U. S.  SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C.  20549


                                  FORM SB-2/A
                                AMENDMENT NO. 1


             Registration Statement Under the Securities Act of 1933

                           MATERIAL TECHNOLOGIES, INC.
                         (Name of Small Business Issuer)



                 Delaware                               95-4622822
      (State or other jurisdiction of       (I.R.S. Employer Identification No.)
       incorporation or organization)

                                                           1057
                                                (Primary Standard Industrial
                                                     Classification Code)



   11661 SAN VICENTE BOULEVARD                      GARY C. WYKIDAL
            SUITE 707                             245 FISCHER AVENUE
 LOS ANGELES, CALIFORNIA 90049                         SUITE A-1
          (310) 208-5589                       COSTA MESA, CALIFORNIA 92626
 (Address and telephone number of                   (714) 751-8505
   principal executive offices)          (Name, address, and telephone number of
                                                   agent for service)


     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable  after  this  Registration  Statement  becomes  effective.

     If  the  securities  being registered on this form are to be offered on the
delayed  or  continuous  basis  pursuant to Rule 415 under the Securities Act of
1933,  as  amended  (the  "Securities Act"), please check the following box. /x/
                                                                              -

     If this form is filed to  register  additional  securities  for an offering
pursuant to Rule 462(b) under the  Securities  Act,  check the following box and
list  the  Securities  Act  registration  statement  number  of  the  earlier
effective  registration  statement  for  the  same  offering.  /_/

     If  this  form  is a post-effective amendment filed pursuant to Rule 462(c)
under  the  Securities  Act, check the following box and list the Securities Act
registration  statement  number  of the earlier effective registration statement
for  the  same  offering.  /_/


                                        1

     If  delivery  of the Prospectus is expected to be made pursuant to Rule 434
check  the  following  box.  /_/



                                                                                PROPOSED
                                               AMOUNT       PROPOSED MAXIMUM    MAXIMUM
TITLE OF EACH CLASS OF SECURITIES              BEING        OFFERING PRICE      AGGREGATE
TO BE REGISTERED                               REGISTERED   PER  SHARE          OFFERING PRICE

                                                                       
Common Stock offered by selling shareholders  6,367,585(1)  $       0.13(1)     $      827,786

     Total Registration Fee

     (1)     Estimated solely for the purpose of calculating the  registration  fee pursuant to
Rule  457(a)  of  the Securities Act of 1933 and based on the average of the high and low price
per  share  of  our  common stock as quoted on the OTC Electronic Bulletin Board on February 4,
2002,  $.13.




The  Registrant  hereby amends this Registration Statement on such date or dates
as  may be necessary to delay its effective date until the Registrant shall file
a  further  amendment which specifically states that this Registration Statement
shall  thereafter  become  effective  in  accordance  with  Section  8(a) of the
Securities  Act  of  1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a),  may  determine.


                                        2



                                               TABLE OF CONTENTS
                                   Pursuant to Item 502(f) of Regulation S-B

                                                                                                         

PROSPECTUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   6
     MATERIAL TECHNOLOGIES, INC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   6

PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   7
     OUR BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   7

FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   8

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   9
     THE SHARES BEING OFFERED HEREBY ARE HIGHLY SPECULATIVE AND ARE SUBJECT TO MANY SIGNIFICANT
          RISKS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   9
     HISTORY OF LOSSES; ACCUMULATED DEFICIT; WORKING CAPITAL DEFICIENCY. . . . . . . . . . . . . . . . . .   9
     GOING CONCERN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   9
     NO ASSURANCE OF PRODUCT DEVELOPMENT; NEED FOR ADDITIONAL RESEARCHAND DEVELOPMENT; MARKET UNCERTAINTY.   9
     LIMITED CURRENT ABILITY TO MARKET PRODUCTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   9
     LACK OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   9
     DEPENDENCE ON MANAGEMENT CONSULTANTS AND ADVISORS . . . . . . . . . . . . . . . . . . . . . . . . . .   9
     COMPETITION FROM OTHER TECHNOLOGIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
     POSSIBLE LOSS OF PATENTS TO SECURED LENDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
     WE FACE RISKS THAT OUR PROPRIETARY RIGHTS, WHICH ARE IMPORTANT IN OUR BUSINESS, ARE NOT
          ADEQUATELY PROTECTED OR ARE NOT SUPERIOR TO THOSE OF OUR COMPETITORS
           . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
     NEED FOR ADDITIONAL FINANCING; LIKELY NEGATIVE CASH FLOW. . . . . . . . . . . . . . . . . . . . . . .  10
     SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET, INCLUDING THE SHARES OFFERED BY THIS
          PROSPECTUS, COULD REDUCE THE VALUE OF YOUR INVESTMENT DUE TO THE VERY SIGNIFICANT
          MARKET OVERHANG
           . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
     OUR STOCK PRICE MAY BE HIGHLY VOLATILE AND SUBJECT TO WIDE FLUCTUATIONS DUE TO MANY
          FACTORS, INCLUDING A SUBSTANTIAL MARKET OVERHANG
           . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
     YOUR INVESTMENT MAY HAVE LIMITED LIQUIDITY IF AN ACTIVE TRADING MARKET DOES NOT DEVELOP
          OR CONTINUE
           . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
     IMPEDIMENTS TO OBTAINING ADDITIONAL FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
     ROYALTY OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
     WE DO NOT PLAN TO PAY DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
     RISK OF NEW PRODUCT AND TECHNOLOGY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
     ROBERT M. BERNSTEIN'S CONTINUES TO  CONTROL OUR AFFAIRS . . . . . . . . . . . . . . . . . . . . . . .  12
     ROBERT M. BERNSTEIN'S CONFLICTS OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
     POTENTIAL STATUS AS A PSEUDO CALIFORNIA CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . .  12
     CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . .  12
     IMPEDIMENTS TO RESALE FROM PENNY STOCK REGULATIONS. . . . . . . . . . . . . . . . . . . . . . . . . .  13

USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

DIVIDEND POLICY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

MARKET PRICE OF REGISTRANT'S COMMON STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13


                                        3

PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14

LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
     SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
          Liquidity and Capital Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15

BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
     THE FATIGUE FUSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
     ELECTROCHEMICAL  FATIGUE  SENSOR  ("EFS") . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

DEVELOPMENT OF TECHNOLOGIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
     STATUS OF THE FATIGUE FUSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
     STATUS OF THE EFS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
     GOVERNMENT FUNDING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
     COMMERCIAL APPLICATIONS OF THE COMPANY'S TECHNOLOGIES . . . . . . . . . . . . . . . . . . . . . . . .  17
     THE BRIDGE MARKET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
     THE SECOND MARKET SECTOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
     MANUFACTURING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
     PATENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
     PRODUCT DISTRIBUTION METHODS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
     COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
     EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18

MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
     EXECUTIVE OFFICERS AND DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
          ROBERT M. BERNSTEIN - PRESIDENT/CHIEF EXECUTIVE OFFICER/CHAIRMAN OF THE BOARD. . . . . . . . . .  19
          JOEL R. FREEDMAN - SECRETARY/TREASURER/DIRECTOR. . . . . . . . . . . . . . . . . . . . . . . . .  19
          DR.  JOHN  W. GOODMAN - CHIEF ENGINEER/DIRECTOR. . . . . . . . . . . . . . . . . . . . . . . . .  19
          WILLIAM BERKS - VICE PRESIDENT OF GOVERNMENT PROJECTS. . . . . . . . . . . . . . . . . . . . . .  19
     ADVISORY BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
          DR. LAWRENCE CHIMERINE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
          ADM. ROBERT P. COOGAN, USN (Ret.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
          ROBERT F. CUSHMAN, ESQ.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
          DAVID HABERMAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
          CAMPBELL LAIRD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
          T.Y. LIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
          Y.C. YANG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
          THOMAS V. ROOT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
          SAMUEL I. SCHWARTZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
     SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . .  22
     EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
     SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT AS OF FEBRUARY 4, 2001. . . . . . . . . . . . . .  23
          Security Ownership of Certain Beneficial Owners. . . . . . . . . . . . . . . . . . . . . . . . .  23
          Security Ownership of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23

SELLING SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24

PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27

DESCRIPTION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
     TRANSFER AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30


                                        4

LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30

EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30

INTEREST OF NAMED EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30

ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30

INDEX TO FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  38

TO FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-1



                                        5

PROSPECTUS

                           MATERIAL TECHNOLOGIES, INC.
                        6,367,585 Shares of Common Stock
                                (par value $.001)

     Materials  Technologies,  Inc.  is registering 6,367,585 shares for sale by
certain  selling  shareholders  par value $.001 per share under this Prospectus.
See  "Selling  Shareholders."

     We  will  not  receive  any  of the proceeds from the sale of the shares of
common stock by our shareholders.  There is presently no public market for these
shares.  The  expenses of the offering, estimated to be $33,576, will be paid by
us.

     Bid  and asked prices for our common stock are quoted, and the last sale is
reported,  on  the  OTC  Electronic  Bulletin  Board  maintained by the National
Association  of  Securities  Dealers  under  the  symbol "MTEY."  On February 4,
2002,  the  last  bid  price  of  the  common  stock  as  reported  was  $.13.

     Neither  the  Securities  and  Exchange Commission nor any state securities
commission  has  approved  or disapproved these securities or determined if this
Prospectus  is  truthful  or  complete.  Any representation to the contrary is a
criminal  offense.

     This investment involves a high degree of risk.  You should purchase shares
only  if  you  can  afford  a  complete  loss  of  your  investment.

     Information  contained  in  this  Prospectus  is  subject  to completion or
amendment.  A registration statement relating to these securities has been filed
with  the  Securities and Exchange Commission.  These securities may not be sold
nor  may  offers to buy be accepted prior to the time the registration statement
becomes effective.  This Prospectus shall not constitute an offer to sell or the
solicitation  of an offer to buy nor shall there be any sale of these securities
in  any  State in which such offer, solicitation or sale would be unlawful prior
to  registration  or  qualification under the securities laws of any such State.

                 The date of this Prospectus is _______, 2001


                                        6

                               PROSPECTUS SUMMARY

OUR  BUSINESS

     Material  Technologies,  Inc.  ("we", "our" or the "Company") is engaged in
research and development of metal fatigue detection, measurement, and monitoring
technologies.  We  are  a development stage company doing business as Tensiodyne
Scientific  Corporation.

     Our  efforts  are dedicated to developing devices and systems that indicate
the  presence  of  very  small  cracks  and  the  true fatigue status of a metal
component.  We  have  developed  two  products.  The first is a small, extremely
simple  device  that  continuously monitors fatigue life in a structural member.
It  is  called a Fatigue Fuse.  The second is an instrument that  is expected to
detect  very  small  cracks  and is intended to determine crack growth rates and
measure  the  amount of fatigue life remaining in an existing structural member.
Nothing  like  it  currently exists in materials technology.  In the laboratory,
the  crack  detection  modality has a resolution of a few microns, exceeding the
current  state  of  the  art  by  fifty  times  or  more.  It  is  called  an
Electrochemical Fatigue Sensor (EFS).  Both devices are pioneering technology in
the  fatigue  field  that  stands  as  cutting-edge  solutions.  They  are  both
patented.

     We  were  formed  as  a  Delaware corporation on March 4, 1997.  We are the
successor  to  the  business  of  Material  Technologies,  Inc.,  a  Delaware
corporation,  also  doing  business  as  Tensiodyne Scientific, Inc. (Matech 1),
which  was  the  successor  to the business of Tensiodyne Corporation that began
developing  the  Fatigue  Fuse  in  1983.  Our  two  predecessors,  Tensiodyne
Corporation  and  Matech  1,  were engaged in developing and testing the Fatigue
Fuse  and,  beginning  in  1993,  developing  the  EFS.

     We  are  offering 6,367,585 shares of common stock by Selling Shareholders.

     Our  principal  executive office is located at 11661 San Vicente Boulevard,
Suite  707,  Los  Angeles,  California  90049.  Our  telephone  number  is (310)
208-5589  and  our  fax  number  is  (310)  473-3177.


                                        7

                                 FINANCIAL DATA

     The  following  table  summarizes  the financial data of our business.  You
should read this information with the discussion in "Management's Discussion and
Analysis  of  Financial  Condition  and Results of Operations" and our financial
statements  and  notes to those statements included elsewhere in this Prospectus




                                                  (Unaudited)                         Year
                                               Nine Months Ended                      Ended
                                              September 30, 2001               December 31, 2000
                                       --------------------------------  ------------------------------
                                            2000             2001             1999            2000
                                       ---------------  ---------------  --------------  --------------
                                                                             
Operating Data:

   Income from Contract                $      601,936   $    1,038,060   $     924,484   $     635,860

   Net Income (Loss)                   $     (275,286)  $   (2,192,298)  $    (539,283)  $    (459,129)

Net Income (Loss) Per Share:

   Basic                               $          .00   $         (.07)  $        (.04)  $        (.02)

Weighted Average Shares
   Outstanding:

   Basic                                   17,483,267       31,272,062      12,242,534      18,900,019


                                        September 30,    September 30,    December 31,    December 31,
                                            2000             2001            1999            2000
                                       ---------------  ---------------  --------------  --------------

Balance Sheet Date:

   Working Capital (Deficit)           $     (357,843)  $     (258,516)  $    (180,157)  $    (403,117)

   Total Assets                        $      172,817   $      384,350   $     250,041   $     108,776

   Net Stockholder's Equity (Deficit)  $     (471,049)  $     (606,921)  $    (620,545)  $    (710,460)



                                        8

                                  RISK FACTORS

THE  SHARES  BEING OFFERED HEREBY ARE HIGHLY SPECULATIVE AND ARE SUBJECT TO MANY
SIGNIFICANT  RISKS

HISTORY  OF  LOSSES;  ACCUMULATED  DEFICIT;  WORKING  CAPITAL  DEFICIENCY

     We  have  incurred  losses of $133,578, $549,187, $539,283 and $459,129 for
the  years  ended  December  31,  1997,  1998, 1999 and 2000, respectively.  The
likelihood  of  our  success  must  be  considered in the light of the problems,
expenses,  difficulties,  complications,  and  delays  frequently encountered in
connection with the development of a business and the competitive environment in
which  we  operate.  Unanticipated  delays,  expenses and other problems such as
setbacks  in  research  and  development  or  product  development  and  market
acceptance  are  frequently  encountered  in  connection with the expansion of a
business.   See  "Need  for  Additional  Financing;  Likely  Negative Cash Flow"
below.  As  a  result  of  the  fixed  nature of many of our expenses, we may be
unable  to  adjust  spending in a timely manner to compensate for any unexpected
delays  in  the development and marketing of our products or any capital raising
or  revenue  shortfall.  Any  such  delays  or shortfalls will have an immediate
adverse  impact  on  our  business,  operations  and  financial  condition.

GOING  CONCERN

     The  financial  statements  as of and for the year ended December 31, 2000,
have  been  prepared  assuming  that  we will continue as a going concern, which
contemplates  the  realization  of assets and the satisfaction of liabilities in
the  normal  course of business.  The carrying amounts of assets and liabilities
presented in the financial statements do not purport to represent the realizable
or  settlement  values.  We  have  suffered  recurring  operating losses and had
limited  working  capital  liquidity at December 31, 2000.  As a result of these
factors, our independent certified public accountants have expressed substantial
doubt  about  our  ability  to continue as a going concern.  We believe that our
efforts to reduce costs and operate more efficiently will generate improved cash
flows, although there can be no assurances that such efforts will be successful.
We currently have enough revenue from government contracts to sustain operations
through  May  of  2002.

NO  ASSURANCE  OF  PRODUCT  DEVELOPMENT;  NEED  FOR  ADDITIONAL  RESEARCH
AND  DEVELOPMENT;  MARKET  UNCERTAINTY

     Our  products  are  in  the  research,  development,  and  testing  stage.
Unexpected  problems,  technological  or specifications changes (1) may make the
technologies  obsolete, (2) may affect the products' overall feasibility, or (3)
may  delay  completion and increase costs of research, development, and testing.
The  time required to bring one or both products to market is uncertain.  Market
acceptance  cannot  be  determined  until  product  development  is  complete.

LIMITED  CURRENT  ABILITY  TO  MARKET  PRODUCTS

     Our  operating  results  will depend on our ability to market our products.
We  have  not  yet  established  a  direct  sales force or distribution network.
Failure to put into place an experienced and skillful marketing infra-structure,
in  a  timely manner, could have a materially adverse impact upon our ability to
bring  our  products  to  market  and  continue  operating.

LACK  OF  EMPLOYEES

     We  currently only have four (4) employees, Robert M. Bernstein, President,
John  Goodman, a part-time engineer, a part-time vice president and a secretary.
There  is  a  substantial  risk  that  we  may not have funds to hire additional
employees  that  may  be needed to complete the development and marketing of our
products.

DEPENDENCE  ON  MANAGEMENT  CONSULTANTS  AND  ADVISORS

     Our  success  largely depends on the performance of our President and Chief
Executive  Officer, Robert M. Bernstein, our consultants, and advisors.  Failure
to  attract  and  retain key consultants, advisors, and employees with necessary
skills  could  have  a  materially  adverse  impact  on our ability to bring our
products  to  market  and  continue  operating.  We  have an Advisory Board, the
members  of  which  serve  without compensation.  We have no contracts with  our
advisors or any consultants.  Our advisors serve without compensation other than
common  stock  that they received.  To date, these advisors have been willing to
provide advice based on their expertise when needed on an ad hoc basis generally
consisting  of  telephone conferences ranging from once a month to several times
in  a  week.  There  is  a risk that these advisors will no longer be willing to
advise  us  without  compensation  and that we will not have the funds to retain
them.  Loss  of these advisors could seriously impair our ability to develop and
market  our  products.


                                       9

COMPETITION  FROM  OTHER  TECHNOLOGIES

     The  metal  fatigue  measuring industry has significant competition.  Other
technologies  exist which indicate the presence of metal fatigue damage.  Single
cracks  larger  than  a  certain  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, for subsequent
estimation  of fatigue damage by computer processing, is possible with recording
instruments  such  as  strain gauges and counting accelerometers.  These methods
have  been in use for up to 40 years and offer the advantage that they have been
accepted  in  the marketplace, whereas our products will remain largely unproved
for  some currently indeterminable time.  Other companies with greater financial
and  technical  resources  and  larger  marketing organizations than ours pose a
potential  threat  if  they  commence  competing  in our market segment.  We are
unaware  of  any  other companies developing technology similar to the Company's
technology  and its patents protect its unique technologies.  On the other hand,
companies  marketing  alternative  technologies  include  Magnaflux Corporation,
Kraut-Kremer-Branson,  Dunegan-Endevco,  and MicroMeasurements.  These companies
have more substantial assets, greater experience, more human and other resources
than ours, 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.  See  "Competition."

POSSIBLE  LOSS  OF  PATENTS  TO  SECURED  LENDERS

     Our  patents  are  encumbered by certain liabilities as described under the
heading,  "Business."  If  we  fail  to  discharge  our  obligations under those
liabilities  to  certain  lenders  including  Robert  M.  Bernstein, a principal
shareholder,  Director and Chief Executive Officer, we may lose our interests in
our  patents  or  certain  rights  to exploit the technology.  See "Management -
Certain Transactions."  We are not in default on any of our indebtedness secured
by  patents  or  out  of  compliance  with  any  covenants of such indebtedness.

WE  FACE RISKS THAT OUR PROPRIETARY RIGHTS, WHICH ARE IMPORTANT IN OUR BUSINESS,
ARE  NOT  ADEQUATELY  PROTECTED  OR ARE NOT SUPERIOR TO THOSE OF OUR COMPETITORS

      We  will  rely  on  a  combination  of patent and trade secret protection,
non-disclosure  agreements,  licensing  arrangements  and  new patent filings to
establish and protect our proprietary rights.  We intend to file applications as
appropriate  for patents covering our products.  Due to the increasing number of
patent applications filed with the United States Patent and Trademark Office, we
are  uncertain  as  to  if  or  when  patents will issue from any of our pending
applications  or,  if patents do issue, that claims allowed will be sufficiently
broad  to  protect our technology.  In addition, there is a possibility that any
patents  that may be issued could be challenged, invalidated or circumvented, or
that  the  rights  granted  to  us  as  owners  of  the patents will not provide
proprietary  protection to us.  Since U.S. patent applications are maintained in
secrecy  until  patents  issue,  and  since  publication  of  inventions  in the
technical  or  patent  literature  tend to lag behind such inventions by several
months,  there  is  a  possibility  that  we  may  not  be  the first creator of
inventions covered by such patents or pending patent applications or that we may
not  be  the  first to file patent applications for such inventions. Despite our
efforts to safeguard and maintain our proprietary rights, we are uncertain as to
whether  we  will  be  successful  in  doing so or that our competitors will not
independently  develop  or patent technologies that are substantially equivalent
or  superior  to  our  technologies.

NEED  FOR  ADDITIONAL  FINANCING;  LIKELY  NEGATIVE  CASH  FLOW

     If  we  fail to raise additional funds necessary for research, development,
and  testing  from  either government grants, sale of securities, borrowings, or
other  sources,  we  will  not  have  a  product  for  a  potential  market  and
shareholders  will  have  no  possibility  of  any  financial return or economic
benefit  from  their  ownership  of shares.  Even if the necessary $5,000,000 is
raised  and research, development, and testing is completed, no assurance can be
given  that  the  results  will  establish that the products will be marketable.
Moreover,  no assurance can be given that our products can be produced at a cost
which will make it possible to market them at a commercially feasible price.  We
are likely to have negative cash flow through at least March 31, 2002.  Over the
next 24 months, $5,000,000 will be required to complete research and development
of  both products and market them.  If we do not successfully raise these funds,
we  may  be compelled to halt all operations resulting in complete loss of share
value.


                                       10

SALES  OF OUR COMMON STOCK IN THE PUBLIC MARKET, INCLUDING THE SHARES OFFERED BY
THIS  PROSPECTUS,  COULD  REDUCE  THE  VALUE  OF YOUR INVESTMENT DUE TO THE VERY
SIGNIFICANT  MARKET  OVERHANG

     The  sale  of shares of our common stock in the public market could cause a
reduction  in  the  market  price  of  our common stock.  This Prospectus covers
6,367,585 shares or approximately 15% of our issued and outstanding common stock
at  February  4,  2002.  As  of February 4, 2002,we had 43,092,678 common shares
issued  and outstanding.  Any substantial sale of our common stock may result in
the  reduction of its market price, and as a result, a reduction in the value of
your  investment.  Moreover,  the  perceived  risk  of  dilution  may  cause
shareholders  to  sell  their  shares,  which  would  contribute to the downward
movement  in  the  stock  price  of  our  common  stock.

OUR  STOCK  PRICE MAY BE HIGHLY VOLATILE AND SUBJECT TO WIDE FLUCTUATIONS DUE TO
MANY  FACTORS,  INCLUDING  A  SUBSTANTIAL  MARKET  OVERHANG

     The  market price of our common stock may be highly volatile and subject to
wide  fluctuations  in  response  to  quarterly variations in operating results,
announcements  of  technological  innovations,  services, or affiliations or new
products  by us or our competitors, changes in financial estimates by securities
analysts,  lack  of  market  acceptance  of  our products and services, or other
events  or  factors,  including the risk factors described herein.  In addition,
the stock market in general, and the technology stocks in particular, experience
significant  price  and  volume  fluctuations  that  are  often  unrelated  to a
company's  operating performance.  As with any public company, we may be subject
to  securities  class  action  litigation following periods of volatility in the
market  price  of  our  securities which could result in substantial costs and a
diversion  of  management's  attention  and  resources.

     Additionally,  the  sale of a substantial number of shares of common stock,
or  even  the  potential  of sales, in the public market following this offering
could  deflate  the market price for the common stock and make it more difficult
for  us  to  raise  additional  capital  through  the  sale of our common stock.

YOUR  INVESTMENT MAY HAVE LIMITED LIQUIDITY IF AN ACTIVE TRADING MARKET DOES NOT
DEVELOP  OR  CONTINUE

     Your  purchase  of  our common stock may not be a liquid investment because
our securities trade over the counter with quotes on the OTC electronic bulletin
board.  You  should  consider carefully the limited liquidity of your investment
before  purchasing  any  shares  of  our common stock.  We have no obligation to
apply  for  quotation  of  our  common  stock  on the NASDAQ Stock Market or for
listing  of  our common stock on any national securities exchange.  Factors such
as  our lack of earnings history, the absence of expectation of dividends in the
near  future,  mean  that  there  can  be no assurance that an active and liquid
market  for  our  common  stock  will  exist  at  any time, that a market can be
sustained,  or  that  investors in the common stock will be able to resell their
shares. In addition, the free transferability of the common stock will depend on
the securities laws of the various states in which it is proposed that a sale of
the  common  stock  be  made.

IMPEDIMENTS  TO  OBTAINING  ADDITIONAL  FINANCING

     Under  modified  agreements  with the University of Pennsylvania to satisfy
the  debt  due  them  in  the  amount  of $406,535 , we must pay a percentage of
amounts raised from financing other than from government contracts.  We must pay
the  University  30%  of  any such financing over $200,000.  In addition, we are
obligated  to  pay  royalties totaling 12% on revenues received from sale of the
Fatigue  Fuse  and  10%  of  revenues  received  from  sale  of  the  EFS. These
commitments  are  likely  to  increase  the  difficulty  in  finding third party
financing.  Underwriters and other financing sources are less likely to agree to
finance  our  research  and development if these amounts must be paid out rather
than used for additional research and development.  See Notes 6, 10f, and 10g to
the  Financial  Statements  and  "Agreements  and  Royalty  Obligations."

ROYALTY  OBLIGATIONS

     Over  the  years,  to  finance  development  of  the  Fatigue  Fuse  and
Electrochemical  Sensor,  our  predecessors  sold  substantial royalty rights to
others.  As  of  the date of this Prospectus, we were obligated to pay royalties
to  others  totaling  12%  of revenues from sales of our Fatigue Fuse and 10% of
revenues  from sales of EFS.  If these products are manufactured and sold, these
royalty  obligations  will  reduce  our revenue from the sale of these products.
See  Note  10g  to  the  Financial  Statements.


                                       11

WE  DO  NOT  PLAN  TO  PAY  DIVIDENDS

     We  will  not  be able to pay dividends until we recover any losses that we
may have incurred and we become profitable.  We intend to retain our earnings to
finance  growth  and  expansion  and for general corporate purposes.  Any future
declaration  and  payment  of dividends on the common stock will depend upon our
earnings  and  financial  condition,  liquidity  and  capital  requirements, the
general  economic  and  regulatory climate, our ability to service any equity or
debt  obligations  senior to the common stock, and other factors deemed relevant
by  our  Board  of  Directors.  Holders of our preferred stock have the right to
dividends  declared  with  respect to the common stock on an as-converted basis.

RISK  OF  NEW  PRODUCT  AND  TECHNOLOGY

     The  manufacturing  and  marketing  of  our  products which incorporate new
technology,  has  inherent  risk.  It is uncertain how each product will operate
over time and under various conditions of use.  Even if one or both products are
successfully  developed,  manufactured,  and  marketed,  warranty  or  product
liability,  or  lack  of  market acceptance due to product failure or failure to
meet  expectations,  could  prevent us from becoming profitable.  Developing new
technologies  for  manufacture  is  frequently  subject  to unforeseen expenses,
difficulties,  and  complications and, in some cases, such development cannot be
accomplished.

ROBERT  M.  BERNSTEIN'S  CONTINUES  TO  CONTROL  OUR  AFFAIRS

     Our  President,  Robert M. Bernstein, owns 100,000 shares of Class B stock,
each of which has 1,000 votes per share, which represents 100,000,000 votes, and
also  owns  15,967,522  shares  of  our  Class  A  common  stock  representing
approximately  37%  of  the  total  outstanding shares. Thus, in any shareholder
vote,  Mr. Bernstein has 115,967,522 votes out of a total of 43,092,678 possible
votes  equal  to  approximately 81% voting control of the Company. Mr. Bernstein
overwhelmingly  controls our direction and management. Our Bylaws do provide for
cumulative  voting.  Nevertheless,  a  minority shareholder will have no control
over  management  and  probably  will  be  unable  to  elect  any  directors.

ROBERT  M.  BERNSTEIN'S  CONFLICTS  OF  INTEREST

     Mr.  Bernstein  controls our operations as majority shareholder, President,
Chief  Executive  Officer,  and  Chairman  of  the  Board.  He has a conflict of
interest  since  he  has a lien on the Company's patents giving him the right to
foreclose  on  them  if  loans  he  made  to  the  Company  are not repaid.  Mr.
Bernstein's  right  to  foreclose  means  that,  if our business fails, he could
potentially  profit  by  gaining  personal control its technology.  On the other
hand,  as a director, officer, and controlling shareholder, Mr. Bernstein owes a
fiduciary  duty  to the Company and its shareholders to act in the Company's and
shareholders  best  interests.

POTENTIAL  STATUS  AS  A  PSEUDO  CALIFORNIA  CORPORATION

     Section  2115  of  the  California General Corporation Law subjects certain
foreign  corporations  doing  business  in  California  to  various  substantive
provisions  of  the  California  General  Corporation  Law in the event that the
average  of  its  property, payroll and sales is more than 50% in California and
more  than  one-half  of its outstanding voting securities are held of record by
persons residing in the State of California.  Some of the substantive provisions
include  laws  relating  to  annual  election of directors, removal of directors
without  cause,  removal  of  directors by court proceedings, indemnification of
officers  and  directors,  directors standard of care and liability of directors
for  unlawful  distributions.  The  aforesaid  Section  does  not  apply  to any
corporation  which, among other things, has outstanding securities designated as
qualified  for  trading  as  a  national  market  security  on  NASDAQ  if  such
corporation  has  at  least eight hundred holders of its equity securities as of
the  record  date  of  its  most  recent  annual meeting of shareholders.  It is
currently  anticipated  that we may be subject to Section 2115 of the California
General  Corporation  Law  which,  in  addition  to other areas of the law, will
subject  us  to  Section  708  of  the  California General Corporation Law which
mandates  that  shareholders have the right of cumulative voting at the election
of  directors.

CAUTIONARY  STATEMENT  ABOUT  FORWARD-LOOKING  STATEMENTS

     Cautionary  statement  about  some  of  the  statements  in this Prospectus
contain  "forward  looking  statements",  including  statements regarding, among
other items, our business strategies, projections, and anticipated trends in our
business  and the industry in which it operates.  The words "believe," "expect,"
"anticipate," "intends," "forecast," "project," and similar expressions identify
forward-looking  statements.  These forward-looking statements are based largely
on  our  expectations  and  are  subject to a number of risks and uncertainties,
certain  of  which are beyond our control.  We caution that these statements are
further qualified by important factors that could cause actual results to differ
materially from those in the forward looking statements, including those factors
described under "Risk Factors" and elsewhere herein. In light of these risks and
uncertainties,  there  can  be no assurance that any forward-looking information


                                       12

contained herein will in fact transpire or prove to be accurate.  All subsequent
written  forward-looking  statements attributable to us or persons acting on our
behalf  are  expressly  qualified  in  their  entirety  by  this  section.

IMPEDIMENTS  TO  RESALE  FROM  PENNY  STOCK  REGULATIONS

     The Securities and Exchange Commission ("SEC") regulations generally define
"Penny  Stock"  to  be  any equity security that has a market price (as defined)
less  than  $5.00  per  share or an exercise price of less than $5.00 per share,
subject  to  certain  exceptions.  For  transactions covered by these rules, the
broker  dealer  must  make a delivery, prior to the transaction, of a disclosure
schedule  prepared  by  the  SEC relating to the penny stock market.  The broker
dealer  also must disclose the commissions payable to both the broker dealer and
registered  representative,  current  quotations for the securities, and, if the
broker  dealer  is  the  sole market maker, the broker dealer must disclose this
fact and the broker dealer's presumed control over the market.  Finally, monthly
statements  must  be  sent out disclosing recent price information for the penny
stock  held  in  the  customer's  account and information on a limited market in
penny stocks.  Consequently, the "Penny Stock" rules may restrict the ability of
broker dealers to sell our securities and may affect the ability of stockholders
to  sell  our  securities  in  the  secondary  market.

                                USE OF PROCEEDS

     All  shares of common stock being offered by this Prospectus are being sold
by  Selling  Shareholders.  No  proceeds  will  be  received  by  us.

                                DIVIDEND POLICY

     We  have not paid dividends and do not plan on paying dividends in the near
future.  Instead,  we  currently  intend  to  retain  any  earnings  for  use in
expanding  our  business  and,  therefore,  we  do  not  anticipate  paying cash
dividends  in  the  foreseeable  future.

                    MARKET PRICE OF REGISTRANT'S COMMON STOCK

     Our  common  stock  is traded on the NASDAQ Bulletin Board.   Our symbol is
MTEY.  From January, 2000 through December 31, 2001, our common stock was quoted
between  a  low  bid of $.08 per share and a high bid of $2.875 per share.  Such
over-the-counter  quotations reflect inter-dealer prices, without retail markup,
markdown,  or  commission and may not necessarily represent actual transactions.
The  following  chart  shows  the high and low bid prices per share per calendar
quarter  from  January  2000  to  December  31,  2001.


                      HIGH BID PRICE (1)   LOW BID PRICE (1)

First  Quarter 2000  $             2.875  $             .343

Second Quarter 2000  $             1.437  $              .42

Third  Quarter 2000  $               .54  $              .22

Fourth Quarter 2000  $              .312  $              .13

First  Quarter 2001  $               .23  $              .09

Second Quarter 2001  $               .12  $              .08

Third  Quarter 2001  $               .22  $             .084

Fourth Quarter 2001  $               .25  $              .10

     (1)     All  bid  prices  were  supplied  to  us  by  Smith  Barney.


                                       13

                                   PROPERTIES

     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 $2,348 per month and
expires  on  June  1,  2002.

     We own a remote monitoring system and certain equipment that was being used
by  the  University  of Pennsylvania for instructional and testing purposes.  We
determined  that  the  system  has  no  future  use and probably cannot be sold.
Therefore,  we  charged  its  full  costs  of  $97,160  to operations, which are
included  in  general  and  administrative  expenses.


                                LEGAL PROCEEDINGS

     We  are  not  presently  involved  in  any  legal  proceedings that, in our
opinion,  might  have  a  material  effect  on  our  operations.

SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SHAREHOLDERS

     NONE

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION AND RESULTS OF
OPERATIONS

For  the  nine  months  ended  September  30,  2000  and  2001:

     During  the  nine  month  period  ended  September  30,  2000, we generated
approximately  $915,340  in  revenue,  which  consisted  of  $601,936  under our
research  and  development  contracts,  $251,798  from  the  sale  of marketable
securities, and $61,606 in interest.  Of the $61,606 in interest earned, $55,572
relates  to  interest accrued on non-recourse stock subscription receivables due
from  our  President  and  a  Director.

     During  the  nine  month  period  ended  September  30,  2001, we generated
approximately  $1,127,993  in  revenue,  which consisted of $1,038,060 under our
research  and  development  contracts,  and  $89,933  in interest.  Of the total
interest  earned,  $85,536  relates  to  interest  accrued on non-recourse stock
subscription  receivables  due  from  our  President  and  a  Director.

     During  the  nine  month  periods  ended  September  30,  2000 and 2001, we
incurred  approximately  $433,445  and  $828,326,  respectively,  in development
costs,  all  of  which  related  to  the  above  indicated  contracts.

     General  and  administration  costs  were  $443,777  and  $2,402,032,
respectively,  for  the  nine-month  periods ended September 30, 2000, and 2001.
The  major  expenses  incurred  during the nine-month period ended September 30,
2000,  consisted  of  $84,101  in  consulting fees, $90,000 in officer's salary,
$109,315  in  professional  fees, $18,855 in rent, $14,577 in telephone expense,
$28,187  in  salaries,  office  expense of $21,761, and $22,491 in travel costs.

     The  major  expenses  incurred during the nine-month period ended September
30,  2001,  consisted  of  $1,500,000 relating to the modification of the amount
owed  to us by our President and a Director on non-recourse stock subscriptions,
$420,000  of  prior years' compensation due our President that was paid in stock
in  2001,  $147,569  in consulting fees, $90,000 in officer's salary, $97,695 in
professional  fees,  $16,454  in  rent, $11,706 in telephone expense, $26,200 in
office  salaries,  office  expense  of  $16,454,  and  $25,643  in travel costs.

For  the  three  months  ended  September  30,  2000  and  2001:

     During  the  three-month  period  ended  September  30,  2000, we generated
approximately  $182,909  in  revenue,  which  consisted  of  $143,781  under our
research  and development contracts, and interest earned of $39,128 the majority
of  which  relates  to  interest  accrued  on  non-recourse  stock  subscription
receivables  due  from  our  President  and  a  Director.

     During  the  three-month  period  ended  September  30,  2001, we generated
approximately  $438,491  in  revenue,  which  consisted  of  $427,004  under our
research and development contracts, and interest earned of $11,487, the majority
of  which  related  to  interest  accrued  on  non-recourse  stock  subscription
receivables  due  from  our  President  and  a  Director.


                                       14

     During  the  three-month  periods  ended  September  30,  2000 and 2001, we
incurred  approximately  $100,051  and  $356,706,  respectively,  in development
costs,  all  of  which  related  to  the  above-indicated  contracts.

     General  and administration costs were $117,477 and $258,597, respectively,
for  the  three-month  periods  ended  September  30,  2000 and 2001.  The major
expenses  incurred  in  2000, consisted of officer's salaries of $30,000, office
salaries of $8,928, consulting fees of $8,591, professional services of $34,498,
rent  of  $6,411,  office  expense  of  $6,246, telephone expense of $5,236, and
travel  expense  of  $3,672.

     The  major  expenses  incurred  in 2001, consisted of officer's salaries of
$30,000,  office  salaries of $10,617, consulting fees of $113,066, professional
services  of  $46,486,  rent  of  $6,833,  office  expense of $13,129, telephone
expense  of  $6,875,  and  travel  expense  of  $16,674.

Liquidity  and  Capital  Resources

     Cash  and  cash  equivalents as of September 30, 2000 and 2001 were 54,783,
and  $101,610,  respectively.  During  2000,  we  received  $841,647 through our
research  contracts,  $3,000 through advances from our President, $5,000 through
the  issuance  of  our common stock, $251,798 through the sale of stock held for
investment,  $3,990 from interest earned on savings, and other receipts totaling
$3,053.  Of  the $1,108,488 received, $1,070,988 was used in operations, $15,000
was  invested  in  a  joint  venture,  and  $22,500 was repaid to our President.

     During  2001,  we received $885,808 through our research contracts, $14,800
through  advances  from  our President, and $230,308 through the issuance of our
common  stock.  Of  the  $1,130,917  received,  $949,580 was used in operations,
$5,600  was  used  in  the  development  of our website, $47,281 was used in the
selling  of  the  stock  and  $28,800  was  advanced  to  our  President.


                                    BUSINESS

THE  FATIGUE  FUSE

     The  Fatigue Fuse is designed to be affixed to a structure to give warnings
as  preselected portions of the fatigue life have been used up (i.e., how far 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 a design specific notch near the base.  By applying the laws
of physics 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 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 load and wear history as the
member.

     We  believe  that the Fatigue Fuse will be of value in monitoring aircraft,
ships,  bridges,  conveyor  systems,  mining equipment, cranes, etc.  No special
training  will be 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 development and
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  determine  its  ability  to produce and market the Fatigue Fuse, we
need  substantial  additional  capital and no assurance can be given that needed
capital  will  be  available.

     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 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.  The EFS is dedicated to that purpose.


                                       15

ELECTROCHEMICAL  FATIGUE  SENSOR  ("EFS")

     The  EFS  is  a  device  that  employs  the  principle  of
electrochemical/mechanical interaction to measure the state of fatigue damage in
a  metal  structural  member.  It is expected to provide a means for determining
the fatigue age of that member so that appropriate action (monitor, replacement,
or  repair)  can  be  taken  before  structural  failure  occurs.

     In conjunction with a license and development agreement with the University
of  Pennsylvania,  the  Company  is  developing  product  designs  to  measure
electrochemically  the  status  of  fatigue  in  structures  without knowing the
structure's  past  load  history.  This  technology  is known as electrochemical
fatigue  sensor.

     The  EFS  functions  by  treating  the  location  of  interest (the target)
associated  with  the  structural  member  as an electrode of an electrochemical
cell.  To  complete the electro-cellular reaction an electrolyte, in the form of
a  low  corrosion  gel,  is  placed  in  contact with the target.  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, as normal traffic on the bridge would do.  The results are a
specific  set  of  current  waveforms  and  amplitudes  that  is  expected  to
characterize  and  report  fatigue  damage  (age).

     Stress  points  are  very  often  located in difficult-to-get-at places for
humans.  Therefore,  it  has  become  desirable  to  miniaturize the process and
develop  a  means  for  delivery to inaccessible areas.  The answer is borescope
technology,  that  is  currently  unproven  and  being developed.  We are highly
dependent  on  this  technology  for  much  of  its  potential  market.


                           DEVELOPMENT OF TECHNOLOGIES

STATUS  OF  THE  FATIGUE  FUSE

     The  development  and  application sequence for the Fatigue Fuse and EFS is
(a)  basic  research, (b) exploratory development, (c) advanced development, (d)
prototype  evaluation,  (e)  application demonstration, and (f) commercial sales
and  service.  The  Fatigue  Fuse  came  first.  The inventor, Professor Maurice
Brull,  conducted  the  basic  research  at  the University of Pennsylvania.  We
conducted the advanced development, including variations of the adhesive bonding
process,  and  fabricating  a  laboratory-grade  remote  recorder  for  finger
separation  events  that constitute proper functioning of the Fatigue Fuse.  The
next  step,  prototype  evaluation which encompasses empirical tailoring of Fuse
parameters to fit the actual spectrum loading expected in specific applications,
needs  to  be  done.  The  associated  tests  include  both coupon specimens and
full-scale  structural  tests  with  attached  Fuses.  A  prototype  of a flight
qualifiable  operational separation event recorder was designed, fabricated, and
successfully  demonstrated.  The  next  tasks  will be to prepare a mathematical
analysis  for  more  efficient  selection  of  Fuse  parameters and to conduct a
comprehensive  test  program  to  prove  the  ability  of  the  Fatigue  Fuse to
accurately  indicate  fatigue  damage  when  subjected  to  realistically  large
variations  in  spectrum loading.  The final tasks prior to marketing will be an
even  larger  group  of  demonstration  tests.

     The  Fatigue  Fuse  is  at its final stages of testing and development.  To
begin  marketing,  the Fuse will take from 6 to 12 months and cost approximately
$600,000,  including  technical  and  beta  testing  and  final development.  If
testing,  development, and marketing are successful, we estimate we should begin
receiving  revenue  from the sale of the Fatigue Fuse within a year of receiving
the  $600,000.  However,  we  cannot  estimate the amount of revenue that may be
realized  from  sales  of  the  Fuse,  if  any.

     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 Fuses failing in sequence as predicted.


                                       16

STATUS  OF  THE  EFS

     The  existence  and size of very small cracks can be determined by EFS, and
in  this  regard  it  appears  superior  in  resolution  to  other  current
non-destructive  testing  techniques.  It  has  succeeded in regularly detecting
cracks  as small as 40 microns in a titanium alloy, in a laboratory environment,
as  verified  by  a  scanning  electronic microscope, and is probably capable of
detecting cracks down to 10 microns. This is much smaller than the capability of
any  other  practical  non-destructive testing method for structural components.
There  is  also  a  vast  body  of  testing  supporting  successful  use of this
technology  with  selected  aluminum  alloys.

     However,  additional  testing  is  required  to verify EFS' crack detection
capabilities under variable amplitude environments which are more representative
of  actual  structures in the field, like a highway bridge or aircraft fuselage.
It  is  also  believed  that  for  the  first time it is possible to conduct the
fatigue appraisal of steel structural members without requiring any knowledge of
past  loading  history.  Until  additional  tests  are  completed  and  these
capabilities verified, we cannot assure that this technology will be successful.

GOVERNMENT  FUNDING

     In  August  1996,  we  executed an agreement entitled, "Teaming Agreement,"
with  Southwest Research Institute (SRI) and the University of Pennsylvania (the
"Team")  for research and development efforts.  On February 25, 1997, the "Team"
was  awarded from the United States Air Force a $2.5 million Phase I contract to
determine the feasibility of the EFS to improve the U.S. Air Force capability to
perform  durability  assessments  of military aircraft, including air frames and
engines through the application of the EFS to specific military aircraft alloys.
Our  share of this award was approximately $550,000.  On June 18, 1998 the Team,
with Material Technologies as the lead contractor, was awarded a second contract
in  the  amount  of  $2,061,642  to  "determine  the applicability of the EFS to
improve  the  U.  S.  Air  Force capability to perform durability assessments of
military aircraft, including both air frames and engines through the application
of  the EFS to specific military aircraft alloys."  On February 5, 1999, a third
contract  in  the  amount of $2,000,000 was awarded to us to continue and expand
the efforts for turbine engines.  A fourth contract was awarded on November 3rd,
2000  to continue the borescope and EFS technologies, as well as alternate means
of  fatigue  sensing.  Accordingly,  over  the  last  4 years approximately $8.5
million  was  awarded  to  research  and  develop  the EFS.  The results of this
research are encouraging and provide a basis for us and our research partners to
obtain  additional  funding.  No  assurance  can  be  given,  however, that such
funding  will  be  received.

COMMERCIAL  APPLICATIONS  OF  THE  COMPANY'S  TECHNOLOGIES

     No  commercial  application  of our products has been arranged to date, but
the  technology  has  matured  to  a point where we believe it can be applied to
certain  markets.  Our  technology  is applicable to many market sectors such as
bridges  and  aerospace  as  well  as  ships,  cranes,  power  plants,  nuclear
facilities, chemical plants, mining equipment, piping systems, and "heavy iron."

THE  BRIDGE  MARKET

     In the U.S. 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.  Although there are normal business imperatives,
the  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.  Analysis
by  infrastructure  economic  experts,  including  the  Federal  Highway
Administration,  confirms  that  $9  billion per year, for bridges alone, is the
minimum  amount  required to maintain the status quo.  Since that amount has not
been  available,  and  a  backlogged  repair  bill of more than $358 billion has
already  accrued.  In  the  1991  ISTEA  initiative  (Intermodal  Surface
Transportation  and Efficiency Act) and recently in the $200 billion 1998 TEA-21
initiative  (Transportation  Equity  Act)  Bridge  Management  Systems have been
mandated  as  a  matter  of  policy.

THE  SECOND  MARKET  SECTOR

     The  second  market  sector  that  we  intend  to pursue is aerospace.  The
aerospace  industry is concerned with aluminum alloys and titanium alloys.  This
market  opportunity will follow a different time line, budget, and market model.
There  can  be  no  assurance  of  success  until the technology is successfully
installed  in  the  field  and  passed  required  testing  and  validation.


                                       17

MANUFACTURING

     Certain  manufacturers are capable of producing the Fatigue Fuse and EFS at
reasonable cost.  No assurance can be given, however, that these devices will be
successfully  manufactured,  that  they  can be commercially produced, that they
will  perform  to  Management's  expectations, or that they will be successfully
marketed.  Moreover,  significant  competition  may  develop.

PATENTS

     We  are  the  assignee  of  four  patents  originally  issued to Tensiodyne
Corporation.  The first was issued on May 27, 1986, and expires on May 27, 2003.
It is titled "Device for Monitoring Fatigue Life" and bears United States Patent
Office  Numbers 4,590,804.  The second patent, titled "Method of Making a Device
for Monitoring Fatigue Life" was issued on February 3, 1987 and expires February
3, 2004, United States Patent Office Number 4,639,997.  The third patent, titled
"Metal Fatigue Detector" was issued on August 24, 1993 and expires on August 24,
2010,  United States Patent Number 5,237,875.  The fourth patent, titled "Device
for  Monitoring  the  Fatigue Life of a Structural Member and a Method of Making
Same,"  was  issued on June 14, 1994 and expires on June 14, 2011, United States
Patent Number 5,319,982.  In addition, we own a fifth patent, titled "Device for
Monitoring the Fatigue Life of a Structural Member and a Method of Making Same,"
which  was  issued  June  20,  1995,  United States Patent Number 5,425,274, and
expires  June  20,  2012.

PRODUCT  DISTRIBUTION  METHODS

     Subject  to  available financing, we intend to exhibit the Fatigue Fuse and
the  Electrochemical  Fatigue Sensor at various aerospace trade shows and intend
to  also  market  our  products  directly  to  end  users,  including  aircraft
manufacturing  and  aircraft  maintenance  companies,  crane  manufactures  and
operators,  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 measure and indicate 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  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-Kermer-Branson,
Dunegan-Endevco, and Micro Measurements.  These  companies have more substantial
assets,  greater  experience,  and  more resources than ours, 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 four employees, Robert M. Bernstein, President and Chief Executive
Officer,  a  secretary,  one  part-time  engineer  and  one part-time government
contract  advisor.  In addition, we retain consultants for specialized work such
as  an  accountant  who  oversees  our  government  contracts.


                                       18

                                   MANAGEMENT

EXECUTIVE  OFFICERS  AND  DIRECTORS

The name, age, office, and principal occupation of our executive officers and
directors and certain information relating to their business experiences are set
forth below:

NAME                 AGE  POSITION

Robert M. Bernstein   67  President, Chief Executive Officer, Chairman of the
                          Board

Joel R. Freedman      42  Secretary, Treasurer, Director

Dr. John Goodman      68  Chief Engineer, Director

William Berks         71  Vice President of Government Projects


     The  term of the directors and officers is until the next annual meeting or
until  their  successors  are  elected.

ROBERT  M.  BERNSTEIN  - PRESIDENT/CHIEF EXECUTIVE OFFICER/CHAIRMAN OF THE BOARD

     Robert  M. 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,  PA,  an  oil  and  gas exploration company.  In December 1985, he
formed  a  research  and  development  partnership  for  Tensiodyne,  funding
approximately  $750,000  for research on the Fatigue Fuse.  In October, 1988, he
became  Chairman  of  the  Board,  President  and  CEO.

JOEL  R.  FREEDMAN  -  SECRETARY/TREASURER/DIRECTOR

     Joel  R.  Freedman  has  acted  as  our Secretary and Treasurer since 1989.
Since  1983,  he  has  been  President  of Genesis Advisors, Inc., an investment
                             -
advisory  firm in Bala Cynwyd, Pennsylvania.  Since January 1, 2000, he has been
a  Senior  Vice  President  of  PMG  Capital  Corp.,  a securities brokerage and
investment  advisory  firm in West Conshohocken, Pennsylvania.  His duties there
are  a  full-time  commitment.  Accordingly,  he does not take part in our daily
activities.  He  is  not  a  director  of  any  other  company.

DR.  JOHN  W.  GOODMAN  -  CHIEF  ENGINEER/DIRECTOR

     Dr.  John  W.  Goodman  is  retired  from TRW Space and Electronics and was
formerly  Chairman  of  the  Aerospace  Division  of  the  American  Society  of
Mechanical  Engineers.  He  holds a Doctorate of Philosophy in Materials Science
that was awarded with distinction by the University of California at Los Angeles
in  1970.  In  1957,  he  received  a  Masters  of Science degree in Engineering
Mechanics  from  Penn  State  University  and  in 1955 he received a Bachelor of
Science  degree in Mechanical Engineering from Rutgers University.  From 1972 to
1987,  Dr.  Goodman was with the U. S. Air Force as lead Structural Engineer for
the  B-1  aircraft,  Chief  of the Fracture and Durability Branch, and Materials
Group  Leader,  Structures  Department,  Aeronautical  Systems  Center,
Wright-Patterson  Air  Force  Base.  From  1987  to December 1993, he was on the
Senior Staff, Materials Engineering Department of TRW Space and Electronics.  He
has  been  Chief  Engineer  for Development of Matech's products since May 1993.
Over  the  last  four  years  he  has  consulted  for  us  on a part time basis.

WILLIAM  BERKS  -  VICE  PRESIDENT  OF  GOVERNMENT  PROJECTS

     William  Berks  retired  from  TRW, Inc. in November 1992.  Mr. Berks' last
assignment  was  as  a project manager in the Advanced Systems Division of TRW's
Space  and  Technology Group.  He managed the Structures and Mechanism Subsystem
of the Universal Test Bed Project, which is a three axis stabilized advanced bus
for  large  geostationary  satellites.  In  a  collateral  assignment,  he  was
responsible  for  planning  a  building and its equipment for the National Space
Program  Office  of  Taiwan,  Republic  of  China,  for  the  design,  assembly,
integration  and  test  of  small  three  axis  spacecraft  and  each  of  their
subsystems, and manpower planning for a spacecraft program.  Recently he was the


                                       19

Chief  Mechanical  Engineer  for  the  Space  and  Technology Group's commercial
satellite  operations.  He  served six years as Manager of the Mechanical Design
Laboratory,  the  engineering design skill center for the design and development
of spacecraft mechanical systems, which had as many as 350 individuals.  For ten
years  he  was  Manager  of  the  Advanced  Systems Design Department, which was
responsible  for  mechanical  systems design for all spacecraft project.  He was
Assistant  Project  Manager  for  Mechanical  Subsystems  for a major spacecraft
program,  which  included  preparation  of  plans,  specifications and drawings,
supervision  of  two  major subcontracts, and responsibility for flight hardware
fabrication  and  testing.  Mr.  Berks has also managed independent research and
development  projects (antennas, materials, solar arrays) and holds six patents.
He has over 30 years of experience in spacecraft mechanical systems engineering.
He  was  with  TRW,  Inc.  for  26  years.

ADVISORY  BOARD

     Since  1987,  we and our predecessors have had an Advisory Board consisting
of 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 us on technical,
financial,  and  business  matters  and  may  in  the  future  be  additionally
compensated  for  these  services.  A biographical description of the members of
the  Advisory  Board  is  as  follows:

DR.  LAWRENCE  CHIMERINE

     Dr.  Chimerine  is  President  of  Radnor  International Consulting Inc. in
Radnor,  PA., an economics consulting firm, and co-founder of igrandparents.com.
            -                                                                  -
From  1993 to 2000, he was Managing Director and Chief Economist of the Economic
Strategy  Institute  in  Washington  DC.  He  is  the  former  Chairman,  Chief
Executive,  and  Chief  Economist of Chase Econometrics and The WEFA Group.  For
more  than  19  years,  Dr.  Chimerine  has  lent  his  advice and council to an
impressive  resume  of  Fortune  500  companies,  financial  institutions,  and
government agencies, providing private consultation on the state of the U.S. and
world  economics,  specific  industries, and sectors, and the impact of economic
conditions on decision making, budgeting, and strategic planning.  He has served
on  numerous corporate boards, is a member of various professional associations,
and  has  held teaching positions at three universities.  From 1965 to 1979, Dr.
Chimerine  was Manager of the U.S. Economic Research and Forecasting for the IBM
Corporation.  He  left IBM to assume the chairmanship at Chase Economics and, in
1987,  was  appointed  Chairman  and  CEO  of the WEFA Group.  Dr. Chimerine has
served  on  numerous  governmental  advisory  boards  including  the  House  of
Representatives Task Force on International Competitiveness, the Census Advisory
Committee,  and  the Economic Policy Board of the Department of Commerce.  He is
frequently  called  upon  to testify on key economic issues before Congressional
committees  including  the  House  and  Senate  Budget Committee, Joint Economic
Committee,  Senate  Finance  Committee,  Senate Banking Committee, and the House
Committee  on  Monetary  Policy.

ADM.  ROBERT  P.  COOGAN,  USN  (Ret.)

     Robert  P.  Coogan  retired  from  a distinguished naval career spanning 40
years during which he held numerous posts including: Commander U.S. Third Fleet,
Commander  Naval Air Force - U.S. Pacific Fleet, Commandant of Midshipmen - U.S.
Naval  Academy,  and  Chief of Staff - Commander Naval Air Force - U.S. Atlantic
Fleet.  From  1980  to  1991,  he was with Aerojet General Company and served as
Executive  Vice  President of Aerojet Electrosystems Co. from 1982-1991.  He has
his  BS in Engineering from the US Naval Academy and MA in International Affairs
from  George  Washington  University.

ROBERT  F.  CUSHMAN,  ESQ.

     Mr. Cushman is a partner in the Philadelphia office of Pepper Hamilton LLP,
and  is also the permanent chairman of the Andrews Conference Group Construction
Super  Conference,  and  is  the  organizing  chairman  of  the  Forbes Magazine
Conferences  on  Worldwide  Infrastructure  Partnerships,  Rebuilding  America's
Infrastructure  Conference,  Alternative Dispute Resolution, the Forbes/ Council
of the Americas Latin American Marketing Conference and the Forbes Environmental
Super  Conference.

DAVID  HABERMAN

     Mr.  Haberman  is chairman and co-founder of DCH Technology Inc., a company
that specializes in hydrogen technology development, safety, process monitoring,
and  hydrogen  fuel  cell power applications.  In 1996, William Richardson, then
Secretary of the Department of Energy (DOE), appointed Mr. Haberman to represent
the  perspectives  of  commercial product developers and safety engineers on the
Hydrogen  Technical  Advisory Board (HTAP).  This panel, created by the Hydrogen
Futures  Act,  reports directly to the Secretary of Energy and is responsible to
the  U.S.  Congress to monitor the DOE's implementation of the National Hydrogen
Program.  As a director of the National Hydrogen Association (NHA), Mr. Haberman
chairs  the Implementation Planning Committee.  He is a co-founder and President
of  the California Hydrogen Business Council, an American delegate and member of
the  International Standards Organization (ISO) Working Group on hydrogen system
safety,  and  works  to  define  the  commercial  future  of  hydrogen  energy.


                                       20

CAMPBELL  LAIRD

     Campbell Laird 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.

T.Y.  LIN

     Mr.  Lin graduated from Tangshan College, Jiaotong University, and received
a  M.S.  degree  in  Civil  Engineering  from  the  University  of California at
Berkeley.  Since  1934,  he  taught and practiced civil engineering in China and
the U.S. and planned and designed highways, railways, and over 1,000 bridges and
buildings  in Asia and the Americas.  He is known as Mr. Prestressed Concrete in
the  U.S.,  having  pioneered both the technology and industry in the 1950s.  He
authored and co-authored three textbooks in structural engineering and more than
100  technical  papers.  He  was  the  founder  of  T.Y.  Lin International that
provides  design and analysis for all types of concrete and steel structures and
pioneered  the  design of long-span structures, prestressing technology, and new
design  and  construction  methods  over  the  past  40  years.

Y.C.  YANG

     Mr.  Yang is a pioneer in "value engineering" which optimized many projects
with  economic  te-designs.  He  is  a recipient of the 1988 Jiaotong University
Outstanding  Alumnus Award, a citation from Engineering News Record, and the ACI
Mason  Award.  With  their partnership dating back to wartime China in the early
1940s,  Mr. Lin and Mr. Yang established their international stature in the U.S.
over the five decades that followed.  In 1992, they formed the San Francisco, CA
headquartered  firm,  Lin  Tung-Yen  China, Inc., to continue their tradition of
excellence  and innovation in structural and civil engineering and to serve as a
bridge  between  East  and  West.  The  firm  serves its clients through various
tasks,  ranging  from  planning  and  designs to construction management and the
introduction  of  financing.

THOMAS  V.  ROOT

      Mr.  Root  is  President  and  CEO  of  Optim Incorporated, a company that
develops, manufactures, markets, sells and services flexible endoscopic products
and  solutions  to  medical  and  industrial markets.  Optim Incorporated is ISO
2001certified  and  also  manufactures and markets a complete line of industrial
fiberscopes  to  serve the remote inspection needs of aerospace, transportation,
energy  generation,  law enforcement, and school security markets.  Mr. Root has
had  25  years of experience in all methods of nondestructive testing and was an
NDT, Level III, member of the American Society for Nondestructive Testing (ASNT)
Educational  Council  and Level III question committee.  In addition, he is past
chairman  of  ASNT  CT  Yankee, and former member of SAE Committee .  His career
began  at  General Dynamics in 1972 and after serving in the nondestructive test
engineering  and education departments he joined Technical Operations as manager
of  Technical  Services  in  1976.  In  1978,  Mr. Root co-founded Northeast NDE
Company,  a  private  distribution  and  service  company committed to providing
products  and  services  for  the  development  of  nondestructive  testing
applications.  After  completing a sale transaction to Northeast NDE's treasurer
in  1990,  Mr.  Root founded Valtec Systems, a private firm, for the development
and distribution of specialty nondestructive testing systems.  In early 1996, he
sold  Valtec  and became Vice President of Operations and General Manager of the
industrial  products  company  of  Applied Fiberoptics, Inc., the predecessor of
Optim  Inc.  In  1997,  he  became  the  CEO  of  Optim.

SAMUEL  I.  SCHWARTZ

     Samuel  I.  Schwartz,  age  49, 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.
SECTION  16(A)  BENEFICIAL  OWNERSHIP  REPORTING  COMPLIANCE

     On  March  27,  2001,  Mr.  Robert  Bernstein,  Chief Executive Officer and
Chairman, filed a Form 5 relating to several transactions of stock issued to him
in  2000 and a Form 4 for a January 2001 transaction.  Mr. Bernstein was late in
reporting  these  transactions.


                                       21

     On  March  27,  2001,  Dr.  John  Goodman,  Director,  filed a Form 4 for a
transaction  in  January,  2001.

     In  September,  2000,  Joel  Freedman, a Director, filed a Form 4 showing a
transaction  of  stock gifted in 1999 and a transaction of 350,000 shares issued
to  him  in  May,  2000.

     We  are unaware of any other late filings or any other failures to file any
Form  3,  4  or  5.



EXECUTIVE  COMPENSATION

Name and Principal Position  Year  Salary ($)  Bonus ($)  Other Annual   Restricted   Options (SARs)
                                                          Compensation      Stock          (#)
                                                             ($)          Awards($)
                                                                    


Robert M. Bernstein, CEO     1998     100,000          -              -           -     1,800,000(1)

                             1999     150,000          -              -           -               -

                             2000     120,000          -              -    4,183 (3)              -

John W. Goodman, Director    1998      20,462          -              -           -               -
 and Engineer
                             1999      23,384          -              -   11,700 (2)              -

                             2000      26,614          -              -           -               -

(1)  In  June  1998,  we issued to Mr. Bernstein a warrant to purchase 1,800,000
     shares  of  common  stock for $.50 per share that was later reduced to $.10
     per  share. In November 1999, we canceled this warrant with Mr. Bernstein's
     approval.

(2)  In  1999,  we  issued  to  Mr.  Goodman 142,000 shares of restricted common
     stock.  These  shares  were  valued  at  $11,700.

(3)  In  2000,  we issued to Mr. Bernstein as escrow holder, 4,183,675 shares of
     our  common  stock,  in  part,  for  future  compensation,  subject  to
     restrictions.  See  Exhibit  4.3.  We  included the par value of the shares
     issued  in  Mr.  Bernstein's  2000  compensation  amounting  to  $4,183.



                                       22


SECURITY  OWNERSHIP  OF  CERTAIN  OWNERS  AND  MANAGEMENT AS OF FEBRUARY 4, 2002

Security  Ownership  of  Certain  Beneficial  Owners

     We do not know of any non-affiliated person or "group" as that term is used
in  Section13(d)(3)  of the Exchange Act that owns more than five percent of any
class  of  our  voting  securities.

Security Ownership of Management

CLASS OF STOCK     NAME AND ADDRESS OF     AMOUNT AND NATURE    PERCENT OF CLASS
                    BENEFICIAL OWNER         OF BENEFICIAL
                                               OWNERSHIP

Common Stock    Robert M. Bernstein, CEO          15,967,522              37.3%
                Suite 707
                11661 San Vicente Blvd.
                Loa Angeles, CA 90049

                Joel R. Freedman,                    826,471               1.9%
                Director
                1 Bala Plaza
                Bala Cynwyd, PA 19004

                John Goodman, Director             1,000,000               2.3%
                Suite 707
                11661 San Vicente Blvd.
                Los Angeles, CA 90049

                William Berks                      1,000,000               2.3%
                532 14th Street
                Manhattan Beach, CA
                90266

                Directors and executive           18,793,993              43.6%
                officers as a group (4
                persons)

Class B         Robert M. Bernstein, CEO             100,000             100.0%
Common Stock    Suite 707
                11661 San Vicente Blvd.
                Loa Angeles, CA 90049

(1)  Of  these 15,967,522 shares, Mr. Bernstein has full rights to approximately
     12,183,847  shares. The remaining shares are subject to options to purchase
     by third parties or are in escrow. On October 27, 2000, we issued 4,183,675
     shares  to  Mr.  Bernstein  pursuant  to a Stock Escrow/Grant Agreement, of
     which  400,000  shares have been returned to escrow. Under the terms of the
     agreement,  Mr. Bernstein is required to hold these shares in escrow. While
     in  escrow,  he  cannot  vote the shares but has full rights as to cash and
     non-cash  dividends, stock splits or other change in shares. Any additional
     shares  issued to Mr. Bernstein by reason of the ownership of the 3,783,675
     shares  will  also  be escrowed under the same terms of the agreement. Upon
     the  exercise  by  certain  holders of our options or warrants, or upon the
     need  by  us, in the sole discretion of the Board, to issue common stock to
     certain individuals or entities, the number of shares required for issuance
     to  these  holders  will  be  returned from escrow by Mr. Bernstein thereby
     reducing  the  number  of  shares  he  holds. The shares held in escrow are
     non-transferable  and  will  be  granted  to  Mr.  Bernstein  only upon the
     exercise or expiration of all of the options and warrants, the direction of
     the Board, in its sole discretion, or the mutual agreement of Mr. Bernstein
     and  the  Board  to terminate the agreement. We valued these shares at par.
     Upon  the actual grant of the remaining shares to Mr. Bernstein, the shares
     issued will be valued at market value when issued and charged to operations
     as  compensation. As of the date of this filing, 400,000 of these 4,183,675
     shares  had  been  transferred  to  satisfy a stock agreement. Accordingly,
     3,783,675  of these escrowed shares are included in the total of 17,034,876
     shares  beneficially  owned  by  Mr.  Bernstein. In addition, approximately
     1,500,000  of  these  shares  are  subject  to an option that Mr. Bernstein
     granted  to  a  group  of  investors  in  July  1998 in connection with the
     settlement of a law suit between these investors, us and Mr. Bernstein. See
     Note  11  to  Financial  Statements.


                                       23

(2)  Each  of  Mr. Bernstein's Class B Common Shares has 500 votes on any matter
     on  which  the common stockholders vote. Accordingly, these shares give Mr.
     Bernstein  50  million votes. Those votes give Mr. Bernstein voting control
     of  the  Company.

                              SELLING SHAREHOLDERS

     An  aggregate  of  6,367,585 shares of common stock are being registered in
this  offering  for the account of the Selling Shareholders.  Subject to certain
restrictions  discussed  below,  the shares of common stock being registered for
the  account of the Selling Shareholders may be sold by the Selling Shareholders
or their transferees commencing on the third business day after the Registration
Statement  has been declared effective.  Sales of such shares of common stock by
the  Selling  Shareholders  or  their  transferees  may depress the price of the
common  stock  in  any  market  that  may  develop  for  the  common  stock.

     The  following table sets forth certain information with respect to persons
for  whom  we  are  registering  such  shares  of common stock for resale to the
public.  We will not receive any of the proceeds from the sale of such shares of
common  stock.  None of the Selling Shareholders has had any position, office or
material  relationship  with  the  Company.  The  shares  of  common stock being
registered for the account of the Selling Shareholders are not being sold by the
Company.  None  of  the  Selling  Shareholders  has  any  plan,  arrangement,
understanding,  agreement,  commitment  or  intention  with  us  to  sell  their
securities.



Selling Shareholder                           Shares Beneficially Owned  Percentage Total Shares
                                                                   
John Sheldon Legge Brandenburg                                  200,000                        *

John Andrew and Alicia Elizabeth Law                             25,000                        *

Maria De La Rosario Leon                                         47,500                        *

Philip Guilfoyle                                                120,000                        *

James Auld                                                       33,000                        *

James Marshall                                                   13,000                        *

Willard Clapp                                                    14,300                        *

Brian Taylor                                                     71,500                        *

Luz Pelayo                                                        8,400                        *

Christopher Collins                                              10,000                        *

Ali Siddiqui                                                     18,000                        *

Frank Alexander                                                  10,000                        *

Howard Wilson                                                    50,000                        *

Roderick L. Carter                                               10,000                        *

Charles Hannan                                                   32,000                        *

Nancy Demarr                                                     52,500                        *

Carol Drugan                                                     16,000                        *

Jill Robinson                                                    14,000                        *

Strategic Growth Solutions                                      160,000                        *

De Jong & Associates Inc.                                       370,000                        *


                                        24

John Darragh                                                    160,000                        *

Adrian Thomas William Bell                                       40,000                        *

B&L Superannuation Fund                                         100,000                        *

Robert John Guthrie                                              75,000                        *

Robert Malcolm & Gwendolyn Smith                                150,000                        *

Garry Allan Smith                                                 6,000                        *

Perry Robert Smith                                                6,000                        *

Russell Robert Charles Smith                                     24,000                        *

Jeremy Robert Charles Smith                                      40,000                        *

Sharene-Adelle Rebecca Jayne Smith                                6,000                        *

Sharene-Priscilla Joanna-Joy Smith                                6,000                        *

Graeme Thomas McLean                                             30,000                        *

Erna May Gville & Maxwell Vincent Guille                        200,000                        *

Wallace Sew-Hoy                                                 100,000                        *

Colin Greegan                                                    15,000                        *

Christopher John Mackertich                                      37,500                        *

Matthew Develin                                                 100,000                        *

Philip John Roden                                                37,500                        *

Eva Pelayo                                                      163,000                        *

James R. Willman                                                170,000                        *

George Amaro & Maria Amaro                                       55,000                        *

International Prestige Promotions Inc.                           12,000                        *

Glen Harris                                                      30,000                        *

John Andrew Green                                                62,000                        *

Preferential Publication Pty Ltd                                 55,000                        *


                                        25

Jamie Hull                                                       55,000                        *

Hun Teong Chew                                                  100,000                        *

George F. Johnson                                                55,000                        *

David D. McNabb                                                  50,000                        *

Anthony Mark McCullough                                         100,000                        *

Jack Walton Ingram Jr.                                           70,000                        *

Adam Christopher Gilbert                                         80,000                        *

Timothy Stuart Wheaton                                           55,000                        *

Christine Ann Tysoe                                              32,000                        *

Robert G. Adams                                                  80,000                        *

Deborah Anne Darragh                                            160,000                        *

Clayton Gilbert                                                  83,190                        *

John Terrence Gilbert & Janice Rose Gilbert                      25,000                        *

Frank L. Jenkins                                                300,000                        *

Valma Judith Wood                                                80,000                        *

Amaro Superannuation Fund                                       145,000                        *

Douglas McKay Hamilton                                           65,000                        *

Gosling Superannuation Fund                                      80,000                        *

Robert Lester Foster & Nicole Jane Foster                        12,800                        *

Bettyanne Frances Austen                                         45,000                        *

Euan MacFarlane                                                 160,000                        *

R N Wickham & C A Wickham                                        45,000                        *

Bahaderalli Keshani                                             100,000                        *

Preferential Publication Pty Ltd                                100,000                        *

Clarence Bernard Fitzner                                         40,000                        *

George F. Johnson                                                50,000                        *


                                        26

Bahaderalli Keshani                                             150,000                        *

Mark Robert Israel                                               20,000                        *

Ross Williams                                                   100,000                        *

Warren Arthur Heuston & Lynette Kay Heuston                      62,000                        *

Geoffrey Michael Rynne & Gregory David Rynne                    200,000                        *

Maria D. Sarabia                                                105,000                        *

Bernard D. Coble & Laura L. Coble                                30,000                        *

Brad Anthony Smyth                                                6,500                        *

Glen Andrew Humbert                                              50,000                        *

Francis A. Sliwinski                                             11,000                        *

George Wesley Moser                                              50,000                        *

Gaynelle Williamson                                               7,000                        *

Hubert S. Williams & Lyla M. Williams                            15,000                        *

Coslow E. Holt Jr. & Donna G. Holt                               14,500                        *

Genice Akins                                                     28,500                        *

Robert Lester Foster                                             32,357                        *

Dorothy Ellerbe & Travis Ellerbe                                 13,611                        *

A.A. Capital Ventures, LLC                                      116,309                        *

Barry E. Mitchell                                                37,256                        *

Reynolds Technologies, Inc.                                      81,462                        *

Tyrone Moore                                                     74,775                        *

John R. Sarabia                                                  29,565                        *

Don L. Calhoun                                                    6,257                        *

Alex Greene                                                       3,303                        *
                                              -------------------------  -----------------------
     Total                                                    6,367,585                    14.79
                                              =========================  =======================

*     Less than 1% of total outstanding shares per Rule 507



                                        27

                              PLAN OF DISTRIBUTION

     We anticipate that the Selling Shareholders sell their shares directly into
the market on the NASD's Electronic Bulletin Board.  The prices that the Selling
Shareholders  receive will be determined by market conditions.  These shares may
be  sold  by the Selling Shareholders, as the case may be, from time to time, in
one  or more transactions.  We do not intend to enter into any arrangements with
any securities dealers concerning solicitation of offers to purchase the shares.

     Commissions  and  discounts  paid  in connection with the sale of shares by
Selling  Shareholders  will  be determined through negotiations between them and
the  broker-dealers  through  or  to which the securities are to be sold and may
vary,  depending on the broker-dealers fee schedule, the size of the transaction
and  other factors. The separate costs of the Selling Shareholders will be borne
by  them.  The  Selling  Shareholders  and  any  broker-dealer  or  agent  that
participates  with the Selling Shareholder in the sale of the shares by them may
be  deemed  an  "underwriter"  within the meaning of the Securities Act, and any
commissions  or  discounts  received  by  them  and  any  file reports and other
information  with  the Commission. All such reports and other information may be
inspected  and  copied at the Commission's public reference facilities described
above.  The  Commission  maintains  a  web site that contains reports, proxy and
information  statements  and  other  information  regarding  issuers  that  file
electronically  with  the  Commission.  The  address  of  such  site  is
http://www.sec.gov. In addition, we intend to make available to its shareholders
annual reports, including audited financial statements and such other reports as
we  may  determine.


                                       28

                            DESCRIPTION OF SECURITIES

     The  Company is authorized to issue two hundred fifty million (250,000,000)
shares  of  stock,  $.001  par  value,  in  classes  as  follows:

     a.   Two  hundred  million  (200,000,000)  shares  of  stock  designated as
          "Common  Stock",  of  which  one  hundred thousand (100,000) shares of
          stock  shall be designated as "Class B Common Stock", $.001 par value.
          The  holders  of  Common  Stock  shall  be  entitled  to  receive such
          dividends  out of the funds or assets of the Company legally available
          therefore  as,  from time to time, the Board of Directors may declare.
          The  holders  of Class B Common Stock shall not be entitled to receive
          dividends.  The  holders  of  Common  Stock and the holders of Class B
          Common  Stock shall vote as a single class on all matters submitted to
          a  vote  of  stockholders, with each share of Common Stock entitled to
          one  (1)  vote  and each share of Class B Common Stock entitled to one
          thousand  (1,000)  votes.  In  all other aspects, the Common Stock and
          Class  B  Common  Stock  shall  be  identical.

     b.   Fifty  million  (50,000,000)  shares of stock designated as "Preferred
          Stock",  $.001  par  value.  The  Board  of  Directors  is granted the
          authority  by resolution to authorize the Company to issue one or more
          series of the Preferred Stock and to determine the voting powers, full
          or  limited,  or  no voting powers, and such designations, preferences
          and  relative, participating, optional or other special rights of each
          and  every  series  of  Preferred  Stock  and  the  qualifications,
          limitations  or  restrictions  on  such  preferences  and/or  rights.

     Class  A  Common stockholders are entitled to receive such dividends out of
the  funds  or assets of the Company legally available therefor as, from time to
time,  the Board may declare.  Upon liquidation, Class A Common stockholders are
entitled  to distribution of any remaining assets after payment of all creditors
and  payment of the liquidation preferences of the Class A and Class B Preferred
Stock.  Class  A  Common  stockholders, as holders, have no preemptive rights to
receive  offers for additional stock issued by the Company.  The Baker Group, by
agreement,  has  a  right  to  purchase  or  receive  from Mr. Bernstein, or any
affiliate of Mr. Bernstein, 35% of all Class A Common Stock Mr. Bernstein or any
such  affiliate  purchases  or  receives  from the Company at the same price Mr.
Bernstein  or  such  affiliate  pays  for  such  stock.

     In  electing  directors, if one or more Stockholders or their proxy deliver
written  notice  to the Secretary of the Company prior to the meeting, or to the
Chairperson prior to the vote for directors, all Stockholders may cumulate their
votes  in  electing  directors.  If  and  only  if  such  notice is given, every
Stockholder  entitled  to  vote  for  directors  shall  have the number of votes
determined by multiplying the number of directors to be elected by the number of
shares  the  Stockholder  is entitled to vote and each Stockholder may then give
one  nominated  candidate  all  such  votes  or  distribute  such  votes  in any
proportion  among  the  nominated  candidates.

     The Company's Certificate of Incorporation provides that the designation of
powers, preferences and rights, including voting rights, if any, qualifications,
limitations  or  restrictions on Preferred Stock is to be fixed by resolution or
resolutions  of  the  Board  of  Directors.

     On  April  28,  1997,  the Company filed with the Secretary of State of the
State  of  Delaware  a  Certificate of Designation designating 350,000 shares of
preferred  stock  designated  Class  A  Convertible Preferred Stock (hereinafter
referred  to  as  "Class  A  Preferred".)  Class  A  Preferred has a liquidation
preference.  In  the event of liquidation, holders of Class A Preferred have the
right  to  receive  $.72  for  each  share of Class A Preferred held; before any
payment is made or any assets are distributed to holders of Common Stock, or any
other  stock of any other series or class ranking junior to these shares. In the
event  of  liquidation, holders of Class A Preferred are not entitled to payment
beyond  $.72  per  share.  These  provisions  may  have  the effect of delaying,
deferring  or preventing a change in control. Each share of Class A Preferred is
convertible  into  common  stock at the discretion of the holder, at the rate of
one  share  of  Class  A Preferred for each .72 share of common stock. Thus, the
350,000  outstanding  shares  of  Class  A  Preferred Stock are convertible into
486,111  shares  of  Class A Common Stock. Under the Certificate of Designation,
the  Company  is  not  permitted to issue stock which is senior to or pari passu
with  Class  A  Preferred without prior consent of a majority of the outstanding
Class  A  Preferred  shares.  Adjustment  of  the  number  of  Class A Preferred
outstanding  is provided for in the event of any reclassification of outstanding
securities  or  of the class of securities which are issuable upon conversion of
shares  and  in  the event of any reorganization of the Company which results in
any  reclassification  or change in the number of shares outstanding. Similarly,
in  the  event of any such change, the conversion price is subject to adjustment
to  reflect  such  change.  If at any time while shares of Class A Preferred are
outstanding a stock dividend on the Common Stock is issued, the conversion price
will  be  adjusted  to  prevent any dilution of the holders of Class A Preferred
right  of  conversion.  If  (a)  there  is  a  reclassification or change in the
Company's  Common  Stock  to  which  the Class A is convertible other than stock
splits  or  other  decrease or increase in the number of shares outstanding, (b)
the  Company consolidates or merges with another corporation, or (c) the Company
sells  or  transfers substantially all of its assets, then the Class A Preferred
shareholders  are  entitled  to  the  same consideration as they would have been
entitled  to  if  their shares had been converted prior to the reclassification,
change,  consolidation,  merger,  sale, or transfer. This provision may have the


                                       29

effect  of  delaying, deferring or preventing a change in control. Voting rights
and  the right to receive dividends inherent in Class A Preferred are similar to
those  rights  of  the  Common  Stock.

     On  April 28, 1997, the Company filed a Certificate of Designation bringing
into existence a Class B Preferred Stock.  Class B Preferred Stock is junior and
subordinate to Class A Convertible Preferred Stock.  One hundred (100) shares of
Class  B Preferred Stock were authorized from the 550,000 undesignated preferred
shares.  Fifteen  (15)  shares  have  been  issued to Tensiodyne in exchange for
canceling  its  15  Class  B  Preferred  shares  in  Matech  1.  In the event of
liquidation,  dissolution  or  winding  up  of the Company, whether voluntary or
involuntary,  holders of Class B Preferred Stock are entitled to receive $10,000
per share as a liquidation preference.  This liquidation preference is senior to
liquidation  rights of all other classes of stock except the Class A Preferred's
liquidation  rights.  This  provision may have the effect of delaying, deferring
or  preventing  a change in control.  At any time, the Company has the option to
redeem  Class B Preferred stock for $10,000 per share plus any unpaid dividends.
At any time after January 31, 2002, holders have the right to compel the Company
to  redeem their shares for $10,000 per share plus any unpaid dividends. Holders
have  the  right  to  receive  cash  dividends as determined by a formula in the
Certificate of Designation which reads as follows: "Each time a cash dividend is
paid  on  the  Common  Stock  there  shall  also  be  paid  with respect to each
outstanding share of Class B Preferred Stock an amount determined by multiplying
the  aggregate amount of the dividend paid with respect to the Common Stock by a
fraction  (i)  the  numerator  of which is 3,214,480 and (ii) the denominator of
which  is  the  number of shares of Common Stock on which the dividend was paid,
and  (x)  multiplying the resulting product by thirty percent (30%) and then (y)
dividing  the resulting product by five hundred and ten (510)." Holders of Class
B  Preferred  Stock  shall  have one (1) vote per share and shall be entitled by
class  vote to elect one (1) director and to vote, as a class, on removal of any
director  so  elected.  Otherwise,  holders of Class B Preferred Stock shall not
have  the  right  to  vote  as  a  class  on  any  matter.

CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS
(SEE  NOTE  11  TO  FINANCIAL  STATEMENTS.)

     From  time to time, Robert M. Bernstein advanced us funds.  At December 31,
2000,  all  such  advances  had  been  repaid.  The  Board  approved  paying Mr.
Bernstein  interest  at  the  rate  of  10%  per year on his advances. Robert M.
Bernstein is under no obligation to make further advances to the Company but may
continue to so do at his sole discretion.  See Note 11r to Financial Statements.

     In  August,  1997,  the  Board  signed a resolution recognizing our extreme
dependence  on  the  experience,  contacts,  and  efforts  of  Mr. Bernstein and
authorized to pay him a salary of $150,000 a year since 1991.  In February 2001,
our Board authorized the issuance of 6,000,000 shares of our common stock to Mr.
Bernstein  for $600,000 of past compensation due to him.  This amount represents
the difference between the $150,000 a year and the compensation actually accrued
during  the  years  1991  through  2000.

     On  May  25,  2000,  we  issued  4,650,000  shares  of  common stock to Mr.
Bernstein  in  exchange for $4,650 and a $1,855,350 non-recourse promissory note
bearing  interest  at  an  annual  rate of 8%.  Approximately 1,500,000 of these
shares  are subject to an option to purchase by a third party.  On the same day,
we  issued 350,000 shares of our common stock to a Director in exchange for $350
and  a  $139,650 non-recourse promissory note bearing interest at an annual rate
of  8%.  Both  notes  mature  on  May  25,  2005, when the principal and accrued
interest  becomes  fully  due  and  payable.

     On October 27, 2000, we issued 4,183,675 shares to Mr. Bernstein for future
compensation pursuant to a Stock Escrow/Grant Agreement.  Under the terms of the
agreement,  he  is  required to hold these shares in escrow. While in escrow, he
cannot  vote  the  shares but has full rights as to cash and non-cash dividends,
stock  splits  or  other  change  in shares. Any additional shares issued to Mr.
Bernstein  by  reason  of  the  ownership  of  the 4,183,675 shares will also be
escrowed  under  the  same  terms of the agreement. Upon the exercise by certain
holders of options or warrants or upon the need by us, in the sole discretion of
the  Board, to issue common stock to certain individuals or entities, the number
of shares required for issuance to these holders will be returned from escrow by
Mr.  Bernstein  thereby reducing the number of shares he holds.  The shares held
in  escrow  are  non-transferable and will be granted to Mr. Bernstein only upon
the  exercise or expiration of all of the options and warrants, the direction of
the  Board, in its sole discretion, or the mutual agreement by Mr. Bernstein and
the  Board  of Directors to terminate the agreement.  We  valued these shares at
par.  Upon the actual grant of the remaining shares to Mr. Bernstein, the shares
issued  will  be valued at market value when issued and charged to operations as
compensation.  See  Exhibit  4.3.

     On  January  9,  2001,we  authorized  the issuance of 100,000 shares of our
common  stock  to William Berks, a part-time employee, for engineering and other
services  rendered  to  us.

     On  January  8,  2001,  we authorized the issuance of 100,000 shares of our
common  stock  to  Dr.  Campbell  Laird,  an advisory board member, for services
rendered.


                                       30

     On  January  9,  2001,we  authorized  the issuance of 100,000 shares of our
common stock to John Goodman, a director and part-time employee, for engineering
and  other  services  rendered.

     On  January  9,  2001,  we  authorize the issuance of 100,000 shares of our
common  stock  to  William  Berks,  vice  president of government contracts, for
engineering  and  other  services  rendered.

     On February 19, 2001, we authorized the issuance of 6,000,000 shares of our
common  stock  to  Robert  M.  Bernstein  for  compensation  due.  Approximately
1,500,000 of these shares are subject to an option that Mr. Bernstein granted to
a  group  of investors in July, 1998, in connection with the settlement of a law
suit  between  these  investors,  us  and  Mr.  Bernstein.

     On  October  4,  2001,  we authorized the issuance of 300,000 shares of our
common  stock  each  to  William Berk and to John Goodman for services rendered.

TRANSFER  AGENT

     The  transfer  agent  for  the  common  stock  of  the Company is Interwest
Transfer  Company,  Inc.,  1981  E.  4800  South, Ste. 100, Salt Lake City, Utah
84117,  and  its  telephone  number  is  (801)  272-9294.


                                  LEGAL MATTERS

     The  legality  of  the  shares offered hereby will be passed upon for us by
Gary  C.  Wykidal  &  Associates.


                                     EXPERTS

     The  audited  financial  statements  included  in this Prospectus have been
audited  by  Jonathan P. Reuben, Independent Certified Public Accountant, to the
extent  and  for the periods set forth in his report thereon and are included in
reliance  upon such report given upon the authority of such firm as an expert in
accounting  and  auditing.


                            INTEREST OF NAMED EXPERTS

     The  legality  of  the shares is being passed on by Gary C. Wykidal who has
received  securities  in  the  Company  as  partial  payment  for  legal  fees.


                             ADDITIONAL INFORMATION

     The  Company  has  filed  a Registration Statement under the Securities Act
with  respect  to the securities offered hereby with the Securities and Exchange
Commission.  This  Prospectus,  which  is  a part of the Registration Statement,
does  not contain all of the information contained in the Registration Statement
and the exhibits and schedules thereto.  Certain items are omitted in accordance
with  the rules and regulations of the Commission.  For further information with
respect  to  the Company and the securities offered hereby, reference is made to
the  Registration Statement, including all exhibits and schedules thereto, which
may be inspected and copied at the public reference facilities maintained by the
Commission  at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
its  Regional Offices located at 7 World Trade Center, New York, New York 10048,
and  at  Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661  at  prescribed rates during regular business hours.  Statements contained
in  this Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract  or  document  filed  as an exhibit to the Registration Statement, each
such  statement  being qualified in its entirety by such reference.  The Company
will  provide, without charge upon oral or written request of any person, a copy
of  any  information  incorporated  by reference herein.  Such request should be
directed  to  Material  Technologies, Inc. at 11661 San Vicente Blvd., Ste. 707,
Los  Angeles,  California  90049,  telephone  (310)  208-5589.


                                       31

                            BACK COVER OF PROSPECTUS

     No  dealer,  salesman or other person is authorized to give any information
or  to  make  any representations not contained in this Prospectus in connection
with  the  offer  made  hereby,  and,  if  given  or  made,  such information or
representations  must  not be relied upon as having been authorized by us.  This
Prospectus does not constitute an offer to sell or a solicitation to an offer to
buy  the  securities  offered  hereby  to  any  person  in  any  state  or other
jurisdiction in which such offer or solicitation would be unlawful.  Neither the
delivery  of  this  Prospectus  nor  any  sale  made  hereunder shall, under any
circumstances,  create  any implication that the information contained herein is
correct  as  of  any  time  subsequent  to  the  date  hereof.

                                TABLE OF CONTENTS

PROSPECTUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   6
PROSPECTUS SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . .   7
FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . . .   8
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   9
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
MARKET PRICE OF REGISTRANT'S COMMON STOCK . . . . . . . . . . . . . . .  13
PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
DEVELOPMENT OF TECHNOLOGIES . . . . . . . . . . . . . . . . . . . . . .  16
MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
SELLING SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . .  24
PLAN OF DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . . .  27
DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . .  27
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
INTEREST OF NAMED EXPERTS . . . . . . . . . . . . . . . . . . . . . . .  30
ADDITIONAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . .  30


                          MATERIAL TECHNOLOGIES, INC.

                                6,367,585 SHARES

                                   PROSPECTUS

                               February   , 2002




                                       32

                          MATERIAL TECHNOLOGIES, INC.

                                    PART II

Item  24.  Indemnification  of  Directors  and  Officers

     In  accordance  with  Delaware  general  corporation  law,  the Company has
included  a  provision in its Certificate of Incorporation to limit the personal
liability  of  its  directors  for  violation  of fiduciary duty.  The provision
serves to eliminate such directors' liability to the Company or its stockholders
for  monetary  damages,  except  for  (i)  any  breach of the director's duty of
loyalty  to  the Company or its stockholders, (ii) acts of omissions not in good
faith  or  which  involve  intentional misconduct or a knowing violation of law,
(iii)  unlawful payment of dividends or unlawful stock purchases or redemptions,
or  (iv)  any  transaction  from  which  a director derived an improper personal
benefit.

     Insofar as indemnification for liabilities arising under the Securities Act
of  1933  being  permitted  to  directors,  officers, or persons controlling the
Company  pursuant  to  the  foregoing  provisions, the Company has been informed
that,  in  the  opinion  of  the  Securities  and  Exchange  Commission,  such
indemnification  is  against public policy as expressed in the Securities Act of
1933  and  is  therefore  unenforceable.

Item 25.  Other Expenses of Issuance and Distribution

     Filing  fee  under  the  Securities  Act of 1933               $     76.15
     Printing  and  Engraving  (1)                                  $    500.00
     Blue  Sky  Fees                                                $  1,000.00
     Auditing  Fees  (1)                                            $  5,000.00
     Legal  Fees  (1)                                               $ 25,000.00
     Miscellaneous  (1)                                             $  2,000.00
                                                                    -----------
     TOTAL                                                          $ 33,576.15

(1)  Estimates


Item  26.  Recent  Sales  of  Unregistered  Securities

     At  various  times  during  2000, we issued common stock to various persons
relying  on  Section4(2)  of  the  Securities  Act of 1933.  Each and every such
person  has  been  associated  with  us  in  some  way, is sophisticated, and is
familiar  with  our  business  and  our  financial  position.

     On  January  12,  2000,  the Board authorized the issuance of up to 110,000
shares  of  common  stock  to  a  group  of  approximately 22 investors who were
defrauded  by  a  former consultant to us in exchange for an assignment of their
claims  to  us and a release of all claims against us. During January, February,
and  August 2000, we issued 65,028 shares of our common stock to these investors
in  exchange  for  an  assignment  and  release  of  claims.

     On January 27, 2000, we issued 40,000 shares of our Class B common stock to
Robert  M.  Bernstein  in  exchange  for  40,000  shares  of  common stock.  Mr.
Bernstein, therefore, owns 100,000 shares of Class B common stock that has 1,000
votes  per  share.  Therefore,  Mr.  Bernstein's  Class  B  common  stock  has
100,000,000  votes  and  gives  him  effective  control  of  the  Company.

     On  January  31,  2000,  we  issued  50,000 shares of common stock to David
Haberman,  a  new  member  of  the  advisory  board.

     On  February  8,  2000,  we  issued  10,000  shares  of  common  stock to a
consultant  for  services.

     On February 28, 2000, we issued 200,000 of common stock to a consultant for
financial  services.  Also on February 28, 2000, we issued 4,500 of common stock
to  a  public  relations  consultant.

     On  March  9,  2000,  we  issued 100,000 of common stock to a consultant in
cancellation  of  $100,000  due.


                                       33

     On  March  13,  2000, we issued two consultants a total of 75,000 shares of
common  stock  for  services  relating  to  the development of our Fatigue Fuse.

     On  March 29, 2000, we issued 50,000 shares of common stock to a consultant
for  services.

     On  April 11, 2000, we issued 15,000 shares of common stock to a consultant
relating  to  the  operations  of  a   joint  venture.

     On  April  11,  2000,  we issued 25,000 shares of common stock for advisory
services.

     On April 12, 2000, we filed a registration statement to increase the number
of  shares  of  common  stock  that may be issued under our 1998 Stock Plan from
1,800,000  to  6,800,000  shares  of  common  stock.

     On  April  28,  2000,  we issued 30,000 shares of common stock for advisory
services.

     On May 25, 2000, we issued to our President, Robert M. Bernstein, 4,650,000
shares  of  common  stock  in  exchange for $4,650 and a $1,855,350 non-recourse
promissory  note  bearing interest at an annual rate of 8%.  On the same day, we
issued 350,000 shares of our common stock to a Director in exchange for $350 and
a  $139,650  non-recourse  promissory note bearing interest at an annual rate of
8%.  Both  notes mature on May 25, 2005, when the principal and accrued interest
are  due  and  payable.

     On  July  13,  2000,  we  issued  40,000  shares  of common stock for legal
services.

     On October 27, 2000, we issued 4,183,675 shares to our President, Robert M.
Bernstein,  for  future compensation pursuant to a Stock Escrow/Grant Agreement.
Under the terms of the agreement, Mr. Bernstein is required to hold these shares
in escrow.  While in escrow, he cannot vote the shares but has full rights as to
cash  and  non-cash  dividends,  stock  splits  or  other change in shares.  Any
additional  shares  issued  to  Mr.  Bernstein by reason of the ownership of the
4,183,675  shares  will  also be escrowed under the same terms of the agreement.

     On  November  14,  2000, we issued 400,000 shares of common stock to one of
our  stockholders  in  exchange  for  $22,490.

     On  December  13,  2000, we issued 250,000 shares of our common stock to an
individual  to  settle  a  lawsuit  brought  against  us.

     On  December  19,  2000,  we issued 200,000 shares of our common stock to a
consultant.

     On  January  8,  2001,  we  issued  50,000  shares of our common stock to a
consultant  for  technical  services  rendered.

     On  January  8,  2001,  we issued 100,000 shares of our common stock to Dr.
Campbell  Laird,  an  advisory  board  member,  for  services  rendered.

     On January 9, 2001, we issued 100,000 shares of our common stock to William
Berks,  an  officer  and  part-time employee, for engineering and other services
rendered.

     On  January  9,  2001,we  issued 100,000 shares of our common stock to John
Goodman,  a  director and part-time employee, for engineering and other services
rendered.

     On February 19, 2001, we issued 6,000,000 shares of our common stock to Mr.
Bernstein  for  past  compensation due.  Approximately 1,500,000 of these shares
are  subject to an option that Mr. Bernstein  granted to a group of investors in
July  1998  in  connection  with  the  settlement  of  a  lawsuit  between these
investors,  the  Company, and  Mr. Bernstein.  See, Notes 10e, 11, 12, and 13 of
the  Financial  Statements

Item  27.  Exhibits  and  Financial  Statement  Schedules

a.     Exhibits.

Exhibit  No.  Description  of  Document

3(i)          Certificate  of  Incorporation  of  Material  Technologies,  Inc.


                                       34

              Certificate  of  Amendment,  February  16,  2000(1)

              Certificate  of  Amendment,  July  12,  2000(2)

              Certificate  of  Amendment,  July  19,  2000(4)

              Certificate  of  Amendment,  July  31,  2000(2)

              Certificate  of  Amendment,  October  16,  2001(4)

3(ii)         Bylaws  of  Material  Technologies,  Inc.(1)

4.1           Class  A  Convertible  Preferred  Stock
              Certificate  of  Designations(1)

4.2           Class  B  Convertible  Preferred  Stock
              Certificate  of  Designations(1)

4.3           Material  Technologies,  Inc.  Stock  Escrow/Grant(2)

10.1          License  Agreement  Between  Tensiodyne  Corporation  and
              the  Trustees  of  the  University  of  Pennsylvania(1)

10.2          Sponsored  Research  Agreement  between Tensiodyne Corporation and
              the  Trustees  of  the  University  of  Pennsylvania(1)

10.3          Amendment  1  to  License  Agreement Between Tensiodyne Scientific
              Corporation  and the Trustees of the University of Pennsylvania(1)

10.4          Repayment  Agreement Between Tensiodyne Scientific Corporation and
              the  Trustees  of  the  University  of  Pennsylvania(1)

10.5          Teaming  Agreement  Between  Tensiodyne Scientific Corporation and
              Southwest  Research  Institute(1)

10.6          Letter  Agreement  between  Tensiodyne  Scientific  Corporation,
              Robert  M.  Bernstein,  and  Stephen  Forrest Beck and Handwritten
              modification(1)

10.7          Agreement Between Tensiodyne Corporation and Tensiodyne 1985-1 R&D
              Partnership(3)

10.8          Amendment  to  Agreement  Between  Material Technologies, Inc. and
              Tensiodyne  1985-1  R&D  Partnership(3)

10.9          Agreement  Between  Advanced  Technology  Center  of  Southeastern
              Pennsylvania  and  Material  Technology,  Inc.(3)

10.10         Addendum  to  Agreement  Between  Advanced  Technology  Center of
              Southeastern  Pennsylvania  and  Material  Technologies,  Inc.(3)

10.11         Agreement  Between Allied Boston International, Inc. and Material
              Technologies,  Inc.(4)

23            Consents  of  Experts  and  Counsel

23.1          Consent  of  Jonathan  P.  Reuben,  Certified  Public  Accountant

23.2          Consent  of  Gary  C.  Wykidal  &  Associates


                                       35

------------------------

     1.   Previously  filed  in  connection with S-1Registration Statement which
          became  effective  on  July  31,  1997.
     2.   Previously  filed.
     3.   Previously  filed  in connection with S-1 Registration Statement which
          became  effective  on  January  19,  1996.
     4.   Filed  herein.

b.     Reports  on  Form  8-K  -  none.

c.     Financial  Statements  -  attached.

Item  28.  Undertakings.

(a)  The  undersigned  small  business  issuer  hereby  undertakes:

     (1)     To  file, during any period in which it offers or sells securities,
a  post-effective  amendment  to this Registration Statement to: (i) include any
prospectus  required  by Section 10(a)(3) of the Securities Act; (ii) reflect in
the  Prospectus any facts or events which, individually or together, represent a
fundamental  change  in the information in the Registration Statement; and (iii)
include  any  material  or  changed  information  in  the  plan of distribution.

     (2)     For  determining  liability  under  the  Securities Act of 1933, as
amended  (the  "Act"), treat each post-effective amendment as a new registration
statement  of  the  securities offered, and the offering of the securities as at
that  time  to  be  the  initial  bona  fide  offering  thereof.

     (3)     File  a post effective amendment to remove from registration any of
the  securities  that  remain  unsold  at  the  end  of  the  offering.

(b)     To  provide  to  the  underwriter  at  the  Closing  specified  in  the
underwriting agreement certificates in such denominations and registered in such
names  as  may  be required by the underwriter to permit prompt delivery to each
purchaser.

(c)     Insofar  as indemnification for liabilities arising under the Act may be
permitted  to  directors, officers and controlling persons of the small business
issuer  pursuant  to  the foregoing provisions, or otherwise, the small business
issuer  has  been  advised  that  in  the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.  In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer in
the  successful  defense  of any action, suit or proceeding) is asserted by such
director,  officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
that  matter  has  been  settled  by controlling precedent, submit to a court of
appropriate  jurisdiction  the  question  whether  such indemnification by it is
against  public policy as expressed in the Act and will be governed by the final
adjudication  of  such  issue.

(d)     The  undersigned  small  business issuer hereby undertakes that it will:

     (1)     For  purposes  of  determining any liability under the Act that the
information  omitted  from  the  form  of  prospectus  filed  as  part  of  this
Registration  Statement  in  reliance  upon Rule 430A and contained in a form of
prospectus  filed  by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under  the Act shall be deemed to be a part of this Registration Statement as of
the  time  the  Commission  declared  it  effective.

     (2)     For  the  purpose  of determining any liability under the Act, that
each  post-effective  amendment  that  contains  a  form  of prospectus as a new
registration statement for the securities offered in the registration statement,
and  that  offering  of  the  securities  at  that time as the initial bona fide
offering  of  those  securities.

                                   SIGNATURES

     In  accordance  with  the  requirements  of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of  the  requirements  for  filing on Form SB-2 and authorizes this Registration
Statement  to  be  signed  on  its behalf by the undersigned, in the city of Los
Angeles,  State  of  California,  on  the  4th  day  of  February,  2002.


                                       36


                          MATERIAL TECHNOLOGIES, INC.

                            By:    /s/  Robert M. Bernstein
                            -------------------------------
                            Robert M. Bernstein, President

     Each  person whose signature appears below hereby constitutes and appoints,
Robert  M.  Bernstein,  his  or  her true and lawful attorneys-in-fact with full
power  of  substitution, for him or her and in his or her name, place and stead,
in  any  and  all  capacities,  to  sign  any  and  all  amendments  (including
post-effective  amendments)  to  this  Registration Statement, and to sign a new
registration  statement filed to register additional securities pursuant to Rule
462(b) under the Securities Act of 1933, as amended, and to cause the same to be
filed,  with  all  exhibits thereto and other documents in connection therewith,
with  the  Securities  and  Exchange  Commission,  hereby  granting  to  said
attorneys-in-fact and agent, full power and authority to do and perform each and
every  act  and  thing whatsoever requisite or desirable to be done in and about
the  premises,  as fully to all intents and purposes as the undersigned might or
could  do  in  person,  hereby ratifying and confirming all acts and things that
said  attorneys-in-fact  and  agents,  or  their  substitutes or substitute, may
lawfully  do  or  cause  to  be  done  by  virtue  hereof.

     Pursuant  to  the  requirements  of  the  Securities  Act  of  1933,  this
Registration  Statement  has been signed by the following persons on the 4th day
of  February,  2002,  in  the  capacities  indicated.

MATERIAL  TECHNOLOGIES,  INC.



     /s/  Robert  M.  Bernstein
Robert  M.  Bernstein,  President

     Pursuant  to the requirements of the Securities Exchanges Act of 1933, this
report  has  been  signed  below  by  the  following  persons  on  behalf of the
registrant  and  in  the  capacities  and  on  the  dates  indicated.


By:    /s/  Robert  M.  Bernstein
     Robert  M.  Bernstein,  President,  Director,
     Chief Executive Officer, and Chief Financial Officer
     (Principal Executive Officer, Principal Financial Officer,
     and  Principal  Accounting  Officer)


By:    /s/  Joel  Freedman
     Joel  Freedman,  Secretary  and  Director


By:    /s/  John  Goodman
     John  Goodman,  Director


                                       37

                           MATERIAL TECHNOLOGIES, INC.
                          (A Development Stage Company)
                              FINANCIAL STATEMENTS


                                    Contents

                                                                            Page

     Independent  Auditors'  Report                                          F-1

     Balance  Sheets                                                         F-2

     Statements  of  Operations                                              F-4

     Statements  of  Comprehensive  Loss                                     F-5

     Statement  of  Stockholders'  Equity  (Deficit)                         F-6

     Statements  of  Cash  Flows                                            F-14

     Notes  to  Financial  Statements                                       F-16


                                       38

                          INDEPENDENT AUDITORS' REPORT


Board  of  Directors
Material  Technologies,  Inc.
Los  Angeles,  California


We  have audited the accompanying balance sheets of Material Technologies, Inc.,
(A  Development Stage Company) as of December 31, 1999 and 2000, and the related
statements  of  operations,  comprehensive  income  (loss), stockholders' equity
(deficit), and cash flows, for the years ended December 31, 1998, 1999, and 2000
and  for  the  period  from  the  Company's inception (October 21, 1983) through
December  31,  2000.  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  audits.

We  conducted  our  audits  in  accordance  with  generally  accepted  auditing
standards.  These  standards  require  that  we  plan  and perform the audits to
obtain  reasonable  assurance about whether the financial statements are free of
material  misstatement.  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 provide 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 Material Technologies, Inc. as
of  December  31,  1999  and  2000,  and  the  results  of  its  operations, its
comprehensive  loss,  and  its cash flows for the years ended December 31, 1998,
1999,  and  2000, and for the period from Company's inception (October 21, 1983)
through  December  31,  2000,  in  conformity with generally accepted accounting
principles.

                                            /s/  Jonathon  P.  Reuben  CPA

                                            Jonathon P. Reuben,
                                            Certified Public Accountant
                                            Torrance,  California
                                            March  19,  2001



                                       F-1



                                MATERIAL TECHNOLOGIES, INC.
                               (A Development Stage Company)
                                      BALANCE SHEETS

                                          ASSETS

                                          December 31,

                                      1999         2000
                                   -----------  ----------
                                          
CURRENT ASSETS
  Cash and Cash Equivalents        $    62,904  $    1,954
  Accounts Receivable                  144,796      33,932
  Advances to Officer                        -      22,052
  Employee Advance                       1,500           -
                                   -----------  ----------
    TOTAL CURRENT ASSETS               209,200      57,938
                                   -----------  ----------

FIXED ASSETS
  Property and Equipment, Net
      of Accumulated Depreciation        3,949       2,990
                                   -----------  ----------

OTHER ASSETS
  Investments                           20,055      33,000
  Intangible Assets, Net of
    Accumulated Amortization            14,701      12,712
  Refundable Deposit                     2,136       2,136
                                   -----------  ----------

    TOTAL OTHER ASSETS                  36,892      47,848
                                   -----------  ----------

    TOTAL ASSETS                   $   250,041  $  108,776
                                   ===========  ==========



                             See accompanying notes.
                                      F-2



                                          MATERIAL TECHNOLOGIES, INC.
                                         (A Development Stage Company)
                                                 BALANCE SHEETS


                                    LIABILITIES AND STOCKHOLDERS'  (DEFICIT)
                                    ----------------------------------------

                                                                             December 31,
                                                                          1999             2000
                                                                    ----------------  ---------------
                                                                                
CURRENT LIABILITIES
  Legal Fees Payable                                                $       145,900   $      209,306
  Fees Payable to R&D Subcontractor                                         101,322           20,474
  Consulting Fees Payable                                                   159,000           50,000
  Accounting Fees Payable                                                    24,153           26,288
  Other Accounts Payable                                                     18,122           10,157
  Accrued Expenses                                                           24,269           24,982
  Accrued Wages Due Officer                                                       -           40,000
  Note Payable - Current Portion                                             25,688           25,688
  Loan Payable - Officer                                                     10,270                -
  Loans Payable-Others                                                       58,319           54,160
                                                                    ----------------  ---------------

    TOTAL CURRENT LIABILITIES                                               567,043          461,055

Payable on Research and
   Development Sponsorship                                                  303,543          358,181
Notes Payable - Other                                                             -                -
                                                                    ----------------  ---------------

    TOTAL LIABILITIES                                                       870,586          819,236
                                                                    ----------------  ---------------


STOCKHOLDERS'  (DEFICIT)
  Class A Common Stock, $.001 Par Value, Authorized 100,000,000
     Shares, Outstanding 14,597,435 Shares at December 31, 1999,
     and 24,618,167 Shares at  December 31, 2000                             14,597           24,618
  Class B Common Stock, $.001 Par Value, Authorized 100,000
     Shares, Outstanding 100,000 Shares                                          60              100
   Class A Preferred, $.001 Par Value, Authorized 900,000 Shares
     Outstanding 350,000 Shares at December 31, 1999, and 337,471
     Shares at December 31, 2000                                                350              337
  Additional Paid in Capital                                              3,455,004        5,909,782
  Less Notes and Subscriptions Receivable - Common Stock                    (39,694)      (2,133,251)
  Deficit Accumulated During the Development Stage                       (4,052,917)      (4,512,046)
  Unrealized Holding Gain on Investment Securities                            2,055                -
                                                                    ----------------  ---------------

  TOTAL STOCKHOLDERS' (DEFICIT)                                            (620,545)        (710,460)
                                                                    ----------------  ---------------

    TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)                   $       250,041   $      108,776
                                                                    ================  ===============



                                  See accompanying notes.
                                      F-3



                                                           MATERIAL TECHNOLOGIES, INC.
                                                          (A Development Stage Company)
                                                             STATEMENTS OF OPERATIONS


                                                                                                  From Inception
                                                                                                (October 21, 1983)
                                                                                                      Through
                                                        1998            1999          2000       December 31, 2000
                                                  ----------------  ------------  ------------  -------------------
                                                                                    

 REVENUES
  Sale of Fatigue Fuses                           $             -   $         -   $         -   $           64,505
  Sale of Royalty Interests                                     -             -             -              198,750
  Income from Research and Development Contract           374,324       924,484       635,868            2,983,666
  Test Services                                                 -             -             -               10,870
                                                  ----------------  ------------  ------------  -------------------
    TOTAL REVENUES                                        374,324       924,484       635,868            3,257,791
                                                  ----------------  ------------  ------------  -------------------

COSTS AND EXPENSES
  Research and Development                                252,257       536,237       496,501            2,871,700
  General and Administrative                              792,338       875,444       640,481            4,809,645
                                                  ----------------  ------------  ------------  -------------------
    TOTAL COSTS AND EXPENSES                            1,044,595     1,411,681     1,136,982            7,681,345
                                                  ----------------  ------------  ------------  -------------------
    INCOME (LOSS) FROM OPERATIONS                        (670,271)     (487,197)     (501,114)          (4,423,554)
                                                  ----------------  ------------  ------------  -------------------

OTHER INCOME (EXPENSE)
  Expense Reimbursed                                            -             -             -                4,510
  Interest Income                                               8         2,613       103,419              145,535
  Miscellaneous Income                                          -             -             -               25,145
  Loss on Sale of Equipment                                     -             -             -              (12,780)
  Settlement of Teaming Agreement                               -             -             -               50,000
  Litigation Settlement                                         -             -             -               18,095
  Interest Expense                                        (42,242)      (58,295)      (60,634)            (245,519)
  Modification of Royalty Agreement                        (7,332)            -             -               (7,332)
  Gain on Foreclosure                                           -             -             -               18,697
  Gain on Sale of Stock                                   171,450         4,396             -              207,497
                                                  ----------------  ------------  ------------  -------------------
    TOTAL OTHER INCOME                                    121,884       (51,286)       42,785              203,848
                                                  ----------------  ------------  ------------  -------------------

NET INCOME (LOSS) BEFORE EXTRAORDINARY
  ITEMS AND PROVISION FOR INCOME TAXES                   (548,387)     (538,483)     (458,329)          (4,219,706)
PROVISION FOR INCOME TAXES                                   (800)         (800)         (800)              (9,400)
                                                  ----------------  ------------  ------------  -------------------
    NET INCOME (LOSS) BEFORE
      EXTRAORDINARY ITEMS                                (549,187)     (539,283)     (459,129)          (4,229,106)
 EXTRAORDINARY ITEMS
  Forgiveness of Debt                                           -             -             -             (289,940)
  Utilization of Operating  Loss Carry forward                  -             -             -                7,000
                                                  ----------------  ------------  ------------  -------------------
    NET INCOME (LOSS)                                    (549,187)   $  (539,283)  $  (459,129)  $       (4,512,046)
                                                  ================  ============  ============  ===================

PER SHARE DATA
  Income (Loss) Before Extraordinary Item         $       (0.0625)  $   (0.0440)  $   (0.0243)
  Extraordinary Items                                           -             -             -
                                                  ----------------  ------------  ------------
    NET (LOSS) PER SHARE                                  (0.0625)  $   (0.0440)  $   (0.0243)
                                                  ================  ============  ============
 WEIGHTED AVERAGE  COMMON SHARES OUTSTANDING            8,782,808    12,242,534    18,900,019
                                                  ================  ============  ============



                              See accompanying notes.
                                      F-4



                                                 MATERIAL TECHNOLOGIES, INC.
                                                (A Development Stage Company)
                                              STATEMENTS OF COMPREHENSIVE LOSS


                                                                                               From Inception
                                                                                             (October 21, 1983)
                                                                                                 Through
                                                       1998          1999          2000      December 31, 2000
                                                   -------------  -----------  ------------  ------------------
                                                                                 
    NET (LOSS)                                     $   (539,283)  $ (207,331)  $  (459,129)  $      (4,512,046)

   Other Comprehensive income (loss), net of tax
       Unrealized gain (loss) on securities                   -       (6,164)       (2,054)                  -
                                                   -------------  -----------  ------------  ------------------

       Comprehensive Loss                          $   (539,283)  $ (213,495)  $  (461,183)  $      (4,512,046)
                                                   =============  ===========  ============  ==================



                 See accompanying notes and accountants' report.
                                      F-5



                                                    MATERIAL TECHNOLOGIES, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                            STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)


                                                                                                                         DEFICIT
                                     CLASS A COMMON         CLASS B COMMON     CLASS A PREFERRED STOCK                 ACCUMULATED
                                  ---------------------  ---------------------  ---------------------     CAPITAL      DURING THE
                                    SHARES                 SHARES                 SHARES                IN EXCESS OF   DEVELOPMENT
                                  OUTSTANDING   AMOUNT   OUTSTANDING   AMOUNT   OUTSTANDING   AMOUNT     PAR VALUE       STAGE
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------
                                                                                              
Initial Issuance of Common
  Stock October 21, 1983               2,408   $     2            -   $     -            -   $     -   $      2,498   $         -
Adjustment to Give Effect
   to Recapitalization on
  December 15, 1986
Cancellation of Shares                (2,202)       (2)           -         -            -         -             (2)            -
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------

                                         206         -            -         -            -         -          2,496             -
Balance - October 21, 1983
Shares Issued By Tensiodyne
  Corporation in Connection
  with Pooling of Interests           42,334        14            -         -            -         -          4,328             -
Net (Loss), Year Ended
 December 31, 1983                         -         -            -         -            -         -              -        (4,317)
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------

Balance, January 1, 1984              42,540        14            -         -            -         -          6,824        (4,317)
Capital Contribution                       -        28            -         -            -         -         21,727             -
Issuance of Common Stock               4,815         5            -         -            -         -         10,695             -
Costs Incurred in Connection
  with Issuance of Stock                   -         -            -         -            -         -         (2,849)            -
Net (Loss), Year Ended
 December 31, 1984                         -         -            -         -            -         -              -       (21,797)
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------

Balance, January 1, 1985              47,355        47            -         -            -         -         36,397       (26,114)
Shares Contributed Back
  to Company                            (315)       (0)           -         -            -         -              -             -
Capital Contribution                       -         -            -         -            -         -        200,555             -
Sale of 12,166 Warrants at
  $1.50 Per Warrant                        -         -            -         -            -         -         18,250             -
Shares Cancelled                      (8,758)       (9)           -         -            -         -              9             -
Net (Loss), Year Ended
 December 31, 1985                         -         -            -         -            -         -              -      (252,070)
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------



                 See accompanying notes and accountants' report.
                                      F-6



                                                    MATERIAL TECHNOLOGIES, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                            STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)


                                                                                                                        DEFICIT
                                                                                                                      ACCUMULATED
                                     CLASS A COMMON         CLASS B COMMON     CLASS A PREFERRED STOCK    CAPITAL      DURING THE
                                  ---------------------  ---------------------  ---------------------  -------------  ------------
                                    SHARES                 SHARES                 SHARES                IN EXCESS OF   DEVELOPMENT
                                  OUTSTANDING   AMOUNT   OUTSTANDING   AMOUNT   OUTSTANDING   AMOUNT     PAR VALUE       STAGE
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------
                                                                                              
Balance, January 1, 1986              38,282        38            -         -            -         -        255,211      (278,184)
Net (Loss), Year Ended
 December 31, 1986                         -         -            -         -            -         -              -       (10,365)
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------

Balance, January 1, 1987              38,282        38            -         -            -         -        255,211      (288,549)
Issuance of Common Stock upon
  Exercise of Warrants                   216         -            -         -            -         -         27,082             -
Net (Loss), Year Ended
 December 31, 1987                         -         -            -         -            -         -              -       (45,389)
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------

Balance, January 1, 1988              38,498        38            -         -            -         -        282,293      (333,938)
Issuance of Common Stock
Sale of Stock (Unaudited)              2,544         3            -         -            -         -        101,749             -
Services Rendered (Unaudited)          3,179         3            -         -            -         -         70,597             -
Net (Loss), Year Ended
  December 31, 1988 (Unaudited)            -         -            -         -            -         -              -      (142,335)
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------

Balance, January 1, 1989
  (Unaudited)                         44,221        44            -         -            -         -        454,639      (476,273)
Issuance of Common Stock
Sale of Stock                          4,000         4            -         -            -         -          1,996             -
Services Rendered                     36,000        36            -         -            -         -         17,964             -
Net (Loss), Year Ended
 December 31, 1989                         -         -            -         -            -         -              -       (31,945)
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------

Balance, January 1, 1990              84,221        84            -         -            -         -        474,599      (508,218)
Issuance of Common Stock
Sale of Stock                          2,370         2            -         -            -         -         59,248             -
Services Rendered                      6,480         7            -         -            -         -         32,393             -
Net Income, Year Ended
 December 31, 1990                         -         -            -         -            -         -              -       133,894
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------



                 See accompanying notes and accountants' report.
                                      F-7



                                                    MATERIAL TECHNOLOGIES, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                            STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)


                                                                                                                         DEFICIT
                                     CLASS A COMMON         CLASS B COMMON     CLASS A PREFERRED STOCK               ACCUMULATED
                                  ---------------------  ---------------------  ---------------------     CAPITAL      DURING THE
                                    SHARES                 SHARES                 SHARES                IN EXCESS OF   DEVELOPMENT
                                  OUTSTANDING   AMOUNT   OUTSTANDING   AMOUNT   OUTSTANDING   AMOUNT     PAR VALUE       STAGE
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------
                                                                                              
Balance January 1, 1991               93,071        93            -         -            -         -        566,240      (374,324)
Issuance of Common Stock
Sale of Stock                            647         1            -         -      350,000       350        273,335             -
Services Rendered                      4,371         4            -         -            -         -         64,880             -
Conversion of Warrants                    30         -                                                            -
Conversion of Stock                   (6,000)       (6)      60,000        60            -         -              -             -
Net (Loss), Year Ended
 December 31, 1991                         -         -            -         -            -         -              -      (346,316)
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------

Balance January 1, 1992               92,119        92       60,000        60      350,000       350        904,455      (720,640)
Issuance of Common Stock
Sale of Stock                         20,000        20            -         -            -         -         15,980             -
Services Rendered                      5,400         5            -         -            -         -         15,515             -
Conversion of Warrants                 6,000         6            -         -            -         -         14,994             -
Sale of Class B Stock                      -         -       60,000        60            -         -         14,940             -
Issuance of Stock to
  Unconsolidated Subsidiary            4,751         5            -         -            -         -         71,659             -
Conversion of Stock                    6,000         6      (60,000)      (60)           -         -              -             -
Cancellation of Shares                (6,650)       (7)           -         -            -         -              7             -
Net (Loss), Year Ended
 December 31, 1992                         -         -            -         -            -         -              -      (154,986)
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------

Balance January 1, 1993              127,620       127       60,000        60      350,000       350      1,037,550      (875,626)
Issuance of Common Stock
Licensing Agreement                   12,500        13            -         -            -         -          6,237             -
Services Rendered                     67,030        67            -         -            -         -         13,846             -
Warrant Conversion                    56,000        56            -         -            -         -        304,943             -
Cancellation of Shares               (31,700)      (32)           -         -            -         -         (7,537)            -
Net (Loss) for Year Ended
 December 31, 1993                         -         -            -         -            -         -              -      (929,900)
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------



                 See accompanying notes and accountants' report.
                                      F-8



                                                    MATERIAL TECHNOLOGIES, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                            STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)


                                                                                                                        DEFICIT
                                     CLASS A COMMON         CLASS B COMMON     CLASS A PREFERRED STOCK                 ACCUMULATED
                                  ---------------------  ---------------------  ---------------------     CAPITAL      DURING THE
                                    SHARES                 SHARES                 SHARES                IN EXCESS OF   DEVELOPMENT
                                  OUTSTANDING   AMOUNT   OUTSTANDING   AMOUNT   OUTSTANDING   AMOUNT     PAR VALUE       STAGE
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------
                                                                                              
Balance January 1, 1994              231,449       231       60,000        60      350,000       350      1,355,039    (1,805,526)
Adjustment to Give Effect
  to Recapitalization on
 February 1, 1994                     30,818        31            -         -            -         -        385,393             -
Issuance of Shares for
Services Rendered                    223,000       223            -         -            -         -              -             -
Sale of Stock                      1,486,112     1,486            -         -            -         -         23,300             -
Issuance of Shares for
the Modification of Agreements        34,000        34            -         -            -         -            (34)            -
Net (Loss) for the Year
Ended December 31, 1994                    -         -            -         -            -         -              -      (377,063)
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------

Balance January 1, 1995            2,005,380     2,005       60,000        60      350,000       350      1,763,698    (2,182,589)

Issuance of Common Stock
  in Consideration for
  Modification of Agreement          152,500       153            -         -            -         -              -             -
Net (Loss) for the Year
Ended December 31, 1995 -                  -         -            -         -            -         -              -      (197,546)
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------

Balance January 1, 1996            2,157,880     2,157       60,000        60      350,000       350      1,763,698    (2,380,135)

Issuance of Shares for
  Services Rendered                  164,666       165            -         -            -         -         16,301             -
Sale of Stock                         70,000        70            -         -            -         -        173,970             -
Issuance of Shares for the
  Modification of Agreements         250,000       250            -         -            -         -           (250)            -
Cancellation of Shares Held
  in Treasury                        (62,000)      (62)           -         -            -         -       (154,538)            -
Net (Loss) for the Year
  Ended December 31, 1996                  -         -            -         -            -         -              -      (450,734)
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------



                 See accompanying notes and accountants' report.
                                      F-9



                                                    MATERIAL TECHNOLOGIES, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                            STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)


                                                                                                                        DEFICIT
                                     CLASS A COMMON         CLASS B COMMON     CLASS A PREFERRED STOCK                ACCUMULATED
                                  ---------------------  ---------------------  ---------------------     CAPITAL      DURING THE
                                    SHARES                 SHARES                 SHARES                IN EXCESS OF   DEVELOPMENT
                                  OUTSTANDING   AMOUNT   OUTSTANDING   AMOUNT   OUTSTANDING   AMOUNT     PAR VALUE       STAGE
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------
                                                                                              
Balance January 1, 1997            2,580,546     2,580       60,000        60      350,000       350      1,799,181    (2,830,869)
Sale of Stock                        100,000       100            -         -            -         -         99,900             -
Conversion of Indebtedness           800,000       800            -         -            -         -        165,200             -
Class A Common Stock Issued
in Cancellation of $372,000
Accrued Wages Due Officer          1,499,454     1,500            -         -            -         -        370,500             -
Issuance of Shares for
Services Rendered                    247,000       247            -         -            -         -          2,224             -
Adjustment to Give Effect
to Recapitalization on
9-Mar-1997                           560,000       560            -         -            -         -           (560)            -
Net (Loss) for the Year
Ended December 31, 1997                    -         -            -         -            -         -              -      (133,578)

                                   5,787,000     5,787       60,000        60      350,000       350      2,436,445    (2,964,447)
Shares Issued in Cancellation
of Indebtedness                    2,430,000     2,430            -         -            -         -        167,570             -
Conversion of Options                500,000       500            -         -            -         -        124,500             -
Issuance of Shares for
Services Rendered                  1,121,617     1,122            -         -            -         -        111,040             -
Shares Issued in Cancellation
of Redeemable Preferred Stock         50,000        50            -         -            -         -        149,950             -
Shares Returned to Treasury
and Cancelled                       (560,000)     (560)           -         -            -         -            560             -
Modification
  of Royalty Agreement               733,280       733            -         -            -         -          6,599             -
Issuance of Warrants to Officer            -         -            -         -            -         -         27,567             -
Net (Loss) for the Year
Ended December 31, 1998                    -         -            -         -            -         -              -      (549,187)



                 See accompanying notes and accountants' report.
                                      F-10



                                                    MATERIAL TECHNOLOGIES, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                            STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)


                                                                                                                         DEFICIT
                                     CLASS A COMMON         CLASS B COMMON     CLASS A PREFERRED STOCK                ACCUMULATED
                                  ---------------------  ---------------------  ---------------------     CAPITAL      DURING THE
                                    SHARES                 SHARES                 SHARES                IN EXCESS OF   DEVELOPMENT
                                  OUTSTANDING   AMOUNT   OUTSTANDING   AMOUNT   OUTSTANDING   AMOUNT     PAR VALUE       STAGE
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------
                                                                                              
                                  10,061,897   $10,062       60,000   $    60      350,000   $   350   $  3,024,231   $(3,513,634)
Shares Issued in Cancellation
  of Indebtedness                  2,175,000     2,175            -         -            -         -        164,492             -
Issuance of Shares for
  Services Rendered                1,255,000     1,255            -         -            -         -         93,844             -
Shares Issued in Modification
  of Licensing Agreement             672,205       672            -         -            -         -           (672)            -
Sale of Stock                        433,333       433            -         -            -         -        173,107             -
Net (Loss) for the Year
Ended December 31, 1999                    -         -            -         -            -         -              -      (539,283)
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------

                                  14,597,435   $14,597       60,000   $    60      350,000   $   350   $  3,455,002   $(4,052,917)

Issuance of Shares for
  Services Rendered                  699,500       699            -         -            -         -         83,251             -
Shares Issued to
  Pursuant to Investors
  Settlement Agreement                65,028        65            -         -            -         -            (65)            -
Shares Issued for Cash and
  Non-Recourse Promissory Notes    5,000,000     5,000            -         -            -         -      1,990,000             -
Shares Issued for Cash               400,000       400            -         -            -         -         29,496             -
Shares Issued in Cancellation
of Indebtedness                      100,000       100            -         -            -         -         99,900             -
Shares Issued as Compensation
  Pursuant to Escrow Agreement     4,183,675     4,184            -         -            -         -              -             -
Shares Returned from Escrow         (400,000)     (400)           -         -            -         -            400             -
Common Shares Converted
  into Class B Common                (40,000)      (40)      40,000        40            -         -              -             -
Preferred Shares Converted
  into Common                         12,529        13            -         -      (12,529)      (13)
Net (Loss) for the Year                                                                                           -             -
Ended December 31, 2000                    -         -            -         -            -         -              -      (207,331)
                                  -----------  --------  -----------  --------  -----------  --------  -------------  ------------

  Balance December 31, 2000       24,618,167    24,618      100,000       100      337,471       337      5,657,984    (4,260,248)
                                  ===========  ========  ===========  ========  ===========  ========  =============  ============



                 See accompanying notes and accountants' report.
                                      F-11



                                                        MATERIAL TECHNOLOGIES, INC.
                                                       (A Development Stage Company)
                                                         STATEMENTS OF CASH FLOWS


                                                                                                     From Inception
                                                                                                   (October 21, 1983)
                                                                                                         Through
                                                                   1998        1999       2000      December 31, 2000
                                                                ----------  ----------  ---------  -------------------
                                                                                       

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income (Loss)                                             $(549,187)  $(539,283)  (459,129)  $       (4,512,046)
                                                                ----------  ----------  ---------  -------------------
  Adjustments to Reconcile Net Income (Loss) to
  Net Cash Provided  (Used) by Operating Activities
     Depreciation and Amortization                                  4,889       2,242      2,948              174,573
     Interest Income Accrued  on Stock Subcription Receivable           -      (1,432)   (98,557)             (99,989)
     Bad Debts                                                     50,000           -                          50,000
     Gain on Sale of Securities                                  (171,450)     (4,396)         -             (196,596)
     Charge off of Deferred Offering Costs                              -           -                          36,480
     Charge off Long-lived Assets due to Impairment                92,919           -                          92,919
     Gain on Foreclosure                                                -           -                         (18,697)
     Modification of Royalty Agreement                              7,332           -                           7,332
     (Increase) Decrease in  Receivables                         (140,405)     57,941    112,364              (80,932)
     (Increase) Decrease in Prepaid Expenses                            -        (268)                             53
     Loss on Sale of Equipment                                          -           -                          12,780
     Issuance of Common  Stock for Services                       139,729      95,100     88,133              621,397
     Issuance of Common  Stock for Agreement Modifications              -           -                             152
     Forgiveness of Indebtedness                                        -           -                         165,000
    Increase (Decrease) in Accounts
       Payable and Accrued Expenses                               104,049     222,471      8,441              919,872
    Interest Accrued on Notes Payable                              50,658      57,500     57,062              205,037
    Increase in Research and Development
       Sponsorship Payable                                              -           -                         218,000
    (Increase) in Note for Litigation Settlement                        -           -                         (25,753)
    (Increase) in Deposits                                              -           -          -               (2,189)
                                                                ----------  ----------  ---------  -------------------
    TOTAL ADJUSTMENTS                                             137,721     429,158    170,391            2,079,439
                                                                ----------  ----------  ---------  -------------------
        NET CASH PROVIDED (USED) BY
        OPERATING ACTIVITIES                                     (411,466)   (110,125)  (288,738)          (2,432,607)
                                                                ----------  ----------  ---------  -------------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds From Sale of Equipment                                      -           -          -               10,250
   Purchase of Property and Equipment                              (3,304)     (1,490)         -             (230,903)
   Proceeds from Sale of Securities                               261,450       4,396          -              283,596
   Purchase of Securities                                         (90,000)          -          -              (90,000)
   Proceeds from Foreclosure                                            -           -          -               44,450
   Investment in Joint Venture                                          -     (18,000)   (15,000)            (102,069)
   Payment for License Agreement                                        -           -          -               (6,250)
                                                                ----------  ----------  ---------  -------------------

       NET CASH PROVIDED (USED) BY
      INVESTING ACTIVITIES                                        168,146     (15,094)   (15,000)             (90,926)
                                                                ----------  ----------  ---------  -------------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Issuance of Common Stock                                      125,000     150,000    274,288            1,381,607
    Costs incurred in Offering                                          -           -          -              (31,480)
    Sale of Common Stock Warrants                                       -           -          -               18,250
    Sale of Preferred Stock                                             -           -          -              258,500
    Sale of Redeemable Preferred Stock                                  -           -          -              150,000
    Capital Contributions                                               -           -          -              301,068
    Payment on Proposed Reorganization                                  -           -          -               (5,000)
    Loans  From  Officers                                         150,500     102,198      8,000              736,005
    Repayments to Officer                                         (34,611)    (71,500)   (39,500)            (455,532)
    Increase in Loan Payable-Others                                     -       7,405          -              172,069
                                                                ----------  ----------  ---------  -------------------



                             See accompanying notes.
                                      F-12



                                                      MATERIAL TECHNOLOGIES, INC.
                                                     (A Development Stage Company)
                                                       STATEMENTS OF CASH FLOWS


                                                                                             From Inception
                                                                                           (October 21, 1983)
                                                                                                Through
                                                     1998           1999          2000      December 31, 2000
                                                --------------  ------------  ------------  ------------------
                                                                                

     NET CASH PROVIDED BY FINANCING ACTIVITIES  $     240,889   $    188,103  $   242,788   $        2,525,487
                                                --------------  ------------  ------------  ------------------
NET INCREASE (DECREASE) IN CASH
      AND CASH EQUIVALENTS                             (2,431)        62,884      (60,950)               1,954

BEGINNING BALANCE  - CASH AND
      CASH EQUIVALENTS                                  2,451             20       62,904                    -
                                                --------------  ------------  ------------  ------------------
ENDING BALANCE  - CASH AND CASH
     EQUIVALENTS                                $          20   $     62,904  $     1,954   $            1,954
                                                ==============  ============  ============  ==================



SUPPLEMENTAL INFORMATION: -

  A.  Definition  of  Cash  and  Cash  Equivalents

      For  the  purpose  of  the  statements  of  cash flows, all highly  liquid
      investments  with  a  maturity  of  three  months  or less are  considered
      to  be  cash  equivalents.


  B.  Interest  and  Income  Taxes  Paid



                                                                     
      Interest Paid During Period               $       2,500   $      2,565  $     2,565
                                                ==============  ============  ============
      Income Taxes Paid                         $           -   $      2,400  $       800
                                                ==============  ============  ============



  C.  Non  Cash  Investing  and  Financing  Activities

During  1998, the Company issued 2,430,000 shares of Class A Common Stock to its
President  in  exchange  for  the  cancellation  of  $170,000  of  indebtedness.

During  1998,  the  Company  issued  733,280  shares  of Class A Common Stock in
exchange  for the reduction of a royalty on the fatigue fuse from 20% to 5%. The
Company  valued  the  shares  issued  at $7,332 which was charged to operations.

During  1998,  the  Company  issued  50,000  shares  of  Class A Common Stock in
exchange  for  the  cancellation  of  the  $150,000  redeemable preferred stock.

During 1999, the Company issued 175,000 shares of its Class A Common Stock in in
exchange  for  the  cancellation of the $66,667 of indebtedness due a consultant

During  1999, the Company issued 2,000,000 shares of its Class A Common Stock to
its  President  in exchange for the cancellation of $100,000 of indebtedness due
him.

During  1999, the Company issued 100,000 shares of its Class A Common Stock to a
consultant  for  $.35  a  share, payable by a non-recourse, non-interest bearing
promissory note payable on or before June 15, 2003, and is secured by the stock.

During  2000,  a  holder  of  12,259 shares of the the Company's Preferred Stock
converted  all  of  his  shares  into  12,259  shares  of  common.

Under  a  settlement agreement, during 2000, the Company issued 65,028 shares of
common  stock  to  investors  who  were  defrauded by a former consultant of the
Company.

During  2000, the Company issued to its President 4,650,000 shares of its common
stock  in  exchange for $4,650 and a $1,855,350 promissory note bearing interest
at  8%  due  May  2005  Shares  issued  were  valued  at  $.40  per  share.

During 2000, the Company issued to a Director 350,000 shares of its common stock
in  exchange  for $350 and a $139,650 promissory note bearing interest at 8% due
May  2005  Shares  issued  were  valued  at  $.40  per  share.

Through  a  stock  grant,  the Company in 2000 issued to its President 4,183,675
shares  of  its  common  stock for future compensation. These shares are held in
escrow  and  have  restrictive  covenants.


                            See accompanying notes.
                                      F-13

MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS

NOTE  1  -  ORGANIZATION

     Material Technologies, Inc. (the "Company") was organized on March 4, 1997,
     under  the  laws  of  the  state  of  Delaware.

     The  Company  is  in the development stage, as defined in FASB Statement 7,
     with  its  principal activity being research and development in the area of
     metal  fatigue technology with the intent of future commercial application.
     The  Company  has  not paid any dividends and dividends that may be paid in
     the  future  will  depend  on the financial requirements of the Company and
     other  relevant  factors.

NOTE  2  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

     a.   Property  and  Equipment

          The  cost  of property and equipment is depreciated over the estimated
          useful  lives  of  the related assets. Depreciation is computed on the
          straight-line  method  for financial reporting purposes and for income
          tax  reporting  purposes.

     b.   Intangible  Assets

          Intangibles  are  amortized  on  the straight-line method over periods
          ranging  from  5  to  20  years  (see  Note  3).

     c.   Net  Loss  Per  Share

          Net  loss  per  share is computed under FASB Statement 128. Under this
          statement,  when  common  shares are issued to acquire a business in a
          transaction  accounted  for  as  a  purchase business combination, the
          computation of earnings (loss) per share shall recognize the existence
          of  the  new  shares  only  from the acquisition date. The Company was
          formed  in 1997 and through the issuance of its common stock, acquired
          all  of  the  assets  and liabilities of Material Technology, Inc. The
          Company  accounted  for this recapitalization as a purchase, therefore
          loss  per  share  is  computed  only  for 1997 and subsequent periods.

     d.   Pervasiveness  of  Estimates

          The  preparation  of financial statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions that affect certain reported amounts and disclosures.
          Accordingly,  actual  results  could  differ  from  those  estimates.

     e)   Fair  Value  of  Financial  Instruments

          The  Company  estimates the fair value of its financial instruments at
          their  current  carrying  amounts.

                                      F-14

MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS

     f)   Concentration  of  Credit  Risk

          Currently,  the  Company's  only  source  of  income  comes  from  its
          sub-contracts for Electrochemical Fatigue Sensor ("EFS") research with
          the  United  States  Air Force contractors. The Company believes these
          contracts  will  continue  through  2001.

     g)   Stock  Based  Compensation

          For  1998 and subsequent years, the Company has adopted FASB Statement
          123  which  establishes  a  fair  value  method  of accounting for its
          stock-based  compensation  plans.  Prior to 1998, the Company used APB
          Opinion  25.

     h)   Investments  in  companies  in  which  the Company has less than a 20%
          interest  are carried at cost. The Company includes dividends received
          from  those  companies  in other income. The Company applies dividends
          received in excess of the Company's proportionate share of accumulated
          earnings  as  a  reduction  of  the  cost  of  the  investment.

NOTE  3  -  INTANGIBLES

     Intangible  assets  consist  of  the  following:



                               Period of     December  31,
                              Amortization   1999     2000
                                --------  ---------  -------
                                            
Patent Costs                    17 Years  $ 28,494   $28,494

License Agreement               20 Years     6,250     6,250
     (See Note 5)                            _____     _____
                                            34,744    34,744
Less Accumulated Amortization              (20,043)  (22,032)
                                --------  ---------  -------

                                          $  14,701  $12,712
                                          =========  =======


     Amortization  charged  to operations for 1998, 1999, and 2000, were $1,990,
     $1,989,  and  $1,989,  respectively.


                                      F-15

MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS

NOTE  4  -  LICENSE  AGREEMENT

     The  Company  has  entered  into a license agreement with the University of
     Pennsylvania regarding the development and marketing of the EFS. The EFS is
     designed  to  measure  electrochemically  the status of a structure without
     knowing the structure's past loading history. The Company is in the initial
     stage  of  developing  the  EFS.

     Under  the  terms  of  the  agreement  the Company issued to the University
     12,500  shares  of  its  common  stock,  and  a  5% royalty on sales of the
     product.  The Company valued the licensing 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  20  years.

     In  addition  to  entering  into  the licensing agreement, the Company also
     agreed  to  sponsor  the  development  of  the  EFS.  Under the Sponsorship
     agreement, the Company agreed to reimburse the University development costs
     totaling  approximately  $200,000  that  was  to  be  paid  in  18  monthly
     installments  of  $11,112.

     Under  the agreement, the Company reimbursed the University $10,000 in 1996
     for  the cost it incurred in the prosecution and maintenance of its patents
     relating  to  the  EFS.

     The  Company and the University agreed to modify the terms of the licensing
     agreement  and  related  obligation.  The  modified agreements increase the
     University's royalty to 7% of the sale of related products, 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 modified
     agreements,  and  to pay to 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  owed  to  the  University.

     The  parties  agreed that the balance owed on the Sponsorship Agreement was
     $200,000 and commencing June 30, 1997, the balance due will accrue interest
     at  a  rate  of 1.5% per month until the loan matures on December 16, 2001,
     when the loan balance and accrued interest become fully due and payable. In
     addition,  under  the  agreement,  Mr.  Bernstein  agreed  to  limit  his
     compensation  from  the  Company  to  $150,000  per year until the loan and
     accrued  interest  is  fully paid. Interest charged to operations for 1998,
     1999,  and  2000,  relating  to  this  obligation was $39,240, $46,303, and
     $54,638,  respectively.  The  balance of the note at December 31, 1999, and
     2000,  was  $257,240  and  $303.543,  respectively,

NOTE  5  -  PROPERTY  AND  EQUIPMENT

     The  following  is  a  summary  of  property  and  equipment:

                                      F-16

MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS



                                 December  31,
                             1999          2000
                          -----------  ------------
                                 
Office Equipment          $   23,380   $    23,380
Remote Monitoring System          --            --
Manufacturing Equipment      100,067       100,067
                          -----------  ------------
                             123,447       123,447
  Less: Accumulated
     Depreciation           (119,498)     (120,457)
                          -----------  ------------
                          $    3,949   $     2,990
                          ===========  ============


     Depreciation  charged  to  operations  was $2,900, $253, and $959, in 1998,
     1999,  and 2000, respectively. The useful lives of office equipment for the
     purpose  of computing depreciation are five years. Management will commence
     depreciating  its  manufacturing  equipment  upon  the  commencement of the
     manufacturing  of  its  products.

     The  Company's  equipment  has  been pledged as collateral on the agreement
     with  Advanced  Technology  Center  (See  Note  8(b)).

     In  1998,  the  Company had determined that based upon its current research
     and development program, its current Remote Monitoring System has no future
     use  and  probably  cannot be sold. Therefore, the Company charged its full
     cost  of  $97,160  to  operations.  The  $97,160 is included in general and
     administrative  expenses.  The  Company  determined  the  current value and
     impairment  loss  of  $97,160 based upon the present value of the expectant
     future  cash  flows  generated  from  the  current  system.

NOTE  6  -  NOTES  PAYABLE

     On  May  27,  1994,  the Company borrowed $25,000 from Mr. Sherman Baker, a
     current  shareholder.  The  loan  is evidenced by a promissory note that is
     assessed  interest  at  major  bank prime rate. The Company has pledged its
     patents  as  collateral  against  this  loan.

     As additional consideration for the loan, the Company granted to Mr. Baker,
     a  1%  royalty  interest in the Fatigue Fuse and a 0.5% royalty interest in
     the  Electrochemical  Fatigue Sensor. The Company has not placed a value on
     the  royalty  interest granted. The balance due on this loan as of December
     31,  1999,  and  2000,  was  $42,851,  and  $53,991, respectively. Interest
     charged  to  operations  for  1998,  1999  and 2000 was $2,993, $4,640, and
     $3,245,  respectively.

     The Company did not pay any amounts due on this note when it matured on May
     26,  1996,  and  the  note  is  in  default.

                                      F-17

MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS

     In  October  1996,  the  Company  borrowed  $25,000 from an unrelated third
     party.  Under  the  terms  of  the  promissory  note, the loan was assessed
     interest  at  an  annual  rate  of 10% and matured on October 15, 1998. The
     Company  renegotiated  the  terms of the loan. Under the revised terms, the
     note  is assessed interest at a rate of 11% per annum commencing January 1,
     1999,  and  matures  on  October  15,  2000. In addition the Company issued
     warrants  to  the  lender for the purchase of 2,500 shares of the Company's
     common stock at a price of $1.00 per share. The loan balance as of December
     31,  1999  and 2000 was $25,527 and $25,527, respectively. Interest charged
     to  operations  on  this loan in 1998, 1999, and 2000, were $2,500, $2,750,
     and  $2,750,  respectively.

     The  Company  did  not  pay any amounts due on this note when it matured on
     October  15,  2000,  and  the  note  is  in  default.

NOTE  7  -  INCOME  TAXES

     Income  taxes  are  provided  based  on  earnings  reported  for  financial
     statement  purposes  pursuant  to  the provisions of Statement of Financial
     Accounting  Standards  No.  109  ("FASB  109").

     FASB  109  uses the asset and liability method to account for income taxes.
     That  requires  recognizing  deferred  tax  liabilities  and assets for the
     expected future tax consequences of temporary differences between tax basis
     and  financial  reporting  basis  of  assets  and  liabilities.

     An  allowance  has  been  provided for by the Company which reduced the tax
     benefits accrued by the Company for its net operating losses to zero, as it
     cannot  be  determined  when,  or  if,  the tax benefits derived from these
     operating losses will materialize. As of December 31, 2000, the Company has
     unused  operating loss carryforwards, which may provide future tax benefits
     in  the  amount  of  approximately $2,393,000 which expire in various years
     through  2020.

     The  Company's  use of its net operating losses may be restricted in future
     years  due  to  the  limitations  pursuant to IRC Section 382 on changes in
     ownership.

                                      F-18

MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS

NOTE  8  -  COMMITMENTS  AND  CONTINGENCIES

     The  Company's  commitments  and  contingencies  are  as  follows:

     a.   On  December 24, 1985, to provide funding for research and development
          related  to  the  Fatigue  Fuse,  the  Company  entered  into  various
          agreements  with  the  Tensiodyne  1985-I  R  &  D  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. The Company's obligation to the Partnership is
          limited to the capital contributed to it by its partners in the amount
          of  approximately  $912,500  and  accrued  interest.

     b.   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 sublicensing revenue. The royalty is limited to the $45,000
          plus an 11% annual rate of return. At December 31, 1999, and 2000, the
          future  royalty  commitment  was  limited  to  $184,359  and $204,639,
          respectively.

          The  payment  of  future royalties is secured by equipment used by the
          Company  in  the development of technology as specified in the funding
          agreement.

     c.   On May 4, 1987, the Company entered into a 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 sublicensing 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.

          At  December 31, 1999, and 2000, the total future royalty commitments,
          including  the  accumulated 26% annual rate of return, were limited to
          approximately $1,086,693, and $1,369,233, respectively. If the Company
          defaults  on  the  agreement,  then  the  obligation  relating to this
          agreement  becomes  secured  by  the  Company's patents, products, and
          accounts receivable, which may be related to technology developed with
          the  funding.

     d.   In 1994, the Company issued to Variety Investments, Ltd. of Vancouver,
          Canada  ("Variety"),  and 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 250,000 shares
          of  its  Common Stock to Variety, Variety reduced its royalty interest
          to 20%. In 1998, in exchange for the Company issuing 733,280 shares of
          its  Common  Stock to Variety, Variety reduced its royalty interest to
          5%.

                                      F-19

MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS

     e.   In 1995, the Company entered into an agreement with an unrelated third
          party  for providing the idea of pursuing government contracts for the
          funding  of the development of the Company's technologies, under which
          he  would receive a number of the Company's Common Stock equal to 2.5%
          of  the  number  of  shares  outstanding  as  of the date a government
          contract  is  signed,  15%  of the amount of the respective government
          contract,  and  an  appointment  to  the Company's Board of Directors.
          Funds  due him are to be paid only when such funds become available to
          the  Company. The Company and the third part disagree as to the amount
          owed  and the timing of payment under the Agreement and are attempting
          to  settle  the  disagreements  amicably.

          Under  the  agreement, the Company's obligation is created on the date
          the  government  contract  is  signed.  Under  the agreement with this
          individual,  the  amounts due are to be evidenced by a promissory note
          bearing  interest  at  major  bank  prime.

          The Agreement contains anti-dilution provisions relating to the shares
          to  be  issued  that  expire  once  $50,000  is  paid.  The  Company's
          obligation  to have this person as a Director expires once all amounts
          due are paid. The contingent amount due has been personally guaranteed
          by  the  Company's  President and is secured by the Company's patents,
          subject  to  a  prior  lien  in  favor of the Company's President. The
          personal  guarantee  expires  upon  the individual receiving $100,000.

     f.   In  1999,  the  Company  was  notified  that  a former consultant used
          company materials to sell shares of the Company's stock to the public.
          The Consultant defrauded 25 investors out of $112,000. The Company had
          no  knowledge  of  his  actions.  But  in  order  to  avoid  potential
          litigation  and  have  the  ability  to  pursue  the  claims  of these
          investors,  the Company authorized issuance of up to 110,000 shares of
          its  restricted  Common  Stock  to these investors in exchange for the
          assignment  of their respective claims to the Company and a release of
          any  claims  against  the  Company.  During 2000, 65,028 shares of the
          Company's  common  stock  were  issued  to  these defrauded investors.

     g.   As  discussed  in Note 6, the Company granted a 1% royalty interest in
          the  Company's  Fatigue  Fuse  and  a  .5%  royalty  interest  in  its
          Electrochemical  Fatigue  Sensor  to  Mr.  Sherman  Baker  as  part
          consideration  on  a  $25,000  loan  made by Mr. Baker to the Company.

          A  summary  of  royalty interests that the Company has granted and are
          outstanding  as  of  December  31,  1999,  follows:

                                      F-20

MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS



                                    Fatigue   Fatigue
                                     Fuse      Sensor
                                   ---------  --------
                                        
Tensiodyne 1985-1 R&D Partnership       -- *       --
Advanced Technology Center
  Future Gross Sales                  6.00%*       --
  Sublicensing Fees                     -- **      --
Variety Investments, Ltd               5.00%       --
University of Pennsylvania
   Net Sales of Licensed Products        --      7.00%
   Net Sales of Services                 --      2.50%
Sherman Baker                          1.00%     0.50%
                                   ---------  --------

                                      12.00%    10.00%
                                   =========  ========

*    Royalties  limited  to  specific rates of return as discussed in Notes 8(a)
     and  (b)  above.

**   The  Company  granted  12%  royalties  on  sales  from  sublicensing. These
     royalties are also limited to specific rates of return as discussed in Note
     8(b)  and  (c)  above.



     g)   Operating  Leases

          The  Company  leases its existing office under a non-cancelable lease,
          which  expires  on  May  31,  2002.

          Rental  expense charged to operations for the years ended December 31,
          1998,  1999, and 2000 was approximately $22,632, $25,375, and $23,129,
          which  consisted  solely  of  minimum  rental  payments.

          In  addition  to rent, the Company is obligated to pay property taxes,
          insurance,  and other related costs associated with the leased office.

          Minimum  rental  commitments  under the noncancelable leases expire as
          follows:

          Year  Ended  2001                    $    27,121
          Year  Ended  2002                    $    11,740

NOTE  9  -  INVESTMENTS

     a)   The  Company  acquired 6,625,000 of Class A Common Stock of Tensiodyne
          Corporation.  During  1996, the Company received approximately $17,750
          through  the sale of 50,000 shares of Tensiodyne Corporation stock. Of
          the  6,575,000  shares  of  Tensiodyne  shares held as of December 31,
          1996,  only  690,000  shares were unrestricted and available for sale.
          The  Company  valued these 690,000 shares at their quoted market price
          on  December  31,  1996  of  $.08  per  share  totaling  $55,200.

                                      F-21

MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS

          As of December 31, 1997, all of the 6,575,000 shares were unrestricted
          and  available for sale. The quoted market price of these shares as of
          December  31,  1997,  was  $.10 per share. However, due to the share's
          limited market, the Company could not sell any of these shares at that
          price.  Tensiodyne  Corporation is a development stage company with no
          sales history and little prospect of commencing operations in the near
          future. The Company believed that its inability to sell the Tensiodyne
          shares  held at their quoted market price would continue indefinitely.
          Therefore, as of December 31, 1997, the Company continued to value the
          Tensiodyne  shares  at  $55,200,  the  estimated net proceeds that the
          Company  believed  it would receive if it sold the shares at that date
          in  bulk.

          In  1998,  the  Board  of  Shareholders'  of Tensiodyne authorized two
          reverse  stock  splits  that  reduced  the  total  shares owned by the
          Company  to  65,750. These shares were valued at December 31, 1998, at
          their  quoted  market price of $.1250 per share totaling $8,219. As of
          December  31,  2000,  the  Company determined that these shares had no
          market  value  and  valued  its  interest  in  these  shares  at  $ 0.

     b)   In  1998,  the  Company  acquired  through  a  private stock offering,
          115,000  shares  of DCH Technology for $90,000. The Company sold these
          shares  throughout  1998  and 1999 for net proceeds totaling $265,846,
          thereby  reporting a net gain from these sales in 1998 of $171,450 and
          in  1999  of  $4,396.

     c)   The  Company owns a .5% interest in Antaeus Research, LLC. During 1999
          and  2000, the Company invested $33,000. The Company accounts for this
          investment  under  the  Cost  Method.

NOTE  10  -  STOCKHOLDERS'  EQUITY

     a.   Warrants

          On  June  25,  1998,  the  Company  granted  warrants to Mr. Robert M.
          Bernstein  and  Mr.  Joel  Freedman  to acquire 1,800,000, and 200,000
          shares of the Company's Common Stock, respectively. The exercise price
          at  June  25,  1998,  was initially $.50, but on November 6, 1998, the
          Company's  Board  reduced  the  purchase  price  to  $.10 a share. The
          warrants  were  to  expire  on  June  30,  2002.

                                      F-22

MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS

          The  Company  valued  the  warrants  issued to Mr. Bernstein using the
          Black-Sholes  option  pricing  model  using  with  the  following
          assumptions:  risk-free  interest  rate of 5.5%, dividend yield of 0%,
          volatility factor of the expected market price of the Company's common
          stock  of  .12 and the expected life of the warrants of 42 months. For
          1998,  and  1999,  the  Company charged the fair value of the warrants
          totaling  $27,567  in  each  year  to  operations. These warrants were
          cancelled  in  1999.

     b.   Common  Stock

          The holders of the Company's Common Stock are entitled to one vote per
          share  of  common  stock  held.

     c.   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  500  votes  for  each  share  of  Class  B  Common held.

     d.   Class  A  Preferred  Stock

          During  1991,  the  Company  sold  to a group of 15 individuals, 2,585
          shares  of  $100  par  value  preferred stock and warrants to purchase
          2,000  shares  of  common stock for a total consideration of $258,500.

          In  the  Company's  1994  spin  off,  these  shares were exchanged for
          350,000  shares  of  the Company's Class A Convertible Preferred Stock
          and  300,000  shares  of its Common Stock. The holders of these shares
          have a liquidation preference to receive out of assets of the Company,
          an amount equal to $.72 per one share of Class A Preferred Stock. Such
          amounts  shall  be paid upon all outstanding 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 $.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.

                                      F-23

MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS

          In  2000, a holder of 12,259 shares of preferred stock exchanged these
          shares for 12,259 shares of the Company's common. The 12,259 shares of
          preferred  were  subsequently  cancelled.

     e.   Issuances  Involving  Non-cash  Consideration

          All  issuances  of the Company's stock for non-cash consideration have
          been  assigned a dollar 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.

          During  1998,  the  Company  issued a total of 1,121,617 shares of its
          Common Stock in exchange for services. During 1999, the Company issued
          a total of 4,202,205 shares of its Common Stock for services and other
          non-cash  consideration.  During  2000,  the Company issued a total of
          9,620,732  shares  of its Common Stock for services and other non-cash
          consideration.  A  summary  of  each  transaction  follows:

          On  May 1, 1998, the Company issued 259,427 shares to two consultants.
          These  shares were valued at $25,943. Also on May 1, 1998, the Company
          issued  302,190  to  Joel  Freedman,  a  Director  of the Company, for
          services  rendered.  These shares were valued at $30,219. On September
          1,  1998,  the  Company issued to a consultant 200,000 shares of stock
          for  services  relating to marketing efforts. These shares were valued
          at  $20,000.  On  October  9,  1998, Company issued 100,000 shares for
          consulting  services. These shares were valued at $10,000. In November
          1998,  the  Company  issued  60,000  shares  to  a  company for public
          relations  and marketing services. These shares were valued at $6,000.
          On  November  24,  1998,  the  Company  issued to a consultant 200,000
          shares  of  stock for consulting services. These shares were valued at
          $20,000.

          On February 4, 1999, the Company issued 175,000 shares in exchange for
          the  cancellation  of  $66,667 of indebtedness due to a consultant. On
          March  5,  1999,  the Company issued 50,000 shares to Mr. John Goodman
          for  services  rendered  relating  to  the  research  and  development
          projects.  These  shares were valued at $2,500. Also on March 5, 1999,
          the  Company  issued  50,000 shares to a consultant. These shares were
          valued  at $2,500. On April 15, 1999, the Company issued 50,000 shares
          to  a consultant. These shares were valued at $2,500. On June 9, 1999,
          the  Company  issued 2,000,000 shares to its President in exchange for
          canceling  $100,000  of  indebtedness  due  him.  On May 27, 1999, the
          Company  issued  its  director, Joel Freedman, 200,000 shares of stock
          from  services. These shares were valued at $10,000. On June 21, 1999,
          the  Company  issued  100,000  shares to a consultant for $.35 a share
          payable  by  a  non-recourse,  non-interest  bearing  promissory  note
          payable  on  or  before  June  15,  2003 and is secured by the 100,000

                                      F-24

MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS

          shares.  The  shares  were  valued at the present value of the note of
          $23,541.  On  June  12,  1999, the Company issued 200,000 shares to an
          attorney for services. These shares were valued at $10,000. On July 7,
          1999,  the  Company  issued  672,205  shares  to  the  University  of
          Pennsylvania pursuant to the terms of the modified licensing agreement
          as discussed in Note 4. These shares were valued at par. On August 23,
          1999,  the  Company issued 50,000 shares to a consultant. These shares
          were valued at $2,500. On September 29, 1999, the Company issued 8,000
          shares  for  public  relations  services.  These shares were valued at
          $400.  On October 27, 1999, the Company issued 300,000 to its board of
          advisors.  These  shares were valued at $30,000. On November 12, 1999,
          the  Company  issued  25,000 shares to a consultant. These shares were
          valued  at  $2,500.  On  November  14, 1999, the Company issued 92,000
          shares  to  Mr.  John Goodman for services rendered in connection with
          the  development  of  the  fatigue  fuse.  These shares were valued at
          $9,200.  On  December  14, 1999, the Company issued 50,000 shares to a
          consultant.  These shares were valued at $5,000. On December 21, 1999,
          the  Company issued 20,000 shares to a consultant for public relations
          services.  These  shares  were valued at $1,500. On December 21, 1999,
          the  Company  issued  10,000  shares  to  an  individual who is on the
          Company's  advisory  board.  These  shares  were  valued at $1,000. On
          December  30, 1999, the Company issued 150,000 shares to a consultant.
          These  shares  were  valued  at  $15,000.

          On  January 31, 2000, the Company issued 50,000 shares of common stock
          to a member of its advisory board. These shares were valued at $5,000.
          On  February 8, 2000, the Company issued 10,000 shares of common stock
          to a consultant who assisted in developing the Company's web site. The
          Company  valued  these  shares  at  $1,000.  On February 28, 2000, the
          Company  issued  200,000 of common stock to a consultant for financial
          services.  These  shares  were valued at $20,000. Also on February 28,
          2000,  the  Company issued 4,500 of common stock to a public relations
          consultant.  These shares were valued at $4,500. On March 9, 2000, the
          Company issued 100,000 of common stock to a consultant in cancellation
          of $100,000 due. On March 13, 2000, the Company issued two consultants
          a  total of 75,000 shares of common stock for services relating to the
          development  of the fatigue fuseThese shares were valued at $7,500. On
          March 21, 2000, the Company's President returned to the Company 40,000
          shares  of  Common  stock  in  exchange for receiving 40,000 shares of
          Class  B  common  stock.  On March 29, 2000, the Company issued 50,000
          shares  of  common stock to a consultant for financial services. These
          shares  were  valued at $10,000. On April 11, 2000, the Company issued
          15,000 shares of common stock to consultant relating to the operations
          of  the  Company joint venture. These shares were valued at $3,000. On
          April  11,  2000, the Company issued 25,000 shares of common stock for
          advisory  services.  These  shares were valued at $5,000. On April 28,
          2000,  the  Company  issued 30,000 shares of common stock for advisory
          services.  These  shares  were  valued at $12,000. On May 4, 2000, the
          Company  issued  12,529  shares  of  its  common stock in exchange for
          12,529  shares  of  its  preferred  stock.  The  preferred shares were
          subsequently  cancelled.  On  May  25,  2000,  the  Company issued its

                                      F-25

MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS

          President 4,650,000 shares its common stock in exchange for $4,650 and
          a  $1,855,350  non-recourse  promissory  note  bearing  interest at an
          annual  rate of 8%. On the same day, the Company issued 350,000 shares
          its  common  stock  to  a Director in exchange for $350 and a $139,650
          non-recourse promissory note bearing interest at an annual rate of 8%.
          Both  notes  mature  on  May  25, 2005, when the principal and accrued
          interest  becomes fully due and payable. On July 13, 2000, the Company
          issued  40,000  shares  of  its common stock for legal services. These
          shares were valued at $10,000. On October 27, 2000, the Company issued
          4,183,675  to  its  President  for  futures  services  to  be rendered
          pursuant  to  a stock grant and escrow agreement. As discussed further
          in  Note  11,  these shares are held in escrow, subject to substantial
          restrictions  and  the  actual  shares  that may vest to the President
          could  be  substantially  less  then  the  number  of shares placed in
          escrow.  These  shares  were  valued  at  par.  On  November 14, 2000,
          pursuant  to  the  stock  grant  and  escrow  agreement, the President
          returned  400,000  shares  of  common  stock  to the Company that were
          subsequently cancelled. On the same day, 400,000 shares were issued in
          exchange for $22,490. On December 19, 2000, the Company issued 200,000
          shares  of  its common stock to a consultant. These shares were valued
          at  $10,000.  During  January  and  February  2000, the Company issued
          65,028 shares of its common stock to investors who were defrauded by a
          former  consultant of the Company. These shares were valued at par. In
          February  2000,  the  Company received $251,798 from the proceeds from
          the  sale of shares of DCH Technologies, Inc. These shares were placed
          in  a brokerage account in 1998 by a shareholder of the Company on the
          Company's behalf. The Company had no access to the account. Due to the
          restrictive  covenants  of  the brokerage account, the Company did not
          reflect  the  transaction  on  its financial statements prior to 2000,
          when  the  shares  were  sold.  The  Company  credited the proceeds to
          additional  paid-in  capital.

NOTE  11  -  TRANSACTIONS  WITH  MANAGEMENT

     a.   During 1993, Mr. Bernstein exercised warrants to purchase 6,000 shares
          of the Company's common stock. Pursuant to the resolution on April 12,
          1993,  adjusting  the  per  share  amount  from  $10.00  to $2.50, Mr.
          Bernstein  paid $60 and executed a five year non-interest bearing note
          to  the  Company  for  $14,940.  The Note is non-recourse and the only
          security  pledged  for  the  obligation  is  the  stock purchased. The
          promissory  note  was  extended  to  the  year  2003.

     .    In  1998,  the  Company issued 2,430,000 shares of its common stock to
          Mr.  Bernstein  in  exchange  for  the  cancellation  of  $170,000  of
          indebtedness.

     b.   In 1998, the Company issued to a Director 302,190 shares of its common
          stock  for  consulting  services  valued  at  $30,219

                                      F-26

MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS

     c.   In  1998,  the  Company granted warrants to Mr. Bernstein and Mr. Joel
          Freedman  to  acquire  1,800,000  and  200,000 shares of the Company's
          Common Stock, respectively, at a price of $.10 a share. These warrants
          were  cancelled  in  1999.

     d.   In  1999,  the  Company issued 2,000,000 shares of its Common Stock in
          exchange  for  the  cancellation  of $100,000 of indebtedness owed its
          President.

     e.   During  2000,  the  President advanced the Company $8,000 and received
          $39,500  from  the  Company.  The  outstanding  amount  due  from  the
          President  as  of  December 31, 2000 is $22,052. The amount of accrued
          interest  charged to operations on the President's loans in 1998, 1999
          were $8,425, and $3,516, respectively. The amount of interest credited
          to  operations  for  2000  totaled  $822.

          As  of  December  31,  2000,  the  Company  accrued  $40,000 of unpaid
          compensation  owed  its  President.

     f.   On May 25, 2000, the Company issued its President 4,650,000 shares its
          common  stock  in  exchange  for  $4,650 and a $1,855,350 non-recourse
          promissory  note bearing interest at an annual rate of 8%. On the same
          day,  the Company issued 350,000 shares its common stock to a Director
          in  exchange  for  $350  and  a  $139,650 non-recourse promissory note
          bearing interest at an annual rate of 8%. Both notes mature on May 25,
          2005,  when  the  principal and accrued interest becomes fully due and
          payable.  At  the  date  of  issuance,  the  shares were valued by the
          Company  at  $.40  per  share.

     g.   On  October  27,  2000,  the  Company  issued  4,183,675 shares to its
          President  for  future  compensation  pursuant to a Stock Escrow/Grant
          Agreement. Under the terms of the agreement, the President is required
          to  hold these shares in escrow. While in escrow, the President cannot
          vote the shares but has full rights as to cash and non-cash dividends,
          stock  splits  or other change in shares. Any additional shares issued
          to  the  President  by reason of the ownership of the 4,183,675 shares
          will  also  be  escrowed  under  the  same  terms  of  the  agreement.

          Upon the exercise by certain holders of Company options or warrants or
          upon  the need by the Company, in the sole discretion of the Board, to
          issue  common  stock to certain individuals or entities, the number of
          shares  required  for  issuance to these holders will be returned from
          escrow  by  the  President  thereby  reducing  the number of shares he
          holds.  The  shares  held  in  escrow are non-transferable and will be
          granted  to  the  Company's  President  only  upon  the  exercise  or
          expiration  of  all  of the options and warrants, the direction of the
          Board,  in  its  sole  discretion,  or  the  mutual  agreement  by the
          President  and  the Board of Directors to terminate the agreement. The
          Company  valued  these  shares  at  par.  Upon the actual grant of the
          remaining  shares  to  the President, the shares issued will be valued
          its  market  value  when  issued  and  charged  to  operations  as
          compensation.


                                      F-27

MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS

NOTE  12  -  STOCK-BASED  COMPENSATION  PLANS

     a    In  1996,  the Company adopted the 1996 Stock Option Plan and reserved
          1,700,000  shares  of  Common  Stock  for distribution under the Plan.
          Eligible  Plan  participants include employees, advisors, consultants,
          and  officers  who  provide  services  to  the  Company.  A  Committee
          appointed  by  the  Company's Board of Directors determines the option
          price  and the number of shares subject to each option granted. In the
          case  of  Incentive Stock Options granted to an optionee who owns more
          than 10% of the Company's outstanding stock, the option price shall be
          at  least  110% of the fair market value of a share of common stock at
          date  of  grant. In 2000, the Company increased the number of reserved
          shares  to  6,800,000.

          In  1998,  the  Company  granted  options to acquire 900,000 shares of
          which  500,000  shares were exercised for $125,000. In addition, under
          the  Plan,  the Company issued additional 50,000 shares for consulting
          services.  The  Company charged the fair value of the 50,000 shares of
          $5,000  to  operations.

          In  1999,  the  Company  granted  options to acquire 775,000 shares of
          Common Stock through the Plan. The Company did not issue any shares in
          1999  under  the  Plan.

     b.   In  1998, the Company adopted the 1998 Stock Plan and reserved 800,000
          shares  of  Common Stock for distribution under the plan. The Plan was
          adopted  to  provide a means by which the Company could compensate key
          employees, advisors, and consultants by issuing them stock in exchange
          for  services  and  thereby  conserve  the Company's cash resources. A
          Committee  of  the  Board  of  Directors  determines  the value of the
          services  rendered  and  the  related  number  of  shares to be issued
          through  the  Plan  for these services. In 2000, the Company increased
          the  number  of  reserved  shares  to  6,800,000.

          In 1998, the Company issued 310,000 shares of Common Stock through the
          plan  in  exchange  for  consulting services. The Company valued these
          shares  at  $31,000,  the  fair  value  of  the  services  rendered.

          The  following  is  summary  of  the 1996 and 1998 Stock option plans:


                                      F-28



MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS


Material  Technologies,  Inc.
Reconcilation  of  Stock  Option  Plans



                                                    1996 STOCK OPTION PLAN   1998 STOCK OPTION PLAN        1998 STOCK PLAN
                                                    ----------------------  --------------------------  ----------------------
                                                                WEIGHTED                     WEIGHTED                 WEIGHTED
                                                                AVERAGE                       AVERAGE                  AVERAGE
                                                     NUMBER OF  EXERCISE    NUMBER OF         EXERCISE    NUMBER OF   EXERCISE
                                                      SHARES      PRICE       SHARES            PRICE      SHARES       PRICE
                                                     ---------  ---------  ------------    ------------  -----------  ---------
                                                                                                 
OUTSTANDING JAN 1, 1997                          1)          -  $       -             -  $            -            -  $       -
                                                     =========  =========  ============    ============  ===========  =========
GRANTED                                                      -  $       -             -  $            -               $       -
EXERCISED                                                    -  $       -             -  $            -               $       -
FORFIETED                                                    -  $       -             -  $            -               $       -
                                                     ---------  ---------  ------------    ------------  -----------  ---------
OUTSTANDING JAN 1, 1998                                      -  $       -             -  $            -            -  $       -
                                                     =========  =========  ============    ============  ===========  =========
GRANTED                                                      -  $       -    900,000.00  $         0.64   310,000.00  $    0.10
EXERCISED                                                    -  $       -    550,000.00  $         0.19   310,000.00  $    0.10
FORFIETED                                                    -  $       -             -  $            -            -  $       -
                                                     ---------  ---------  ------------    ------------  -----------  ---------
OUTSTANDING DEC 31, 1998                                     -  $       -    350,000.00  $            -            -  $       -
                                                     =========  =========  ============    ============  ===========  =========
GRANTED                                                      -  $       -    750,000.00  $         0.25            -  $       -
EXERCISED                                                    -  $       -    100,000.00  $         0.35            -  $       -
FORFIETED                                                    -  $       -             -  $            -               $       -
                                                     ---------  ---------  ------------    ------------  -----------  ---------
OUTSTANDING DEC 31, 1999                                     -  $       -  1,000,000.00  $            -  $         -  $       -
                                                     =========  =========  ============    ============  ===========  =========
GRANTED                                                      -  $       -             -  $                 6,800,000  $       -
EXERCISED                                                    -  $       -     50,000.00  $         0.25    5,894,500  $    0.41
FORFIETED                                                    -  $       -             -  $            -               $       -
                                                     ---------  ---------  ------------    ------------  -----------  ---------
OUTSTANDING DEC 31, 2000                                     -  $       -    950,000.00  $            -  $905,500.00  $       -
                                                     =========  =========  ============    ============  ===========  =========
WEIGHTED AVERAGE FAIR VALUE OF OPTIONS GRANTED
   DURING 1998                                                                           $         0.19
                                                                                           ============
WEIGHTED AVERAGE FAIR VALUE OF OPTIONS GRANTED
   DURING 1999                                                                           $         0.00
                                                                                           ============
WEIGHTED AVERAGE FAIR VALUE OF OPTIONS GRANTED
   DURING 2000                                                                           $         0.00
                                                                                           ============


     1)  Plan  transferred  to  SecureFone  America  in  February  1997  reoganization



                                      F-29

MATERIAL  TECHNOLOGIES,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)
NOTES  TO  FINANCIAL  STATEMENTS

NOTE  13  -  SUBSEQUENT  EVENTS

          In  January  2001,  the  Company's  Board  of Directors authorized the
          issuance  of  450,000  shares  of  its Common Stock to individuals for
          legal  and  consulting  services.

          In  February  2001,  the  Company's  Board of Directors authorized the
          issuance  of  6,000,000  shares  of  its Common Stock to the Company's
          President  for  past  compensation  due  valued  at  $.10  per  share.


                                      F-30