10-K 1 modn601k.txt 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, 2001 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) 461 Beach 124 Street Belle Harbor, NY 11694 (Address of Principal Executive Office) (Zip Code) (718)318-0994 (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 10, 2001, 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 10, 2001 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, 2001 the Registrant added two 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. The Registrant has signed an agreement on December 8, 2000 to invest up to $238,500 in exchange for 403,000 shares of Scientio Inc., ("Scientio") a United Kingdom based development stage company engaged in developing a line of software products (XML products). The shares received by the Registrant represents a 20% ownership interest in Scientio. Scientio is a newly formed U.S. company established in the state of Delaware with operations conducted in the United Kingdom. Scientio has not generated any revenues from its inception (in December 2000) through June 30. 2001. As part of the agreement, Scientio intends to register the shares owned by the Registrant under the Securities Act, for distribution and trading. Upon the effective date of the proposed Registration Statement, the Registrant intends to distribute its 403,000 share position in Scientio to its shareholders in a transaction similar to the Omnicomm distribution discussed earlier in this management's discussion. The Registrant will cover registration costs and expenses in connection with the preparation and filing of the proposed registration statement of the Scientio shares. An investment of $188,500 by the Registrant will be used by Scientio to complete and test its initial XML software products and enable Scientio to begin a marketing program. The proposed XML Miner and XML Rule products are targeted to software developers as they relate to the field of data mining. Through June 30, 2001, the Registrant has invested $209,109. The Registrant's portion of its investment in Scientio treated as goodwill is being amortized over a three year period. In the consolidated statement of operations for the year ended June 30, 2001, the Registrant has recorded goodwill amortized amounting to $27,881 and has recorded its share of Scientio's loss amounting to $15,314. On the consolidated balance sheet at June 30, 2001, part of the Registrant's investment in Scientio has been carried as Goodwill - $139,406. No assurances can be given that Scientio's XML software products will be successfully received by software developers worldwide. The Registrant has signed an agreement on March 19, 2001 to invest $100,000 - in exchange for 790,604 shares of Interactive Medicine, Inc. ("Interactive"), a Florida based development stage company engaged in the healthcare Internet business. Interactive aggregates medical opinion leaders, physician peer groups, shared content and commerce into specific web based communities, each a Healthcare Channel. With its proprietary technology, consisting of a set of Internet-based connectivity tools and solutions, it hopes to become one of the premier medical specialty networks used by doctors and other healthcare providers. For its most recent fiscal year, Interactive generated revenues of $90,925 with a net loss of $420,969. The 790,604 shares of Interactive held by the Registrant represents a 5% ownership interest in Interactive. As part of the agreement, Interactive intends to register the shares owned by the Registrant under the Securities Act, for distribution and trading. Upon the effective date of the proposed Registration Statement, the Registrant intends to distribute its 790,604 share position in Interactive to its shareholders in a transaction similar to the Omnicomm distribution and the Scientio distribution discussed earlier in this management's discussion. The $100,000 the Registrant has invested in Interactive will be used by Interactive to cover registration costs and expenses in connection with the preparation and filing of the proposed registration statement of the Interactive shares, with any funds not spent for registration procedures to be used by Interactive for working capital purposes. There is a clause in the agreement with Interactive which takes effect after 1 year of the filing of a registration statement. If the registration statement is not declared effective within one year of its filing management of Interactive has the right to terminate the agreement, receive back the 790,604 shares held by the Registrant and return the $100,000 - invested by the Registrant. 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, 2001 Excess did not generate any revenues and at June 30, 2001 it had approximately 620 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. On March 9,2001, Lite King Corp ("Lite King") through a wholly owned subsidiary acquired all of the assets and subsidiaries of National Cabling Services, Inc. (National Cabling"). At the completion of the merger, shareholders of National Cabling received 5,149,029 shares of Lite King. Upon signing the merger agreement, the officers and directors of Lite King resigned (the same officers and directors of the Registrant), and were replaced by officers and directors of National Cabling. National Cabling's principal business activity is the design and installation of cabling for computer networks (fiberoptic). The Registrant owns 719,971 shares of Lite King. 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, 2001, the Registrant has generated a net loss of $27,996. Its revenue for the year ended June 30, 2001 was derived from interest income of $35,517 and gain on securities sales (sale of Omnicomm System shares) of $65,683. The Registrant's revenues of $101,200 for the year ended June 30, 2001 has been offset by the following expenses: Officers' salaries of $26,660, general and administrative expenses, consisting of those generated by the Registrant's 70% owned subsidiary Excess Materials Inc and salaries to officers (total of $54,745), goodwill amortization of the investment in Scientio of $27,881 and equity in loss of affiliate -Scientio Inc $15,314. There was also income tax expense of $4,596 generated. For the year ended June 30, 2000, the Registrant generated a net loss of $39,216 which can be attributed primarily to expenses generated by the Registrant's 70% owned subsidiary, Excess Materials Inc. Item 2. Properties. As of June 30, 2001, the Registrant owned no property. The Registrant utilizes some space in the home of Arthur and Anne Seidenfeld, treasurer and president of the Registrant. 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 - 377 shareholders of record of 9/10/01. 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. Item 6. Selected Financial Data For the Year ended June 30, 2001 2000 1999 1998 1997 Total Revenues $101,200 $ 43,812 $266,984 $102,991 $72,985 Operating Income (Loss) before tax (23,400) (42,326) 144,323 28,160 6,388 Net Income (Loss) (27,996) (39,216) 103,105 16,198 11,925 Net Income (Loss) per share NIL NIL $.01 NIL NIL Total Assets 759,174 788,106 902,861 752,417 731,238 Long Term Debt -0- -0- -0- -0- -0- Dividends -0- -0- 30,300 -0- -0- Item 7. Management's Discussion and Analysis of Results of Operations. During the fiscal year ended June 30, 2001, the Registrant had generated a net loss of $27,996. Its revenues for the year ended June 30, 2001 was derived from interest income of $35,517 and gain on securities sales (sale of shares in Omnicomm Systems) of $65,683. The Registrant's revenues of $101,200 has been offset by the following: officers' salaries of $26,660, general and administrative expenses(consisting of expenses generated by the Registrant's 70% owned subsidiary, Excess Materials, Inc and accounting and legal expenses) of $54,745, equity in a loss by Scientio Inc. of $15,314 (the Registrant has a 20% ownership interest in Scientio Inc.), and goodwill amortization of the investment in Scientio of $27,881. During the fiscal year, income tax expense generated amounted to $4,596. 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, 2001 Excess Materials did not generate any revenues. At June 30, 2001 Excess Materials had approximately 600 registered members. At June 30, 2001 the Registrant's total assets amounted to $759,174 and as compared with $788,106 at June 30, 2000. At June 30, 2001, stockholders' equity amounted to $749,810, as compared with $777,806 at June 30, 2000. 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 50 President and Next Annual Director Meeting Anne Seidenfeld 88 Treasurer, Secretary Next Annual and Director Meeting Gerald Kaufman 60 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 was president and director of Lite King Corp, a public reporting company from February 1989 until March 2001 when Lite King Corp merged with National Cabling Services Inc. 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 commerce field and is secretary and a director of Scientio Inc., a software development company. 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. 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. She was treasurer and Director of Lite King Corp until March 2001 when Lite King Corp merged with National Cabling Services Inc. 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 from 1998 until March 2001. 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, 2001, management salaries were as follows: Anne Seidenfeld - Treasurer-Secretary $7,200 Arthur Seidenfeld - President $19,460 During the year ended June 30, 2000, Anne Seidenfeld, pursuant to an oral agreement with the Company earned $7,000 as an annual salary. Arthur Seidenfeld, the Registrant's president did not earn any salary during the year ended June 30, 2000. 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, 2001 AND JUNE 30, 2000 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD JULY 1, 1998 TO JUNE 30, 2001 CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 2001, 2000 AND 1999 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2001, 2000 AND 1999 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, 2001 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, 2001 Anne Seidenfeld Treasurer, Secretary September 20, 2001 and Director Gerald Kaufman Director September 20, 2001 MODERN TECHNNOLOGY CORP. FINANCIAL STATEMENTS JUNE 30, 2001 AND 2000 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 6-12 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, 2001 and 2000 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, 2001. 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, 2001 and 2000, and the consolidated results of its operations and cash flows for the three years in the period ended June 30, 2001, in conformity with generally accepted accounting principles. GREENBERG & COMPANY LLC Springfield, New Jersey July 20, 2001 Page 1 of 12 MODERN TECHNOLOGY CORP. CONSOLIDATED BALANCE SHEETS June 30, 2001 2000 A S S E T S CURRENT ASSETS Cash and Cash Equivalents $472,617 $663,250 Other Current Assets -0- 5,000 ------- ------- 472,617 668,250 ------- ------- EQUIPMENT - At Cost 15,405 13,500 Less: Accumulated Depreciation (12,005) (11,007) ------ ------ 3,400 2,493 ------ ------ OTHER ASSETS Investments, At Cost 116,800 16,800 Investments, at Equity 26,508 -0- Note Receivable -0- 100,000 Other Assets 443 563 Goodwill, net 139,406 -0- ------- ------- 283,157 117,363 ------- ------- TOTAL ASSETS $759,174 $788,106 ======= ======= 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 $ 5,500 $ 10,000 Income Tax Payable 3,564 -0- ----- ------ Total Current Liabilities 9,064 10,000 ----- ------ MINORITY INTEREST 300 300 --- --- 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 252,634 280,630 ------- ------- 749,810 777,806 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $759,174 $788,106 ======= ======= See accompanying summary of accounting policies and notes to financial statements. Page 2 of 12
MODERN TECHNOLOGY CORP. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD JULY 1, 1998 TO JUNE 30, 2001 Common Stock Total Par Stock- # of Value Paid-In Retained holders' Shares $.0001 Capital Earnings Equity BALANCES AT JULY 1, 1998 20,150,000 $2,015 $495,161 $247,041 $744,217 Dividend distribution of Omnicomm Systems Inc. stock to Modern Technology stockholders (30,300) (30,300) Net Income (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 Net Income (Loss) for the Year Ended June 30, 2001 (27,996) (27,996) BALANCE AT ---------- ----- ------- ------- ------- JUNE 30, 2001 20,150,000 $2,015 $495,161 $252,634 $749,810 ========== ===== ======= ======= =======
See accompanying summary of accounting policies and notes to financial statements. Page 3 of 12 MODERN TECHNOLOGY CORP. CONSOLIDATED STATEMENTS OF OPERATIONS For The Years Ended June 30, 2001 2000 1999 REVENUES Interest Income $ 35,517 $ 43,812 $ 35,834 Gain on Securities Sales 65,683 -0- 231,150 ------- ------ ------- 101,200 43,812 266,984 ------- ------ ------- EXPENSES Officers' Salaries 26,660 7,000 29,575 General and Administrative Expenses 54,745 79,138 65,677 Merger Related Expense -0- -0- 27,409 Equity in Loss of Affiliate 15,314 -0- -0- Goodwill amortization 27,881 -0- -0- ------- ------ ------- 124,600 86,138 122,661 ------- ------ ------- INCOME (LOSS) BEFORE TAXES (23,400) (42,326) 144,323 Income Tax Expense (Benefit) 4,596 (3,110) 41,218 ------ ------ ------- NET INCOME (LOSS) $ (27,996) $ (39,216) $ 103,105 ====== ====== ======= INCOME (LOSS) PER SHARE NIL NIL $ .01 ====== ====== ======= NUMBER OF WEIGHTED AVERAGE SHARES OUTSTANDING 20,150,000 20,150,000 20,150,000 ========== ========== ========== See accompanying summary of accounting policies and notes to financial statements. Page 4 of 12
MODERN TECHNOLOGY CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS For The Years Ended June 30, 2001 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $(27,996) $(39,216) $103,105 Adjustments to Reconcile Net Income to Net Cash Provided By (Used In) Operating Activities: Depreciation & Amortization 28,879 832 356 Equity in Loss of Affiliate 15,314 -0- -0- Gain on Investments (65,683) -0- (231,150) Merger of Subsidiary -0- -0- (30,300) Changes in Assets and Liabilities: Decrease (Increase) in Other Current Assets 5,000 17,360 (22,360) Decrease (Increase) in Deferred Registration Costs -0- -0- 26,007 Decrease (Increase) in Other Assets 120 (85) ( 213) Increase (Decrease) Accrued Expenses and Taxes (936) (75,839) 77,639 Net Cash Provided By (Used In) ------ ------ ------ Operating Activities (45,302) (96,948) (76,916) ------ ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital Expenditures (1,905) -0- (3,561) (Purchase) Sale of Securities 165,683 -0- 239,100 Purchase of Investments (309,109) -0- -0- Purchase - Note Receivable -0- -0- (100,000) Net Cash (Used In) Provided By ------- ---- ------- Investing Activities (145,331) -0- 135,539 ------- ---- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Capital Contribution - Minority Interest -0- 300 -0- Net Cash (Used In) Provided By --- --- --- Financing Activities -0- 300 -0- --- --- --- Net Increase (Decrease) in Cash and Cash Equivalents (190,633) (96,648) 58,623 Cash and Cash Equivalents, Beginning of Year 663,250 759,898 701,275 CASH AND CASH EQUIVALENTS, ------- ------- ------- END OF YEAR $472,617 $663,250 $759,898 ======= ======= ======= Supplemental Disclosures Of Cash Flow Information Cash Paid During The Period For: Taxes $ 1,033 $ 40,405 $ 2,665 Interest $ -0- $ -0- $ -0-
See accompanying summary of accounting policies and notes to financial statements. Page 5 of 12 MODERN TECHNOLOGY CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2001 AND 2000 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, 2001, 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 original maturities of 90 days or less. The carrying amount reported in the accompanying balance sheets approximates fair value. Page 6 of 12 MODERN TECHNOLOGY CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2001 AND 2000 (Continued) NOTE RECEIVABLE During the year ended June 30, 1999 the Company purchased a $100,000 convertible note in Omnicomm Systems Inc. (Omnicomm). The note carries a 10% annual interest rate and is convertible at the Company's option into 80,000 shares of Omnicomm common stock. The note matures in 2004. During the three months ended September 30, 2000, the Company exercised its right to convert the $100,000 convertible note in Onmicomm to 80,000 shares of Omnicomm common stock. The Company sold all of Omnicomm common stock. As of June 30, 2001, the Company holds no Omnicomm common stock. 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. ADVERTISING Advertising costs are expensed as incurred. Advertising expense for the years ended June 30, 2001, 2000 and 1999 was $2,345, $-0-, and $-0-, respectively. Page 7 of 12 MODERN TECHNOLOGY CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2001 AND 2000 (Continued) 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. 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. Page 8 of 12 MODERN TECHNOLOGY CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2001 AND 2000 (Continued) Note 3: CONCENTRATIONS OF CREDIT RISK The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash. At June 30, 2001 and June 30, 2000, the Company had deposits in various financial institutions totaling a bank balance of $592,796 and $663,250, respectively. Of the bank balance, up to $4,127 and $1,889 was covered by federal depository insurance. The remaining balance was uninsured and uncollateralized. At times during the year and at June 30, 2001 and June 30, 2000, the Company had funds on deposit with banks that were uninsured and uncollateralized, as a result, funds are at risk of loss. The Company has not experienced any losses in such accounts and believes they are not exposed to any significant credit risk on cash and cash equivalents. The carrying amount of these deposits in the accompanying financial statements was $472,617 and $663,250 at June 30, 2001 and June 30, 2000 respectively. NOTE 4: 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. During the quarter ended March 31, 1999, the entire investment was sold. The total realized gain was $231,150. During the quarter ended September 30, 2000 the investment in Omnicomm Systems, Inc. of 32,250 shares was considered a trading security in accordance with Financial Accounting Standard (FAS)115. Omnicomm shares are traded on the NASD over the counter bulletin board system. The cost of these shares was $40,312. During the quarter ended September 30, 2000, the total unrealized gain was $24,188. During the quarter ended December 31, 2000, Modern sold the remaining shares of Omnicomm. Page 9 of 12 MODERN TECHNOLOGY CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2001, AND 2000 (Continued) NOTE 5: INVESTMENT IN EQUITY SECURITIES (At Cost) Investments in Non Marketable Equity Securities consist of the following: June 30, June 30, 2001 2000 Investment in 360,000 restricted shares in Daine Industries, Inc. $ 15,900 $15,900 Investment in 5% of total shares in Interactive Medicine Inc. 100,000 -0- Investments in other restricted securities 900 900 ------- ------ $116,800 $16,800 ======= ====== NOTE 6: INVESTMENT IN EQUITY SECURITIES (At Equity) Investments in Non Marketable Equity Securities consist of the following: June 30, June 30, 2001 2000 Investment in 20% of total shares in Scientio Inc. $26,508 $ -0- ------ --- $26,508 $ -0- ====== === Since Modern owns 20% of Scientio Inc., the investment is accounted for under the equity method. There were no intercompany transactions between Modern and Scientio. Since the net assets of Scientio were less than Modern's investment, the excess of the pro rata net assets of Scientio was recorded as goodwill of $167,287 at June 30, 2001. Goodwill is being amortized over three years using straight line. Goodwill amortization was $27,881 during the year ended June 30, 2001. The following unaudited information is provided for Scientio as of May 15, 2001, (the most recent information available): Total assets $34,543 Total liabilities $49 (Loss) for the period Dec 11, 2000(inception) Through May 15, 2001 $(76,569) Page 10 of 12 MODERN TECHNOLOGY CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2001 AND 2000 (Continued) NOTE 7: INCOME TAX EXPENSE (BENEFIT) The provision for income taxes is comprised of the following: 6/30/01 6/30/00 6/30/99 Current $6,633 $ 405 $41,218 Deferred (2,037) (3,515) -0- ----- ----- ------ $4,596 $(3,110) $41,218 ===== ===== ====== The provision for income taxes differs from the amount computed by applying the statutory federal income rate as follows: 6/30/01 6/30/00 6/30/99 Expected statutory amount $2,978 $ -0- $40,513 Net operating loss (2,037) (3,515) -0- State income taxes, net of federal benefit 3,655 405 705 ----- ----- ------ $4,596 $(3,110) $41,218 ===== ===== ====== 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, 2001 and June 30, 2000 relate to Excess, the Company's 70% owned subsidiary, and the timing differences resulting from the Company's investment accounted for under the equity method. Since the accounts of Excess are not allowed to be consolidated with Modern for tax purposes and Excess has generated losses since inception, the deferred tax assets associated with these losses have been fully reserved in the valuation allowance. The tax effect of significant temporary differences, which comprise the deferred tax assets are as follows: 6/30/01 6/30/00 Deferred tax assets: Net operating loss carry forwards $18,000 $18,000 Amortization of Intangibles 8,412 -0- Investment loss 4,620 -0- ------ ------ Gross deferred tax assets 31,032 18,000 Valuation allowance (31,032) (18,000) ------ ------ Net deferred tax assets $ -0- $ -0- ====== ====== The current net operating loss of approximately $39,000 expires in the year ended June 30, 2021. The amortization of intangibles and investment loss result from the accounting treatment required by GAAP for equity method investments. The tax benefits have been fully reserved due to a lack of consistent operating profitability. Page 11 of 12 MODERN TECHNOLOGY CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2001 AND 2000 (Continued) NOTE 8: 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 9: 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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