ITEM 1. BUSINESS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS DISCUSSED IN THIS ANNUAL REPORT ON FORM 10-K ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES, INCLUDING THE TIMELY DEVELOPMENT, INTRODUCTION AND ACCEPTANCE OF NEW PRODUCTS, DEPENDENCE ON OTHERS, THE IMPACT OF COMPETITIVE PRODUCTS, PATENT ISSUES, CHANGING MARKET CONDITIONS AND THE OTHER RISKS DETAILED THROUGHOUT THIS FORM 10-K. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED. THESE FORWARD-LOOKING STATEMENTS REPRESENT THE COMPANY'S JUDGMENT AS OF THE DATE OF THE FILING OF THIS FORM 10-K. THE COMPANY DISCLAIMS, HOWEVER, ANY INTENT OR OBLIGATION TO UPDATE THESE FORWARD-LOOKING STATEMENTS.
Maritime Transport & Technology, Inc. (the "Registrant") was incorporated under the laws of the State of New York on June 26, 1968 under the name of "Inter-County Premium Advancing Corp." On May 2, 1976, Registrant acquired 100% (1,300,000 shares) of the issued and outstanding common stock, $.Ol par value per share, of Delhi Chemicals, Inc., a New York corporation, in exchange for an aggregate of 1,300,000 newly-issued shares of the common stock of Registrant. The foregoing constituted a tax-free exchange within the meaning of Section 368 (A)(1)(B) of the Internal Revenue Code of 1954 as amended. On June 22, 1976, pursuant to a Certificate of Merger filed with the Secretary of State-of New York, Delhi Chemicals, Inc. was merged into the Registrant and Registrant amended its certificate of incorporation so as to change its name to "Delhi Chemicals, Inc." in January and April of 1981, respectively, pursuant to shareholder approval granted at a meeting of Registrant's shareholders held on November 25, 1980, Registrant's certificate of incorporation was amended so as to change its authorized common stock from 4,000,000 to 6,000,000 shares, and its name to "Delhi Consolidated Industries, Inc."
From May 1976 until the Fall of 1983, Registrant was engaged in the furniture refinishing products business as the distributor and franchiser of "Houck's Process" furniture and metal stripping and refinishing products. In the Fall of 1983, after experiencing eight (8) successive fiscal quarters in which operating losses were incurred, Registrant discontinued all active business operations. Registrant has not engaged in any active business operations since such discontinuance.
On June 22, 1983, Registrant's shareholders approved a one-for-two reverse split of all of Registrant's issued and outstanding common stock, $.Ol par value, per share, effective July 27, 1983, resulting in there being 4,886,347 shares of Registrant's common stock outstanding after such reverse-split. Subsequently, Registrant rescinded the issuance of 680,000 Shares for non-delivery of consideration. Accordingly, there were 9,311,019 shares of common stock issued and outstanding. All references to the issued and outstanding stock of Registrant, appearing hereinafter in this report, give effect to the foregoing stock split.
In December, 1987, The Company agreed to purchase from Maritime Transport and Technology, Inc. patents, metal forging engineering designs and technology. The Company issued 4,990,000 shares of common stock to Maritime for the acquisition, as a partial payment of a total consideration of 11,185,933 shares of common stock and 7,100 shares of preferred stock. Subsequently, additional shares were issued, primarily in exchange for cancellation of debt owed to James Howell, President of the Company, bringing the total number of shares issued and outstanding to 38,985,549.
In May, 1998, the Company completed the reverse acquisition of B.G. Banking Equipment, Inc., ("B.G. Banking") and Financial Building Equipment Exchange, Inc., ("FBEE"), Kentucky corporations. This merger had an effective date of June 1, 1998. In that transaction, the Company purchased all of the outstanding shares of B.G. Banking Equipment, Inc., in exchange for 11,282,250 shares of the Company's common stock. Prior to this exchange, the Company had done a ten for one reverse split which had left the Company with 3,848,455 common shares issued and outstanding. After the completion of the merger, the amount of the Company's common stock issued and outstanding was 15,130,705.
The Registrant sells and services new, used and reconditioned automated teller machines (ATMs), electronic and physical security systems, various products used to equip bank facilities, software and systems for global financial and commercial markets. Sales of systems and equipment are made directly to customers by the registrant's sales personnel and by manufacturer's representatives and distributors. The sales/support organization works closely with customers and their consultants to analyze and fulfill the customers' needs. Products are sold under contract for future delivery at agreed upon prices.
INDUSTRY
In the past several years, acquisitions and mergers in the banking industry have resulted in many large bank holding companies. Manufacturers and service companies have not kept pace with the new larger banks. Geographic spread of branches has created servicing problems. Many banks are unable to find and purchase equipment needed for their day to day banking needs. Part of the reason for this is the fact that the large banks have hired away most of the experienced buyers, and the smaller banks are now faced with less experienced staff, lower amounts of funds available for purchases in comparison to the larger banks, and limited geographical access to suppliers. Even though there are smaller service companies in almost every area, they still cannot provide service to many of these small banks because of the lack of available parts. The result is a large number of "home town" or limited branch banks which are unable to keep pace with the larger banks in terms of their access to and acquisition of much of the equipment needed to manage the bank - bank equipment such as vault doors, safes, drive-up equipment and ATM's.
THE SERVICE
Because the Company handles pre-owned equipment, it has been able to sell many parts desired by banks. The Company is now in the process of cataloging all parts and equipment. The Company thus has specialized equipment that does not age, such as vault doors, safes, and deposit boxes. Most of this equipment costs more to manufacture than the price for which the Company can sell it. The larger banks are now outsourcing to facilities maintenance groups. The Company has become an outsource resource, including new equipment, pre-owned equipment and replacement parts, and maintenance personnel. The Company views its market as the smaller banks, and intends to act as an outsource operation for these banks, supplying them with the know how, sources, and technical expertise needed to acquire and maintain the equipment necessary to run a bank in this day and age. Because the Company uses pre-owned equipment, it is able to do this at a very competitive price.
THE COMPETITION
The Company knows of several other entities presently competing for the same market. Many of these Companies have greater capital resources, larger staffs and more sophisticated facilities and more experience in the industry than the Company. Such companies may more effectively service clients than the Company and may be more successful than the Company in their servicing and marketing of the Company's products. There can be no assurance that other companies will not enter the markets developed by the Company or its customers. There can be no assurance that the Company will be able to compete successfully in the future with existing or new competitors.
EMPLOYEES
Currently, the Company employs 19 full time employees, Paul Clark as President, Roberta Clark as corporate secretary and vice president. Two persons are employed in sales, four persons are employed in office/clerical capacities, as well as one bookkeeper and one secretary. In addition there are six installation personnel and three persons in service.
ITEM 2.
ITEM 2. PROPERTIES
The Company presently occupies 24,000 square feet of office and warehouse space located at Building 1535 Memphis Junction Road, Bowling Green, Kentucky 42101 for a monthly rent of $5,000 pursuant to a lease dated August 1, 1998 for three years. This space is rented to the Company by Paul Clark, President of the Company.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
As at May 31, 1998 and the filing date hereof, no material legal proceedings were pending to which the Registrant or any of its property is subject, nor to the knowledge of the Registrant are such legal proceedings threatened.
The Company intends to file a suit in the near future. Two of the Company's past directors, Andrew Seim and Alexander Brosda, acting and individually and acting as principals of Taurus Investments International, Inc. ( a Nevada corporation) (together "Taurus"), acting as Directors of B.G. Banking prior to its acquisition by the Company and subsequent to the acquisition becoming Directors of the Company, offered and sold on behalf of B.G. Banking what Taurus has admitted to being an aggregate of 304,500 shares of common stock of B.G. Banking for an aggregate consideration of $304,500. Taurus has remitted to B.G. Banking and the Company a net proceeds of $109,673.05 and claims the difference of $194,826 be retained by Taurus as payment for expenses and commissions. Taurus has refused to disclose the names and numbers of shares of common stock and refused to remit to the Company the proceeds of the shares sold.
The Company intends to enter into a lawsuit with Taurus demanding the balance of $194,826 that was improperly withheld be remitted to the Company and that Taurus disclose the names of the persons and the number of shares of common stock sold to these individuals. As of May 31, 1999, Taurus has failed to turn over the balance of money, provide the names of the stock subscribers and the number of shares of common purchased.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Registrant submitted no matters to a vote of its security holders during its fiscal year ended May 31, 1998. PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Currently, the Company's Common Stock is traded over the counter on the Bulletin Board. Following is a chart of the Company's high and low bid information for each quarter within the last fiscal year. The listed quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not represent actual transactions.
(b) As of May 31, 1998, there were approximately 901 holders of the Company's Common Stock.
(c) No dividends were paid during the fiscal year ending May 31, 1998.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE MATTERS DISCUSSED IN THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HERE. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THE SECTIONS ENTITLED "BUSINESS" AND "RISK FACTORS," AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K. THE COMPANY DISCLAIMS, ANY INTENT OR OBLIGATION TO UPDATE THESE FORWARD-LOOKING STATEMENTS.
OVERVIEW
Maritime Transport & Technology (the "Company") was established in 1968. The Company remained dormant for many years until the Company completed the acquisition of B.G. Banking Equipment, Inc., ("B.G. Banking") and Financial Building Equipment Exchange, Inc., ("FBEE"), Kentucky corporations. The Company is now in the business of buying, selling, trading both new and refurbishing of financial equipment for banks and other financial institutions. The Company markets the products throughout the United States primarily through direct sales to financial institutions and other distributors supported by the Company's direct sales force and soliciting new contacts through its presence on the Internet. The Company anticipates that its results of operations may fluctuate for the foreseeable future due to several factors, including whether and when new products at competitive prices are obtained and sources of good used banking and banking related equipment and furniture available at favorable prices; market acceptance of current or new products, delays, or inefficiencies, shipment problems, seasonal customer demand, the timing of significant orders, competitive pressures on average selling prices and changes in the mix of products sold.
Operating results would also be adversely affected by a downturn in the market for the Company's current and future products, order cancellations or order rescheduling or remanufacturing or delays. The Company purchases and resells new and used merchandise and remanufactures and ships its other products shortly after receipt of orders and has not developed a significant backlog for such products and does not anticipate it will develop a material backlog for such products in the future.
Because the Company is continuing to increase its operating expenses, primarily for personnel and activities supporting newly-introduced products, new product development and entering new markets, the Company's operating results would be adversely affected if its sales did not correspondingly increase or if its product development efforts are unsuccessful or are subject to delays. The Company has incurred losses due to the payment of consulting fees and the issuance of shares of common stock in consideration for consulting expenses charged to operations in lieu of the payment of cash.
The Company may not sustain revenue growth or return to profitability on a quarterly or annual basis and its operating results may not be consistent with predictions made by securities analysts.
RESULTS OF OPERATIONS
The following table sets forth operating data as a percentage of net sales:
Results of operations for the nine months ended May 31, 1998 as compared to the year ended August 31, 1997. The fiscal year ended May 31, 1998 consisted of nine months resulting from B.G. Banking Equipment, Inc., and Financial Building Equipment Exchange, Inc., changing its fiscal year end from August 31 to May 31 to conform to the fiscal year end of the Company.
For the year ended May 31, 1998, the Company generated net sales of $1,065,802 as compared to $1,401,301 for the year ended August 31, 1997 representing a decrease of $335,499. The Company's cost of goods sold for the year ended May 31, 1998 was $465,015 as compared to $700,494 for the year ended August 31, 1997. The Company's gross profit on sales was $600,787 for the year ended May 31, 1998 as compared to $700,807 for the year ended August 31, 1997. The decrease in sales is the direct result of the change in the fiscal year ends creating shortfall of 3 months in sales for the fiscal year end May 31, 1998. The ratio in Gross profit was reduced from 50.0% for the year end August 31, 1997 as compared to a gross profit percentage of 43.6%. The reduction is a direct result of the product mix for the products sold being higher in refurbished equipment than new equipment sales. The cost of purchasing and refurbishing equipment for resale is significantly lower then the cost of purchasing new equipment.
General and administrative costs for the year ended May 31, 1998 was $637,315 as compared to $606,916 for the year ended August 31, 1997 representing an increase of $30,399. These increased general and administrative costs were undertaken to create the infrastructure necessary to meet the Company's marketing and production goals. As an outgrowth of increasing equipment sales the Company expects general and administrative costs to continue to increase but at a slower rate. As a percent of sales, this cost to sales decreased 33.6% during the current year as the fiscal year May 31, 1998 was only for nine months.
BENEFIT (PROVISION) FOR INCOME TAXES
As a result of the pre-tax loss recorded for 1998, the Company not recorded a benefit for Federal income taxes. Instead the Company recognized no income tax benefit from the losses generated in the year ended May 31, 1998. SFAS No. 109 requires that a valuation allowance be provided if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Company's ability to realize benefit of its deferred tax asset will depend on the generation of future taxable income. Because the Company has yet to recognize significant revenue from the sale of its products, the Company believes that a full valuation allowance should be provided. The Company will continue to assess the likelihood of realization of such assets; however, if future events occur which make the realization of such assets more likely than not, the Company will record a tax benefit. The Company is liable for the payment of a Corporate Kentucky State on tangible assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations through revenues from operations, private and public placements of equity securities, debt and capital lease financing and interest income earned on the net proceeds from the private placements. Since its reorganization, the Company has received proceeds of approximately $103,000 in long-term debt and $86,000 from investors.
During the year ended May 31, 1998, the Company had negative cash flow from operations of $124,841 essentially because of an increase in accounts receivable of $127,907, inventory of $9,404, and an increase in accounts payable and accrued expenses of $46,340 customer deposits payable increased $12,853. Other significant business activities affecting cash included the purchase of fixed assets of $39,684.
The Company is evaluating various alternatives in addressing its future facilities expansion needs. The alternatives being evaluated include negotiations with various parties for the leasing of additional facility space and the purchase of additional property to build a new or additional office and warehousing facility. Relocation to a new facility or leasing of additional facility space would be expected to result in an increase in rent upon occupancy.
The Company believes that its available cash, cash from operations and funds from existing credit arrangements will be sufficient to satisfy its funding needs for at least the next 12 months. Thereafter, if cash generated from 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 additional capital, if needed, will be available on satisfactory terms, if at all. Furthermore, any additional equity financing may be dilutive to stockholders, and debt financing, if available, may include restrictive covenants. The Company's future liquidity and capital funding requirements will depend on numerous factors, including the extent to which the Company's new products and products under consideration are successfully developed, gain market acceptance and become and remain competitive, the timing and results of regulatory actions in the banking industry, the costs and timing of further expansion of sales, marketing and manufacturing activities, facilities expansion needs. The failure by the Company to raise capital on acceptable terms when needed could have a material adverse effect on the Company's business, financial condition and results of operations. ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTALLY DATE
MARITIME TRANSPORT & TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEET
See accompanying notes to financial statement
MARITIME TRANSPORT & TECHNOLOGY, INC. CONSOLIDATED STATEMENT OF OPERATIONS
See accompanying notes to financial statement
MARITIME TRANSPORT & TECHNOLOGY, INC. CONSOLIDATED STATEMENT OF CASH FLOWS
See accompanying notes to financial statement
MARITIME TRANSPORT & TECHNOLOGY, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
See accompanying notes to financial statement
MARITIME TRANSPORT & TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 1997 AND MAY 31, 1998
NOTE 1 - FORMATION OF COMPANY AND ISSUANCE OF COMMON STOCK
a. Formation and Description of the Company
Maritime Transport & Technology, Inc. (the "Company") was formed under the laws of the State of New York on June 26, 1968 and authorized up to issue to 80,000,000 shares of common stock, $.01 par value. On May 31, 1998, the Company completed the acquisition of B.G. Banking Equipment, Inc. ("B.G. Banking") and Financial Building Equipment Exchange, Inc. ("FBEE"), Kentucky corporations, in exchange for 11,282,250 shares of its common stock. The aforementioned transaction has been accounted for as a reverse merger involving a shell company, effectively a recapitalization of B.G. Banking Equipment, Inc. and Financial Building Equipment Exchange, Inc. (the operating companies/accounting acquirers). Accordingly, the historical financial statements of the operating companies are presented as the historical financial statements of the registrant. The results of operations of Maritime Transport & Technology, Inc. (legal acquirer) are included in the consolidated financial statements since May 31, 1998, the date of the merger. The Company is in the business of buying, selling, trading and refurbishing of financial equipment for banks and other financial institutions.
b. Issuance of Common Stock
The number of common shares outstanding at May 31, 1997 is 38,484,549. No other shares have been issued.
On May 3, 1998, the Company reverse split the number of shares of common stock outstanding in a ratio of 1 for 10 restating the number of shares outstanding to 3,848,455.
On May 3, 1998, the Company authorized for issuance 11,282,250 shares of common stock pursuant to an Agreement of Business Combination, the ("Agreement"), with B.G. Banking and FBEE. On May 31, 1998, the shares of common stock were released from escrow.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Financial Statement Presentation
The consolidated financial statements of the Company presented consist of the balance for the Company of as of August 31, 1997 and May 31, 1998, and the balance sheet for B.G. Banking and FBEE as of August 31, 1997 and May 31, 1998 and the related consolidated statements of operations, retained earnings and cash flows for the year ended August 31, 1996 and 1997 and May 31, 1998 for the Company, and the related statements of operations, retained earnings and cash flows for the years ended August 31, 1996 and 1997 and May 31, 1999 for B.G. Banking and FBEE. The consolidated statement of operations, cash flows and stockholders equity for the year ended May 31, 1998 consists of the short nine month year ended May 31, 1998 for BG Banking and FBEE reflecting BG Banking and FBEE changing its fiscal year end to May 31 from an August 31 year end. The consolidated statement of operations, cash flows and stockholders equity for the year ended August 31, 1996 and 1997 consists of the statement of operations, cash flows and stockholders equity for year ended August 31, 1996 and 1997 for the Company and the statement of operations, cash flows and stockholders equity for the fiscal year ending August 31, 1996 and 1997.
b. Cash and Cash Equivalents
The Company treats cash equivalents which includes temporary investments with a maturity of less than three months as cash when purchased with cash.
c. Inventory
Inventory has been recorded at the lower of cost or market under the first-in-first-out method. Inventory components for B.G. Banking and FBEE as of August 31, 1997 and May 31, 1998 were goods available for sale aggregating $161,391 and $170,795 respectively.
d. Earnings 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 weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution of securities that could share in 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 shares of common stock. As of May 31, 1999, there no are matters that would effect the number of shares of common stock outstanding.
e. Revenue recognition
Revenue is recognized when products are shipped or services are rendered.
f. Customer Deposits
Customer deposits represent monies advanced by customers at the time orders were placed. The amount of the deposit is used to reduce the customer's accounts receivable balance at the time of shipment of the order. At August 31, 1997 and May 31, 1998, there were $48,553 and $61,406 respectively in advance deposits received from customers for orders to be filled.
g. Federal Corporate Incomes Tax Receivable
The balance of taxes receivable consists of monies that were overpaid to the United States Government with the Federal Income Tax return filed for August 31, 1997. This amount was paid subsequent to the date of the financial statements.
h. Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. i. Asset Impairment
The Company adopted the provisions of SFAS No. 121, Accounting for the impairment of long lived assets and for long-lived assets to be disposed of effective January 1, 1996. SFAS No. 121 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the estimated undiscounted cash flows to be generated by those assets are less than the assets' carrying amount. SFAS No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of. Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that full recoverability is questionable. There was no effect of such adoption on the Company's financial position or results of operations.
j. Significant Concentration of Credit Risk
At August 31, 1997 and May 31, 1998, the Company has concentrated its credit risk by maintaining deposits in several banks. The maximum loss that could have resulted from this risk totaled $-0- which represents the excess of the deposit liabilities reported by the banks over the amounts that would have been covered by the federal insurance.
k. Recent Accounting Standards
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, 2000, 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.
NOTE 3 - ACQUISITION OF SUBSIDIARIES
On May 3, 1998, The Company entered into an Agreement with B.G. Banking and FBEE, pursuant to which the Company and an affiliated entity controlled my Paul and Roberta Clark exchanged all the issued and outstanding shares of common stock of these entities for 11,282,250 shares of Maritime's common stock. The shares of common stock were released from escrow on May 31, 1998. The transaction has been accounted for as the issuance of shares of common stock by a private company for the net assets of the Company, accompanied by a recapitalization. Accordingly, the financial statements of Company became the consolidated financial statements of B.G. Banking and FBEE.
In a separate private transaction, the principals of the Company acquired on in December, 1997 27,943,370 shares of Maritime's common stock, which subsequently reverse split in a ratio of 10 to 1 on April 14, 1998.
NOTE 4 - NOTES RECEIVABLE
a. Loans receivable - shareholder
As of August 31, 1997 and May 31, 1998, the Company is due an aggregate of $75,914 and $91,352 respectively from Paul Clark. These amounts were advanced without interest and are due on demand.
b. Notes receivable non affiliated
As of August 31, 1997 and May 31, 1998, the Company has outstanding notes receivable aggregating $36,276 and $40,699 as follows:
As of August 31, 1997 and May 31, 1998, a balance of $23,076 and $27,499 respectively due from Morgan Glass and Mirror, Inc. consisting of monies advanced to the Company on January 1, 1997 with interest of 10.5% and is payable on demand. This amount is collateralized by the underlying accounts receivable of Morgan.
On August 31, 1997 and May 31, 1998, a balance of $13, 200 and $13,900 respectively due from AAA Alarm Systems, Inc. with interest of 9.5% and is payable on demand. This amount is collateralized by the underlying accounts receivable.
c. Loan receivable - shareholder
As of May 31, 1998, Paul Clark was obligated to repay monies advanced to him by the Company. This amount is due without interest and on demand. Such amount was repaid to the Company in 1999.
d. Loan receivable - non-affiliate
As of May 31, 1998, the Company had outstanding notes receivable aggregating $40,699 as follows:
As of May 31, 1998, the Company has a balance of $27,499 due from Morgan Glass and Mirror, Inc. with interest at 10%. This loan represents an open line of credit and is collateralized by his accounts receivable.
On May 31, 1998, the Company advanced $13,200 to AAA Alarm Systems, Inc. The note is due on demand with interest at 9.5%
NOTE 5 - RELATED PARTY TRANSACTIONS
a. Leased Office Space
The Company has entered into a three year lease with Paul Clark, President of the Company beginning August 1, 1997, for the lease of an aggregate of 23,976 square feet of office and warehouse space located at Building 1535 Memphis Junction Road, Bowling Green, Kentucky, 42101 for a monthly rent of $ 5,000 per month.
Rent paid pursuant to this lease agreement for the year ending May 31, 1998 is $45,000. The minimum lease payments for the years ending May 31, 1999 and 2000 of the lease is $60,000 and $60,000 respectively
b. Officer Salaries
Mr. Paul Clark, President of the Company received an aggregate salary of $129,600 consisting of cash payments of $33,600.
Roberta Clark, Secretary to the Company received a salary of $21,600 plus vacation and health benefits.
No other officer has received a salary in excess of $100,000.
c. Managerial Relationship
Mr. Paul Clark is the President of both the Company, B.G. Banking and FBEE. Paul and Roberta Clark are husband and wife.
d. Change in Managerial Control
On May 3, 1998, The Company entered into an Agreement with B.G. Banking and FBEE, pursuant these affiliated entities controlled by Paul and Roberta Clark exchanged all the issued and outstanding shares of common stock of these entities for 11,282,250 shares of Maritime's common stock.
NOTE 6 - PROPERTY PLANT AND EQUIPMENT
Property Plant and Equipment consists of the following at May 31, 1998
NOTE 7 - BANK LOANS PAYABLE
a. Loans Due South Central Bank of Bowling Green, Inc.
Bank loans aggregating $15,542 at May 31, 1999 are as follows: FBEE is obligated to repay a loan payable to the South Central Bank of Bowling Green, Inc. in the principal amount of $8,052 in 36 equal monthly installments of $263.54 beginning January 16, 1998 with interest at 11%. The balance due at May 31, 1998 is $7,077. The loan is secured by a 1992 Ford truck.
FBEE is obligated to repay a loan payable to the South Central Bank of Bowling Green, Inc. in the principal amount of $14,052 in 40 equal monthly installments of $342.66 beginning June 20, 1998 with interest at 7.75%. The balance due at May 31, 1998 is $14,052. The loan is secured by a 1995 Buick Park Avenue.
FBEE is obligated to repay a loan payable to the South Central Bank of Bowling Green, Inc. in the principal loan balance amount of $1,564 at May 31, 1998 with monthly installments of $342.66. The loan is secured by a Ford truck.
b. First American National Bank
FBEE has a $150,000 line of credit with the First American National Bank with interest at prime plus 2%. As of May 31, 1998, FBEE is obligated to repay a balance of $100,500 and $-0- respectively. Interest is billed monthly. The line of credit is secured personally by the residence of Paul and Roberta Clark.
NOTE 8 - INCOME TAXES
The Company provides for the tax effects of transactions reported in the financial statements. The provision if any, consists of taxes currently due plus deferred taxes related primarily to differences between the basis of assets and liabilities for financial and income tax reporting. The deferred tax assets and liabilities, if any, represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. As of May 31, 1998, the Company had no material current tax liability, deferred tax assets, or liabilities to impact on the Company's financial position because the deferred tax asset related to the Company's net operating loss carry forward and was fully offset by a valuation allowance.
At May 31, 1998, the Company has net operating loss carry forwards for income tax purposes of $131,850. These carry forward losses are available to offset future taxable income, if any, and expire in the year 2010. The Company's utilization of this carry forward against future taxable income may become subject to an annual limitation due to a cumulative change in ownership of the Company of more than 50 percent.
The components of the net deferred tax asset as of May 31, 1998 are as follows:
The Company recognized no income tax benefit for the loss generated for the year ended May 31, 1998.
The Company recognized no income tax benefit from the loss generated in the year ended May 31, 1997. SFAS No. 109 requires that a valuation allowance be provided if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Company's ability to realize benefit of its deferred tax asset will depend on the generation of future taxable income. Because the Company has yet to recognize significant revenue from the sale of its products, the Company believes that a full valuation allowance should be provided.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
a. Private Placement and Investor Loans Payable
As of May 31, 1998, Investor loans payable were $131,500. These amounts represent shares of common stock sold at $1.00 per share sold as of these dates, but remain undelivered by the Company.
The Company offered 2,000,000 shares of common stock at $1.00 per share on a "best efforts basis".
As of May 31, 1998, the Company had sold 131, 500 shares of common stock for an aggregate consideration of $131,500 for which delivery of the shares representing 93,100 shares or an aggregate of $93,100 was effectuated in the next fiscal year.
The Company has reserved 1,868,500 shares of common stock pending the completion of the private placement.
NOTE 10 - BUSINESS AND CREDIT CONCENTRATIONS
The amount reported in the financial statements for cash and trade accounts receivable approximates fair market value. Because the difference between cost and the lower of cost or market is immaterial, no adjustment has been recognized and investments are recorded at cost.
Financial instruments that potentially subject the company to credit risk consist principally of trade receivables. Collateral is generally not required.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company did not change accountants for the fiscal year ending May 31, 1998.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF REGISTRANT
PAUL CLARK
Mr. Clark is the founder of B.G. Banking Equipment, Inc. (Formerly AAA Alarms and Services, Inc., March 1977) He is also the President and CEO of Financial Building Equipment Exchange, Inc. He has worked in a variety of management and sales positions in the electronic security and banking equipment industries as well as the U.S. Navy. His education and training were from several technical schools including an Industrial Electronics degree received in 1970. Mr. Clark also received medical electronics specialist training as an interior communication electrician with the United States Naval Submarine Service. Mr. Clark also attends specialized educational courses annually to stay current in the field of security.
ROBERTA CLARK
Ms. Clark has been a director, the secretary and Vice President of the Company since May, 1998. From 1977 to 1998, Ms. Clark served in similar positions at AAA Alarms. She attended Colorado State University in Fort Collins, Colorado. In 1962 she received a B.A. in Art and in 1966 a Masters Degree in Art.
ALBERT E. BLANKENSHIP
Mr. Blankenship is and has been since at least 1990 a practicing accountant. He has extensive financial experience in a variety of industries, with both publicly and privately held corporations. He also managed financial and tax affairs for a variety of corporate clients. Mr. Blankenship received his B.S. in Business Administration from Bowling Green (KY) College of Commerce, and is a retired U.S. Army officer. He holds certificate #871 for state board of accountancy effective 2-14-62.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Mr. Paul Clark, President of the Company received an aggregate salary of $129,600 consisting of cash payments of $33,600.
Roberta Clark, Secretary to the Company received a salary of $21,600 plus vacation and health benefits.
No other officer has received a salary in excess of $100,000.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the share ownership, as of May 31, 1998, of those persons known to Registrant to be the beneficial owners of more than 5% of Registrant's common stock, $.Ol par value, and by Registrant's officers and directors:
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Following are the related party transactions during the fiscal year ended May 31, 1998.
a. Loans receivable - shareholder
As of August 31, 1997 and May 31, 1998, the Company is due an aggregate of $75,914 and $91,352 respectively from Paul Clark. These amounts were advanced without interest and are due on demand.
b. Loan receivable - shareholder
As of May 31, 1998, Paul Clark was obligated to repay monies advanced to him by the Company. This amount is due without interest and on demand.
c. Leased Office Space
The Company has entered into a three year lease with Paul Clark, President of the Company beginning August 1, 1997, for the lease of an aggregate of 23,976 square feet of office and warehouse space located at Building 1535 Memphis Junction Road, Bowling Green, Kentucky, 42101 for a monthly rent of $ 5,000 per month.
Rent paid pursuant to this lease agreement for the year ending May 31, 1998 is $45,000. The minimum lease payments for the years ending May 31, 1999 and 2000 of the lease is $60,000 and $60,000 respectively
d. Officer Salaries
Mr. Paul Clark, President of the Company received an aggregate salary of $129,600 consisting of cash payments of $33,600.
Roberta Clark, Secretary to the Company received a salary of $21,600 plus vacation and health benefits.
No other officer has received a salary in excess of $100,000.
e. Managerial Relationship
Mr. Paul Clark is the President of both the Company, B.G. Banking and FBEE. Paul and Roberta Clark are husband and wife.
f. Change in Managerial Control
On May 3, 1998, The Company entered into an Agreement with B.G. Banking and FBEE, pursuant these affiliated entities controlled my Paul and Roberta Clark exchanged all the issued and outstanding shares of common stock of these entities for 11,282,250 shares of Maritime's common stock.
Part IV Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
(A)(1) FINANCIAL STATEMENTS
The following financial statements are included under a separate caption "Financial Statements and Supplementary Data" in Part II, Item 8 hereof and are incorporated herein by reference.
Consolidated Balance Sheet for Years Ended May 31, 1998 and August 31, 1997
Consolidated Statements of Operations for Years Ended May 31, 1998, August 31, 1997 and August 31, 1996
Consolidated Statements of Cash Flows for Years Ended May 31, 1998, August 31, 1997 and August 31, 1996
Consolidated Statements of Shareholders' Equity for Years Ended May 31, 1998, August 31, 1997 and September 1, 1996
Notes to Consolidated Financial Statements
(A)(2)
Financial Statement Schedules All financial statement schedules have been omitted as the required information is inapplicable or has been included in the Consolidated Financial Statements.
(A)(3)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Maritime Transport & Technology, Inc.
By: /s/ Paul Clark --------------------------------- Paul Clark President, CEO & Director
3-15-01 -------------------------------- (Date)
Pursuant to the requirements of the Securities Exchange Act of 1934, 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/ Roberta Clark --------------------------------- Roberta Clark Vice President, Secretary & Director
3/15/01 ------------------------------------- (Date)
By: /s/ Albert Blankenship --------------------------------- Albert Blankenship Chief Financial Officer
3-15-01 ----------------------------------- (Date)