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 March 31, 1998 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 Avenue, Brooklyn, NY 11226
(Address of Principal Executive Office) (Zip Code)
(718)469-3132
(Registrant's Telephone Number, Including Area Code)
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
MARCH 31, 1998
I N D E X
Page
INDEPENDENT ACCOUNTANTS' REVIEW REPORT 1
CONSOLIDATED BALANCE SHEETS 2
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY 3
CONSOLIDATED STATEMENTS OF OPERATIONS 4-5
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7-10
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors and Stockholders
MODERN TECHNOLOGY CORP.
Brooklyn, NY
We have reviewed the consolidated balance sheets of MODERN
TECHNOLOGY CORP. as at March 31, 1998, and the related consolidated
statements of operations, stockholders' equity and cash flows for
the nine month periods ended March 31, 1998 and 1997, in accordance
with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants.
All information included in these financial statements is the
representation of management of Modern Technology Corp.
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 balance sheet as of June 30, 1997, and the
related 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 balance
sheet from which it has been derived.
GREENBERG & COMPANY, LLC
Springfield, New Jersey
April 23, 1998
Page 1 of 10
MODERN TECHNOLOGY CORP.
CONSOLIDATED BALANCE SHEETS
March 31, 1998
(Unaudited) June 30, 1997
A S S E T S
CURRENT ASSETS
Cash and Cash Equivalents $702,473 $647,886
Total Current Assets 702,473 647,886
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
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 $760,905 $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 $ 17,892 $ 3,219
Total Current Liabilities 17,892 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 245,837 230,843
Total Stockholders' Equity 743,013 728,019
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $760,905 $731,238
Subject to the comments contained in the Accountants' Review Report.
Page 2 of 10
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JULY 1, 1994 TO MARCH 31, 1998
Common Stock Total
Par Stock-
# of Value Paid-In Retained holders'
Shares $.0001 Capital Earnings Equity
BALANCES AT
JULY 1, 1995 20,150,000 $2,015 $495,161 $222,638 $719,814
Net (Loss) for
the Year Ended
June 30, 1996 (3,720) (3,720)
BALANCES AT
JUNE 30, 1996 20,150,000 2,015 495,161 218,918 716,094
Net Income
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
for the Nine
Months Ended
March 31, 1998 14,994 14,994
BALANCES AT
MARCH 31, 1998
(UNAUDITED) 20,150,000 $2,015 $495,161 $245,837 $743,013
Subject to the comments contained in the Accountants' Review Report.
Page 3 of 10
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For The Nine
Months Ended
March 31,
1998 1997
REVENUES
Interest Income $23,644 $26,029
Management Income 3,200 7,200
Gain on Sale of Securities 67,065 29,940
93,909 63,169
EXPENSES
Officers Salaries 22,100 5,400
General and Administrative Expenses 40,624 22,517
Bad Debt -0- 11,400
62,724 39,317
INCOME BEFORE TAXES 31,185 23,852
Income Tax Expense 16,191 3,112
NET INCOME (LOSS) $14,994 $20,740
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 10
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For The Three
Months Ended
March 31,
1998 1997
REVENUES
Interest Income $ 7,304 $11,476
Management Income -0- 2,400
Gain on Sale of Securities -0- 29,940
7,304 43,816
EXPENSES
Officers Salaries 1,200 1,800
General and Administrative Expenses 8,191 8,926
Bad Debt -0- 11,400
9,391 22,126
INCOME (LOSS) BEFORE TAXES (2,087) 21,690
Income Tax Expense (Benefit) (1,119) 2,674
NET INCOME (LOSS) $ (968) $19,016
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 5 of 10
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For The Nine
Months Ended
March 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 14,994 $ 20,740
Adjustments to Reconcile Net
Income to Net Cash Provided By
Operating Activities:
Changes in Assets and Liabilities:
(Increase) Decrease in Due from
Securities Sale -0- (32,000)
(Increase) Decrease in Receivable
- Affiliate -0- (800)
(Increase) Decrease in Other Assets -0- (300)
(Decrease) Increase in Accrued
Expenses 14,673 3,643
Net Cash Provided By (Used In)
Operating Activities 29,667 (8,717)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of Investment 25,020 25,000
Deferred Registration Costs - Subsidiary (100) (12,650)
Loans to Affiliate -0- -0-
Bad Debt - Loan to Affiliate -0- 11,400
Net Cash Provided By (Used In)
Investing Activities 24,920 23,750
Net (Decrease) Increase in Cash
and Cash Equivalents 54,587 15,033
Cash and Cash Equivalents,
Beginning of Period 647,886 616,268
CASH AND CASH EQUIVALENTS
END OF PERIOD $702,473 $631,301
Supplemental Disclosures of
Cash Flow Information
Cash Paid During Period For:
Taxes $ 8,113 $ 523
Interest -0- -0-
Subject to the comments contained in the Accountants' Review Report.
Page 6 of 10
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1998
(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.
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 its 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.
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.
Page 7 of 10
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1998
(Unaudited)
(Continued)
DEFERRED REGISTRATION COSTS
As of March 31, 1998, 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
consumation 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:
March 31, June 30,
1998 1997
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 501,000
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 501,000 shares of Davin
Enterprises, Inc. at a cost of $7,950.
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.
Page 8 of 10
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1998
(Unaudited)
(Continued)
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.
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.
NOTE 5: INCOME TAXES
The provision for income taxes is comprised of the
following:
3/31/98 3/31/97
Current tax expense:
Federal income tax $ 4,890 $ 2,606
State & city tax 11,301 506
$16,191 $ 3,112
There were no timing differences during the current
periods. Therefore, there was no deferred tax expense
during the quarters ended March 31, 1998 and 1997.
Page 9 of 10
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1998
(Unaudited)
(Continued)
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:
3/31/98 3/31/97
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
Arthur Seidenfeld, President and a director of the
Company, owns 14.5% of the outstanding shares of Daine
Industries, 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 March 31, 1998 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 10 of 10
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 nine months
ended March 31, 1998, 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 $3,200 from Davin. As of January 1, 1998, Davin
is no longer a client of the company.
During the nine months ended March 31, 1998, the
Registrant had net income of $14,994 as compared with net income of
$20,740 during the nine months ended March 31, 1997. For the nine
months ended March 31, 1998 total revenues amounted to $93,909, a
49% increase over revenues generated during the nine months ended
March 31, 1997. Expenses for the nine months ended March 31, 1998
amounted to $62,724, a 60% increase over expenses incurred for the
nine months ended March 31, 1997. Net income before taxes amounted
to $31,185 for the nine months ended March 31, 1998, a 31% increase
over net income earned during the nine months ended March 31, 1997.
After tax net income for the nine months ended March 31,
1998 declined by 28% ($5,746) when compared with net income after
tax earned during the nine months ended March 31, 1997. This
decline can be attributed to income tax expense of $16,191 incurred
during the nine month period ended March 31, 1998, a dramatic
increase over income tax expense of $3,112 incurred during the nine
months ended March 31, 1997.
During the nine month period ended March 31, 1998 the
Registrant sold its share positions in Delta Three Inc and TTR
Inc., generating a gain of $67,065. The rise in expenses for the
nine months ended March 31, 1998 can be attributed to higher
officers salaries and general and administrative expenses offset by
a decline in bad debts (none incurred during the nine months ended
March 31, 1998 as compared with $11,400 incurred during the nine
months ended March 31, 1997 as a result of a writeoff of the
Registrant's loan to Soft Sail Wind Power Inc).
During the nine months ended March 31, 1998 and 1997, the
Registrant's treasurer-secretary, Anne Seidenfeld received a salary
of $5,400. During the nine months ended March 31, 1998 the
Registrant's president received a salary of $16,700.
The cash and cash equivalents balances along with
holdings of U.S. Treasury Obligations of the Company as of March
31, 1998 and June 30, 1997 were $702,473 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 December 31, 1996,
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 March 31, 1997, the Registrant had written off its investment
and loan with Soft Sail Wind Power Inc.
During the quarter ended March 31, 1995, the Registrant
purchased one unit in TTR Inc. in the amount of $25,000, consisting
of a 10% promissory note and warrants to purchase 4,000 shares of
common stock. During the quarter ended March 31, 1997, TTR repaid
its note to the Registrant with interest amounting to $5,000. The
Registrant exercised warrants to purchase 4,000 shares of TTR Inc.
costing $60 and sold the accompanying shares for $30,000,
generating a gain of $29,940.
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.
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
May 12, 1998
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