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 December 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 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 TECHNOLOGY CORP.
FINANCIAL STATEMENTS
DECEMBER 31, 1998
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 7-12
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 December 31, 1998, and the related
consolidated statements of operations, stockholders' equity and
cash flows for the six month periods ended December 31, 1998 and
1997, 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,
1998, 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, 1998, 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, 1998 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
January 21, 1999
Page 1 of 12
MODERN TECHNOLOGY CORP.
CONSOLIDATED BALANCE SHEETS
Dec. 31, 1998
(Unaudited) June 30, 1998
A S E T S
CURRENT ASSETS
Cash and Cash Equivalents $667,944 $701,275
Marketable Securities 201,966 -0-
Deferred Taxes 2,458 -0-
Total Current Assets 872,368 701,275
EQUIPMENT - At Cost 9,939 9,939
Less: Accumulated Depreciation 9,939 9,939
-0- -0-
OTHER ASSETS
Investments, At Cost 16,800 24,750
Deferred Registration Costs 48,930 26,007
Other Assets 385 385
Total Other Assets 66,115 51,142
TOTAL ASSETS $938,483 $752,417
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 $ 12,265 $ 8,200
Deferred Taxes 58,916 -0-
Total Current Liabilities 71,181 8,200
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 370,126 247,041
Total Stockholders' Equity 867,302 744,217
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $938,483 $752,417
Subject to the comments contained in the Accountants' Review Report.
Page 2 of 12
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JULY 1, 1996 TO DECEMBER 31, 1998
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 20,150,000 2,015 495,161 230,843 728,019
Net Income
(Loss) for
the Year
ended
June 30, 1998 16,198 16,198
BALANCES AT
JUNE 30, 1998
(Audited) 20,150,000 2,015 495,161 247,041 744,217
Net Income(Loss)
for the Six
Months Ended
Dec. 31, 1998 123,085 123,085
BALANCES AT
DEC. 31, 1998
(Unaudited) 20,150,000 $2,015 $495,161 $370,126 $867,302
Subject to the comments contained in the Accountants' Review Report.
Page 3 of 12
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For The Three
Months Ended
December 31,
1998 1997
REVENUES
Interest Income $ 7,278 $ 9,928
Management Income -0- 1,600
Unrealized Gains - Trading Securities 194,016 -0-
201,294 11,528
EXPENSES
Officers Salaries 7,775 3,100
General and Administrative Expenses 10,130 23,976
17,905 27,076
INCOME (LOSS) INCOME BEFORE TAXES 183,389 (15,548)
Income Tax Expense 56,458 1,181
NET INCOME (LOSS) $126,931 $(16,729)
NET INCOME (LOSS) PER SHARE $ 0.01 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 12
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For The Six
Months Ended
December 31,
1998 1997
REVENUES
Interest Income $ 16,920 $16,340
Management Income -0- 3,200
Gain on Securities Sale -0- 67,065
Unrealized Gains - Trading Securities 194,016 -0-
210,936 86,605
EXPENSES
Officers Salaries 8,975 20,900
General and Administrative Expenses 21,035 32,433
30,010 53,333
INCOME (LOSS) INCOME BEFORE TAXES 180,926 33,272
Income Tax Expense 57,841 17,310
NET INCOME (LOSS) $123,085 $15,962
NET INCOME (LOSS) PER SHARE $ 0.01 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 12
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For The Six
Months Ended
December 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $123,085 $ 15,962
Adjustments to Reconcile Net
Income to Net Cash Provided By
Operating Activities:
Unrealized Gains (194,016) -0-
Changes in Assets and Liabilities:
(Increase) in Deferred Registration
Costs (22,923) -0-
(Increase) Decrease in Other Assets (2,458) (100)
(Decrease) Increase in Accrued
Expenses and Taxes 62,981 15,556
Net Cash (Used In) Provided By
Operating Activities (33,331) 31,418
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of Investments -0- 25,020
Net Cash Provided By (Used In)
Investing Activities -0- 25,020
Net (Decrease) Increase in Cash
and Cash Equivalents -0- 56,438
Cash and Cash Equivalents,
Beginning of Period 701,275 647,886
CASH AND CASH EQUIVALENTS
END OF PERIOD $667,944 $704,324
Supplemental Disclosures of
Cash Flow Information
Cash Paid During Period For:
Taxes $ 4,000 $ 8,113
Interest -0- -0-
Disclosure of Information:
During the six months ended December 31, 1998, the investment in
Creative Master International was reclassified to marketable
securities. The amount carried at cost in investments of $7,950 was
reclassified to fair value of $201,966 in marketable securities.
Subject to the comments contained in the Accountants' Review Report.
Page 6 of 12
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 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 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 7 of 12
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(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 December 31, 1998, the Company's subsidiary, Coral,
has incurred deferred registration costs of $48,930
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: 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
reclassified 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.
Page 8 of 12
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(Unaudited)
(Continued)
NOTE 4: INVESTMENT IN EQUITY SECURITIES (At Cost)
Investments in Non-Marketable Equity Securities consist
of the following:
Dec. 31, June 30,
1998 1998
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- 7,950
Investments in other
restricted securities 900 900
$16,800 $24,750
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 37,575 shares of Creative Master
International, Inc. (formerly Davin Enterprises, Inc.) at
a cost of $7,950. This investment was reclassified to a
marketable securities as a trading security at December
31, 1998.
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 9 of 12
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(Unaudited)
(Continued)
NOTE 5: 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 on the loan was $11,400 and the loss on
its equity investment was $16,005. Both of these losses were
recognized during the year ended June 30, 1997.
Page 10 of 12
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(Unaudited)
(Continued)
NOTE 6: INCOME TAXES
The provision for income taxes is comprised of the
following:
12/31/98 12/31/97
Current tax expense (benefit)
Federal income tax $ 800 $ 4,944
State & city income tax 582 12,366
1,382 17,310
Deferred tax expense (benefit)
Unrealized gains 58,917 -0-
Operating loss carryback (2,458) -0-
56,459 -0-
Total Tax Expense $57,841 $17,310
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 Coral of approximately $9,000 will
expire in fiscal year June 30, 2013. The related tax
asset of $1,323 has been fully reserved since it is
highly uncertain if Coral will realize this benefit.
The tax effect of significant temporary differences,
which comprise the deferred tax assets are as follows:
12/31/98 6/30/98
Deferred tax assets:
Net operating loss
Carry forwards $ 3,781 $ 1,323
Valuation allowances (1,323) (1,323)
Net deferred tax (assets) $ 2,458 $ -0-
12/31/98 6/30/98
Deferred tax liability:
Unrealized gain $58,917 $ -0-
NOTE 7: 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.
Page 11 of 12
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(Unaudited)
(Continued)
NOTE 8: 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 9: INTERIM FINANCIAL REPORTING
The unaudited financial statements of the Company for the
period July 1, 1998 to December 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 12 of 12
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.
During the six months ended December 31, 1998, the
Registrant had a net income of $123,085 as compared with net income
of $15,962 during the six months ended December 31, 1997. For the
six months ended December 31, 1998, total revenues amounted to
$210,936, a $124,331 increase over revenues generated during the
six months ended December 31, 1997. Expenses for the six months
ended December 31, 1998 amounted to $30,010, a 44% decline over
expenses incurred for the six months ended December 31, 1997. The
net income before taxes amounted to $180,926 for the six months
ended December 31, 1998, as compared with net income before taxes
of $33,272 earned during the six months ended December 31, 1997.
The net income generated for the six months ended
December 31, 1998 can be attributable to an unrealized gain in
trading securities (Creative Masters International Inc. formerly
Davin Enterprises Inc.) less income tax expense.
During the three month period ended September 30, 1997,
the Registrant sold its share positions in Delta Three Inc. and TTR
Inc., generating a gain of $67,065.
During the six months ended December 31, 1998, the
Registrant's treasurer-secretary, Anne Seidenfeld, received a
salary of $3,600. During the six months ended December 31, 1997,
she received a salary of $3,600. During the six months ended
December 31, 1998, the Registrant's president, Arthur Seidenfeld,
received a salary of $5,375. For the six months ended December 31,
1997, the Registrant's president, Arthur Seidenfeld, received a
salary of $17,300.
The cash and cash equivalent balances along with holdings
of U.S. Treasury Obligations of the Company as of December 31, 1998
and June 30, 1998 were $667,944 and $701,275 respectively.
The Registrant received management fees of $3,200 from
Davin Enterprises Inc. for the six months ended December 31, 1997.
The Registrant provided administrative, clerical, bookkeeping and
other services to Davin Enterprises Inc. The agreement to provide
the above listed services was terminated on December 31, 1997. At
December 31, 1998, the Registrant owned 37,575 shares of Creative
Master International Inc. (formerly Davin Enterprises Inc.) at a
cost of $7,950, representing about 1% of the total outstanding
shares of Creative Master outstanding. Davin Enterprises merged
with Creative Master International Inc. in December 1997.
During December 1996, the Registrant purchased 403,000
shares of Coral Development Corp. for $30,300. The Registrant has
registered these shares with the Securities and Exchange Commission
with the intention to distribute those shares to the Registrant's
shareholders in the form of a dividend.
Coral Development Corp ("the Company") was incorporated
under the laws of Delaware on November 19, 1996 by Modern
Technology Corp (MTC). 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 may be made without compliance with
Rule 419 but will be accompanied by a Form 10-SB filed on December
22, 1998. The Company shares owned by MTC will be 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.
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
February 11, 1998
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