SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the
Securities Act of 1934
For the quarterly period ended September 30, 1997 or
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Act of 1934
For the transition period from to
Commission file number 2-80891-NY
MODERN TECHNOLOGY CORP.
(Exact Name of Registrant as Specified in its Charter)
Nevada 11-2620387
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
240 Clarkson Ave Brooklyn, New York 11226
(Address of Principal Executive Office) (Zip Code)
(718)469-3132
(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
Securities and Exchange Act of 1934 during the preceding twelve
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 ninety days.
Yes / X / No / /
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes / / No / /
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date. 20,150,000
10Q-1
MODERN TECHNOLOGY CORP.
FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
I N D E X
Page
ACCOUNTANTS' REVIEW REPORT 1
CONSOLIDATED BALANCE SHEETS 2
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY 3
CONSOLIDATED STATEMENTS OF OPERATIONS 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 6-11
ACCOUNTANTS' REVIEW REPORT
To the Board of Directors and Stockholders
MODERN TECHNOLOGY CORP.
Brooklyn, New York
We have reviewed the consolidated balance sheets of MODERN
TECHNOLOGY CORP. as at September 30, 1997, and the related
consolidated statements of operations, stockholders' equity and
cash flows for the three month periods ended September 30, 1997 and
1996, in accordance with standards established by the American
Institute of Certified Public Accountants.
A review of interim financial information consists principally of
obtaining an understanding of the system for the preparation of
interim financial information, applying analytical review
procedures to financial data, and making inquiries of persons
responsible for financial and accounting matters. It is
substantially less in scope than an examination in accordance with
generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the consolidated financial statements for
them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of June 30,
1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended (not
presented herein); and in our report dated August 15, 1997, we
expressed an unqualified opinion on those financial statements. In
our opinion, the information set forth in the accompanying balance
sheet as of June 30, 1997 is fairly stated in all material respects
in relation to the consolidated balance sheet from which it has
been derived.
GREENBERG & COMPANY, LLC
Springfield, New Jersey
October 29, 1997
Page 1 of 11
MODERN TECHNOLOGY CORP.
CONSOLIDATED BALANCE SHEETS
Sept. 30, 1997
(Unaudited) June 30, 1997
A S S E T S
CURRENT ASSETS
Cash and Cash Equivalents $713,982 $647,886
Income Tax Receivable 7,378 -0-
Total Current Assets 721,360 647,886
EQUIPMENT - At Cost 9,939 9,939
Less: Accumulated Depreciation 9,939 9,939
-0- -0-
OTHER ASSETS
Investments, At Cost 24,750 49,770
Investments, At Equity -0- -0-
Loan Receivable - Affiliate -0- -0-
Deferred Tax Asset 7,375 7,375
Deferred Registration Costs 26,007 25,907
Other Assets 300 300
Total Other Assets 58,432 83,352
TOTAL ASSETS $779,792 $731,238
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
CURRENT LIABILITIES
Accrued Expenses and Taxes $ 19,082 $ 3,219
Total Current Liabilities 19,082 3,219
STOCKHOLDERS' EQUITY
Common Stock Par Value $.0001
Authorized: 150,000,000
Shares Issued and Outstanding:
20,150,000 Shares 2,015 2,015
Paid-In Capital in Excess of Par 495,161 495,161
Retained Earnings 263,534 230,843
Total Stockholders' Equity 760,710 728,019
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $779,792 $731,238
Subject to the comments contained in the Accountants' Review Report.
Page 2 of 11
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JULY 1, 1996 TO SEPTEMBER 30, 1997
Total
Par Stock-
# of Value Paid-In Retained holders'
Shares $.0001 Capital Earnings Equity
BALANCES AT
JULY 1, 1996 20,150,000 $2,015 $495,161 $218,918 $716,094
Net Income(Loss)
for the year ended
June 30, 1997 11,925 11,925
BALANCES AT
JUNE 30, 1997
(Audited) 20,150,000 $ 2,015 $495,161 $230,843 $728,019
Net Income
(Loss) for
the Three
Months ended
Sept. 30, 1997 32,691 32,691
BALANCES AT
SEPTEMBER 30, 1997
(Unaudited) 20,150,000 $ 2,015 $495,161 $263,534 $760,710
Subject to the comments contained in the Accountants' Review Report.
Page 3 of 11
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For The Three
Months Ended
September 30,
1997 1996
REVENUES
Interest Income $ 6,412 $ 7,665
Management Income 1,600 2,400
Gain on Securities Sale 67,065 -0-
75,077 10,065
EXPENSES
Officers Salaries 17,800 1,800
General and Administrative Expenses 8,457 7,424
26,257 9,224
INCOME (LOSS) INCOME BEFORE TAXES 48,820 841
Income Tax Expense (Note 5) 16,129 164
NET INCOME (LOSS) $32,691 $ 677
NET INCOME (LOSS) PER SHARE NIL NIL
NUMBER OF WEIGHTED AVERAGE SHARES
OUTSTANDING 20,150,000 20,150,000
Subject to the comments contained in the Accountants' Review Report.
Page 4 of 11
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For The Three
Months Ended
September 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 32,691 $ 677
Adjustments to Reconcile Net
Income to Net Cash Provided By
Operating Activities:
Changes in Assets and Liabilities:
(Increase) Decrease in Income Tax
Receivable (7,378) -0-
(Increase) Decrease in Deferred
Registration Costs (100) -0-
(Decrease) Increase in Accrued
Expenses and Taxes 15,863 (781)
Net Cash (Used In) Provided By
Operating Activities 41,076 (104)
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans to Affiliate -0- -0-
Sale of Investments 25,020 -0-
Net Cash Provided By (Used In)
Investing Activities 25,020 -0-
Net (Decrease) Increase in Cash
and Cash Equivalents 66,096 (104)
Cash and Cash Equivalents,
Beginning of Period 647,886 616,268
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 713,982 $ 616,164
Supplemental Disclosures of
Cash Flow Information
Cash Paid During Period For:
Taxes $ 8,113 $ 807
Interest -0- -0-
Subject to the comments contained in the Accountants' Review Report.
Page 5 of 11
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
NOTE 1: ORGANIZATION AND NATURE OF OPERATIONS
Modern Technology Corp. (Modern) is a Nevada corporation.
Modern is engaged in aiding prospective clients in
obtaining financing and in providing managerial services
to client companies. Modern's office is located in New
York. Modern's clients are located throughout the world.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING POLICIES
Modern Technology Corp.'s accounting policies conform to
generally accepted accounting principles. Significant
policies followed are described below.
BASIS OF PRESENTATION
The accompanying consolidated financial statements
include the accounts of the Company's wholly owned
subsidiary Coral Development Corp(Coral). All
significant intercompany balances and transactions
have been eliminated in consolidation. Modern invested
$30,300 in Coral during the quarter ended December 31,
1996.
RECLASSIFICATIONS
Certain items from prior periods within the financial
Statements have been reclassified to conform to current
period classifications.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid, short-term
investments with maturities of 90 days or less.
ESTIMATES IN FINANCIAL STATEMENTS
The preparation of the Company's financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions
that affect the reported amounts of 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.
Page 6 of 11
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
(Continued)
INCOME TAXES
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No.
109, Accounting for Income Taxes. SFAS 109 has as its
basic objective the recognition of current and deferred
income tax assets and liabilities based upon all events
that have been recognized in the financial statements as
measured by the provisions of the enacted tax laws.
Valuation allowances are established when necessary to
reduce deferred tax assets to the estimated amount to be
realized. Income tax expense represents the tax payable
for the current period and the change during the period
in the deferred tax assets and liabilities.
DEFERRED REGISTRATION COSTS
As of September 30, 1997, the Company's subsidiary,
Coral, has incurred deferred registration costs of
$26,007 relating to expenses incurred in connection with
the Proposed Distribution of Coral's securities. Upon
consummation of this Proposed Distribution, the deferred
registration costs will be charged to equity. Should the
Proposed Distribution prove to be unsuccessful, these
deferred costs, as well as additional expenses to be
incurred, will be charged to operations.
NOTE 3: INVESTMENT IN EQUITY SECURITIES (At Cost)
Investments in Non-Marketable Equity Securities consist
of the following:
Page 7 of 11
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
(Continued)
Sept. 30, June 30,
1997 1996
Investment in 25,000 Shares
of Delta Three, Inc. $ -0- $25,000
Investment in TTR Inc.
10% Promissory Note -0- 25,000
Investment in 72 million
restricted shares in
Daine Industries, Inc. 15,900 15,900
Investment in 50,100,000
restricted shares in
Davin Enterprises, Inc. 7,950 7,950
Investments in other
restricted securities 900 920
$24,750 $74,770
The Company purchased 72 million shares of Daine
Industries, Inc. stock at a cost of $15,900. This
represents 29% of the total outstanding shares of common
stock.
The Company purchased 50,100,000 shares of Davin
Enterprises, Inc. at a cost of $7,950. This represents
25.8% of the total outstanding shares of common stock.
The Company purchased an investment in TTR Inc., a 10%
promissory note in the amount of $25,000 with warrants
for 4,000 shares exercisable at $.01 at the time of a TTR
initial public offering. TTR Inc. incorporated for the
purpose of designing, developing, and marketing computer
software products. During the quarter ended September
30, 1997, this investment was sold.
The Company purchased 25,000 shares of Delta Three Inc.
for $25,000. Delta Three, Inc. is a telecommunications
provider using Internet technology for voice
transmission. During the quarter ended September 30, 1997
this investment was sold.
Page 8 of 11
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
(Continued)
NOTE 4: INVESTMENT IN AFFILIATE (At Equity)
Investment in Soft Sail Wind Power Inc.
(representing approximately 36% of the
outstanding common stock)
The summarized unaudited financial information below
represents the Company's nonsubsidiary affiliate:
Balance Sheet Data at June 30, 1996:
Total Assets $ 12,656
Total Liabilities 11,400
Net Assets 1,256
Company's Equity in Net Assets 452
Earnings Data at June 30, 1996:
Net Earnings (Loss) (26,350)
Company's Equity in Net
Earnings (Loss) (9,486)
During the year ended June 30, 1997 the Company
recognized a complete loss on its investment and loan to
Soft Sail. There is no financial information available
since June 30, 1996. At the present time the Company
does not believe Soft Sail will be able to repay its debt
to the Company and has therefore considered its debt and
equity investment in Soft Sail to be worthless. The loss
in the previous year on the loan was $11,400 and the loss
in the previous year on its equity investment was
$16,005.
Page 9 of 11
MODERN TECHNOLOGY CORP.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
(Continued)
NOTE 5: INCOME TAXES
The provision for income taxes is comprised of the
following:
9/30/97 9/30/96
Current tax expense:
Federal income tax $5,966 $ 8
State & city income tax 10,163 156
16,129 164
There were no timing differences during the current
periods. Therefore, there was no deferred tax expense
during the quarters ended September 30, 1997 and 1996.
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes
and amounts used for income tax purposes and the impact
of available net operating loss carryforwards. The net
operating loss of approximately $25,000 will expire in
fiscal year June 30, 2012.
The tax effect of significant temporary differences,
which comprise the deferred tax assets are as follows:
9/30/97 9/30/96
Deferred tax assets:
Net operating loss
Carry forwards $ 7,375 $ -0-
Net deferred tax (assets) $(7,375) $ -0-
NOTE 6: POSTRETIREMENT BENEFITS
The Company does not maintain any employee benefits
currently. The Company does not maintain a plan for any
postretirement employee benefits, therefore, no provision
was made under FAS's 106 or 112.
NOTE 7: RELATED PARTY TRANSACTIONS
Davin Enterprises, Inc. (Davin) entered into an oral
agreement with Modern Technology Corp. providing for the
partial use of office space for Davin on a month to month
basis. The company does not pay rent but pays a fee to
Modern Technology Corp. for services. There were no
outstanding balances between these companies.
Page 10 of 11
MODERN TECHNOLOGY CORP.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
(Continued)
Arthur Seidenfeld, President and a director of the
Company, owns 14.5% of the outstanding shares of Daine
Industries, Inc. and 29.4% of the outstanding shares of
Davin Enterprises, Inc. Anne Seidenfeld, Treasurer,
Secretary and a director of the Company, owns 12% of the
outstanding shares of Modern Technology Corp. Anne
Seidenfeld is Arthur Seidenfeld's mother.
NOTE 8: INTERIM FINANCIAL REPORTING
The unaudited financial statements of the Company for the
period July 1, 1997 to September 30, 1997 have been
prepared by management from the books and records of the
Company, and reflect, in the opinion of management, all
adjustments necessary for a fair presentation of the
financial position and operations of the Company as of
the period indicated herein, and are of a normal
recurring nature.
Page 11 of 11
Part 1. Financial Information
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Modern Technology Corp. ("The Company") is engaged in
aiding prospective clients in obtaining financing and in providing
management services to client companies. During the three months
ended September 30, 1997, the Registrant was involved in providing
managerial services to one firm which it aided in obtaining
financing, namely Davin Enterprises, Inc. ("Davin") and received
management fees of $1,600 from Davin.
During the three months ended September 30, 1997, the
Registrant had net income of $32,691 as compared with net income of
$677 during the three months ended September 30, 1996. The
increase in profitability for the comparative periods discussed in
the previous sentence can be attributed to a gain from the sale of
shares of Delta Three Inc. and International Well Control,
Inc(formerly Havenwood Inc.). During the three months ended
September 30, 1997 and 1996, the Registrant's treasurer-secretary,
Anne Seidenfeld received a salary of $1,800. During the three
months ended September 30, 1997, the Registrant's president, Arthur
Seidenfeld, received a salary of $16,000.
The cash and cash equivalents balances along with
holdings of U.S. Treasury Obligations of the Company as of
September 30, 1997 and June 30, 1997 were $713,982 and $647,886.
On July 27, 1994, the Registrant signed an agreement to
purchase a 40% ownership interest in a company entitled Soft Sail
Wind Power Inc. The purpose of Soft Sail Wind Power Inc. will be
to exploit and commercialize wind power. As of September 30, 1997,
the Registrant owned 404 shares of Soft Sail Wind Power Inc. at a
cost of $40,449 and has loaned Soft Sail Wind Power Inc. $11,400.
As of September 30, 1997, the Registrant has written off its loan
and cost basis in the shares it owns in Soft Sail Wind Power Inc.
During the quarter ended June 30, 1996, the Registrant
purchased 25,000 shares of Delta Three Inc. for $25,000. Delta
Three Inc. is an Israeli based telecommunications provider using
Internet technology for voice transmission. During the quarter
ended September 30, 1997, the Registrant sold its shares of Delta
Three Inc., for $50,000, generating a gain of $25,000.
During the quarter ended December 31, 1996, the
Registrant established a new subsidiary entitled Coral Development
Corp.(Coral). In February of 1997 the Registrant filed a
registration statement with the Securities and Exchange(SEC) to
spin off its 100 percent holdings in Coral, representing 403,000
shares, directly to the Registrant's shareholders, in the ratio of
1(one) share of Coral for each 50(fifty) shares of the Registrant
held.
The transfer of shares will take place after the
registration statement for Coral shares is declared effective by
the SEC and a merger agreement with a privately owned company is
completed. No assurances can be given that the registration
statement will be declared effective and a merger agreement with a
privately owned company will be successfully completed.
The Registrant expects that its current balances of cash
and cash equivalents will be sufficient to meet its minimum planned
capital and liquidity needs for the next year. The Company does
not believe that the impact of inflation on its activities is
significant.
Part 2. Other Information
Item 1. Legal Proceedings. None.
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.
Item 5. Other Materially Important Events. None.
Item 6. Exhibits and Reports on Form 8-K. None.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MODERN TECHNOLOGY CORP.
By: Arthur J. Seidenfeld
President, Chief Executive and
Chief Financial Officer
November 12, 1997
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