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 February 28, 1999. [ ] 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.) Employerincorporation or organization) 1535 Memphis Junction Road Bowling Green, KY 42101 (Address of principal executive offices) (800) 726-0337 (Registrant's telephone number, including area code) 108 Main St. Stamford, NY, 12167-1137 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 15,463,021 shares of common stock outstanding PART I FINANCIAL INFORMATION Item 1. Financial Statements The condensed financial statements for the periods ended November 30, 1998 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 February 28, 1999, and the results of operations and cash flows for the nine month periods ended February 28, 1998 and 1999. The Company's results of operations during the nine 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 February 28, May 31, 1999 1998 Unaudited Assets Current assets Cash and cash equivalents $145,079 $104,077 Accounts receivable 310,086 527,370 Inventory 170,795 213,314 Note receivable 13,200 13,200 Corporate income taxes receivable 8,925 Prepaid expenses 1,200 1,400 ----- --------------- Current assets 649,285 859,361 Capital assets-net 44,043 4,850 Other assets Loans receivable - non affiliated 27,499 42,501 Loans receivable-affiliated 91,351 88,282 Security deposit 805 805 ---- ------ Total other assets 119,655 131,588 -------- ------ Total assets $812,983 $ 995,771 ======== ======== Liabilities and Stockholders' Equity Current liabilities Accounts payable and accrued expenses $235,913 $305,203 Customer deposits 61,406 102,782 Corporate income tax payable 1,580 18,475 Investor loans payable 131,500 162,346 Notes payable-bank 109,338 121,502 ---------- ------ Total current liabilities 539,737 710,308 Long term liabilities Note payable - bank 13,855 ------ Total liabilities 553,592 Capital stock Common stock-authorized 80,000,000 common shares, par value $.01 each, at May 31, 1998 and February 28, 1999the shares outstanding were 15,130,705 and 15,463,021 respectively 151,308 154,631 Additional paid in capital 494,508 823,501 Retained earnings (386,425) (692,669) --------- --------- Total stockholders' equity 259,391 285,463 -------- ------- Total liabilities and stockholders' equity $812,983 $ 995,771 ======== ======== See accompanying notes to financial statements. F1 MARITIME TRANSPORT & TECHNOLOGY, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED February 28, 1998 1999 Unaudited Unaudited Revenue $-0- $1,339,364 Costs of goods sold -0- 661,589 --------- Gross profit -0- 677,775 Operations: General and administrative 43 888,511 Depreciation and amortization 48,539 ------ -------- Total expense 43 937,050 Income before corporate taxes (43) (259,275) Corporate income taxes 27,400 Other income and expenses Interest Income 1,052 Interest expense (20,621) ------- Total other income and expenses (19,569) Net income (loss) $(43) $(306,244) ===== ======= Net income (loss) per share -basic $(0.00) $(0.02) ======== ===== Number of shares outstanding-basic 15,130,705 15,463,021 =========== ========== See accompanying notes to financial statements. MARITIME TRANSPORT & TECHNOLOGY, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED February 28, 1998 1999 Unaudited Unaudited Revenue $-0- $510,439 Costs of goods sold -0- 289,382 ---- ------- Gross profit -0- 221,057 Operations: General and administrative 43 523,368 Depreciation and amortization -0- ------ Total expense 43 523,368 Income before corporate taxes (43) (302,311) Corporate income taxes 20,865 Other income and expenses Interest Income 896 Interest expense (15,871) ------- Total other income and expenses (14,975) Net income (loss) $(43) $(338,151) ===== ======= Net income (loss) per share -basic $(0.00) $(0.02) ======== ===== Number of shares outstanding-basic 15,130,705 15,463,021 =========== ========== See accompanying notes to financial statements. MARITIME TRANSPORT & TECHNOLOGY, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED February 28, February 28, 1998 1999 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(43) $(306,244) Non cash transactions 100,000 Depreciation -0- 48,539 Account receivables (217,284) Inventory (42,519) Prepaid expenses (200) Accounts payable and accrued expenses 69,290 Customer deposits payable 41,376 Corporate taxes payable 25,820 ----- ------- TOTAL CASH FLOWS FROM OPERATIONS (43) (281,222) CASH FLOWS FROM INVESTING ACTIVITIES Capital assets (9,318) Note receivable-affiliate 3,069 Note receivable- non affiliate (15,002) -------- TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (21,251) CASH FLOWS FROM FINANCING ACTIVITIES Loan payable- affiliate Loan payable- investors 30,846 Sale of shares of common stock 232,316 Note payable-bank (1,691) --------- TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 261,471 NET INCREASE (DECREASE) IN CASH (43) (41,002) CASH BALANCE BEGINNING OF PERIOD 53 145,079 --- ------- CASH BALANCE END OF PERIOD $10 $104,077 === ======= See accompanying notes to financial statements . MARITIME TRANSPORT & TECHNOLOGY, INC. PROFORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY Additional Accumulated Common Stock Common paid in deficit during Stock capital development stage Total C> 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 Exercise of options 100,000 1,000 99,000 100,000 Sale of shares 232,316 2,323 229,993 232,316 Net loss (306,244) (306,244) ---------- --------- -------- ------- ------ February 28, 1999 15,463,021 $154,631 $823,501 $(692,669) $285,463 ========== ======== ======== ========= ======== (1) Reflects a 10 to 1 reverse split. (2) Reflects the issuance of shares for acquisitions valued at $.02 per share. See accompanying notes to financial statements MARITIME TRANSPORT & TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED NOVEMBER 30, 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 nine months For the six months months ended months ended February 28, February 28, 1998 1999 ------------- -------------- Total number common shares outstanding 15,130,705 15,463,021 ========== ========== 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. Issuance of Shares of Common Stock The Company issued 100,000 shares of common stock through exercise of 100,000 options issued pursuant to the Company's stock option plan value at $1.00 for an aggregate consideration of $100,000 in consulting expenses. The Company sold pursuant to a private placement 232,316 shares of common stock at $1.00 per share for an aggregate consideration of $232,316. 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 Six months ended November 30, 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 nine months ended February 28, 1999 as compared to the nine months ended February 28, 1998. - - - ---------------------------------------------------------------------------- Revenues were $1,339,364 nine months ended February 28, 1999 as compared to $-0-nine months ended February 28, 1998. Costs of goods sold and related expenses nine months ended February 28, 1999, were $661,589 as compared to $0 nine months ended February 28, 1998 representing a cost of goods sold and related expenses of 100.0%nine months ended February 28, 1999 as compared to 0%nine months ended February 28, 1998. General and administrative costs nine months ended February 28, 1999 were $888,511, an increase of 100.0% over expenses of $43 nine months ended February 28, 1999. Liquidity and capital resources as of the end of the six months ended November 30, 1998. - - - -------------------------------------------------------------------------- The Company's cash balance was $104,077 and working capital was a $149,053 as at February 28, 1999. 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 November 30, 1998, the Company has a loss $(306,244). 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. Year 2000 Readiness The following disclosure is a Year 2000 ("Y2K") readiness disclosure statement pursuant to the Year 2000 Readiness and Disclosure Act. The Company's Year 2000 program is designed to minimize the possibility of serious Year 2000 interruption. Possible Year 2000 worst case scenarios include the interruption of significant parts of the Company's business as a result of internal business system failure or the failure of the business systems of its suppliers, distributors or customers. The potential effect to the operations of the present business are minimized currently because the Company's reliance upon computer systems in the day to day operations is minimal. However, the Company decided to significantly upgrade its "business systems" (all computer hardware and software used to run its businesses including its operations management, administration and financial systems). Specifications were developed for desired capabilities, including Year 2000 compliance. In 1998 the Company began assessing its Year 2000 exposure and commenced implementation of a plan to achieve Year 2000 readiness. Based on its review to date, the Company believes that its products and business software are Year 2000 compliant. The Company has also begun to survey major suppliers, distributors, and customers to determine the status and schedule for their Year 2000 compliance. To date, no significant issues have been identified, and the survey is expected to be completed in the third quarter of 1999. Where it believes that a particular supplier's situation poses unacceptable risks, the Company plans to identify an alternative source. The costs of the readiness program for business systems, other infrastructure areas, and suppliers are a combination of incremental external spending and use of existing internal resources. In total, the Company expects to spend less than $1,000 to achieve readiness, of which approximately 10% has been expended to date. This amount is based on the costs to upgrade the existing business systems to Y2K compliant versions. Milestones and implementation dates and the costs of the Company's Year 2000 readiness program are subject to change based on new circumstances that may arise or new information becoming available that may change the underlying assumptions or requirements. Recent Accounting Pronouncements Accounting for Derivative Instruments and Hedging Activities Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133) was issued in June 1998. It is effective for all fiscal years beginning after June 15, 1999. The new standard requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivatives and whether they qualify for hedge accounting. The key criterion for hedge accounting is that the hedging relationship must be highly effective in achieving offsetting changes in fair value or cash flows. The Company does not currently engage in derivative trading or hedging activity. The Company will adopt SFAS 133 in the fiscal year ending December 31, 1999, although no impact on operating results or financial position is expected. Accounting for the Costs of Computer Software Developed or Obtained for Internal Use In March of 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use". SOP 98-1 requires computer software costs associated with internal use software to be charged to operations as incurred until certain capitalization criteria are met. SOP 98-1 is effective beginning January 1, 1999. The Company is currently assessing the impact that adoption of this statement will have on consolidated financial position and results of operations. Forward - Looking Information The Quarterly Report on Form 10-QSB contains forward-looking statements concerning the Company's financial performance and business operations. The Company wishes to caution readers of this Report on Form 10-K that actual results might differ materially from those projected in the forward-looking statements contained herein. Factors which might cause actual results to differ materially from those projected in the forward-looking statements contained herein include the following: the seasonality of the business, inability of the Company to develop the end user market for quality control products; inability of the Company to grow the sales to the extent anticipated; the interruption of significant parts of the Company's business as a result of internal business system failure or the failure of the business systems of its suppliers or customers due to the inability of such systems to properly handle credit card purchases after December 31, 1999; and the potential insufficiency of Company resources, including human resources, plant and equipment and management systems, to accommodate any future growth. 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: June 10, 1999