debt discount related to the Beneficial
Conversion Feature of the convertible debt
|
issued
in the amount of $450,697.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2006, the company issued 119,164 shares, of common stock for $500,000 in
cash and licensed technology valued at
|
$1,913,445.
The Company deemed the technology received impaired and charged off the
$1,913,445 to operations in 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2006, the Company issued 19,693 shares of its common stock in conection
with various offerings. The 19,693 shares
|
were
valued at $418,812 which was charged against the proceeds
received.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2006, the Company purchased 929 shares of its common stock for
$45,643.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2006, certain shareholders returned to the Company
12,967 shares of its common stock which was
subsequently
|
canceled.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
report of independent registered public accounting firm
and
accompanying notes to the consolidated financial statements.
F-14
Duirng
2006 the Company issued 6,245,664 shares pursuant to antidilution
provisions of various agreements.
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2006, the Company issued 5,850 shares to Birchington pursuant to the
downside price protection
|
|
provision
of the exchange agreement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2006, the Company issued 30,000,000 shares of its common stock to its
President pursuant to an
|
|
employment
agreement. The shares vest over a 3 year period. For the year ended
December 31, 2006,
|
|
|
$6,575,342
was recognized as compenastion and charged to operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
report of independent registered public accounting firm
and
accompanying notes to the consolidated financial statements.
F-15
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
NOTE 1 – ORGANIZATION AND
BASIS OF PRESENTATION
Organization
Material
Technologies, Inc. (the “Company”) was organized on October 21, 1983, under the
laws of the state of Delaware.
The
Company is in the development stage, as defined in Statement of Financial
Accounting Standards (“SFAS”) No. 7, Accounting and Reporting by
Development Stage Enterprises, with its principal activity being research
and development in the area of metal fatigue technology with the intent of
future commercial application.
On
January 22, 2003, the Company formed Matech International, Inc., a Nevada
corporation (“International”). International was formed as a wholly owned
subsidiary of the Company to advertise, market and sell the Company’s videoscope
technology which is presently utilized in the inspection of stress and crack
points in turbine engines on the wings of airplanes. At the present time
there is no activity in International and the Company does not anticipate nor
reasonably foresee any business activity in International in the near
future.
On March
13, 2003, the Company formed Matech Aerospace, Inc., a Nevada corporation
(“Aerospace”). Aerospace was formed as a wholly owned subsidiary of the
Company to advertise, market and sell all manufacturing and marketing rights to
the Company’s products and technologies in all commercial markets within the
United States. During 2003, Aerospace sold shares of its common stock to
investors. As of December 31, 2007, the Company holds a 99% interest in
Aerospace. At the present time there is no activity in Aerospace and the
Company does not anticipate nor reasonably foresee any business activity in
Aerospace in the near future.
On August
18, 2006, the Company acquired 100% of the issued and outstanding stock of
Materials Monitoring Technologies, Inc., (“Monitoring”) which was organized in
the State of Florida on August 1, 2006. On the acquisition date,
Monitoring had $500,000 in cash, a license to utilize patented technology
relating to the structural health monitoring of bridges and railroads,
and an agreement with a consultant to provide services associated
with the development, application, and testing of the licensed technology
through August 2007 (see Note 7). As Monitoring had no customers,
expenses, or operations, the acquisition of Monitoring was treated as an
acquisition of assets of $500,000 in cash and $1,913,445 for intellectual
property for 119,164 shares (post-split) of common stock. The
$1,913,445 was charged to operations as the value of the intellectual properties
was deemed by management to be impaired.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
On
January 26, 2007, the Company acquired 100% of the issued and outstanding stock
of Stress Analysis Technologies, Inc. (“SATI”), which was organized in the State
of Florida on October 19, 2006. In consideration for the SATI shares
received, the Company issued 50,000 shares of
its Class
E convertible preferred stock which has a stipulated value of $975,000 (see Note
11). On the acquisition date, SATI had $100,000 in cash and a license to utilize
patented technology relating to the structural monitoring of bridges.
Under the terms of the license, royalties and fees are due on revenue generated
through the utilization of the licensed technology. The license expires on
January 23, 2023. As SATI had no customers, expenses, or operations, the
acquisition of SATI was treated as an acquisition of assets of $100,000 in cash
and $875,000 was charged to operations as management deemed the underlying value
of the license to be impaired.
On April
30, 2007, the Company acquired 100% of the issued and outstanding stock of
Damage Assessment Technologies, Inc. (“DATI”), which was organized in the State
of Florida on April 23, 2007. On the acquisition date, DATI had $250,000
in cash, a license to utilize patented technology relating to the damage
assessment, and has an agreement with a consultant to provide services
associated with the development, application, and testing of the licensed
technology through August 2007 (see Note 7). As DATI had no customers,
expenses, or operations, the acquisition of DATI was treated as an acquisition
of assets of $250,000 in cash and $11,000,000 of intellectual property for
7,500,000 shares of common stock. The $11,000,000 value assigned to
the intellectual properties was deemed impaired by management and charged to
operations.
On June
28, 2007, the Company acquired 100% of the issued and outstanding stock of
Non-Destructive Assessment Technologies, Inc. (“NDATI”), which was organized in
the State of Florida on May 24, 2007. On the acquisition date, NDATI had
$250,000 in cash, a license to utilize patented technology relating to the
damage assessment, and an agreement with a consultant to provide
services associated with the development, application, and testing of the
licensed technology through August 2007 (see Note 7). As NDATI had no
customers, expenses, or operations, the acquisition of NDATI was treated as an
acquisition of assets of $250,000 in cash and $7,380,876 of intellectual
property for 6,412,500 shares of common stock. The $7,380,876
assigned to the intellectual properties was deemed impaired by management and
charged to operations.
On
September 28, 2007, the Company acquired from its chief engineer 100% of the
issued and outstanding stock of Bridge Testing Concepts, Inc. (“BTCI”), which
was organized in the State of California on July 30, 2007. On the date of
acquisition, BTCI’s sole asset consisted of technology relating to the testing
of fatigue on bridges. In consideration for the shares of BTCI, the Company
issued 1,500,000 shares of its common stock and paid $37,500 in October 2007.
The Company treated the acquisition as a related party transaction and valued
the shares issued at par. The total purchase price of $39,000 was assigned to
the intellectual property received. Management deemed the value of the
technology to be impaired and charged the $39,000 to operations.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
Unless
otherwise noted, common stock refers to the Company’s Class A common
stock. Effective
on November 8, 2006, the Company declared a 1-for-300 reverse split of the
Company’s
Class A common stock. All shares amounts and per share amounts have
been adjusted throughout the financial statements for this reverse stock
split.
Going
Concern
The
Company's consolidated financial statements are prepared using the accrual
method of accounting in accordance with accounting principles generally accepted
in the United States of America and have been prepared on a going concern basis,
which contemplates the realization of assets and the settlement of liabilities
in the normal course of business. The Company has sustained operating losses
since its inception (October 21, 1983). In addition, the Company has
used substantial amounts of working capital in its
operations. Further, at December 31, 2007, deficit accumulated during
the development stage amounted to approximately
$ 313,208,402.
In view
of these matters, realization of a major portion of the assets in the
accompanying consolidated balance sheet is dependent upon the Company’s ability
to meet its financing requirements and the success of its future
operations. During 2007, the Company received approximately
$4,000,000 (net of offering costs) through the issuance of 12,686,300 shares of
its common stock and exercise of warrants and received $600,000 through the
acquisitions of three wholly owned subsidiaries as discussed in
above. The Company plans to continue raising funds through the sale
of its common stock through private offerings which management expects to
continue in 2008. The Company has commenced to market its current technologies
while continuing to develop new methods and applications.
Management
believes that these sources of funds and current liquid assets will allow the
Company to continue as a going concern through the end of
2008. Management of the Company will need to raise additional debt
and/or equity capital to finance future activities beyond
2008. However, no assurances can be made that current or anticipated
future sources of funds will enable the Company to finance future periods’
operations. In light of these circumstances, substantial doubt exists
about the Company’s ability to continue as a going concern. These consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets or liabilities that might
be necessary should the Company be unable to continue as a going
concern.
Restatement of Financial
Statements
In
valuing previous period’s non-cash security transactions, the Company utilized
discounts to the respective share’s trading prices which it has determined are
without foundation. In addition, the Company has also adjusted its derivative
liabilities to fair value. Therefore, it has restated its 2005 and
2006 financial statements eliminating all discounts. The net effect of the
restatements was to increase is accumulated deficit at December 31, 2006 from
$72,358,976 to $239,811,823 (See Note 13).
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
Recent
Accounting Pronouncement
SFAS No.
159 - In February 2007, the FASB issued Statement No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities—Including an amendment of FASB
Statement No. 115. This Statement permits entities to choose to measure many
financial instruments and certain other items at fair value. The objective is to
improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. This Statement is expected to expand the use of fair value
measurement, which is consistent with the Board’s long-term measurement
objectives for accounting for financial instruments. This Statement applies to
all entities, including not-for-profit organizations. Most of the provisions of
this Statement apply only to entities that elect the fair value option. However,
the amendment to FASB Statement No. 115, Accounting for Certain Investments in
Debt and Equity Securities, applies to all entities with available-for-sale and
trading securities. Some requirements apply differently to entities that do not
report net income. This Statement is effective as of the beginning of an
entity’s first fiscal year that begins after November 15, 2007. Early adoption
is permitted as of the beginning of a fiscal year that begins on or before
November 15, 2007, provided the entity also elects to apply the provisions of
FASB Statement No. 157, Fair Value Measurements. No entity is permitted to apply
this Statement retrospectively to fiscal years preceding the effective date
unless the entity chooses early adoption. The choice to adopt early should be
made after issuance of this Statement but within 120 days of the beginning of
the fiscal year of adoption, provided the entity has not yet issued financial
statements, including required notes to those financial statements, for any
interim period of the fiscal year of adoption. This Statement permits
application to eligible items existing at the effective date (or early adoption
date). The Company has evaluated the impact of the implementation of SFAS No.
159 and does not believe the impact will be significant to the Company's overall
results of operations or financial position.
SFAS No.
141 (revised 2007) – In December 2007, the FASB issued Statement No. 141
(revised 2007), Business Combinations. This statement replaces FASB Statement
No. 141 Business Combinations. The objective of this Statement is to
improve the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial reports about a
business combination and its effects. To accomplish that, this Statement
establishes principles and requirements for how the acquirer 1) recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree, 2)
recognizes and measures the goodwill acquired in the business combination or a
gain from a bargain purchase, and 3) determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
the
business combination. This Statement applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning
on or after December 15, 2008. The Company is currently assessing the potential
effect of SFAS 141 (revised 2007) on its financial statements.
SFAS No.
160 – In December 2007, the FASB issued Statement No. 160, Noncontrolling
Interests in Consolidated Financial Statements—an amendment of ARB No. 51. The
objective of this Statement is to improve the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements by establishing accounting and reporting
standards that require 1) the ownership interests in subsidiaries held by
parties other than the parent be clearly identified, labeled, and presented in
the consolidated statement of financial position within equity, but separate
from the parent’s equity, 2) the amount of consolidated net income attributable
to the parent and to the noncontrolling interest be clearly identified and
presented on the face of the consolidated statement of income, 3) changes in a
parent’s ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently, 4) when a subsidiary
is deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value, and 5) entities provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. This
Statement is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008. The Company is
currently assessing the potential effect of SFAS 160 on its financial
statements.
SFAS No.
161 - In December 2007, the FASB issued Statement No. 161, Disclosures about
Derivative Instruments and Hedging Activities—an amendment of FASB Statement No.
133. This Statement changes the disclosure requirements for derivative
instruments and hedging activities. Entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows.
This
Statement is intended to enhance the current disclosure framework in Statement
133. The Statement requires that objectives for using derivative instruments be
disclosed in terms of underlying risk and accounting designation. This
disclosure better conveys the purpose of derivative use in terms of the risks
that the entity is intending to manage. Disclosing the fair values of derivative
instruments and their gains and losses in a tabular format should provide a more
complete picture of the location in an entity’s financial statements of both the
derivative positions existing at period end and the effect of using derivatives
during the reporting period. Disclosing information about credit-risk-related
contingent features should provide information on the potential effect on an
entity’s liquidity from using derivatives. Finally, this Statement
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
requires
cross-referencing within the footnotes, which should help users of financial
statements locate important information about derivative
instruments.
This
Statement is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. This Statement encourages, but does not require, comparative
disclosures for earlier periods at initial adoption. The
Company is currently evaluating SFAS 161 and has not yet determined its
potential impact on its future results of operations or financial
position.
NOTE 2
– SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Principles of
Consolidation
The
accompanying financial statements include the accounts and transactions of
Material Technologies, Inc., its wholly owned subsidiaries Matech International,
Inc., (“International”) Materials Monitoring Technologies, Inc., (“Monitoring”),
Stress Analysis Technologies, Inc. (“SATI”), Damage Assessment Technologies,
Inc., (“DATI”), Non-Destructive Assessment Technologies, Inc., (“NDATI”), Bridge
Testing Concepts, Inc., (“BTCI”) and its substantially owned subsidiary Matech
Aerospace, Inc., (“Aerospace”). Intercompany transactions and
balances have been eliminated in consolidation. The minority owners’
interests in a subsidiary have been reflected as minority interest in the
accompanying consolidated balance sheet.
Use of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, 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. Significant estimates include the fair value of
marketable securities, the value of shares issued for non-cash consideration,
and the recoverability of deferred tax assets. Accordingly, actual
results could differ from those estimates.
Cash
Equivalents
For
purposes of the statements of cash flows, the Company considers cash equivalents
to include highly liquid investments with original maturities of three months or
less.
Investments
Marketable
securities purchased with the intent of selling them in the near term are
classified as trading securities. Trading securities are initially
recorded at cost and are adjusted to their fair value, with the change in fair
value during the period included in earnings as unrealized gains or
losses. Realized gains or losses on dispositions are based upon the net
proceeds and the adjusted
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
book
value of the securities sold, using the specific identification method, and are
recorded as realized gains or losses in the consolidated statements of
operations. Marketable securities that are not classified as trading
securities are classified as available-for-sale securities.
Available-for-sale securities are initially recorded at cost.
Available-for-sale securities with quoted market prices are adjusted to their
fair value. Any change in fair value during the period is excluded from
earnings and recorded, net of tax, as a component of accumulated other
comprehensive income (loss). Any decline in value of available-for-sale
securities below cost that is considered to be “other than temporary” is
recorded as a reduction of the cost basis of the security and is included in the
statement of operations as an impairment loss.
Non-marketable
securities consist of equity securities for which there are no quoted market
prices. Such investments are initially recorded at their cost. In
the case of non-marketable securities acquired with the Company’s common stock,
the Company values the securities at a significant discount to the stated per
share cost based upon the Company’s historical experience with similar
transactions as to the amount ultimately realized from the sale of the
shares. Such investments will be reduced if the Company receives
indications that a permanent decline in value has occurred. At such time
as quoted market prices become available, the net cost basis of these securities
will be reclassified to the appropriate category of marketable securities.
Until that time, the securities will be recorded at their net cost basis,
subject to an impairment analysis (see Note 3).
Accounts
Receivable
Accounts
receivable are reported at the customers’ outstanding balances less any
allowance for doubtful accounts. The Company does not accrue interest
on overdue accounts receivable.
The
allowance for doubtful accounts is charged to income in amounts sufficient to
maintain the allowance for uncollectible accounts at a level management believes
is adequate to cover any probable losses. Management determines the
adequacy of the allowance based on historical write-off percentages and
information collected from individual customers. As of December 31,
2007, management believes all accounts receivable are
collectible. Accordingly, no allowance for doubtful accounts is
included in the accompanying consolidated balance sheet.
Long-Lived
Assets
The
Company accounts for its long-lived assets in accordance with SFAS No. 144,
Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS No. 144 requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
the
historical cost carrying value of an asset may no longer be
appropriate. The Company assesses recoverability of the carrying
value of an asset by estimating the future net cash flows expected to result
from the asset, including eventual disposition. If the future net
cash flows are less than the
carrying value of the asset, an impairment loss is recorded equal to the
difference between the asset’s carrying value and fair value or disposable
value. As of December 31, 2007, the Company does not believe there has been any
impairment of its long-lived assets.
Intangible
Assets
Intangible
assets consist of patents, license agreements and website design costs and are
recorded at cost. Patents and license agreements are amortized over
17 years and website design costs are amortized over five years. In
accordance with SFAS No. 142, Goodwill and Other Intangible
Assets, the carrying values of intangible assets are evaluated for
impairment annually or whenever events or changes in circumstances indicate that
the historical cost carrying value may no longer be appropriate. As
of December 31, 2007, the Company deemed all of its acquired licenses in 2007 to
be impaired and has charged the total cost assigned of $19,294,875 to
operations. In 2006, the Company charged to operations the value assigned to the
licenses acquired in that year amounting to $1,913,445.
Income
Taxes
The
Company accounts for income taxes under the provisions of SFAS No. 109, Accounting for Income
Taxes. Under SFAS No. 109, deferred tax assets and liabilities
are recognized for future tax benefits or consequences attributable to temporary
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. A valuation allowance is provided for
significant deferred tax assets when it is more likely than not that such assets
will not be realized through future operations.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
Convertible
Debentures
If the
conversion feature of conventional convertible debt provides for a rate of
conversion that is below market value, this feature is characterized as a
beneficial conversion feature (“BCF”). A BCF is recorded by the
Company as a debt discount pursuant to EITF Issue No. 98-5 (“EITF 98-05”), Accounting for Convertible
Securities with Beneficial Conversion Features or Contingency Adjustable
Conversion Ratio, and EITF Issue No. 00-27, Application of EITF Issue No. 98-5
to Certain Convertible Instruments. In those circumstances,
the convertible debt will be recorded net of the discount related to the
BCF. The Company amortizes the discount to interest expense over the
life of the debt using the effective interest method.
Derivative Financial
Instruments
In the
case of non-conventional convertible debt, the Company bifurcates its embedded
derivative instruments and records them under the provisions of SFAS No. 133,
Accounting for Derivative
Instruments and Hedging Activities, as amended, and EITF Issue No. 00-19,
Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
Stock. The Company’s derivative financial instruments consist
of embedded derivatives related to the non-conventional notes (“Notes”) entered
into with Golden Gate Investors (“GGI”) and Palisades Capital, LLC or its
registered assigns (“Palisades”) (see Note 9). These embedded
derivatives include the conversion features, liquidated damages related to
registration rights, warrants issued and default provisions. The
accounting treatment of derivative financial instruments requires that the
Company record the derivatives and related warrants at their fair values as of
the inception date of the agreement and at fair value as of each subsequent
balance sheet date. Any change in fair value will be recorded as
non-operating, non-cash income or expense at each reporting date. If
the fair value of the derivatives is higher at the subsequent balance sheet
date, the Company will record a non-operating, non-cash charge. If
the fair value of the derivatives is lower at the subsequent balance sheet date,
the Company will record non-operating, non-cash income.
Fair Value of Financial
Instruments
The
Company’s financial instruments consist of cash and cash equivalents,
investments, accounts receivable, accounts payable, accrued expenses, notes
payable and convertible debentures. Pursuant to SFAS No. 107, Disclosures About Fair Value of Financial
Instruments, the Company is required to estimate the fair value of all
financial instruments at the balance sheet date. The Company cannot determine
the estimated fair value of the convertible debentures as instruments similar to
the convertible debentures could not be found. Other than this item, the Company
considers the carrying values of its financial instruments in the financial
statements to approximate their fair values.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
Revenue
Recognition
The
Company recognizes revenue in accordance with Staff Accounting Bulletin (“SAB”)
No. 101, Revenue
Recognition in Financial Statements, as revised by SAB No.
104. As such, the Company recognizes revenue on its bridge
inspections when the inspection is completed and the required inspection report
is provided to the client.
Research and
Development
The
Company expenses research and development costs as incurred.
Basic & Diluted Net Loss
per Share
The
Company adopted the provisions of SFAS No. 128, Earnings Per Share
(“EPS”). SFAS No. 128 provides for the calculation of basic and
diluted earnings per share. Basic EPS includes no dilution and
is computed by dividing income or loss available to common shareholders by the
weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution of securities
that could share in the earnings or losses of the entity. For the
year December 31, 2006 and 2007, basic and diluted loss per share is the
same. Since the calculation of diluted per share amounts would result
in an anti-dilutive calculation that is not permitted and therefore not
included. If such shares were included in diluted EPS, they would
have resulted in weighted-average common shares of 29,600,224 and 158,951,824,
for 2006 and 2007, respectively. Such amounts include shares potentially
issuable pursuant to shares held in escrow (see Note 11), convertible debentures
(see Note 9), and outstanding options and warrants (see Note 13).
Issuance of Stock for
Non-Cash Consideration
All
issuances of the Company's stock for non-cash consideration have been assigned a
per share amount equaling either the market value of the shares issued or the
value of consideration received, whichever is more readily determinable. The
majority of the non-cash consideration received pertains to services rendered by
consultants and others and has been valued at the market value of the shares on
the dates issued.
The
Company's accounting policy for equity instruments issued to consultants and
vendors in exchange for goods and services follows the provisions of EITF 96-18,
Accounting for Equity
Instruments That are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services and EITF 00-18, Accounting Recognition for Certain
Transactions Involving Equity Instruments Granted to Other Than
Employees. The measurement date for the fair value of the
equity instruments issued is determined at the earlier of (i) the date at which
a
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
commitment
for performance by the consultant or vendor is reached or (ii) the date at which
the consultant
or vendor's performance is complete. In the case of equity
instruments issued to consultants, the fair value of the equity instrument is
recognized over the term of the consulting agreement. In accordance
with EITF 00-18, an asset acquired in exchange for the issuance of fully vested,
nonforfeitable equity instruments should not be presented or classified as an
offset to equity on the grantor's balance sheet once the equity instrument is
granted for accounting purposes. Accordingly, the Company records the
fair value of the fully vested non-forfeitable common stock issued for future
consulting services as prepaid services in its consolidated balance
sheet.
Stock-Based
Compensation
The
Company adopted SFAS No. 123 (Revised 2004), Share Based Payment (“SFAS
No. 123R”), under the modified-prospective transition method on
January 1, 2006. SFAS No. 123R requires companies to measure and
recognize the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value. Share-based compensation
recognized under the modified-prospective transition method of SFAS
No. 123R includes share-based compensation based on the grant-date fair
value determined in accordance with the original provisions of SFAS
No. 123, Accounting for Stock-Based Compensation, for all share-based
payments granted prior to and not yet vested as of January 1, 2006 and
share-based compensation based on the grant-date fair-value determined in
accordance with SFAS No. 123R for all share-based payments granted after
January 1, 2006. SFAS No. 123R eliminates the ability to account for
the award of these instruments under the intrinsic value method prescribed by
Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock
Issued to Employees, and allowed under the original provisions of SFAS
No. 123. Prior to the adoption of SFAS No. 123R, the Company accounted
for our stock option plans using the intrinsic value method in accordance with
the provisions of APB Opinion No. 25 and related
interpretations.
As of
December 31 2007, the Company had no options outstanding.
Concentrations of Credit
Risk
The
Company maintains its cash balances at financial institutions that are insured
by the Federal Deposit Insurance Corporation (“FDIC”) up to
$100,000. From time to time, the Company’s cash balances exceed the
amount insured by the FDIC. Management believes the risk of loss of
cash balances in excess of the insured limit to be low.
During
the year ended December 31, 2007, the Company’s revenues were generated from
three customers. During 2006, the Company’s revenues were generated from one
customer.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
Rocket
City
In April
2007, the Company issued 10,000,000 shares of its common stock in exchange for
3,000,000 common shares of Rocket City Automotive Group, Inc. In August 2007,
Rocket City declared a 40:1 reverse stock split. The Company initially valued
the 3,000,000 shares received at $10,374,000. The Company and Rocket
City agreed in November 2007 to rescind the transaction whereby the Company
recognized a loss on the transaction of $3,986,000.
Birchington
In 2005,
the Company entered into two agreements (the “Birchington Agreements”) with
Birchington Investments Limited (“Birchington”), a corporation organized under
the laws of the British Virgin Islands. The Company reviewed the recorded
value of the Birchington shares for impairment as of December 31, 2006, pursuant
to EITF 03-1 and determined that the Company’s investment in Birchington had no
value. As of December 31, 2007, there has been no change to the status of this
investment.
Mutual
Funds
As of
December 31, 2007, the Company’s investments in open-end mutual funds
approximate their cost of $300,000. The Company considers its investments
in this account as being held for trading. During 2007, the Company
purchased $302,038 and sold $137,174 of this investment with no gain or
loss.
Investments
as of December 31, 2007 are as follows:
|
|
Adjusted Cost
|
|
|
Unrealized Loss
|
|
|
Fair Value
|
|
Marketable
trading securities
|
|
$ |
300,000 |
|
|
|
- |
|
|
$ |
300,000 |
|
Non-marketable
securities – Birchington
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
Commercial
Paper
As of
December 31, 2007, the Company has investments in a bank’s commercial paper
totaling $1,400,000 which accrue interest at rates ranging from 4.0%
to 4.8% and mature on various dates through April 2008. As of December 31, 2007,
accrued interest on these investments totaled $10,758 which was credited to
operations. Of the $1,410,758 held at December 31, 2007, $401,491 is considered
to be a cash equivalent and is included in cash and cash equivalents on the
balance sheet.
NOTE
4 - INVENTORIES
Inventories
at December 31, 2007 consist of the following:
Finished goods
|
|
$ |
62,216 |
|
|
|
$ |
62,216 |
|
Inventories
consist of sensors and other parts used in the Company’s bridge testing
operations.
NOTE 5 – PROPERTY AND
EQUIPMENT
|
|
2006
|
|
|
2007
|
|
Office
and computer equipment
|
|
$ |
27,645 |
|
|
$ |
27,645 |
|
Manufacturing
equipment
|
|
|
129,676 |
|
|
|
213,354 |
|
|
|
|
157,321 |
|
|
|
240,999 |
|
Less
accumulated depreciation
|
|
|
(151,950 |
) |
|
|
(158,453 |
) |
|
|
$ |
5,371 |
|
|
$ |
82,546 |
|
Depreciation
charged to operations was $6,363 and $6,505, for 2006, and 2007,
respectively.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
NOTE 6 – INTANGIBLE
ASSETS
Intangible
assets consist of the following at December 31:
|
Period
of |
|
|
|
|
|
|
|
Amortization |
|
2006 |
|
|
2007 |
|
Patent
costs
|
17
years
|
|
$ |
28,494 |
|
|
$ |
28,494 |
|
License
agreement (see Note 7)
|
17
years
|
|
|
6,250 |
|
|
|
6,250 |
|
Website
|
5
years
|
|
|
5,200 |
|
|
|
5,200 |
|
|
|
|
|
39,944 |
|
|
|
39,944 |
|
Less
accumulated amortization
|
|
|
|
(36,028 |
) |
|
|
(37,104 |
) |
|
|
|
$ |
3,916 |
|
|
$ |
2,840 |
|
Amortization
charged to operations for 2006 and 2007 was $1,856, and $1,076,
respectively.
Estimated
amortization expense for remaining life of the intangibles is as
follows:
2008
|
$1,076
|
2009
|
$1,076
|
2010
|
$ 688
|
NOTE 7 – LICENSE
AGREEMENTS
University of
Pennsylvania
In 1993,
the Company entered into a license agreement with the University of
Pennsylvania (the “University”) for the development and marketing of
EFS.
Under the
terms of the agreement, the Company issued to the University one share of its
common stock, and a 5% royalty on sales of the product. The Company valued
the license agreement at $6,250. The license terminates upon the
expiration of the underlying patents, unless sooner terminated as provided in
the agreement. The Company is amortizing the license over 17
years.
In
addition to the license agreement, the Company also agreed to sponsor the
development of EFS. Under the sponsorship agreement, the Company agreed to
reimburse the University development costs totaling approximately $200,000, to
be paid in 18 monthly installments
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
of
$11,112. Under the agreement, the Company reimbursed the University
$10,000 in 1996 for the costs it incurred in the procurement and maintenance of
its patents on EFS.
In 2006,
the Company and the University agreed to modify the terms of the license and
sponsorship agreements and related obligations. The modification of the
license agreement increased the University's royalty to 7% of the sales of
related products and provided for the issuance of additional shares of the
Company's common stock to equal 5% of the outstanding stock of the Company as of
the effective date of the modification, subject to anti-dilution
adjustments. The modification of the sponsorship agreement included paying
the University 30% of any amounts raised by the Company in excess of $150,000
(excluding amounts received on government grants or contracts) up to the amount
owing to the University.
The
parties agreed that the balance owed on the sponsorship agreement was $200,000
and commencing September 30, 1997, the balance accrued compound interest at a
rate of 1.5% per month (19.6% effective annual rate) until maturity on December
16, 2001, when the loan balance and accrued interest became fully due and
payable.
In August
2005, the parties entered into an agreement (the “Workout Agreement”) that again
modified the terms of the Company’s obligation under the sponsorship
agreement. Pursuant to the Workout Agreement, retroactive to January 1,
2005, interest will be charged only on the December 31, 2004 balance of $760,831
(“Remaining Obligation”) at a monthly rate of 0.5% simple interest. The
Company is obligated to pay $25,000 annually due on the anniversary date of the
Workout Agreement. Further, the Company is also obligated to pay within
ten days following the filing of the Company’s Forms 10-QSB or 10-KSB an amount
equal to 10% of the Company’s operating income (as defined) as reflected in the
quarterly and annual filings. Under the revised terms of the Workout
Agreement, the Company’s CEO’s annual cash salary is capped at $250,000.
The Company agreed to pay the University an amount equal to any cash salary paid
to its CEO in excess of the $250,000, which will be credited against
the Remaining Obligation. In accordance with the terms of the Workout
Agreement, the Company issued 15,173 (post split) shares of its common stock to
the University in September 2005, representing 5.25% of the Company’s
outstanding shares as of the date of the Workout Agreement. The University
cannot sell the shares for 18 months. The Company valued the shares at
$5,963,120, which was charged to operations as other expense as a modification
of its research and development sponsorship agreement.
Interest
expense charged to operations for 2006 and 2007 amounted to $41,528 and $41,617,
respectively. The balances of the obligation (including accrued interest)
at December 31, 2006 and 2007 were $772,713 and $785,650, respectively, and are
reflected in research and development sponsorship payable in the accompanying
consolidated balance sheets. The current portion represents the minimum
annual payment under the Workout Agreement, while the remaining balance is
reflected as non-current as the Company does not expect to be required to make
additional payments during the next twelve months.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
North Carolina Agricultural
and Technical State University (“NCAT”)
The
Company acquired this sublicense in its purchase of Monitoring. The
license allows the Company to utilize technology covered through two patents
licensed to NCAT. Under the license, the Company is required to support
collaborative research under the direction of the actual inventor of the
patented processes and to deliver to NCAT within three months of the effective
date of the license a report indicating the Company’s plans for commercializing
the subject technology.
In
partial consideration for the license, the Company must pay to NCAT a royalty
equal to 3.5% of net sales of licensed products sold by the Company, its
affiliates and from sublicensees. In the case of sub-licensees, the
Company must pay NCAT 25% of any income, revenue, or other financial
consideration received on any sublicense including but not limited to, advance
payments, license issue fees, license maintenance fees, and option fees.
Minimum royalties are due as follows:
Year
beginning
August
2, 2009
|
$30,000
|
August 2, 2010
|
$30,000
|
August 2, 2011 and each year thereafter
|
$50,000
|
The
license remains in full force for the life of the last-to-expire patent.
The license can be terminated by the Company by giving 90-day written
notice and thereupon stop the manufacturing, use, or sale of any
product developed under the license. In addition, the license
terminates if the Company defaults under the royalty provisions of the license
or files for bankruptcy protection.
ISIS Innovation Limited
(“ISIS”)
In the
2007 acquisition of SATI, the Company acquired a license to develop and market
the patented process known as “X-Ray diffraction method.” Under the terms of the
exclusive license with ISIS Innovation Limited, the licensor was granted back
the right to utilize the process on a perpetual, royalty-free basis. The
licensee is responsible for all costs associated with maintaining and protecting
the patent. In the case of sub-licensees, the Company must pay ISIS 25% of any
income, revenue, or other financial consideration received on any sublicense
including but not limited to, advance payments, license issue fees, license
maintenance fees, and option fees, In addition, a 2.5% royalty on net sales is
due with minimum royalties as follows:
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
Year
beginning
January 29, 2010
|
$21,000
|
January 29, 2011
|
$32,000
|
January 29, 2012
|
$42,000
|
Iowa State University
Research Foundation (“ISURF”)
In the
2007 acquisition of NATI, the Company acquired a license to develop and market
the patented process known as “Nondestructive evaluation and stimulate
industrial innovation.” Under the terms of the non-exclusive license with ISURF,
the Company is required to develop products for sale in the commercial market
and to provide ISURF with a development plan and bi-annual development report
until the first commercial product sale. The Company has the right to sublicense
the patented process to third companies, but is required to pay a royalty fee of
25% of amounts earned by the Company under the sublicenses. For each product
sold under the license, the Company is required to pay ISURF a royalty equal to
3% of the selling price with the following minimum royalty
payments:
Year
beginning
January
1, 2009
|
$10,000
|
January 1, 2010
|
$20,000
|
January 1, 2011 and each year thereafter
|
$30,000
|
NOTE 8 – NOTES
PAYABLE
On May
27, 1994, the Company borrowed $25,000 from a shareholder. The loan is
evidenced by a promissory note bearing interest at 6.5%. The note is
secured by the Company’s patents and matured on May 31, 2002. The loan has
not been paid and is now in default. As additional consideration for the
loan, the Company granted to the shareholder a 1% royalty interest in the
Fatigue Fuse and a 0.5% royalty interest in EFS (see Note 10). The balance
due on this loan as of December 31, 2006 and 2007 was $55,138 and $56,761.
Interest charged to operations for 2006 and 2007 was $1,623 and $1,623,
respectively.
In
October 1996, the Company borrowed $25,000 from an unrelated third party.
The loan bears interest at an annual rate of 11% and matured on October 15,
2000. The Company issued warrants to the lender for the purchase
of one share of the Company’s common stock at a price
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
of $300
per share. The loan was paid off April 2007. Interest
charged to operations for the 2006 and 2007 amounted to $2,752 and $9,
respectively.
On April
28, 2003, the Company borrowed $10,000 from an unrelated third party. The
loan is unsecured, non-interest bearing and due on demand.
On March
5, 2007, the Company borrowed $200,000 from a shareholder. The loan is evidenced
by an unsecured promissory note which is assessed interest at an annual rate of
8%. The note matures on March 5, 2009 when the principal and accrued interest
become fully due and payable. The balance of the loan including accrued interest
at December 31, 2007 is $213,508. Interest charged to operations in
2007 amounted to $13,508.
NOTE 9 – CONVERTIBLE
DEBENTURES
Palisades
On
September 23, 2003, the Company entered into a Class A Secured Convertible
Debenture (the “Debentures”) with Palisades, pursuant to which Palisades agreed
to loan the Company up to $1,500,000. On December 1, 2003, after Palisades
had funded $240,000 of the original Debentures, the Company entered into
additional Class A Secured Convertible Debentures with two additional investors,
pursuant to which such investors would loan the Company up to $650,000 each, and
the Company agreed that Palisades would not make additional advances under the
Debentures. The Company received a total of $1,125,000 under the
Debentures.
Under the
Debentures, each holder has the option to convert the principal amount of all
monies loaned under the Debentures, together with accrued interest, into common
stock of the Company at the lesser of (i) 50% of the average ten closing prices
for the Company’s common stock for the ten days immediately preceding the
conversion date or (ii) $0.10 (the lesser of the two being referred to as the
“Conversion Price”). In addition, the Debentures provide that in the
event the conversion price is less than $0.10 per share when the holder elects
to convert, the Company would have the right, and any time during the 75 days
following the date of the holder’s notice of conversion, to prepay all or a
portion of the Debentures that have been requested to be converted and the
Company would therefore not be required to issue the conversion
shares.
Since the
Debentures allow the holders to convert the outstanding principal amount into
shares of the Company’s common stock at a discount to fair value, the Company
recorded the fair value of the conversion feature of $1,125,000 in
2004.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
The
Company’s CEO entered into a voting agreement and irrevocable proxy, which
provides that as of September 23, 2006, if an event of default (as defined in
the Debentures) continues for a
period of
not more than 30 days, all Class B common stock which the CEO owns of
record, or becomes the owner of record in the future will be voted in accordance
with the direction of a third party named in the Debentures (an affiliate of
Palisades) or his designated successor. This loss of the CEO’s
voting rights would affect a change in the voting control of the
Company.
In August
2006, the Company issued Palisades 8,333 shares of its common stock in exchange
for reducing the balance due on the debenture by $100,000. In addition
during 2006, Palisades paid two consultants on behalf of the Company a total of
$249,610 which increased the balance due accordingly. In addition, in
September 2006, the parties agreed to increase the total obligation due on the
debenture (including accrued interest) from $1,581,470 to $2,000,000 as a result
of Palisades' payment on behalf of the Company. The increase of
$418,530 was charged to interest expense.
The
Debentures bear interest at an annual rate of 10%, are secured by substantially
all assets of the Company and were scheduled to mature on December 31, 2006,
when all principal and accrued interest was payable.
On
October 27, 2006, the Company entered into a series of agreements with
Palisades, whereby the Company extended the due date on over $2,100,000
(including accrued interest) in debentures for two years from December 31, 2006
to December 31, 2008. Pursuant to the terms of a settlement agreement
and general release, the Company agreed to:
|
1.
|
Release
each of the debenture holders from all liability arising prior to October
27, 2006;
|
|
2.
|
Effectuate
a 1-for-300 reverse stock split of the Company’s Class A common
stock;
|
|
3.
|
Issue
warrants to purchase an aggregate of 35,000,000 post-split shares of the
Company’s Class A common stock at an exercise price of $0.001 per
share;
|
|
4.
|
Issue
up to 30,000,000 post-split shares of the Company’s Class A common stock
to the Company’s CEO, as consideration for the receipt of a general
release from him and execution of a new employment agreement (Note
12);
|
|
5.
|
Issue
up to 40,000,000 post-split shares of the Company’s Class A common stock
to certain third-parties designated by the Company’s CEO;
and
|
|
6.
|
Execute
an amendment to each of the outstanding debentures held by the debenture
holders to:
|
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
|
o
|
Extend
the due date to December 31, 2008,
|
|
o
|
Increase
the principal balance by 15%,
|
|
o
|
Maintain
the conversion price at the lower of $0.10 or 50% of the market price
after the reverse stock split,
|
|
o
|
Limit
the number of shares the Company can issue pursuant to a registration
statement on Form S-8,
|
|
o
|
Eliminate
the 75-day waiting requirement between the time the Company receives a
notice of conversion and the time the Company must deliver the applicable
shares,
|
|
o
|
Confirm
that a default under one of the debentures will be considered a default
under all of them,
|
|
o
|
Deposit
9.9% of the Company’s issued and outstanding stock with an escrow agent to
deliver upon a conversion by the debenture holders, and to maintain that
balance with the escrow agent,
|
|
o
|
Limit
the conversion so that no holder may own more that 4.99% of the Company’s
outstanding Class A common stock at any one time,
and
|
|
o
|
Add
$60,000 to the principal balance
owed.
|
As a
result of the settlement agreement and general release, the Company assessed the
debt modification under EITF 96-19, Debtor’s Accounting for a
Modification or Exchange of Debt Instruments and determined that the
modification resulted in a debt extinguishment. The Company recorded
$831,035 as a gain on the modification of debt during 2006.
During
2007, $1,005,000 of indebtedness was cancelled in exchange for the issuance of
10,050,000 shares of the Company’s common stock. In addition, the indebtedness
was increased during the year by $1,100,000 in exchange for the settlement on
behalf of the Company of obligations it owed to various
consultants. In these transactions, the Company charged to operations
consulting fees totaling $4,050,000 with an offset to equity of the same amount.
The $4,050,000 represents the value of the shares issued in excess of the agreed
upon increase in indebtedness.
The
balance of the Debenture, including accrued interest, at December 31, 2006 and
2007 was $105,266 (net of unamortized discount of $2,421,113), and $1,903,143
(net of unamortized discount of $993,233), respectively. Interest charged
to operation in on the face amount of the debentures in 2006 was $1,046,307
(including $418,530 of interest charged in the debt restructuring and $483,671
in interest charged in the reduction in the discount for conversion of
indebtedness). In 2007, interest charged to operations amounted to $274,998
(including a reduction in the discount for conversion of indebtedness of
$183,482) Amortization expense of the discount also charged to operations as
interest expense in 2006 and 2007 amounted to $399,420 and $1,427,880,
respectively.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
Per EITF
00-19, paragraph 4, these convertible debentures do not meet the definition of a
“conventional convertible debt instrument” since the debt is not convertible
into a fixed number of shares. The debt can be converted into common stock
at a conversion price that is a percentage of the market price; therefore the
number of shares that could be required to be delivered upon “net-share
settlement” is essentially indeterminate. Therefore, the convertible
debenture is considered “non-conventional,” which means that the conversion
feature must be bifurcated from the debt and shown as a separate derivative
liability.
In
addition, since the convertible debenture is convertible into an indeterminate
number of shares of common stock, it is assumed that the Company could never
have enough authorized and unissued shares to settle the conversion of the
warrants into common stock. Therefore, the warrants issued in connection
with this transaction are shown as a liability.
GGI
To obtain
funding for ongoing operations, the Company entered into a Securities Purchase
Agreement (the “SPA”) and various amendments to the SPA with Golden Gate
Investors, Inc. (“GGI”) on December 16, 2005 for the sale of (i) $40,000 in
unsecured convertible debentures (the “Notes”) and (ii) warrants to purchase
13,333 shares of the Company’s common stock.
The Notes
bear interest at 5.25% per annum, mature three years from the date of issuance
and are convertible into the number of shares of the Company’s common stock
equal to the dollar amount of the Notes being converted multiplied by 110, less
the product of the conversion formula multiplied by 100 times the dollar amount
of the Notes being converted, which is divided by the conversion formula.
The conversion formula is the lesser of (i) $210, (ii) 80% (the
“Discount Multiplier”) of the average of the three lowest volume weighted
average prices during the twenty trading days prior to the conversion or
(iii) 80% of the volume weighted average price on the trading day
prior to the conversion. Accordingly, there is no limit on the number of
shares into which the Notes may be converted. The
Company agreed to register the shares that may be issued upon
conversion of the Notes and exercise of the related warrants.
Beginning
in the first full calendar month after the registration statement is declared
effective, GGI had agreed to convert at least 5%, but no more than 10% of the
face value of the Notes into shares of the Company’s common stock. If GGI
converts more than 5% of the Notes in any calendar month, the excess over 5%
shall be credited against the subsequent month’s minimum conversion
amount. If GGI fails to convert at least 5% of the face amount of the
Notes in any given calendar month, GGI will not be entitled to collect interest
on the Notes for that month. If the volume weighted average price of the
Company’s common stock is below $60, the Company
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
shall
have the right to prepay that portion of the Notes that GGI is required to
convert, plus any accrued but unpaid interest at 130% of such amount. If
at any time during the calendar month, the volume weighted average price is
below $30, GGI shall not be obligated to convert any portion of the Notes during
that month.
Beginning
in the first full month after the registration statement is declared effective,
GGI agreed to exercise at least 5%, but no more than 10%, of the
warrants per calendar month at an exercise price of $327 per share. If GGI
exercises more than 5% of warrants in any calendar month, the excess over 5%
shall be credited against the subsequent month’s minimum exercise amount.
If GGI fails to exercise at least 5% of the warrants in any given calendar
month, GGI would not be entitled to collect interest on the Notes for
that month. The warrants are exercisable through the maturity date of
December 16, 2008.
At any
time prior to the registration statement being declared effective, GGI may
demand repayment of 130% of the principal amount of the Notes, plus all accrued
and unpaid interest thereon, in cash within 10 days of such demand.
Additionally, the Company would be required to issue and pay to GGI 167 shares
of common stock and $15,000 in cash for each 30-day period, or portion thereof,
that the Registration Statement is not effective. The cash payment
increases to $20,000 for each 30-day period, or portion thereof, after the first
90-day period.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
In the
event the Company breaches any representation or warranty in the SPA, the
Company is required to pay in cash, 130% of the then outstanding principal
balance of the Notes, plus accrued and unpaid interest.
For a
period of one year after the effective date of the SPA, GGI agreed to
restrict its ability to convert its Notes or exercise its warrants and receive
shares of the Company’s common stock such that the number of shares of common
stock held by them in the aggregate and their affiliates after such conversion
or exercise does not exceed 9.99% of the then issued and outstanding shares of
common stock.
The Notes
include certain features that are considered embedded derivative financial
instruments, such as the conversion feature, events of default and a variable
liquidated damages clause. These features are described below, as
follows:
|
The
Notes’ conversion feature is identified as an embedded derivative and has
been bifurcated and recorded on the Company’s balance sheet at its fair
value;
|
|
The
SPA includes a penalty provision based on any failure to meet registration
requirements for shares issuable under the conversion of the Notes or
exercise of the warrants, which represents an embedded derivative, but
such derivative has a de minimus value and has not been recorded in the
accompanying consolidated financial statements;
and
|
|
The
SPA contains certain events of default including not having adequate
shares registered to effectuate allowable conversions; in that event, the
Company is required to pay a conversion default payment at 130% of the
then outstanding principal balance on the Notes, which is identified as an
embedded derivative, but such derivative has a de minimus value and has
not been recorded in the accompanying consolidated financial
statements.
|
During
2006, the Company received an additional advance of $50,000.
In
conjunction with the Notes, the Company issued warrants to purchase 13,333
shares of common stock. The accounting treatment of the derivatives and
warrants requires that the Company record the warrants at their fair values as
of the inception date of the agreement, which totaled
$326,600.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
The
initial fair value assigned to the embedded derivatives and warrants was
$5,957,188. The Company recorded the first $40,000 of fair value of the
derivatives and warrants to debt discount (equal to the total proceeds received
as of December 31, 2005), which will be amortized to interest expense over the
term of the Notes. Amortization expense charged to operations during 2006
and 2005 was $13,333 and $0. The remaining balance of $5,917,188 was
recorded as interest expense for the year ended December 31, 2005.
In May
2006, the Company entered into an addendum to the GGI Notes. Per the terms
of the agreement, the debenture amount was increased from $40,000 to
$1,000,000, and upon notification that the registration statement for the
Conversion Shares (as defined in the agreement) has been filed with the SEC, GGI
shall advance the Company an additional $20,000. Additionally, upon the
effective registration of the underlying shares, the Company shall issue 66,667
registered shares to be held in escrow and GGI shall transfer the Company the
remaining debenture balance. The agreement modified the terms of the
conversion as follows:
|
the
number of shares into which the Notes maybe converted is equal to the
dollar amount of the Notes being converted divided by the conversion
formula;
|
|
eliminates
the provision that if the volume weighted average price is less than $30
that GGI shall not be obligated to convert any portion of the Notes during
that month;
|
|
if
GGI elects to convert a portion of the Notes and, on the day that the
election is made, the volume weighted average price is below the lesser
of: (i) $15, or (ii) the lowest price at which any of the 66,667
additional shares are issued or sold, the Company shall have the option to
do one of the following: (a) redeem that portion of the Notes that GGI
elected to convert, plus any accrued interest, at 108% of such
amount, or (b) increase the discount multiplier to 99% on that portion of
Notes that GGI elected to convert, or (c) one time during any six-month
period, not permit any Notes to be converted by GGI for a
period of 60 days; and
|
|
If
GGI elects to convert a portion of the Notes and, on that day the election
is made, the volume weighted average price is $96 or higher, the Discount
Multiplier shall be 72%.
|
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
The
original 13,333 warrants issued have been cancelled. In May 2006 and in
connection with the modification of the GGI Notes, the Company issued to GGI
166,667 warrants to purchase common stock at a price of $3 per share, provided,
however, in no event will the exercise price be lower or higher than the lowest
price at which the Company sells any common stock (through direct issuance,
conversion of debentures, etc, but not including stock issued for services)
during the 30 days prior to the exercise date. GGI has agreed to exercise
the warrant shares at a rate of at least 4,167 shares per week once the
registration statement has been declared effective. Also, beginning in the
first full calendar month after the registration of the underlying shares is
declared effective, GGI must convert at least 10%, but no more than 40%, of the
face value of the Notes per calendar month into common shares of the Company,
provided that the common shares are available, registered and freely
tradable. The Company may reduce the monthly maximum figure from 40% to 6%
for any three calendar months (but not two consecutive calendar months) during
the term of Notes by giving written notice at least 10 business days prior to
the first applicable month. GGI and the Company shall enter into three
additional $1,000,000 convertible debentures, each with the same terms as
above. The agreement also allows the Company to register up to an
additional 66,667 shares for sale or issuance to parties other than GGI in the
registration statement.
As a
result of the modification of the debt, the Company recognized a gain on the
debt extinguishment for the difference between the fair value of the Notes and
warrant and derivative liabilities immediately before the modification and after
the modification as part of the change in fair value of derivative and warrant
liabilities.
The
balance of the Debenture, including accrued interest, at December 31, 2006 and
2007 was $63,894 (net of unamortized discount of $26,667) and $78,051 (net of
unamortized discount of $13,333), respectively. Interest expense on the
Debentures for the three months ended September 30, 2007 and 2006, excluding
amortization of the discount, was $1,202 and $1,191, respectively. Interest
expense on the Debentures for the nine months ended September 30, 2007 and 2006,
excluding amortization of the discount, was $3,357 and $,2456, respectively.
Amortization of the discount for 2006 and 2007 which was charged to operations
as interest expense amounted to $13,333 and $13,333, respectively.
At
December 31, 2006 and 2007, the fair value of the warrant and conversion
derivative liabilities were $218,061 and $26,746,
respectively.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
NOTE
10 – COMMITMENTS AND CONTINGENCIES
Royalties
On
December 24, 1985, to provide funding for research and development of the
Fatigue Fuse, the Company entered into various agreements with the Tensiodyne
1985-I R & D Partnership (the “Partnership.”) These agreements were
amended on October 9, 1989, and under the revised terms, obligated the Company
to pay the Partnership a royalty of 10% of future gross sales. In
September 2006, the Company issued 3,333 (post split) shares of its common stock
in exchange for the cancellation of the royalty obligation.
On August
30, 1986, the Company entered into a funding agreement with the Advanced
Technology Center (“ATC”), whereby ATC paid $45,000 to the Company for the
purchase of a royalty of 3% of future gross sales and 6% of sublicense
revenue. In September 2006, the Company issued 3,333 (post split) shares
of its common stock in exchange for the cancellation of the royalty
obligation.
On May 4,
1987, the Company entered into another funding agreement with ATC, whereby ATC
provided $63,775 to the Company for the purchase of a royalty of 3% of future
gross sales and 6% of sublicense revenues. The agreement was amended
August 28, 1987, and as amended, the royalty cannot exceed the lesser of (1) the
amount of the advance plus a 26% annual rate of return or, (2) total royalties
earned for a term of 17 years.
During
2006, ATC and the Company entered into a settlement agreement whereby in
consideration for 3,334 shares of common stock, ATC cancelled its rights to any
and all royalties on future Company sales. The 3,334 shares were
valued at $40,000 (based on the market price of the underlying stock on the date
of grant) and charged to other expense as royalty settlement
expense.
In 1994,
the Company issued to Variety Investments, Ltd. of Vancouver, Canada (“Variety”)
a 22.5% royalty interest on the Fatigue Fuse in consideration for the cash
advances made to the Company by Variety. In December 1996, in exchange for
the Company issuing one share of its common stock to Variety, Variety
reduced its royalty interest to 20%. In 1998, in exchange for the Company
issuing two shares of its common stock to Variety, Variety reduced
its royalty interest to 5%.
As
discussed in Note 8, the Company granted a 1% royalty interest in the Company's
Fatigue Fuse and a 0.5% royalty interest in EFS to a shareholder as partial
consideration on a $25,000 loan made by the shareholder to the
Company.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
A summary
of royalty interests that the Company has granted and are outstanding as of
December 31, 2007 follows:
|
Fatigue Fuse
|
|
EFS
|
|
Server
Array
System
|
|
X-Ray
Diffraction Method
|
|
Nondestructive
evaluation and stimulate industrial innovation
|
|
Tensiodyne
1985-1 R&D Partnership
|
-
*
|
|
-
|
|
-
|
|
-
|
|
-
|
Variety
Investments, Ltd.
|
5.00%
|
|
-
|
|
-
|
|
-
|
|
-
|
University
of Pennsylvania (see Note 7)
|
|
|
|
|
|
|
|
|
|
Net
sales of licensed products
|
-
|
|
7.00%
|
|
-
|
|
-
|
|
-
|
Net
sales of services
|
-
|
|
2.50%
|
|
-
|
|
-
|
|
-
|
NCAT
(see Note 7)
|
|
|
|
|
|
|
|
|
|
Net
sales of licensed products
|
-
|
|
-
|
|
3.50%
|
|
-
|
|
-
|
Sublicensing
income
|
-
|
|
-
|
|
25.00%
|
|
-
|
|
-
|
ISIS (see
Note 7)
|
|
|
|
|
|
|
|
|
|
Net
sales of licensed products
|
-
|
|
-
|
|
-
|
|
2.5%
|
|
-
|
Sublicensing
income
|
-
|
|
-
|
|
-
|
|
25.00%
|
|
-
|
ISURF
(see Note 7)
|
|
|
|
|
|
|
|
|
|
Net
sales of licensed products
|
-
|
|
-
|
|
-
|
|
-
|
|
3.0%
|
Sublicensing
income
|
-
|
|
-
|
|
-
|
|
-
|
|
25.00%
|
Shareholder
|
1.00%
|
|
0.50%
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
*
Royalties cancelled through issuance of shares of Company’s common stock
(See Note 11).
|
Litigation
In July
2002, the Company settled a lawsuit related to a contract dispute
with Mr. Stephen Beck. In March 2006, Mr. Beck filed a lawsuit against the
Company alleging breach of contract related to the lawsuit settlement and sought
approximately $135,000 in damages, plus the issuance of 12,989 shares of the
Company’s common stock entitled, plus interest. During the
three months ended June 30, 2006, the Company issued Mr. Beck 4,011 shares of
its common stock related to ongoing negotiations with Mr. Beck. The value
of the shares issued to Mr. Beck was $173,244 and has been included in other
income and expenses in the accompanying statement of operations.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
In
December 2006, the Company entered into a settlement agreement and release
agreement, as well as irrevocable escrow instructions, to settle the lawsuit
filed on March 8, 2006. As consideration under the settlement, the
Company issued 5,000,000 shares of its common stock to Mr. Beck, with the shares
to be held by an escrow agent and distributed to Mr. Beck monthly with a trading
limit equal to 8% of the previous month’s trading volume of the Company’s common
stock, until Mr. Beck has received a total of $800,000. As the Company has
guaranteed this debt to Mr. Beck in the amount of $800,000, the Company
originally recorded a liability for this amount at the time of the
settlement. As Mr. Beck receives proceeds from the sale of his shares
into the market, the Company is reducing its guarantee by that
amount. Additionally during 2006, Mr. Beck was paid $44,000 in cash
as part of the settlement. Mr. Beck also had
anti-dilution rights on those shares to maintain his percentage ownership for an
agreed-upon period of 21 months. The Company issued another 5,000,000
shares to Mr. Beck to be held in escrow until the conditions are met with
respect to the anti-dilution shares. On December 27, 2006, the
Company issued 751,193 shares pursuant to the anti-dilution provision in the
Beck settlement arrangement. On April 6, 2007, the Company
issued Mr. Beck an additional 1,443,439 shares pursuant to the anti-dilution
agreement. As of December 31, 2007, the Company’s guarantee to Mr. Beck is
$230,000. During 2007, the Company paid Mr. Beck $68,588 and Mr. Beck received
approximately $501,442 in proceeds from the sale of Company stock. The Company
is recognizing to income the proceeds received by Mr. Beck on the sale the stock
he owns in the Company. In addition, at December 31, 2007, the Company accrued
an additional $173,024 to Mr. Beck which was charged against equity and paid in
2008.
The
Company has also been named as a defendant in a lawsuit alleging breach of
contract due to the Company’s failure to pay certain amounts due to a consultant
for services. The Company asserts that the contract was unenforceable
due to a number of factors. Legal counsel has advised the Company
that it is premature to estimate the outcome or the range of damages that may
occur if the case is not settled in the Company’s favor.
In the
ordinary course of business, the Company may be from time to time involved in
other various pending or threatened legal actions. The litigation process
is inherently uncertain and it is possible that the resolution of such matters
might have a material adverse effect upon the Company’s` financial
condition and results of operations. However, in the opinion
of management, matters currently pending or threatened
against the Company are not expected to have a material adverse
effect on the Company’s financial position or results of
operations.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
Indemnities and
Guarantees
During
the normal course of business, the Company has made certain indemnities and
guarantees under which it may be required to make payments in relation to
certain transactions. These indemnities include certain agreements with
the Company’s officers under which the Company may be required to indemnify such
person for liabilities arising out of their employment
relationship.
They also include indemnities made to the holders of the convertible debentures,
Mr. Beck, with regards to his settlement with the Company, and the sellers of
investments in securities. The duration of these indemnities and
guarantees varies, and in certain cases, is indefinite. The majority of
these indemnities and guarantees do not provide for any limitation of the
maximum potential future payments the Company would be obligated to make.
Historically, the Company has not been obligated to make significant payments
for these obligations and no liability has been recorded for these indemnities
and guarantees in the accompanying consolidated balance sheet.
NOTE 11
–
STOCKHOLDERS' EQUITY
Class A Preferred
Stock
The
holders of the Class A convertible preferred stock have a liquidation preference
of $720 per share. Such amounts shall be paid on all outstanding Class A
preferred shares before any payment shall be made or any assets distributed to
the holders of the common stock or any other stock of any other series or class
ranking junior to the shares as to dividends or assets.
These
shares are convertible to shares of the Company’s common stock at a conversion
price of $0.72 (“initial conversion price”) per share of Class A preferred stock
that will be adjusted depending upon the occurrence of certain events. The
holders of these preferred shares shall have the right to vote and cast that
number of votes which the holder would have been entitled to cast had such
holder converted the shares immediately prior to the record date for such
vote. The holders of these shares shall participate in all dividends
declared and paid with respect to the common stock to the same extent had such
holder converted the shares immediately prior to the record date for such
dividend.
Class B Preferred
Stock
The
Company has designated 15 shares of Class B preferred stock, of which no shares
have been issued. The holders of Class B preferred shares are entitled to
a liquidation preference of $10,000 per share. Such amounts shall be paid
on all outstanding Class B preferred shares before any payment shall be made or
any assets distributed to the holders of common stock or of any other stock of
any series or class junior to the shares as to dividends or assets,
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
but
junior to Class A preferred shareholders. Holders of Class B preferred
shares are not entitled to any liquidation distributions in excess of $10,000
per share.
The
shares are redeemable by the holder or the Company at $10,000 per share.
The holders of these shares shall have the right to vote at one vote per Class B
preferred share and shall participate in all common stock dividends declared and
paid according to a formula as defined in the series designation.
Class C Preferred
Stock
Each
shareholder of Class C preferred stock is entitled to receive a cumulative
dividend of 8% per annum for a period of two years. Dividends do not
accrue or are payable except out of earnings before interest, taxes,
depreciation and amortization. At June 30, 2007, no dividends are payable
to Class C preferred shareholders. Holders of the Class C preferred stock
are junior to holders of the Company’s Class A and B preferred stock, but hold a
higher position than common shareholders in terms of liquidation rights.
Holders of Class C preferred stock have no voting rights. Holders of Class
C preferred stock have the right to convert their shares to common stock on a
300-to-1 basis.
The
Company requires an approval of at least two-thirds of the holders of Class C
preferred shareholders to alter or change their rights or privileges by way of a
reverse stock split, reclassification, merger, consolidation or otherwise, so as
to adversely affect the manner by which the shares of Class C preferred stock
are converted into common shares.
Class D Preferred
Stock
Holders
of Class D preferred stock have a $0.001 liquidation preference, no voting
rights and are junior to holders of all classes of preferred stock but senior to
common shareholders in terms of liquidation rights. Class D preferred
stockholders are entitled to dividends as declared by the Company’s Board of
Directors, which have not been declared as of June 30, 2007. Holders of
Class D preferred stock have the right to convert their shares to common stock
on a 300-to-1 basis. As of June 30, 2007, there were no Class D Preferred shares
outstanding.
Class E Convertible
Preferred Stock
On
January 26, 2007, the Company amended its certificate of incorporation by filing
a certificate of designation of rights, preferences, privileges and restrictions
of the Company’s Class E convertible preferred stock. The
Company authorized 60,000 shares, each with an original issue price
of $19.50 per share. In each calendar quarter, the holders of the
then outstanding Class E Convertible Preferred Stock are entitled to
receive non-cumulative dividends in an amount equal to 5% of the original
purchase price per annum. All dividends may be accrued by
the Company
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
until
converted into common shares. After one year from the issuance date, the holders
of Class E convertible preferred stock have the right to convert the preferred
shares held into shares of the Company’s common stock at the average closing bid
price of the ten days prior to the date of conversion. Class E Preferred
shares have no liquidation preference, and has ten votes per
share.
In
connection with the acquisition of SATI, the Company issued 50,000 shares of
Class E convertible preferred which were valued at the original
purchase price of $19.50 per share. The
Company
also issued an additional 5,000 shares to a consultant in connection with the
SATI acquisition, which were valued at $97,500 and charged to equity as costs of
the acquisition.
Class A Common
Stock
The
holders of the Company's Class A common stock are entitled to one vote per share
of common stock held.
During
2007, the Company issued 64,390,000 and cancelled 10,468,114 shares of its
common stock.
During
2006, the Company issued 71,956,601 and cancelled 8,129 shares of its common
stock.
From time
to time, the Company issues its common shares and holds the shares in escrow on
behalf of another party until consummation of certain transactions. The
following is a reconciliation of shares issued and outstanding as of December
31, 2007:
Issued
shares
|
546,173,718
|
|
|
Less
shares held in escrow:
|
|
Shares
issued to the Company and held in escrow
|
(4,014,897)
|
Shares
held in escrow pursuant to agreement debenture
|
|
Holders
|
(8,000,000)
|
Shares
held as collateral for potential debt financing
|
(400,000,000)
|
Contingent
shares held related to the Beck settlement
|
|
for
antidilution purposes (see Note 10)
|
(7,805,368)
|
Other
|
(6,000)
|
|
(419,826,265)
|
|
|
Outstanding
shares (including shares committed)
|
126,347,453
|
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
Class B Common
Stock
The
holders of the Company's Class B common stock are not entitled to dividends, nor
are they entitled to participate in any proceeds in the event of a liquidation
of the Company. However, the holders are entitled to 600,000 votes for
each share of Class B common stock held.
Common Shares Issued for Non
Cash Consideration
The value
assigned to shares issued for services were charged to operations in the period
issued.
2007
On
January 9, 2007, the Company issued 20,000 shares of its common stock for
services rendered in connection with its bridge testing which were valued at
$46,000. On January 9, 2007, the Company issued 5,000 shares of its common stock
for legal services valued at $11,500. On January 10, 2007, the Company issued
1,800,000 shares in consideration for the cancellation of $180,000 of
convertible debt. On January 16, 2007, the Company issued 20,000 shares of its
common stock to two consultants for services rendered valued at
$45,000. On January 22, 2007, the Company issued 30,000 shares of its
common stock to two consultants for services rendered valued at $58,500. On
February 1, 2007, the Company issued 10,000 shares of its common stock to a
consultant for services rendered valued at $20,500. On February
2, 2007, the Company issued 4,000,000 shares in consideration for the
cancellation of $400,000 of convertible debt. On February 7, 2007, the Company
issued 15,000 shares of its common stock for legal services in connection with
its private offering valued at $33,750. On February 14, 2007, the Company issued
20,000 shares of its common stock for services rendered in connection with its
bridge testing which were valued at $44,000. On February 28, 2007, the Company
issued 350,000 shares of its common stock to two consultants for services
rendered subject to three year lock up agreement which were valued at $507.500.
Also on February 28, 2007, the Company issued 300,000 shares of its common stock
for accounting services subject to a three year lockup agreement which were
valued at $435,000. On March 2, 2007, the Company issued 26,000 shares of its
common stock for services rendered in connection with its bridge testing which
were valued at $41,600. On March 2, 2007, the Company issued 20,000 shares of
its common stock to two consultants for services rendered valued at
$32,000. On March 6, 2007, the Company issued 1,002,000 shares of its
common stock to two consultants subject to three year lockup agreements for
services rendered valued at $641,280. On March 9, 2007, the Company
issued 56.667 shares of its common stock to two consultants subject to three
year lockup agreements for services rendered valued at $71,967. On
March 12, 2007, the Company issued 150,000 shares of its common stock to a
consultant subject to three year lockup agreement for services rendered valued
at $217,500. On March 16, 2007, the Company issued 3,333 shares of
its common stock to a consultant subject to three year lockup agreement for
services rendered valued at $4,963. On March 19, 2007, 50,000 shares of common
stock were returned and
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
subsequently
cancelled. On March 19, 2007, the Company issued 50,000 shares of its
common stock to a consultant subject to three year lockup agreement for services
rendered valued at $77,500. On March 27, 2007, the Company issued
169,300 shares of its common stock to two consultants subject to three year
lockup agreements for services rendered valued at $279,345.
On April
6, 2007, the Company issued Mr. Stephen Beck 1,446,439 shares of its common
stock pursuant to the anti-dilution provision of his settlement agreement with
the Company. On April 9, 2007, the Company cancelled 9,040,000 shares that it
held in reserve for future financing. These shares were originally considered
issued but not outstanding. On April 17, 2007, the Company issued 6,693 shares
of its common stock subject to a three year lockup agreement and valued at
$10,040. On April 20, 2007, the Company issued 405,000 shares of its common
stock in connection with the exercise of warrants to purchase 2,250,000 shares
of the Company’s common stock,. The 405,000 shares were valued at $587,250 and
charged against equity. On April 25, 2007, the Company issued 2,261 shares of
its common stock subject to a three year lockup agreement and valued at $3,346.
On April 27, 2007, the Company issued 30,000 of its common stock shares to a
consultant subject to a 2 year lock up agreement and valued at $45,000. On April
27, 2007, the Company issued 10,000,000 of its common stock in exchange for
3,000,000 common shares of Rocket City Automotive Group, Inc which were valued
at $13,832,000. On April 27, 2007, the Company issued 7,500,000 shares of its
common stock in exchange for 100% of the outstanding stock in Damage Assessment
Technologies, Inc. The 7,500,000 shares were valued at $11,250,000 of which
$11,000,000 was expensed as an impairment loss. On May 3, 2007, the Company
issued 1,250,000 shares of its common stock to an officer for consultant on the
Company’s technology subject to a three year lockup agreement and valued at
$1,837,500. Also on May 3, 2007, the Company issued a total of 2,450,000 shares
of its common stock to 3 consultants subject to three year lockup agreements and
valued at $3,601,500. On May 3, 2007, the Company issued 750,000 shares of its
common stock to a consultant involved in the Company’s acquisition of Damage
Assessment Technologies, Inc. valued at $1,102,500 which was charged against
equity. On May 11, 2007, the Company issued 304,000 shares of its common stock
for investment relations services pursuant to the terms of the agreement with
the consultant. The 304,000 shares were valued at $456,000.On May 14, 2007,
350,000 shares of the Company’s common stock were returned to treasury and
cancelled. On May 21, 2007, the Company issued 644,000 shares of its common
stock pursuant to the anti-dilution provision of an agreement the Company has
with a consultant. On June 11, 2007, the Company issued 4,000 shares of its
common stock pursuant to the terms of the agreement the Company has with an
investment relations firm valued at $5,600. On June 11, 2007, the Company issued
250,000 shares of its common stock to a consultant valued at
$350,000. On June 19, 2007, the Company issued 2,250,000 shares of
its common stock in exchange for the cancellation of $225,000 of debt owed on
certain convertible notes. On June 21, 2007, the Company issued 1,000,000 shares
to a consultant subject to a 3 year lockup agreement valued at $1,070,000. On
June 26, 2007, the Company issued 100,000,000 shares of its common stock for
future financing. On June 27, 2007, the Company issued 6,412,500 shares of its
common stock in
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
exchange
for 100% of the outstanding stock of Non-Destructive Assessment Technologies,
Inc (“NDTAI”). The 6,412,500 shares were valued at $7,630,875 of which
$7,380,875 was charged to operations as an impairment loss. As part of the
agreement to purchase NDATI, the Company issued 337,500 shares of its common
stock to a consultant valued at $64,463, which was charged against
equity.
On July
17, 2007, the Company issued 264,810 shares of its common stock to Mr. Stephen
Beck pursuant to the anti-dilution provision of Mr. Beck’s settlement agreement.
The 264,810 shares were valued at par. On July 17, 2007, the Company issued
4,000 shares of its common stock to an investment relations firm for services
valued at $4,200. On July 20, 2007, the Company
issued
106,500 shares of its common stock to a consultant valued at
$106,500. On July 27, 2007, the Company issue 100,000,000 shares in
its name which it is holding for future financing. On July 30, 2007, the Company
issued 250,000 shares of its common stock to a consultant valued at
$260,000. On July 30, 2007, the Company issued 4,000 shares of its
common stock to an investment relations firm for services valued at $4,160. On
August 24, 2007, the Company issued 950,000 shares of its common stock to two
consultants valued at $988,000. On August 27, 2007, the Company
issued 8,670 shares of its common stock to a consultant for services valued at
$8,583. On September 11, 2007, the Company issued 290,000 shares of its common
stock for legal services valued at $208,800. On September 19, 2007, the Company
issued 2,000,000 shares of its common stock in exchange for the cancellation of
$200,000 of debt owed on certain convertible notes. On September 19, 2007, the
Company issued 4,000 shares of its common stock to an investment relations firm
for services valued at $2,680. On September 21, 2007, the Company issued 250,000
shares of its common stock to two consultants valued at $167,500. On September
24, 2007, the Company issued 1,000,000 shares of its common stock to a
consultant valued at $670,000. On September 26, 2007, the Company issued 240,000
shares of its common stock to a consultant valued at $165,600. On September 28,
2007, the Company issued 1,500,000 to its chief engineer as part consideration
in the acquisition of Bridge Testing Concepts, Inc., a corporation wholly owned
by chief engineer. The Company deemed the acquisition as a related party
transaction and valued the 1,500,000 shares at par. On September 28, 2007, the
Company issued 675,000 shares of its common stock to a consultant valued at
$540,000.
On
October 1, 2007, the Company issued 400,000 shares of its common stock to an
employee. The shares vest over three years and were valued at $288,000. The
Company charged the $288,000 to operations over the three year vesting period.
On October 2, 2007, the Company issued 76,300 shares of its common stock to a
consultant for services valued at $51,121.On October 4, 2007, certain
shareholders returned 18,114 shares of the Company’s common stock which were
subsequently cancelled. On October 12, 2007, the Rocket City Automotive returned
the 10,000,000 shares of the Company’s common stock which was subsequently
cancelled. On
December 6, 2007, the Company issued 62,500 shares of its common stock in
connection with a private offering. The 62,500 shares were valued at $26,250
which was charged against
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
the
proceeds received. On December 10, 2007, the Company issued 250,000 shares to
one of its advisors for services valued at $155,000. On December 12, 2007, the
Company issued 200,000,000 shares in its name for future financing. On December
27, 2007, the Company issued 231,207 shares of its common stock to Mr. Beck
pursuant to the anti-dilution provision of his settlement agreement with the
Company.
2006
On
January 5, 2006, the Company issued 950 shares of its common stock to two
consultants for services valued at $14,450. On January 10, 2006, the Company
issued 4,920 shares of its common stock to three consultants for services valued
at $295,200. On January 16, 2006, the Company issued 833 shares of its
common stock to a consultant for services valued at $50,000. On January
25, 2006, the Company issued 1,333 shares of its common stock to a consultant
for services valued at $600,000. On January 25, 2006, the Company issued
4,733 shares of its common stock in exchange for the cancellation of 4,733
shares of Class D preferred stock. On February 1, 2006, the Company issued
3,333 shares of its common stock to a consultant for services valued at
$150,000. On February 8, 2006, the Company issued 1,667 shares to one of
its advisors in connection to the development of its products valued at
$45,000. On February 8, 2006, the Company issued 2000 shares of its common
stock to a consultant for services valued at $90,000. On February 13,
2006, the Company issued 4,010 shares of its common stock to Mr. Stephen Beck in
connection with his lawsuit valued at par. On February 22, 2006, the
Company issued 167 shares of its common stock for clerical services valued at
$7,000. On February 23, 2006, the Company issued 2,334 shares of its
common stock to its attorney for services valued at $101,000. On March 1,
2006, the Company issued 167 shares of its common stock to a consultant for
services valued at $7,000. On March 14, 2006, the Company issued 13,000
shares of its common stock in connection with its private offerings. The
shares were valued $429,000 and charged to consultant expense. On March
23, 2006, the Company issued 6,667 shares of its common stock to a consultant
for services rendered valued at $420,000. On March 29, 2006, 533 shares
that were originally issued were returned to the Company, as they were issued in
error.
On April
28, 2006, the Company issued 167 shares to an attorney for services valued at
$13,500. On May 9, 2006, the Company issued 833 shares of its common stock
to a consultant for services rendered in connection with development of its
products valued at $62,500. On May 11, 2006, the Company issued 333 shares
of its common stock to a consultant for services rendered in connection with
development of its products valued at $25,000. On May 12, 2006, the
Company issued 667 to three attorneys for various services rendered valued at
$48,000. On the same day, the Company issued 167 shares of its common
stock to an outside accountant for services valued at $12,000. On May 15,
2006, the Company issued 667 shares of its common stock to a consultant for
services rendered in connection with development of its products valued at
$40,000. On June 5, 2006, Company issued 83 shares of its common stock to
an outside
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
accountant
for services valued at $2,750. On June 13, 2006, the Company issued 667
shares of its common stock to a consultant for services rendered in connection
with development of its products valued at $20,000. On June 16, 2006, the
Company issued 167 shares to an attorney for services valued at $4,500. On
June 23, 2006, the Company issued 667 shares of its common stock to a consultant
for services rendered in connection with the development of its products valued
at $20,000. On June 26, 2006, the Company issued 1667 shares to a
consultant for services
valued at $50,000.
On July
11, 2006, the Company issued 333 shares of its common stock to an attorney for
services valued at $9,000. On July 20, 2006, the Company issued 583 shares
of its common stock to an attorney for services valued at $14,000. On July
25, 2006, the Company issued 833 shares of its common stock to a consultant for
services rendered in connection with the development of its technologies valued
at $20,000. On July 27, 2006, the Company issued 667 shares of its common
stock to an attorney for services valued at $18,000. On August 11, 2006,
the Company issued 8,333 shares of its common stock in consideration for the
cancellation of $100,000 due on a convertible debenture (see Note 9). On August
15, 2006, the Company issued 878 of its common stock to a consultant involved
with the prior period’s Birchington transaction. The shares were valued at
$23,693 and charged to consulting expense. On August 18, 2006, the Company
issued 4,444 shares of its common stock to a consultant for services for
services rendered in connection with the development of its products valued at
$106,667. On August 18, 2006, the Company issued 125,436 shares of its
common stock in consideration for acquiring $500,000 in cash and licensed
technology valued at $2,134,153. The Company deemed the licensed technology
impaired and charged off the $2,134,153 to operations in 2006. (see Note 1).
On August 15, 2006, the Company issued 1,000 shares of its common stock to
a consultant for services rendered in connection with the development of its
technologies valued at $21,000. On August 23, 2006, the Company issued 12,543
shares of common stock to three consultants valued at $263,411 and charged to
consulting expense. On August 25, 2006, the Company issued 3,333 shares of
its common stock to a consultant for services valued at $70,000. On
September 8, 2006, the Company issued 3,333 shares of its common stock to a
consultant for services valued at $40,000. On September 11, 2006, the
Company issued 21,500 shares of its common stock in consideration for the
cancellation of $450,697 due on three convertible debentures (see Note 9).
On September 29, 2006, the Company issued 67 shares of its common stock to an
outside accountant for services valued at $800. On September 29, 2006, the
Company issued 3,333 shares of its common stock in consideration for the
cancellation of royalty obligations on future sales. The 3,333 shares were
valued at $40,000 (see Note 10).
On
October 11, 2006, the Company issued 600 shares of its common stock to a
consultant for services rendered in connection with the public relations valued
at $7,380. On October 18, 2006, the Company issued 3,333 shares of its common
stock to a consultant for services rendered valued at $37,000. On October 18,
2006, the Company issued 67 shares of its common stock for accounting services
valued at $740. On November 6, 2006, the Company cancelled 467 shares
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
held in
treasury. On November 7, 2006, the Company issued 3,333 shares for services
rendered in connection with the development of its technologies valued at
$50,000. Also on November 7, 2006, the Company issued a total of 5,667 shares of
its common stock to three attorneys for legal services valued at $78,200. On
November 14, 2006, the Company’s CEO returned 6,300 shares of the
Company’s common stock in exchange for the cancellation of $62,077 of debt which
he owed the
Company. The Company recognized a loss of $25,537 on this transaction. On
November 16, 2006, the Company issued 200,000 shares of its common stock in
exchange for a $20,000 reduction on the amounts due on certain convertible
debentures. On November 16, 2006, the Company issued 5,000 shares of
its common stock for services rendered in connection with the development of its
technologies valued at $37,500. On November 20, 2006, the Company issued 5,000
shares of its common stock for services rendered in connection with the
development of its technologies valued at $37,500. On November 21, 2008, the
Company issued 30,000,000 shares of its common stock to its CEO
pursuant to an employment agreement. The shares were issued pursuant to a three
year vesting schedule and were valued at $180,000,000 which is being charged to
operations pro rata over the three year period. On November 28, 2006, the
Company issued 100,000 shares of its common stock for services rendered valued
at $599,000. On November 29, 2006, the Company issued 10,000 shares of its
common stock for services rendered valued at $60,000. On December 5, 2006, the
Company issued 5,000 shares of its common stock for services rendered valued at
$30,500. On December 11, 2006, the Company issued 10.000 shares of
its common stock for services rendered in connection with the development of its
technologies valued at $51,000. On December 11, 2006, the Company issued 3.000
shares of its common stock for legal services valued at $15,300. On December 12,
2006, the Company issued 7,500 shares of its common stock for legal services
valued at $40,500. On December 21, 2006, the Company issued 2,000 shares of its
common stock for legal services valued at $10,000. On December 21, 2006, the
Company issued 10,000 shares of its common stock for consulting services valued
at $50,000 On December 22, 2006, the Company issued 10,000 shares of its common
stock for legal services valued at $50,000. On December 27, 2006, the
Company issued 34,641,311 shares of its common stock to various consultants
valued at $121,244,589. On December 28, 2006, the Company issued 300,000 shares
to a consultant for services rendered valued at $1,080,000. On December 28,
2006, the Company issued 6,245,070 shares pursuant to the anti-dilution
provisions in the “Monitoring” purchase agreement. The shares were
valued at par.
NOTE 12 – RELATED PARTY
TRANSACTIONS
As of
December 31, 2007, the Company was owed $8,524 from its CEO.
The loan is assessed interest at an annual rate of 10%. Interest credited
to operations relating to this loan in 2006 and 2007 amounted to $195 and
$1,172, respectively.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
On
October 1, 2006 the Company entered into an employment agreement with the
Company’s CEO, which provides certain terms and conditions with respect to the
CEO’s employment. The agreement is for a three year term,
and the CEO will be paid an annual salary of $250,000, with
one year
of paid severance if he is terminated without good cause prior to the expiration
of the employment term.
On
November 21, 2006, the Company entered into a stock grant and general release
agreement with the Company’s CEO, for the purpose of showing the Company’s
appreciation for the CEO’s work over the past several years. Under
the agreement, the CEO was issued 30,000,000 shares of the Company’s Class A
common stock, restricted in accordance with Rule 144, and subject to forfeiture
back to the Company in accordance with the terms of the agreement, if the
CEO is not employed by the Company for three years from
the date of the agreement. Additionally under the terms of the
agreement, the CEO released the Company from any and all claims he
may have against the Company for any monies owed to him as of the date of the
agreement. The value assigned to the shares issued to the CEO has
been determined to be $180,000,000 based on the Company’s trading price of the
shares on date of issuance. The value will be recorded as additional
compensation expense over the 36 month term of the agreement. In 2006
and 2007, the Company charged to operations $6,575,342 and $60,000,000,
respectively.
Stock
Options
The
Company has the following stock option plans: The 1998 Stock Plan (“the
1998 Plan”), the 2002 Stock Issuance/Stock Plan (“the 2002 Plan”), the 2003
Stock Option, SAR and Stock Bonus Consultant Plan (“the 2003 Plan”), the 2006
Non-Qualified Stock Grant and Option Plan (the “2006 Plan”), and the 2006/2007
Non-Qualified Stock Grant and Option Plan (the “2006/2007 Plan”).
In
September 1998, the Company adopted the 1998 Plan and reserved 2,667 shares of
its common stock for grant under the plan. Eligible participants include
employees, advisors, consultants and officers who provide services to the
Company. The option price is 100% of the fair market value of a share of
common stock at either the date of grant or such other day as the as the Board
may determine. The plan expires upon the earlier of all reserved shares
being granted or September 10, 2008.
In
February 2002, the Company adopted the 2002 Plan and reserved 66,667 shares of
its common stock for grant under the plan. Eligible plan participants
include employees, advisors, consultants and officers who provide services to
the Company. The option price is 100% of the fair market value of a share
of common stock at either the date of grant or such other day as the Board may
determine. The plan expires upon the earlier of all reserved shares being
awarded or December 31, 2007.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
In
September 2003, the Company adopted the 2003 Plan and reserved 33,333 shares of
its common stock for grants. Eligible plan participants include
independent consultants. The option
price
shall be no less than 85% of the fair market value of a share of common stock at
date of grant. The plan expires upon the earlier of all reserved shares
being granted or September 23, 2006.
In April
2006, the Company adopted the 2006 Plan and reserved 100,000 shares of its
common stock for grant. Eligible plan participants include independent
consultants, and the Company may issue shares of stock or options may be granted
at any price. The plan expires upon the earlier of all reserved
shares being granted or April 18, 2016.
In
December 2006, the Company adopted the 2006/2007 Plan and reserved 3,000,000
shares of its common stock for grants. Eligible plan participants
include independent consultants, and the Company may issue the shares of the
stock or option may be granted at any price. The plan expires upon
the earlier of all reserved shares being granted or December 1,
2016.
The
Company also has agreements with two consultants whereby the Company will grant
options to purchase shares of its common stock upon the Company increasing its
annual revenue by $5 million in any fiscal year over its revenues in 2002.
The collective number of shares to be issued will give the two consultants
a 15% interest in the outstanding shares of the Company’s common
stock. No grants have been made pursuant to these agreements as the
Company has not achieved the required revenues.
There was
no activity in any of the Company’s stock option plans in 2006 or 2005 and no
options were outstanding as of December 31, 2007.
Stock
Warrants
During
the year ended December 31, 2006 the Company issued 35,000,000 warrants to
Palisades as part of the Company’s modification of Palisades’ convertible
debentures (see Note 6). The Company has valued these warrants using
a market capitalization method in accordance with its established accounting
policy. The value of these warrants on the date of grant was
$1,668,000 and was included as a component of the Company’s derivative liability
balance (see Note 6). The warrants are exercisable at a price of the
lesser of: (a) $0.001 per share; or (b) 50% of the market price on the date of
exercise.
During
the nine months ended September 30, 2007, the Company issued warrants to
purchase a total of 4,618,334 shares of the Company’s common stock. These
warrants were issued in connection with the Company’s private stock offering
(see Note 8). On April 16, 2007, warrants were exercised to purchase 2,250,000
shares of the Company’s common stock on which
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
the
Company received $1,350,000 of which $342,000 in offering costs. On July 12,
2007, warrants were exercised to purchase 2,250,000 shares of the Company’s
common stock on which the Company received $1,350,000 of which $186,458 was paid
in offering costs.
NOTE 13 – RESTATEMENT OF
PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In
2005 and 2006, the Company used discounts in valuing its stock-based
compensation and derivatives. On certain issuances of its common stock, the
Company placed restrictions as to when the issued shares could be sold. The
amount of the discount taken in valuing the respective issuance depended on the
required holding period. The discounts ranged from 10% to 30%. The
Company also utilized a market capitalization approach that discounted the value
it assigned to issuances of large blocks of common shares and also in valuing
its derivative instruments. By using the market capitalization approach, the
Company discounted the issuances of these large blocks of common shares and
derivative instruments by up to 95%. In addition, in reviewing
its original valuation of the shares issued, it discovered that it used the
wrong stock price in its original valuation of the 15,173 common shares it
issued to the University of Pennsylvania pursuant to the terms of the 2005
modification agreement. The 15,173 shares were originally valued at
$7,738,400, but the actual value of the shares was $5,963,120.
The
Company has determined that it had no foundation in taken the respective
discounts and has restated its 2005 and 2006 financial statements eliminating
all discounts that it previously took in valuing its stock based compensation
and derivatives. The Company’s financial statements for 2005 and 2006 as
originally reported and restated are as follows:
|
|
For
the Year Ended
|
|
|
|
December
31, 2005
|
|
|
|
As
original
|
|
|
|
|
|
|
|
|
|
|
|
stated
|
|
|
Adjustments
|
|
|
|
|
As
restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
statement of operations
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development revenue
|
|
$ |
139,346 |
|
|
$ |
- |
|
|
|
|
$ |
139,346 |
|
Other
|
|
|
- |
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
|
139,346 |
|
|
|
- |
|
|
|
|
|
139,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
2,364,059 |
|
|
|
572,500 |
|
1 |
) |
|
|
2,936,559 |
|
General
and administrative
|
|
|
9,540,328 |
|
|
|
126,930 |
|
2 |
) |
|
|
7,891,978 |
|
|
|
|
|
|
|
|
(1,775,280 |
) |
3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
costs and expenses
|
|
|
11,904,387 |
|
|
|
(1,075,850 |
) |
|
|
|
|
10,828,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(11,765,041 |
) |
|
|
1,075,850 |
|
|
|
|
|
(10,689,191 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other-than-temporary
write down of marketable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities
available for sale
|
|
|
(1,918,587 |
) |
|
|
- |
|
|
|
|
|
(1,918,587 |
) |
Realized
loss on sale of marketable securities
|
|
|
(3,589 |
) |
|
|
- |
|
|
|
|
|
(3,589 |
) |
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
Change
in fair value of investments derivative liabilities
|
|
|
(585,735 |
) |
|
|
(2,219,826 |
) |
4 |
) |
|
|
(2,805,561 |
) |
Interest
expense
|
|
|
(6,493,345 |
) |
|
|
- |
|
|
|
|
|
(6,493,345 |
) |
Interest
income
|
|
|
17,837 |
|
|
|
- |
|
|
|
|
|
17,837 |
|
Other
expenses, net
|
|
|
(8,983,419 |
) |
|
|
(2,219,826 |
) |
|
|
|
|
(11,203,245 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before provision for income taxes
|
|
|
(20,748,460 |
) |
|
|
(1,143,976 |
) |
|
|
|
|
(21,892,436 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
(800 |
) |
|
|
- |
|
|
|
|
|
(800 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(20,749,260 |
) |
|
$ |
(1,143,976 |
) |
|
|
|
$ |
(21,893,236 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average Class A common shares
|
|
$ |
(60.13 |
) |
|
$ |
(3.31 |
) |
|
|
|
$ |
(63.44 |
) |
outstanding
|
|
|
345,096 |
|
|
|
345,096 |
|
|
|
|
|
345,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
$ |
891,607 |
|
|
|
- |
|
|
|
|
$ |
891,607 |
|
Other
assets
|
|
|
3,601,620 |
|
|
|
- |
|
|
|
|
|
3,601,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
4,493,227 |
|
|
|
- |
|
|
|
|
$ |
4,493,227 |
|
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
Liabilities
and stockholders' deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
$ |
1,930,182 |
|
|
|
- |
|
|
|
|
$ |
1,930,182 |
|
Derivative
and warrant liabilities
|
|
|
7,082,188 |
|
|
|
2,219,826 |
|
4 |
) |
|
|
9,302,014 |
|
Other
liabilities
|
|
|
756,186 |
|
|
|
- |
|
|
|
|
|
756,186 |
|
Total
liabilities
|
|
|
9,768,556 |
|
|
|
2,219,826 |
|
|
|
|
|
11,988,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest in consolidated subsidiary
|
|
|
825 |
|
|
|
- |
|
|
|
|
|
825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
1,421 |
|
|
|
- |
|
|
|
|
|
1,421 |
|
Common
stock
|
|
|
1,068 |
|
|
|
- |
|
|
|
|
|
1,068 |
|
Warrants
subscribed
|
|
|
10,000 |
|
|
|
- |
|
|
|
|
|
10,000 |
|
Additional
paid-in capital
|
|
|
55,701,541 |
|
|
|
(1,075,850 |
) |
5 |
) |
|
|
54,625,691 |
|
Deficit
accumulated during the development stage
|
|
|
(60,783,746 |
) |
|
|
(1,143,976 |
) |
6 |
) |
|
|
(61,927,722 |
) |
Note
receivable - common stock
|
|
|
(59,085 |
) |
|
|
- |
|
|
|
|
|
(59,085 |
) |
Treasury
stock
|
|
|
(26,136 |
) |
|
|
- |
|
|
|
|
|
(26,136 |
) |
Accumulated other
comprehensive loss
|
|
|
(121,217 |
) |
|
|
- |
|
|
|
|
|
(121,217 |
) |
|
|
|
(5,276,154 |
) |
|
|
(2,219,826 |
) |
|
|
|
|
(7,495,980 |
) |
Total
liabilities and stockholders' deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4,493,227 |
|
|
|
- |
|
|
|
|
$ |
4,493,227 |
|
1)
|
5,732
shares of common stock originally valued at $2,105,000 with an actual
value of $2,677,500.
|
2)
|
3,621
shares of common stock originally valued at $1,082,900 with an actual
value of $1,209,830.
|
3)
|
15,173
shares of common stock originally valued at $7,738,400 with an actual
value of $5,963,120.
|
4)
|
Derivative
instrument liabilities consisting of stock warrants and beneficial
conversion features on convertible debt
originally valued at $7,082,188 with an actual value of
$9,302,0141.
|
5)
|
Decrease
in paid-in capital of $1,075,850 due to the changes in values assigned to
the above-indicated issuance common
shares.
|
6)
|
Increase
in net loss due to changes in the value if the above indicated common
stock issuances and
derivatives.
|
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
|
|
For
the Year Ended
|
|
|
|
December
31, 2006
|
|
|
|
As
original
|
|
|
|
|
|
|
|
|
|
|
|
stated
|
|
|
Adjustments
|
|
|
|
|
As
restated
|
|
Consolidated
statement of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development revenue
|
|
$ |
39,446 |
|
|
$ |
- |
|
|
|
|
$ |
39,446 |
|
Other
|
|
|
116,707 |
|
|
|
- |
|
|
|
|
|
116,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
|
156,153 |
|
|
|
- |
|
|
|
|
|
156,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
3,071,289 |
|
|
|
40,500 |
|
1 |
) |
|
|
3,111,789 |
|
General
and administrative
|
|
|
9,320,816 |
|
|
|
119,380,465 |
|
2 |
) |
|
|
135,236,956 |
|
General
and administrative
|
|
|
|
|
|
|
6,535,675 |
|
3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
costs and expenses
|
|
|
12,392,105 |
|
|
|
125,956,640 |
|
|
|
|
|
138,348,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(12,235,952 |
) |
|
|
(125,956,640 |
) |
|
|
|
|
(138,192,592 |
) |
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
Other
income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on modification of convertible debt
|
|
|
831,035 |
|
|
|
|
|
|
|
|
|
831,035 |
|
Loss
on subcription receivable
|
|
|
(1,368,555 |
) |
|
|
|
|
|
|
|
|
(1,368,555 |
) |
Other-than-temporary
write down of marketable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities
available for sale
|
|
|
(3,582,600 |
) |
|
|
- |
|
|
|
|
|
(3,582,600 |
) |
Realized
and unrealized loss on sale of marketable securities
|
|
|
(215,916 |
) |
|
|
- |
|
|
|
|
|
(215,916 |
) |
License
modification expense
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Change
in fair value of investments and warrant derivative
liabilites
|
|
|
6,571,357 |
|
|
|
(40,352,231 |
) |
4 |
) |
|
|
(33,780,874 |
) |
Gain
on sale of assets
|
|
|
7,008 |
|
|
|
|
|
|
|
|
|
7,008 |
|
Interest
expense
|
|
|
(1,614,431 |
) |
|
|
- |
|
|
|
|
|
(1,614,431 |
) |
Interest
income
|
|
|
33,624 |
|
|
|
- |
|
|
|
|
|
33,624 |
|
Other
expenses, net
|
|
|
661,522 |
|
|
|
(40,352,231 |
) |
|
|
|
|
(39,690,709 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before provision for income taxes
|
|
|
(11,574,430 |
) |
|
|
(166,308,871 |
) |
|
|
|
|
(177,883,301 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
(800 |
) |
|
|
- |
|
|
|
|
|
(800 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(11,575,230 |
) |
|
$ |
(166,308,871 |
) |
|
|
|
$ |
(177,884,101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average Class A common shares
|
|
$ |
(2.61 |
) |
|
$ |
(37.49 |
) |
|
|
|
$ |
(40.10 |
) |
outstanding
|
|
|
4,435,708 |
|
|
|
4,435,708 |
|
|
|
|
|
4,435,708 |
|
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
Consolidated
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
$ |
421,145 |
|
|
|
- |
|
|
|
|
|
421,145 |
|
Other
assets
|
|
|
11,635 |
|
|
|
- |
|
|
|
|
|
11,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
432,780 |
|
|
|
- |
|
|
|
|
|
432,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders' deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
$ |
542,802 |
|
|
$ |
- |
|
|
|
|
$ |
542,802 |
|
Derivative
and warrant liabilities
|
|
|
1,904,483 |
|
|
|
40,352,231 |
|
4 |
) |
|
|
44,476,540 |
|
|
|
|
|
|
|
|
2,219,826 |
|
7 |
) |
|
|
|
|
Other
liabilities
|
|
|
1,966,873 |
|
|
|
- |
|
|
|
|
|
1,966,873 |
|
Total
liabilties
|
|
|
4,414,158 |
|
|
|
42,572,057 |
|
|
|
|
|
46,986,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest in consolidated subsidiary
|
|
|
825 |
|
|
|
- |
|
|
|
|
|
825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
1 |
|
|
|
- |
|
|
|
|
|
1 |
|
Common
stock
|
|
|
73,779 |
|
|
|
(753 |
) |
8 |
) |
|
|
73,026 |
|
Warrants
subscribed
|
|
|
10,000 |
|
|
|
- |
|
|
|
|
|
10,000 |
|
Additional
paid-in capital
|
|
|
68,306,674 |
|
|
|
125,956,640 |
|
5 |
) |
|
|
193,188,217 |
|
|
|
|
|
|
|
|
(1,075,850 |
) |
7 |
) |
|
|
|
|
|
|
|
|
|
|
|
753 |
|
8 |
) |
|
|
|
|
Deficit
accumulated during the development stage
|
|
|
(72,358,976 |
) |
|
|
(166,308,871 |
) |
6 |
) |
|
|
(239,811,823 |
) |
|
|
|
|
|
|
|
(1,143,976 |
) |
7 |
) |
|
|
|
|
Treasury
stock
|
|
|
(13,681 |
) |
|
|
- |
|
|
|
|
|
(13,681 |
) |
|
|
|
(3,982,203 |
) |
|
|
(42,572,057 |
) |
|
|
|
|
(46,554,260 |
) |
Total
liabilities and stockholders' deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
432,780 |
|
|
$ |
- |
|
|
|
|
$ |
432,780 |
|
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and 2006
|
1)
|
4,083
shares of common stock originally valued at $162,000 with an actual value
of $202,500.
|
|
2)
|
34,776,012
shares of common stock originally valued at $3,577,860 with an actual
value of $122,986,008.
|
|
3)
|
30,000,000
shares of common stock subject to 3 year vesting schedule. Compensation
expense originally reported at $9,667 with an actual value of
$6,535,675.
|
|
4)
|
Derivative
instrument liabilities consisting of stock warrants and beneficial
conversion features on convertible debt originally valued at $1,904,483
with an actual value of
$40,352,231.
|
|
5)
|
Increase
in paid-in capital of $125,956,640 due to the changes in values assigned
to the above indicated issuance common
shares.
|
|
6)
|
Increase
in accumulated deficit due to increase in 2006 net loss for changes in the
value if the above indicated common stock issuances and
derivatives..
|
|
7)
|
Correction
to 2005 activity as indicated
above.
|
|
8)
|
Correction
in actual shares outstanding as of Decemeber 31,
2006.
|
NOTE
14 - SUBSEQUENT EVENTS
On
January 9, 2008, the Company issued 15,413 shares of its common stock in
exchange for the cancelation of $5,000 of indebtedness.
On
January 9, 2008, The Company issued 425,000 shares of common stock to one
individual in exchange for consulting services valued at $187,000.
On
January 14, 2008, The Company issued a total of 7,000,000 shares of common stock
to two entities for investor relations services valued at
$3,150,000.
On
January 16, 2008, the Company issued 45,900 shares of its common stock in
exchange for the cancelation of $15,000 of indebtedness.
On
January 17, 2008, the Company issued 4,000,000 shares of its common stock in
exchange for the cancelation of $400,000 of indebtedness.
On
January 22, 2008, the Company issued 61,200 shares of its common stock in
exchange for the cancelation of $400,000 of indebtedness.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and
2006
On
January 24, 2008, the Company issued 107,900 shares of its common stock in
exchange for the cancelation of $51,131 of indebtedness.
On
January 30, 2008, the Company issued 378,491 shares of its common stock to Mr.
Stephen pursuant to the anti-dilution provision of a settlement
agreement.
On
February 19, 2008, The Company issued 200,000 shares of common stock to one
individual in exchange for services valued at $51,000.
On
February 25, 2008, The Company issued 150,000 shares of common stock to one
individual in exchange for consulting services valued at $44,.000
On
February 25, 2008, The Company issued 150,000 shares of common stock to one
individual in exchange for consulting services valued at $34,500.
On
February 27, 2008, The Company issued 25,000 shares of common stock to one
individual in exchange for consulting services valued at $5,625.
On
January 22, 2008, the Company issued 61,200 shares of its common stock in
exchange for the cancelation of $400,000 of indebtedness.
On March
26, 2008, the Company issued to Palisades the 34,500,000 shares which were held
in escrow. The Company valued the 34,500,000 shares at $1,151,900 and charged
this amount against its derivative warrant liability.
In April
2008, the Company’s Board of Directors authorized an amendment to its articles
of incorporation to 1) increase the number of Company authorized common shares
to 1,500,000,000, 2) effect a one for 1,000 reverse stock split; and
3) change the name of the Company from Material Technologies, Inc. to Matech
Corp.
In
addition, the Board of Directors authorized a stock option plan for its
employees, directors, and consultants. The Company reserved 100,000,000 shares
of its Class A common shares to be issued under the plan. Shares under the plan
will be issued at the trading price on date of grant. In April 2008, the Company
granted Mr. Bernstein under the plan options to purchase 30,000,000 shares of
the Company’s Class A common stock at a price of $.04 per share.
MATERIAL
TECHNOLOGIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the year ended December 31, 2007 and
2006
In April
2008, the holder of 1,300 shares of Class E Convertible Preferred Shares elected
to convert the shares into 1,039,746 shares of the Company’s common
stock.
In April
2008, the Company issued 2,000,000 shares of its Class A common stock to its
President under its 2008 stock option plan.
In April
2008, the Company issued 77,600 shares of its Class A common stock in exchange
for $18,624.