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, 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 TECHNOLOGY CORP.
FINANCIAL STATEMENTS
MARCH 31, 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 7-11
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 March 31, 1999, and the related consolidated
statements of operations, stockholders' equity and cash flows for
the nine month periods ended March 31, 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,
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
April 22, 1999
Page 1 of 11
MODERN TECHNOLOGY CORP.
CONSOLIDATED BALANCE SHEETS
March 31, 1999
(Unaudited) June 30, 1998
A S S E T S
CURRENT ASSETS
Cash and Cash Equivalents $776,179 $701,275
Total Current Assets 776,179 701,275
EQUIPMENT - At Cost 9,939 9,939
Less: Accumulated Depreciation 9,939 9,939
-0- -0-
OTHER ASSETS
Investments, At Cost 47,100 24,750
Note Receivable 100,000 -0-
Deferred Registration Costs -0- 26,007
Other Assets 85 385
Total Other Assets 147,185 51,142
TOTAL ASSETS $923,364 $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 $ 3,200 $ 8,200
Income Tax Payable 46,489 -0-
Total Current Liabilities 49,689 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 376,499 247,041
Total Stockholders' Equity 873,675 744,217
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $923,364 $752,417
See accompanying notes and Accountants' Review Report.
Page 2 of 11
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JULY 1, 1997 TO MARCH 31, 1999
Total
Par Stock-
# of Value Paid-In Retained holders'
Shares $.0001 Capital Earnings Equity
BALANCES AT
JULY 1, 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 Nine
Months Ended
March 31, 1999 129,458 129,458
BALANCES AT
MARCH 31, 1999
(Unaudited) 20,150,000 $2,015 $495,161 $376,499 $873,675
See accompanying notes and Accountants' Review Report.
Page 3 of 11
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For The Three
Months Ended
March 31,
1999 1998
REVENUES
Interest Income $ 7,189 $ 7,304
Realized Gain on Sale of Trading
Securities 37,134 -0-
44,323 7,304
EXPENSES
Officers Salaries 1,800 1,200
General and Administrative Expenses 19,250 6,542
Merger Related Expenses 27,409 -0-
Equity in Loss of Subsidiary -0- 1,649
48,459 9,391
INCOME (LOSS) BEFORE TAXES (4,136) (2,087)
Income Tax Expense (Benefit) (10,509) (1,119)
NET INCOME (LOSS) $ 6,373 $ (968)
NET INCOME (LOSS) PER SHARE $ 0.01 NIL
NUMBER OF WEIGHTED AVERAGE SHARES
OUTSTANDING 20,150,000 20,150,000
See accompanying notes and Accountants' Review Report.
Page 4 of 11
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For The Nine
Months Ended
March 31,
1999 1998
REVENUES
Interest Income $ 24,109 $23,644
Management Income -0- 3,200
Realized Gain on Securities Sale 231,150 67,065
255,259 93,909
EXPENSES
Officers Salaries 10,775 22,100
General and Administrative Expenses 33,500 32,126
Merger Related Expense 27,409 -0-
Equity in Loss of Subsidiary 6,785 8,498
78,469 62,724
INCOME BEFORE TAXES 176,790 31,185
Income Tax Expense 47,332 16,191
NET INCOME (LOSS) $129,458 $14,994
NET INCOME (LOSS) PER SHARE $.01 NIL
NUMBER OF WEIGHTED AVERAGE SHARES
OUTSTANDING 20,150,000 20,150,000
See accompanying notes and Accountants' Review Report.
Page 5 of 11
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For The Nine
Months Ended
March 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $129,458 $ 14,994
Adjustments to Reconcile Net
Income to Net Cash Provided By
Operating Activities:
Changes in Assets and Liabilities:
(Increase) Decrease in Other Assets 300 -0-
(Decrease) Increase in Accrued
Expenses and Taxes 41,489 14,673
Net Cash Provided By (Used In)
Operating Activities 171,247 29,667
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of Investment 7,950 25,020
Purchase of Note Receivable (100,000) -0-
Deferred Registration Costs-Subsidiary -0- (100)
Deconsolidation of Subsidiary (4,293) -0-
Net Cash Provided By (Used In)
Investing Activities (96,343) 24,920
Net (Decrease) Increase in Cash
and Cash Equivalents 74,904 54,587
Cash and Cash Equivalents,
Beginning of Period 701,275 647,886
CASH AND CASH EQUIVALENTS
END OF PERIOD $776,179 $702,473
Supplemental Disclosures of
Cash Flow Information
Cash Paid During Period For:
Taxes $ 843 $ 8,113
Interest -0- -0-
See accompanying notes and Accountants' Review Report.
Page 6 of 11
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(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. 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.
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.
Page 7 of 11
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
(Continued)
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.
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 March 31, 1999, the Company's former subsidiary,
Coral, had incurred deferred registration costs of
$48,930 relating to expenses incurred in connection with
the merger of Coral and Omnicomm Systems Inc. Upon
consummation of this merger, the deferred registration
costs were 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
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.
Page 8 of 11
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
(Continued)
NOTE 4: INVESTMENT IN EQUITY SECURITIES (At Cost)
Investments in Non-Marketable Equity Securities consist
of the following:
March 31, June 30,
1999 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
Investment in 403,000
shares of Omnicomm
Systems, Inc. 30,300 -0-
Investments in other
restricted securities 900 900
$47,100 $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 sold during the
quarter ended March 31, 1999 at a profit of $231,150.
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 11
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(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.
NOTE 6: INCOME TAXES
The provision for income taxes is comprised of the
following:
3/31/99 3/31/98
Current tax expense (benefit)
Federal income tax $46,732 $ 4,890
State & city income tax 600 11,301
Total tax expense $47,332 $16,191
There were no deferred tax assets or liabilities at March
31, 1999 or 1998.
Page 10 of 11
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
(Continued)
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.
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 March 31, 1999 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 Registrant") is engaged in
aiding prospective clients in obtaining financing and in providing
management services to client companies.
During the nine months ended March 31, 1999, the
Registrant had a net income of $129,458 as compared with net income
of $14,994 during the nine months ended March 31, 1998. For the
nine months ended March 31, 1999, total revenues amounted to
$255,259, a $161,350 increase over revenues generated during the
nine months ended March 31, 1998. Expenses for the nine months
ended March 31, 1999 amounted to $78,469, a 25% increase over
expenses incurred for the nine months ended March 31, 1998. The
net income before taxes amounted to $176,790 for the nine months
ended December 31, 1998, as compared with net income before taxes
of $31,185 earned during the nine months ended March 31, 1998.
The net income generated for the nine months ended March
31, 1999 can be attributable to the gain in trading
securities (Creative Master 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 nine months ended March 31, 1999, the
Registrant's treasurer-secretary, Anne Seidenfeld, received a
salary of $5,400. During the nine months ended March 31, 1998, she
received a salary of $4,800. During the nine months ended March
31, 1999, the Registrant's president, Arthur Seidenfeld, received
a salary of $5,375. For the nine months ended March 31, 1998, 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 March 31, 1999
and June 30, 1998 were $776,179 and $701,275 respectively.
The Registrant received management fees of $3,200 from
Davin Enterprises Inc. for the nine months ended March 31, 1998.
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.
During February 1999, the Registrant purchased a $100,000
convertible note in Omnicomm Systems, Inc. ("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 recently completed
raising approx. $800,000. A majority of the noteholders can demand
registration of the shares accompanying these notes. The notes
mature on June 30, 2004.
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 industrial supplies, equipment,
metals, animal hides and textile items. Excess Materials derives
its revenues from commissions paid by the seller on completed
transactions.
It offers a business service matching corporate buyers
and sellers only. It does not handle sales to individual
consumers. Company operations are expected to begin 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.
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
May 11, 1999
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