U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended August 31, 1998. [ ] Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934. For the transition period from To Commission File Number: 0-8880 MARITIME TRANSPORT & TECHNOLOGY, INC. (Exact name of registrant as specified in its charter) New York 11-2196303 (State of jurisdiction of (I.R.S. Identification No.) incorporation or organization) 1535 Memphis Junction Road, Bowling Green, Kentucky, 42101. (Address of principal executive offices) (502) 781 - 8453 (Registrant's telephone number, including area code) Former name, former address and former fiscal year, if changed since last report Indicate by check mark, whether the registrant:: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The Company had 15,130,705 shares of common stock outstanding PART I FINANCIAL INFORMATION Item 1. Financial Statements The condensed financial statements for the periods ended August 31, 1997 included herein have been prepared by Maritime Transport & Technology, Inc., (the "Company") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the Commission"). In the opinion of management, the statements include all adjustments necessary to present fairly the financial position of the Company as of August 31, 1998, and the results of operations and cash flows for the three month periods ended August 31, 1996 and 1998. The Company's results of operations during the three months of the Company's fiscal year are not necessarily indicative of the results to be expected for the full fiscal year. The financial statements included in this report should be read in conjunction with the financial statements and notes thereto in the Company's Annual Report on Form 10-K for the fiscal years ended May 31, 1997 and 1998. MARITIME TRANSPORT & TECHNOLOGY, INC. CONSOLIDATED PROFORMA BALANCE SHEET August 31, May 31, 1998 1998 Unaudited Assets Current assets Cash and cash equivalents $145,079 $65,599 Accounts receivable 310,086 504,442 Inventory 170,795 183,962 Note receivable 13,200 Corporate income taxes receivable 8,925 8,925 Prepaid expenses 1,200 7,400 Current assets 649,285 770,328 Capital assets-net 44,043 44,617 Other assets Loans receivable - non affiliated 27,499 60,819 Loans receivable-shareholder 91,351 Security deposit 805 805 Total other assets 119,655 61,624 Total assets $812,983 $876,569 Liabilities and Stockholders' Equity Current liabilities Accounts payable and accrued expenses $235,913 $246,009 Customer deposits 61,406 88,815 Corporate income tax payable 1,580 1,580 Investor loans payable 131,500 131,500 Notes payable-bank 109,338 112,770 Loan payable-affiliate 8,485 Total current liabilities 539,737 589,159 Long term liabilities Note payable - bank 13,855 12,505 Total liabilities 552,012 601,664 Capital stock Common stock-authorized 80,000,000 common shares, par value $.01 each, at May 151,308 151,308 31, 1998 the shares outstanding was 15,130,705 Additional paid in capital 494,508 494,508 Retained earnings (386,425) (370,911) Total stockholders' equity 259,391 274,905 Total liabilities and stockholders' equity $812,983 $876,569 MARITIME TRANSPORT & TECHNOLOGY, INC. CONSOLIDATED STATEMENT OF OPERATIONS August 31, August 31, 1997 1998 Unaudited Unaudited Revenue $-0- $357,611 Costs of goods sold -0- 121,301 Gross profit -0- 236,310 Operations: General and administrative 43 237,703 Depreciation and amortization Total expense 43 237,703 Income before corporate taxes (43) (1,393) Corporate income taxes Other income and expenses Gain on sale of assets 19,000 Interest Income 83 Interest expense (2,176) Total other income and expenses 16,907 Net income (loss) $(43) $15,514 Net income (loss) per share -basic $(0.00) $0.00 Number of shares outstanding-basic 15,130,705 15,130,705 MARITIME TRANSPORT & TECHNOLOGY, INC. CONSOLIDATED STATEMENT OF CASH FLOWS May 31, August 31, 1998 1998 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(99,860) $15,514 Depreciation 45,938 Account receivables (127,907) (194,356) Inventory (9,404) (13,167) Note receivable 13,200 Federal taxes receivable 618 Prepaid expenses (1,200) (6,200) Accounts payable and accrued expenses 84,612 10,096 Customer deposits payable 12,853 27,409 Corporate taxes payable (24,960) TOTAL CASH FLOWS FROM OPERATIONS (119,310) (147,505) CASH FLOWS FROM INVESTING ACTIVITIES Capital assets (39,682) (575) Note receivable-affiliate (16,055) 99,876 Note receivable- non affiliate (4,423) (33,320) TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (60,160) 65,973 CASH FLOWS FROM FINANCING ACTIVITIES Loan payable- investors 131,500 Note payable-bank 122,368 2,082 TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 253,868 2,082 NET INCREASE (DECREASE) IN CASH 74,398 (79,480) CASH BALANCE BEGINNING OF PERIOD 70,681 145,079 CASH BALANCE END OF PERIOD $145,079 $65,599 MARITIME TRANSPORT & TECHNOLOGY, INC. PROFORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY Additional Accumulated Common Stock Common paid in deficit during Stock capital development stage Total June 1, 1994 38,484,549 384,845 $-0- $(384,845) $-0- May 31, 1995 Net profit 1,579 1,579 May 31, 1995 38,484,549 $384,845 $-0- $(383,266) $1,579 May 31, 1996 Net profit 1,866 1,866 May 31, 1996 38,484,549 384,845 $-0- (381,400) 3,445 May 31, 1997 Net loss (4,952) (4,952) May 31, 1997 38,484,549 384,845 $-0- $(386,372) $(1,527) April 14, 1998(1) 3,848,455 38,485 346,360 (386,372) (1,527) April 15, 1998(2) 11,282,250 112,823 148,148 228,981 May 31, 1998 Net loss (53) (53) May 31, 1998 15,130,705 $151,308 494,508 $(386,425) 259,391 Unaudited August 31, 1998 Net profit 15,514 15,514 August 31, 1998 15,130,705 $151,308 $462,518 $(370,911) $274,905 (1) Reflects a 10 to 1 reverse split. (2) Reflects the issuance of shares for acquisitions valued at $.02 per share. MARITIME TRANSPORT & TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED AUGUST 31, 1998 1. BASIS OF PRESENTATION The accompanying unaudited financial statements of Maritime Transport & Technology, (the "Company"), reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results of the interim periods presented. All such adjustments are of a normal recurring nature. The financial statements should be read in conjunction with the notes to financial statements contained in the Company's Annual Report on Form 10-Ksb for the year ended May 31, 1998. 2. NET INCOME PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE ("Statement No. 128"). Statement No. 128 applies to entities with publicly held common stock or potential common stock and is effective for financial statements issued for periods ending after December 15, 1997. Statement No. 128 replaces APB Opinion 15, Earnings per Share ("EPS"). Statement No. 128 requires dual presentation of basic and diluted earnings per share by entities with complex capital structures. Basic EPS includes no dilution and is computed by dividing net income by the total number of common shares outstanding for the period. Diluted EPS reflects the potential dilution of securities that could dilute the shares in computing the earnings of the Company such as common stock which may be issuable upon exercise of outstanding common stock options or the conversion of debt into common stock. Pursuant to the requirements of the Securities and Exchange Commission, the calculation of the shares used in computing basic and diluted EPS include the shares of common stock issued for the acquisition of B.G. Banking Equipment, Inc. and Financial Building Equipment Exchange, Inc. Shares used in calculating basic and diluted net income per share were as follows: For the three months For the three months months ended months ended August 31, August 31, 1997 1998 ------------- -------------- Total number common shares outstanding 3,848,455 15,130,705 ========= ========== 3. ACCOUNTING FOR INCOME TAXES The Company follows Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which requires an asset and liability approach of accounting for income taxes. Deferred tax assets and liabilities are computed annually for differences between financial statement basis and tax basis of assets, liabilities and available general business tax credit carry-forwards. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. 4. MARKETABLE SECURITIES The Company adopted Financial Accounting Standards Board ("FASB") Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities", which requires that investments in equity securities that have readily determinable fair values and investments in debt securities be classified in three categories: held-to-maturity, trading and available-for-sale. Based on the nature of the assets held by the Company and Management's investment strategy, the Company's investments have been classified as available-for-sale. Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. Securities classified as available-for-sale are carried at estimated fair value, as determined by quoted market prices, with unrealized gains and losses, net of tax, reported in a separate component of stockholders' equity. At December 31, 1997 and August 31, 1998, the Company had no investments that were classified as trading or held-to-maturity as defined by the Statement. The following is a summary of cash, cash equivalents and available-for-sale securities by balance sheet classification at May 31, 1998: Estimated Gross Gross Fair Unrealized Unrealized Market Cost Gains Losses Value ----- -------- --------- ----- Cash $ 145,079 $-0- $ -0- $ 145,079 ------- ------ ------- --------- Total cash and cash equivalents $ 145,079 $-0- $ -0- $ 145,079 The following is a summary of cash, cash equivalents and available-for-sale securities by balance sheet classification at August 31, 1998: Estimated Gross Gross Fair Unrealized Unrealized Market Cost Gains Losses Value Cash $ 65,599 $-0- $ -0- $ 65,599 ------- ---- ------ ------- Total cash and cash equivalents $ 65,599 $-0- $ -0- $ 65,599 Item 2. Management's Discussion and Analysis or Plan of Operation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS for the three months ended August 31, 1997 and 1998 ------------------------------------------------ Except for the description of historical facts contained herein, this Form 10QSB contains certain forward looking statements that involve risks and uncertainties as detailed herein and from time to time in the Company's filings with the Securities and Exchange Commission and elsewhere. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties which could cause actual results to differ materially from those described in the forward-looking statements. These factors include, among others, the Company's fluctuations in sales and operating results, risks associated with international operations and regulatory, competitive and contractual risks and product development. Results of operations for the three months ended August 31, 1998 as compared to the three months ended August 31, 1997. - - ----------------------------------------------------------------------------- Revenues were $357,611 for the three months ended August 31, 1998 as compared to $-0- for the three months ended August 31, 1997. Costs of goods sold and related expenses for the three months ended August 31, 1998, were $121,301 as compared to $0 for the three months ended August 31, 1997 representing a cost of goods sold and related expenses of 33.92% for the three months ended August 31, 1998 as compared to 0% for the three months ended August 31, 1997. General and administrative costs for the three months ended August 31, 1998 were $237,703, an increase of 100.0% over expenses of $-0- for the three months ended August 31, 1997. Liquidity and capital resources as of the end of the three months ended August 31, 1998. - - -------------------------------------------------------------------------------- The Company's cash balance was $65,599 and working capital was a $181,169 as at August 31, 1998. The Company's primary short-term needs for capital, which are subject to change, are for the fullfillment of orders, the search for the acquisition of quality used equipment at the right price, pay continuing operating expenses. Income tax: As of August 31, 1998, the Company has a taxable profit of $15,514. The Company's ability to utilize its tax credit carry-forwards in future years was subject to an annual limitation pursuant to the "Change in Ownership Rules" under Section 382 of the Internal Revenue Code of 1986, as amended. However, the use of the Company's ultilization of carry forward losses was lost because of the change in ownership of the Company. The Company expects its capital requirements to increase over the next several years as it continues to develop its business and seek new company related acquisitions, increases in sales and administration infrastructure and embarks on developing in-house business capabilities and facilities. The Company's future liquidity and capital funding requirements will depend on numerous factors, including the extent to which the Company's present management can fund the continued capital requirements, the timing of regulatory actions regarding the Company's potential acquisitions, the costs and timing of expansion of sales, marketing activities, facilities expansion needs, and competition in the mortgage business entered into. The Company believes that its available cash and cash from management contributions will be sufficient to satisfy its funding needs for the day to day mortgage banking activities for at least the next 12 months. Thereafter, if cash generated from any newly acquired or developed business operations is insufficient to satisfy the Company's working capital and capital expenditure requirements, the Company may be required to sell additional equity or debt securities or obtain additional credit facilities. There can be no assurance that such financing, if required, will be available on satisfactory terms, if at all. PART II OTHER INFORMATION Item 1. Legal Proceedings. No legal proceedings were brought, are pending or are threatened during the quarter. Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security-Holders None. SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Maritime Transport & Technology, Inc. (Registrant) By: /s/ Paul Clark ------------------ Paul Clark PRESIDENT Dated: November 17, 1998