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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, 1999
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 17, 1999, 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 17,
1999 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, 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 to distribute those shares to the
Registrant's shareholders in the form of a dividend. The
Registrant expects Omnicomm to make distribution of the 403,000
shares of Omnicomm held by the Registrant's shareholders during
September 1999. On July 22, 1998, Coral had 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.
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 recently 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.
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 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.
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, 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 Intl)
amounting to $231,150 and interest income of $35,834. During the
fiscal year ended June 30, 1998, the Registrant had net income of
$16,198. Its revenue for the year ended June 30, 1998 was derived
from management income amounting to $3,200, interest income of
$32,726 and a gain on securities sales of $67,065. Total revenues
for the year ended June 30, 1998 amounted to $102,991.
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.
Item 2. Properties.
As of June 30, 1999, 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 - 372 shareholders of record of 9/17/99.
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 has registered these shares with the Securities and
Exchange Commission with the intention to distribute these shares
to the Registrants' shareholders in the form of a dividend. The
Registrant expects Omnicomm to make distribution of the 403,000
shares of Omnicomm held by the Registrant's shareholders during
September 1999.
Item 6. Selected Financial Data
for the Year ended June 30,
1999 1998 1997 1996 1995
Total Revenues $266,984 $102,991 $72,985 $46,449 $40,708
Operating Income
(Loss) 144,323 28,160 6,388 (2,709) (14,375)
Net Income (Loss) 103,105 16,198 11,925 (3,720) (14,375)
Net Income (Loss)
per share $.01 NIL NIL NIL NIL
Total Assets 902,861 752,417 731,238 718,443 721,014
Long Term Debt -0- -0- -0- -0- -0-
Dividends 30,300 -0- -0- -0- -0-
Item 7. Management's Discussion and Analysis of Results of
Operations.
The Registrant had net income after taxes of $103,105 for the
year ended June 30, 1999. Net income after taxes for the year
ended June 30, 1998 amounted to $16,198.
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. 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 monthly 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 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. This distribution can only
be made after a merger agreement with a private company is signed
and at least 80% of the Registrant's shareholders approve such
merger. In July 1998 Coral merged with Omnicomm Systems Inc. a
computer software/internet company. The merger was concluded in
February 1999 and a Form 10-SB was filed in December 1998. The
Registrant anticipates the distribution of Omnicomm shares to be
made to the Registrant's shareholders in September 1999.
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 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.
At June 30, 1999 the Registrant's total assets amounted to
$902,861 and as compared with $752,417 for total assets at June 30,
1998. At June 30, 1999, stockholders' equity amounted to $817,022,
as compared with $744,217 at June 30, 1998.
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 48 President and Next Annual
Director Meeting
Anne Seidenfeld 86 Treasurer, Secretary Next Annual
and Director Meeting
Gerald Kaufman 58 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, 1999, management
salaries were as follows:
Anne Seidenfeld - Treasurer-Secretary $7,200
Arthur Seidenfeld - President $22,375
During the year ended June 30, 1998, Anne Seidenfeld, pursuant
to an oral agreement with the Company earned $7,200 as an annual
salary and Arthur Seidenfeld earned $17,300 effective through June
30, 1998.
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 owns
44,063 of the outstanding shares of Davin Enterprises, Inc. Anne
Seidenfeld, Treasurer-Secretary and a director of the Registrant
owns 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
BALANCE SHEET AS OF JUNE 30, 1999 AND JUNE 30, 1998
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD JULY
1, 1996 TO JUNE 30, 1999
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEARS ENDED JUNE 30,
1999, 1998 AND 1997
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED JUNE 30,
1999, 1998 AND 1997
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.
MODERN TECHNNOLOGY CORP.
FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
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 6-10
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
MODERN TECHNOLOGY CORP.
Belle Harbor, New York 11694
We have audited the accompanying consolidated balance sheets of
MODERN TECHNOLOGY CORP. as at June 30, 1999 and 1998 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, 1999. 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, 1999 and
1998, and the consolidated results of its operations and cash flows
for the three years in the period ended June 30, 1999, in
conformity with generally accepted accounting principles.
GREENBERG & COMPANY LLC
Springfield, New Jersey
August 6, 1999
Page 1 of 10
MODERN TECHNOLOGY CORP.
CONSOLIDATED BALANCE SHEETS
June 30,
1999 1998
A S S E T S
CURRENT ASSETS
Cash and Cash Equivalents $759,898 $701,275
Other Current Assets 22,360 -0-
782,258 701,275
EQUIPMENT - At Cost 13,500 9,939
Less: Accumulated Depreciation (10,295) (9,939)
3,205 -0-
OTHER ASSETS
Investments, At Cost 16,800 24,750
Note Receivable 100,000 -0-
Deferred Registration Costs -0- 26,007
Other Assets 598 385
117,398 51,142
TOTAL ASSETS $902,861 $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 $ 47,326 $ 8,200
Income Tax Payable 38,513 -0-
Total Current Liabilities 85,839 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 495,161 495,161
Retained Earnings 319,846 247,041
817,022 744,217
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $902,861 $752,417
The accompanying notes are an integral part of these financial statements.
Page 2 of 10
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JULY 1, 1996 TO JUNE 30, 1999
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
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
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 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
The accompanying notes are an integral part of these financial statements.
Page 3 of 10
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended June 30,
1999 1998 1997
REVENUES
Interest Income $ 35,834 $ 32,726 $33,445
Management Income -0- 3,200 9,600
Gain on Securities Sales 231,150 67,065 29,940
266,984 102,991 72,985
EXPENSES
Officers' Salaries 29,575 24,500 7,200
General and Administrative
Expenses 65,677 50,331 31,992
(Loss) on Worthlessness of
Affiliate -0- -0- (27,405)
Merger Related Expense 27,409 -0- -0-
122,661 74,831 66,597
INCOME (LOSS) BEFORE TAXES 144,323 28,160 6,388
Income Tax Expense (Benefit) 41,218 11,962 (5,537)
NET INCOME (LOSS) $103,105 $ 16,198 $11,925
INCOME (LOSS) PER SHARE $.01 NIL 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 10
MODERN TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended June 30,
1999 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $103,105 $ 16,198 $ 11,925
Adjustments to Reconcile Net Income
to Net Cash Provided By (Used In)
Operating Activities:
Depreciation 356 -0- -0-
Gain on Investments (231,150) (67,065) (29,940)
Merger of Subsidiary (30,300) -0- -0-
Changes in Assets and Liabilities:
Decrease (Increase) in Other Current
Assets (22,360) -0- -0-
Decrease (Increase) In Deferred Taxes -0- 7,375 (7,375)
Decrease (Increase) in Deferred
Registration Costs 26,007 (100) (25,907)
Decrease (Increase) in Other Assets (213) (85) (300)
Increase (Decrease) Accrued
Expenses and Taxes 77,639 4,981 870
Net Cash Provided By (Used In)
Operating Activities (76,916) (38,696) (50,727)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (3,561) -0- -0-
Write Down of Investments and Loan -0- -0- 27,405
(Purchase) Sale of Securities 239,100 92,085 54,940
Purchase - Note Receivable (100,000) -0- -0-
Net Cash (Used In) Provided By
Investing Activities 135,539 92,085 82,345
Net Increase (Decrease) in Cash
and Cash Equivalents 58,623 53,389 31,618
Cash and Cash Equivalents,
Beginning of Year 701,275 647,886 616,268
CASH AND CASH EQUIVALENTS,
END OF YEAR $759,898 $701,275 $647,886
Supplemental Disclosures Of Cash Flow Information
Cash Paid During The Period For:
Taxes $ 2,665 $ 2,806 $ 623
Interest $ -0- $ -0- $ -0-
The accompanying notes are an integral part of these financial statements.
Page 5 of 10
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
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 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.
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 10
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(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 10
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(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,
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
Investments in other
restricted securities 900 900
$16,800 $24,750
Page 8 of 10
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
(Continued)
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: INVESTMENT IN AFFILIATE
Investment in Soft Sail Wind Power Inc. (Soft Sail) (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
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 9 of 10
MODERN TECHNOLOGY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(Continued)
NOTE 6: INCOME TAXES
The provision for income taxes is comprised of the following:
6/30/99 6/30/98 6/30/97
Current $41,218 $ 4,587 $ 1,838
Deferred -0- 7,375 (7,375)
$41,218 $11,962 $(5,537)
The provision for income taxes differs from the amount computed by
applying the statutory federal income rate as follows:
6/30/99 6/30/98 6/30/97
Expected statutory amount $40,513 $ 3,200 $ 781
Net operating loss -0- 7,375 (7,375)
State income taxes, net
of federal benefit 705 1,387 1,057
$41,218 $11,962 $(5,537)
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:
6/30/99 6/30/98 6/30/97
Deferred tax assets:
Net operating loss
carry forwards $-0- $1,323 $ 7,375
Valuation allowance -0- (1,323) -0-
Net deferred tax (assets) $-0- $ -0- $(7,375)
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.
Page 10 of 10
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 17, 1999
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 17, 1999
Anne Seidenfeld Treasurer, Secretary September 17, 1999
and Director
Gerald Kaufman Director September 17, 1999