Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934 (Fee Required)
For The Fiscal Year Ended June 30, 2000
Commission File #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, New York 11226
(Address of Principal Executive Office) (Zip Code)
(718)469-3132
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 and (2) has been subject to such filing requirements for the
past ninety days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 or Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. X
As of September 13, 2000, there was no aggregate market value of
the voting stock held by non-affiliates of the Registrant due to
the fact that there was no trading market in the shares of the
Registrant.
The Number of Shares Outstanding of the Registrant at September 13,
2000 was 20,150,000.
PART 1
1. Business
The Registrant is engaged in aiding prospective clients in
obtaining financing and in providing managerial services to client
companies. During the year ended June 30, 2000 the Registrant did
not add any new clients for consulting services.
During the year ended June 30, 1999, the Registrant was
involved in providing consulting services to Coral Development
Corp. During December 1996 the Registrant purchased 403,000 shares
of Coral Development Corp. ("Coral") for $30,300. The Registrant
has registered these shares with the Securities and Exchange
Commission with the intention of distributing those shares to the
Registrant's shareholders in the form of a dividend.
On July 22, 1998, Coral signed a merger agreement with
Omnicomm Systems Inc. ("Omnicomm"), a company in the computer
software and internet field. Omnicomm filed a Form 10-SB on
December 22, 1998 and the merger with Coral was concluded in
February 1999. As of June 30, 1999, the Registrant declared a
distribution to its shareholders in the form of all the 403,000
shares of Omnicomm common stock that the Registrant owned.
During February 1999, the Registrant purchased a $100,000
convertible note in Omnicomm. The note carried a 10% interest rate
and was convertible at the Registrant's option into 80,000 shares
of Omnicomm exercisable at $1.25 each. In July 2000 the Registrant
converted the $100,000 note into 80,000 shares of Omnicomm. As of
September 18, 2000, the Registrant has sold 36,500 shares of
Omnicomm and generated approximately $86,000 in gross proceeds from
the sale of these shares.
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. For the year ended June 30, 2000 Excess did not
generate any revenues and at June 30, 2000 it had approximately 540
registered members. Excess plans to restructure its operations to
generate revenues from charging future members an annual fee as
compared to a commission on completed transactions.
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 the fiscal year ended June 30, 2000, the Registrant had
a net loss of $39,216. Its revenue for the year ended June 30,
2000 was derived from interest income of $43,812. The loss can be
attributed primarily to expenses generated by the Registrant's 70%
owned subsidiary, Excess Materials Inc. During the fiscal year
ended June 30, 1999, the Registrant had net income of $103,105.
Its revenue for the year ended June 30, 1999 was derived from a
gain on securities sale of shares of Davin Enterprises Inc. (Davin
merged with Creative Masters International) amounting to $231,150
and interest income of $35,834.
Item 2. Properties.
As of June 30, 2000, the Registrant owned no property. The
Registrant utilizes some space in the offices of Lite King Corp.,
an affiliated company.
Item 3. Legal Proceedings.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholders Matters.
During the past three fiscal years there was no market for the
shares of the Registrant.
Number of Shareholders - 367 shareholders of record of 9/13/00.
Dividends - During the year ended June 30, 1999, the Registrant was
involved in providing consulting services to Coral Development
Corp. During December 1996, the Registrant purchased 403,000
shares of Coral Development Corp. ("Coral") for $30,300. The
Registrant had registered these shares with the Securities and
Exchange Commission with the intention of distributing these shares
to the Registrants' shareholders in the form of a dividend. As of
June 30, 1999, the Registrant declared a distribution to its
shareholders in the form of all of the 403,000 shares of Omnicomm
Systems Inc. ("Omnicomm") common stock that the Registrant owned.
<PAGE>
Item 6. Selected Financial Data
for the Year ended June 30,
2000 1999 1998 1997 1996
Total Revenues $ 43,812 $266,984 $102,991 $72,985 $46,449
Operating Income
(Loss) before tax (42,326) 144,323 28,160 6,388 (2,709)
Net Income (Loss) (39,216) 103,105 16,198 11,925 (3,720)
Net Income (Loss)
per share NIL $.01 NIL NIL NIL
Total Assets 788,106 902,861 752,417 731,238 718,443
Long Term Debt -0- -0- -0- -0- -0-
Dividends -0- 30,300 -0- -0- -0-
Item 7. Management's Discussion and Analysis of Results of
Operations.
During the fiscal year ended June 30, 2000 the Registrant had
a net loss of $39,216. Its revenue for the year ended June 30,
2000 was derived from interest income of $43,812. The loss can be
attributed primarily to expenses related to the Registrant's 70%
owned subsidiary, Excess Materials Inc.
Fiscal year 1999 revenues and income was influenced by
interest income and gains from the sale of securities. During
fiscal year 1999, the revenues amounted to $266,984 as compared
with the comparative fiscal year 1998 figure of $102,991. The net
income figure for fiscal year 1999 was principally due to the sale
of Davin Enterprises Inc. securities (Davin Enterprises Inc. merged
with Creative Master International Inc. in December 1997).
The Registrant received management fees of $3,200 from Davin
for the fiscal year ended June 30, 1998. The Registrant provided
administrative, clerical, bookkeeping and other services to Davin.
The agreement was terminated December 31, 1997.
During the year ended June 30, 1999 the Registrant was
involved in providing consulting services to Coral Development
Corp. During December 1996 the Registrant purchased 403,000 shares
of Coral Development Corp. ("Coral") for $30,300. The Registrant
had registered these shares with the Securities and Exchange
Commission with the intention of distributing these shares to the
Registrant's shareholders in the form of a dividend. As of June
30, 1999 the Registrant declared a distribution to its shareholders
in the form of all of the 403,000 shares of Omnicomm Systems Inc.
("Omnicomm") common stock that the Registrant owned.
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.
During the year ended June 30, 1997 the Registrant recognized
a complete loss on its investment and loan to Soft Sail Wind Power
Inc. (Soft Sail). At the present time the Registrant 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 in fiscal year 1997 on its equity investment was $16,005.
During the fiscal year ended June 30, 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. The Registrant owns 70% of the
shares of Excess Materials.
For the year ended June 30, 2000 Excess Materials did not
generate any revenues. At June 30, 2000 Excess Materials had
approximately 540 registered members.
At June 30, 2000 the Registrant's total assets amounted to
$788,106 and as compared with $902,861 at June 30, 1999. At June
30, 2000, stockholders' equity amounted to $777,806, as compared
with $817,022 at June 30, 1999.
Item 8. Financial Statements.
Attached.
Item 9. Changes In and Disagreement With Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers.
The executive officers and directors of the Registrant are as
follows:
Name Age Title Term Expires
Arthur Seidenfeld 49 President and Next Annual
Director Meeting
Anne Seidenfeld 87 Treasurer, Secretary Next Annual
and Director Meeting
Gerald Kaufman 59 Director Next Annual
Meeting
Each of the above named individuals has served the Registrant
in the capacity indicated since its formation on July 27, 1982
(with the exception of Anne Seidenfeld who became a director of the
Registrant on March 31, 1989 and treasurer on December 17, 1989 and
Gerald Kaufman who became a director in 1990).
Arthur Seidenfeld, has been president and a director of the
Registrant since its formation. Mr. Seidenfeld was awarded a B.S.
Degree in Accounting from New York University in 1972 and a M.B.A.
Degree in Finance in 1978 from Pace University.
He is also president and director of Daine Industries, Inc.,
a publicly traded company and Lite King Corp, a publicly traded
company engaged in the manufacture of wiring devices. He was also
president and director of Davin Enterprises, Inc. (a publicly
traded company that went public in Sept. 1987) from 1987 until
December 1997 when Davin merged with Creative Masters International
Inc., a manufacturer of replica cars. From July 1994 until April
1997, he was also treasurer-secretary of Soft Sail Wind Power Inc.,
a newly established company engaged in wind energy research and
development activities. Since December 1996 until December 1998,
he was president and director of Coral Development Corp., a public
company which merged with Omnicomm Systems Inc., a company engaged
in the computer software/internet field. He is president of Excess
Materials, Inc., a 70% owned subsidiary of the Registrant engaged
in the internet ecommerce field.
Anne Seidenfeld, Treasurer, Secretary and Director, received
her diploma from Washington Irving High School, New York City, in
1931. Mrs. Seidenfeld is the Treasurer, Secretary and Director of
Daine Industries, Inc. and Lite King Corp. She is treasurer and
secretary of Excess Materials Inc. She was treasurer, secretary
and director of Coral Development Corp from December 1996 to
December 1998 and was Treasurer, Secretary and Director of Davin
Enterprises Inc. from 1987 until December 1997.
Gerald Kaufman, Director, has been a practicing attorney for
over thirty years. He has served as a director of the Registrant,
along with being a director of Daine Industries Inc. since 1990 and
a director of Lite King Corp since 1998. He has also been a
director of American Mayflower Life Insurance Co. since 1973.
Arthur Seidenfeld is the son of Anne Seidenfeld.
Item 11. Management Executive Compensation.
During the fiscal year ended June 30, 2000, management
salaries were as follows:
Anne Seidenfeld - Treasurer-Secretary $7,000
Arthur Seidenfeld - President $-0-
During the year ended June 30, 1999, Anne Seidenfeld, pursuant
to an oral agreement with the Company earned $7,200 as an annual
salary and Arthur Seidenfeld earned $22,375 effective through June
30, 1999.
PART IV
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
a. The following are known to Registrant to be beneficial
owners of 5% or more of the Registrant's common stock.
Title of Class of Common Stock
Name of Beneficial Owner Amount & Nature of Percentage
Beneficial Ownership of Class
Arthur Seidenfeld
461 Beach 124 Street
Belle Harbor, New York 9,654,820 47.9%
Anne Seidenfeld
461 Beach 124 Street
Belle Harbor, New York 2,426,500 12.0%
All Officers and
Directors as a Group (3) 12,081,320 59.9%
b. The shares owned by management are as follows:
Common Stock.
Name of Beneficial Owner Amount & Nature of Percentage
Beneficial Ownership of Class
Arthur Seidenfeld 9,654,820 47.9%
Anne Seidenfeld 2,426,500 12.0%
Item 13. Certain Relationships and Related Transactions:
For the year ended June 30, 1998, the Registrant received
management fees from Davin Enterprises, Inc. amounting to $3,200.
Arthur Seidenfeld, President and a director of the Registrant owned
44,063 of the outstanding shares of Davin Enterprises, Inc. Anne
Seidenfeld, Treasurer-Secretary and a director of the Registrant
owned 5,470 of the outstanding shares of Davin Enterprises, Inc.
Davin Enterprises Inc.'s name was changed to Creative Master
International Inc. after Creative Master Inc. merged with Davin
Enterprises Inc. Arthur Seidenfeld and Anne Seidenfeld sold the
shares they held in Davin Enterprises Inc. in 1999.
MODERN TECHNOLOGY CORP.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
FILED WITH THE ANNUAL REPORT OF THE COMPANY
ON FORM 10-K
ITEM 14 - EXHIBITS
Financial Statements and Schedules and Reports on Form 8-K.
ACCOUNTANT'S REPORT
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 AND JUNE 30, 1999
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD JULY
1, 1997 TO JUNE 30, 2000
CONSOLIDAATED STATEMENT OF OPERATIONS FOR THE YEARS ENDED JUNE 30,
2000, 1999 AND 1998
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED JUNE 30,
2000, 1999 AND 1998
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other schedules not submitted are omitted, because the information
is included elsewhere in the financial statements or the notes
thereto, or the conditions requiring the filing of these schedules
are not applicable.
Supplemental information to be furnished with reports filed
pursuant to Section 15(d) of the Securities Act of 1934 by
Registrant which have not registered securities pursuant to Section
12 of the Securities Act of 1934.
a) No annual report or proxy material has been sent to security
holders. When such report or proxy materials are furnished to
securities holders subsequent to the filing of this report, copies
shall be furnished to the Commission when sent to securities
holders.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, Principal Executive Officer
and Principal Financial Officer
Dated: September 20, 2000
Pursuant to the requirements of the Securities Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the date indicated.
Name Title Date
Arthur Seidenfeld President and Director September 20, 2000
Anne Seidenfeld Treasurer, Secretary September 20, 2000
and Director
Gerald Kaufman Director September 20, 2000
MODERN TECHNNOLOGY CORP.
FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
I N D E X
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 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 6-9
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
MODERN TECHNOLOGY CORP.
Belle Harbor, New York
We have audited the accompanying consolidated balance sheets of
MODERN TECHNOLOGY CORP. as at June 30, 2000 and 1999 and the
related consolidated statements of operations and stockholders'
equity and cash flows for each of the three years in the period
ended June 30, 2000. These financial statements are the
responsibility of the company's management. Our responsibility is
to express an opinion on these financial statements based upon our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statements presentation. We believe that our audits
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements enumerated
above present fairly, in all material respects, the consolidated
financial position of MODERN TECHNOLOGY CORP. at June 30, 2000 and
1999, and the consolidated results of its operations and cash flows
for the three years in the period ended June 30, 2000, in
conformity with generally accepted accounting principles.
GREENBERG & COMPANY LLC
Springfield, New Jersey
July 26, 2000
Page 1 of 9
MODERN TECHNOLOGY CORP.
CONSOLIDATED BALANCE SHEETS
June 30,
2000 1999
A S S E T S
CURRENT ASSETS
Cash and Cash Equivalents $663,250 $759,898
Other Current Assets 5,000 22,360
668,250 782,258
EQUIPMENT - At Cost 13,500 13,500
Less: Accumulated Depreciation (11,007) (10,295)
2,493 3,205
OTHER ASSETS
Investments, At Cost 16,800 16,800
Note Receivable 100,000 100,000
Other Assets 563 598
117,363 117,398
TOTAL ASSETS $788,106 $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 $ 10,000 $ 47,326
Income Tax Payable -0- 38,513
Total Current Liabilities 10,000 85,839
MINORITY INTEREST 300 -0-
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 495,161 495,161
Retained Earnings 280,630 319,846
777,806 817,022
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $788,106 $902,861
The accompanying notes are an integral part of these financial statements.
Page 2 of 9
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JULY 1, 1997 TO JUNE 30, 2000
Common Stock 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 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 (Loss)
for the Year Ended
June 30, 1999 103,105 103,105
BALANCES AT
JUNE 30, 1999 20,150,000 2,015 495,161 319,846 817,022
Net Income (Loss)
for the Year Ended
June 30, 2000 (39,216) (39,216)
BALANCES AT
JUNE 30, 2000 20,150,000 $2,015 $495,161 $280,630 $777,806
The accompanying notes are an integral part of these financial statements.
Page 3 of 9
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended June 30,
2000 1999 1998
REVENUES
Interest Income $ 43,812 $ 35,834 $ 32,726
Management Income -0- -0- 3,200
Gain on Securities Sales -0- 231,150 67,065
43,812 266,984 102,991
EXPENSES
Officers' Salaries 7,000 29,575 24,500
General and Administrative
Expenses 79,138 65,677 50,331
Merger Related Expense -0- 27,409 -0-
86,138 122,661 74,831
INCOME (LOSS) BEFORE TAXES (42,326) 144,323 28,160
Income Tax Expense (Benefit) (3,110) 41,218 11,962
NET INCOME (LOSS) $(39,216) $103,105 $ 16,198
INCOME (LOSS) PER SHARE NIL $.01 NIL
NUMBER OF WEIGHTED AVERAGE
SHARES OUTSTANDING 20,150,000 20,150,000 20,150,000
The accompanying notes are an integral part of these financial statements.
Page 4 of 9
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended June 30,
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(39,216) $103,105 $ 16,198
Adjustments to Reconcile Net Income
to Net Cash Provided By (Used In)
Operating Activities:
Depreciation 832 356 -0-
Gain on Investments -0- (231,150) (67,065)
Merger of Subsidiary -0- (30,300) -0-
Changes in Assets and Liabilities:
Decrease (Increase) in Other Current
Assets 17,360 (22,360) -0-
Decrease (Increase) In Deferred Taxes -0- -0- 7,375
Decrease (Increase) in Deferred
Registration Costs -0- 26,007 (100)
Decrease (Increase) in Other Assets (85) (213) (85)
Increase (Decrease) Accrued
Expenses and Taxes (75,839) 77,639 4,981
Net Cash Provided By (Used In)
Operating Activities (96,948) (76,916) (38,696)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures -0- (3,561) -0-
(Purchase) Sale of Securities -0- 239,100 92,085
Purchase - Note Receivable -0- (100,000) -0-
Net Cash (Used In) Provided By
Investing Activities -0- 135,539 92,085
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contribution - Minority Interest 300 -0- -0-
Net Cash (Used In) Provided By
Financing Activities 300 -0- -0-
Net Increase (Decrease) in Cash
and Cash Equivalents (96,648) 58,623 53,389
Cash and Cash Equivalents,
Beginning of Year 759,898 701,275 647,886
CASH AND CASH EQUIVALENTS,
END OF YEAR $663,250 $759,898 $701,275
Supplemental Disclosures Of Cash Flow Information
Cash Paid During The Period For:
Taxes $ 40,405 $ 2,665 $ 2,806
Interest $ -0- $ -0- $ -0-
The accompanying notes are an integral part of these financial statements.
Page 5 of 9
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
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 through March 31,
1999. (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. Modern then distributed all the stock
of Omnicomm to its shareholders.
In April 1999 the Company formed a subsidiary named Excess
Materials Inc. (Excess). Excess accounts are included in the
consolidated financial statements at June 30, 2000 and 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.
NOTE RECEIVABLE
During the year ended June 30, 1999 the Company purchased a
$100,000 convertible note in Omnicomm. The note carries a 10%
Page 6 of 9
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
(Continued)
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.
DEFERRED REGISTRATION COSTS
As of June 30, 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.
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 9
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
(Continued)
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:
June 30, June 30,
2000 1999
Investment in 360,000
restricted shares in
Daine Industries, Inc. $15,900 $15,900
Investments in other
restricted securities 900 900
$16,800 $16,800
Page 8 of 9
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
(Continued)
NOTE 6: INCOME TAX EXPENSE (BENEFIT)
The provision for income taxes is comprised of the following:
6/30/00 6/30/99 6/30/98
Current $ 405 $41,218 $ 4,587
Deferred (3,515) -0- 7,375
$(3,110) $41,218 $11,962
The provision for income taxes differs from the amount computed by
applying the statutory federal income rate as follows:
6/30/00 6/30/99 6/30/98
Expected statutory amount $ -0- $40,513 $ 3,200
Net operating loss (3,515) -0- 7,375
State income taxes, net
of federal benefit 405 705 1,387
$(3,110) $41,218 $11,962
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 June 30, 1998 and 1997
related to Coral, the Company's former 100% owned subsidiary.
Since the stock of Coral was merged with Omnicomm, the tax benefits
relating to Coral are no longer carried as a deferred tax asset at
June 30, 1999.
The tax effect of significant temporary differences, which comprise
the deferred tax assets are as follows:
6/30/00 6/30/99 6/30/98
Deferred tax assets:
Net operating loss
carry forwards $18,000 $-0- $1,323
Valuation allowance (18,000) -0- (1,323)
Net deferred tax (assets) $ -0- $-0- $ -0-
The current net operating loss of approximately $39,000 expires in
the year ended June 30, 2020. The tax benefit has been fully
reserved due to a lack of consistent operating profitability.
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 and 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 approximately 8% of the outstanding shares of Daine
Industries, Inc. Anne Seidenfeld is Arthur Seidenfeld's mother.
There were no related party transactions.
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