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, 1999 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)
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 TECHNNOLOGY CORP.
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
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 6-10
ACCOUNTANTS' REVIEW REPORT
Board of Directors and Stockholders
MODERN TECHNOLOGY CORP.
Belle Harbor, New York
We have reviewed the consolidated balance sheet of MODERN TECHNOLOGY CORP. as
at September 30, 1999, and the related consolidated statements of operations,
stockholders' equity and cash flows for the three month periods ended
September 30, 1999 and 1998, 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, 1999, 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 6, 1999, 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, 1999 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 21, 1999
Page 1 of 10
MODERN TECHNOLOGY CORP.
CONSOLIDATED BALANCE SHEETS
Sept. 30 June 30
1999 1999
(Unaudited)
A S S E T S
CURRENT ASSETS
Cash and Cash Equivalents $672,935 $759,898
Other Current Assets 15,048 22,360
687,983 782,258
EQUIPMENT - At Cost 13,500 13,500
Less: Accumulated Depreciation (10,473) (10,295)
3,027 3,205
OTHER ASSETS
Investments, At Cost 16,800 16,800
Note Receivable 100,000 100,000
Deferred Tax 366 -0-
Other Assets 598 598
117,764 117,398
TOTAL ASSETS $808,774 $902,861
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 $ 13,200 $ 47,326
Income Tax Payable -0- 38,513
Total Current Liabilities 13,200 85,839
STOCKHOLDERS' EQUITY
Common Stock Par Value $.0001
Authorized: 150,000,000 Shares
Issued and Outstanding: 20,150,000
Shares 2,315 2,015
Paid-In Capital 495,161 495,161
Retained Earnings 298,098 319,846
795,574 817,022
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $808,774 $902,861
See accompanying notes and accountants' review report.
Page 2 of 10
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JULY 1, 1998 TO SEPTEMBER 30, 1999
Total
Par Stock-
# of Value Paid-In Retained holders'
Shares $.0001 Capital Earnings Equity
BALANCES AT
JULY 1, 1998 20,150,000 $2,015 $495,161 $247,041 $744,217
Dividend distribution
of Omnicomm Systems
Inc stock to Modern
Technology
stockholders (30,300) (30,300)
Net Income for
the Year Ended
June 30, 1999 103,105 103,105
BALANCES AT
JUNE 30, 1999
(Audited) 20,150,000 2,015 495,161 319,846 817,022
Capital Contribution 300 300
Net Income (Loss)
for the Three
Months Ended
Sept. 30, 1999 (21,748) (21,748)
BALANCES AT
SEPT. 30, 1999
(Unaudited) 20,150,000 $2,315 $495,161 $298,098 $795,574
See accompanying notes and accountants' review report.
Page 3 of 10
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For The Three
Months Ended
September 30,
1999 1998
REVENUES
Interest Income $ 8,942 $ 9,642
8,942 9,642
EXPENSES
Officers Salaries 1,600 1,200
General and Administrative Expenses 29,051 10,905
30,651 12,105
INCOME (LOSS) BEFORE TAXES (21,709) (2,463)
Income Tax Expense 39 1,383
NET INCOME (LOSS) $(21,748) $(3,846)
NET INCOME (LOSS) PER SHARE NIL NIL
NUMBER OF WEIGHTED AVERAGE SHARES
OUTSTANDING 20,150,000 20,150,000
See accompanying notes and accountants' review report.
Page 4 of 10
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For The Three
Months Ended
September 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(21,748) $ (3,846)
Adjustments to Reconcile Net
Income to Net Cash Provided By
Operating Activities:
Depreciation 178 -0-
Changes in Assets and Liabilities:
(Increase) Decrease in Other
Current Assets 7,312 -0-
(Increase) Decrease in Deferred Tax (366) -0-
(Decrease) Increase in Accrued
Expenses and Taxes (34,126) 1,800
(Decrease) Increase in Income Tax
Payable (38,513) -0-
Net Cash (Used In) Provided By
Operating Activities (87,263) (2,046)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contribution 300 -0-
Net Cash Provided By (Used In)
Financing Activities 300 -0-
Net (Decrease) Increase in Cash
and Cash Equivalents (86,963) (2,046)
Cash and Cash Equivalents,
Beginning of Period 759,898 701,275
CASH AND CASH EQUIVALENTS
END OF PERIOD $672,935 $699,229
Supplemental Disclosures of
Cash Flow Information
Cash Paid During Period For:
Taxes $ 405 $ 1,383
Interest -0- -0-
See accompanying notes and accountants' review report.
Page 5 of 10
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 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 the Company's wholly owned subsidiary Coral Development
Corp (Coral) through the period ended December 31, 1998. (See
Spinoff of Omnicomm Systems Inc. Investment.) All significant
intercompany balances and transactions have been eliminated in
consolidation. Modern invested $30,300 in Coral during the quarter
ended December 31, 1996.
During the quarter ended March 31, 1999, Modern merged Coral with
Omnicomm Systems, Inc. (Omnicomm). In the exchange, Modern
received 403,000 shares of Omnicomm for all of the issued and
outstanding shares of Coral. Since Modern now owns less than 50%
of Omnicomm and does not exercise any significant control, the
investment is now accounted for at cost.
In April 1999 the Company formed a subsidiary named Excess
Materials Inc. (Excess). Excess accounts are included in the
consolidated financial statements at September 30, 1999 and June
30, 1999. Modern owns 70% of Excess. Arthur Seidenfeld (Modern's
president) owns 10% of Excess, Anne Seidenfeld (Arthur's mother and
secretary/treasurer of Modern) owns 10% of Excess and a relative of
Mr. Seidenfeld owns 10% of Excess.
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. The carrying amount reported
in the accompanying balance sheets approximates fair value.
Page 6 of 10
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Continued)
(Unaudited)
NOTE RECEIVABLE
During the year ended June 30, 1999 the Company purchased a
$100,000 convertible note in Omnicomm. The note carries a 10%
annual interest rate and is convertible at the Company's option
into 80,000 shares of Omnicomm common stock. The note matures in
2004.
PROPERTY AND EQUIPMENT
Renewals and betterments are capitalized; maintenance and repairs
are expensed as incurred. Depreciation is calculated using the
straight line method over the asset's estimated useful life, which
generally approximates 5 years.
ESTIMATES IN FINANCIAL STATEMENTS
The preparation of 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.
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.
YEAR 2000 COMPLIANCE
The Company has evaluated the impact of the Year 2000 issue on the
business and does not expect to incur significant costs with Year
2000 compliance. The Company believes that all software and
hardware requirements to enable it to cope with the Year 2000 issue
have been or are being currently implemented. However, there can
be no assurance that unanticipated costs may arise in implementing
these requirements.
Page 7 of 10
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Continued)
(Unaudited)
SPINOFF OF OMNICOMM SYSTEMS INC INVESTMENT
As of June 30, 1999, Modern declared a distribution to its
shareholders in the form of all the 403,000 shares of Omnicomm
Systems Inc (Omnicomm) common stock that Modern owns. During the
quarter ended March 31, 1999, Modern merged Coral (Modern's 100%
owned subsidiary) with Omnicomm. In the exchange, Modern received
403,000 common shares of Omnicomm for all of the issued and
outstanding shares of Coral. This represented approximately 30% of
the issued and outstanding common shares of Omnicomm at that time.
Modern subsequently declared a distribution of the 403,000 common
shares of Omnicomm to Modern shareholders on a pro rata basis to
their Modern shareholdings. Omnicomm was a privately held computer
systems integrator and software development company. Modern
recognized no gain or loss on the distribution of the Omnicomm
shares. The distribution does not qualify for tax-free treatment
under Internal Revenue Section 355. Therefore, the shareholders of
Modern will receive the Omnicomm shares as a taxable dividend. The
dollar amount of the dividend is $30,300, the amount of Modern's
investment in Coral.
NOTE 3: MARKETABLE SECURITIES
During the quarter ended December 31, 1998, the investment in
Creative Master International Inc. (CMST) (formerly Davin
Enterprises, Inc.) of 37,575 shares was relcassified to a trading
security in accordance with Financial Accounting Standard (FAS)
115. CMST shares were listed on the NASD National Market on
December 30, 1998. The cost of these shares was $7,950. During
the quarter ended March 31, 1999, the entire investment was sold.
The total realized gain was $231,150.
NOTE 4: INVESTMENT IN EQUITY SECURITIES (At Cost)
Investments in Non Marketable Equity Securities consist of the
following:
Sept. 30, June 30,
1999 1999
Investment in 72 million
restricted shares in
Daine Industries, Inc. $15,900 $15,900
Investment in 37,575
restricted shares in
Creative Master
International Inc.
(formerly Davin
Enterprises Inc.) -0- -0-
Investments in other
restricted securities 900 900
$16,800 $16,800
Page 8 of 10
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Continued)
(Unaudited)
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 shares of Creative Master
International Inc. (formerly 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
March 31, 1997, TTR completed its initial public offering and
repaid the note with interest. The Company also exercised its
warrants and realized a gain of $29,940 in the year ended June 30,
1997.
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. This investment was
sold during the year ended June 30, 1998.
NOTE 5: INCOME TAXES
The provision for income taxes is comprised of the following:
9/30/99 9/30/98
Current $ 405 $1,383
Deferred (366) -0-
$ 39 $1,383
The provision for income taxes differs from the amount computed by
applying the statutory federal income rate as follows:
9/30/99 9/30/98
Expected statutory amount $ -0- $ 800
Net operating loss (366) -0-
State income taxes, net
of federal benefit 405 583
$ 39 $1,383
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 deferred tax assets at September 30, 1999
relate principally to Excess, the Company's 70% owned subsidiary.
The tax benefits relating to Excess are fully reserved due to
Excess's lack of history and losses. The remaining deferred tax
asset relates to Modern's NOL for the three months ended September
30, 1999.
Page 9 of 10
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Continued)
(Unaudited)
The tax effect of significant temporary differences, which comprise
the deferred tax assets are as follows:
9/30/99 6/30/99
Deferred tax assets:
Net operating loss
carry forwards $3,317 $-0-
Valuation allowance (2,951) -0-
Net deferred tax (assets) $ 366 $-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 and 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 approximately 8% of the outstanding shares of Daine
Industries, Inc. Anne Seidenfeld is Arthur Seidenfeld's mother.
There were no related party transactions.
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 Registrant") is engaged in aiding
prospective clients in obtaining financing and in providing management
services to client companies.
Presently, the Registrant is seeking out joint venture candidates
and companies for which it can aid in providing financing and managerial
services although no assurances can be given that the Registrant will be
successful in gaining new clients in the near future.
During March 1999, the Registrant established a subsidiary entitled
Excess Materials, Inc. ("Excess Materials"). Excess Materials is an
electronic internet marketplace for corporate buyers and sellers of food
commodities, equipment, metals, industrial supplies, animal hides and textile
items. Excess Materials will derive revenues from commissions paid by the
seller on completed transactions. To date Excess Materials is in the
development stage.
It offers a business service matching corporate buyers and sellers
only. It does not handle sales to individual consumers. Company operations
began in May 1999. The Registrant owns 70% of the shares of Excess
Materials, and the Registrant's president and treasurer-secretary (Arthur and
Anne Seidenfeld) each own 10% of the shares of Excess Materials.
During the three months ended September 30, 1999, the Registrant
had a net loss of $21,748 as compared with net loss of $3,846 during the
three months ended September 30, 1998. For the three months ended September
30, 1999, total revenues amounted to $8,942, a $700 decrease over revenues
generated during the three months ended September 30, 1998. Expenses for the
three months ended September 30, 1999 amounted to $30,651, an $18,546
increase over expenses incurred for the three months ended September 30,
1998. The net loss of $21,748 for the quarter ended September 30, 1999 can
be attributed to expenses related to the Registrant's subsidiary, Excess
Materials Inc.
During the three months ended September 30, 1999, the Registrant's
treasurer-secretary, Anne Seidenfeld, received a salary of $1,600. During
the three months ended September 30, 1998, she received a salary of $1,200.
The cash and cash equivalent balances along with holdings of U.S.
Treasury Obligations of the Company as of September 30, 1999 and June 30,
1999 were $672,935 and $759,898 respectively.
Coral Development Corp ("the Company") was incorporated under the
laws of Delaware on November 19, 1996 by Modern Technology Corp (MTC).
During December 1996, the Registrant purchased 403,000 shares of Coral
Development Corp. for $30,300.
The Company originally completed a "blind pool/blank check" offer
pursuant to Rule 419 by having MTC distribute Company shares as a dividend to
MTC shareholders. On July 22, 1998 it signed an agreement with OmniComm
Systems Inc. (OmniComm) whereby the Company and OmniComm would merge and the
Company would issue 940,000 shares to the shareholders of OmniComm in
exchange for all their shares (which are all the outstanding shares of
OmniComm). Due to time limitations the Rule 419 distribution was not
completed. However, the Company, OmniComm and MTC agreed to merge as planned
and subsequently to distribute the Coral shares as a dividend to MTC
shareholders. As the Company is no longer a "blind pool/blank check" due to
the combination with OmniComm, this distribution was made without compliance
with Rule 419 but was accompanied by a Form 10-SB filed on December 22, 1998.
The Company shares owned by MTC were distributed to MTC shareholders on the
basis of one Coral share for each fifty (50) MTC shares.
OmniComm is an information and technology integration company
located in Coconut Grove, Florida. The Company provides customized,
comprehensive offering of dynamic web and data base applications with its
expertise in designing and configuring networks.
During February 1999, the Registrant purchased a $100,000
convertible note in Omnicomm. The note carries a 10% interest rate and is
convertible at the Registrant's option into 80,000 shares of Omnicomm
(exercisable at $1.25 each). A private placement of notes of Omnicomm was
completed raising approximately $800,000. A majority of the noteholders can
demand registration of the shares accompanying these notes. The notes mature
on June 30, 2004. Omnicomm is presently in the process of a second private
placement to raise up to a maximum of $3 million dollars in additional
funding.
The Registrant has evaluated the impact of the Year 2000 issue on
the business and does not expect to incur significant costs with Year 2000
compliance. The Registrant believes that all software and hardware
requirements to enable it to cope with the Year 2000 issue have been or are
being currently implemented. However, there can be no assurance that
unanticipated costs may arise in implementing these requirements.
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 11, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
<CASH> 672935
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 687983
<PP&E> 13500
<DEPRECIATION> 10473
<TOTAL-ASSETS> 808774
<CURRENT-LIABILITIES> 13200
<BONDS> 0
0
0
<COMMON> 2315
<OTHER-SE> 793259
<TOTAL-LIABILITY-AND-EQUITY> 808774
<SALES> 0
<TOTAL-REVENUES> 8942
<CGS> 0
<TOTAL-COSTS> 30651
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (21709)
<INCOME-TAX> 39
<INCOME-CONTINUING> (21748)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21748)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
