Item 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 $30,000. The Registrant had 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.
The Registrant signed a consulting agreement on December 8, 2000 to invest $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 represented a 20% ownership interest in Scientio. Scientio was a newly formed U.S. company established in the state of Delaware with operations conducted in the United Kingdom. During the quarter ended June 30, 2002, Scientio generated revenues of $2,700. Before the quarter ended June 30, 2002, Scientio did not generate any revenues.
Scientio registered the shares owned by the Registrant under the Securities Act, for distribution and trading. During the first week of October 2001, the Registrant distributed its 403,000 share position in Scientio to its shareholders in a transaction similar to the Omnicomm distribution to be discussed earlier in this management's discussion. The Registrant covered 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 was used by Scientio to complete and test its initial XML software products and enable Scientio to begin a marketing program. Scientio's XML Miner and XML Rule products have been targeted to software developers as they relate to the field of data mining. 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.
On May 29, 2002, a form 8-K was filed by Scientio. As a result of Scientio's inability to raise additional funds for operations and to generate a material amount of licensing revenues, the board of directors of Scientio took the following actions:
Scientio transferred all assets and its software business to a British Virgin Island private company entitled Scientio Inc. (BVI). All software improvements and new products related to the software business will also be transferred into this private BVI company and Andrew Edmonds, former president of Scientio and its current secretary and director has agreed not to compete with this private BVI company in the field of datamining for the next 3 years. BVI hopes to raise capital from private sources.
Scientio has received a 27% ownership interest in Scientio Inc BVI with the family of Andrew Edmonds receiving a 73% ownership interest. Anneke Edmonds, Andrew Edmonds' wife returned 1,541,850 shares of Scientio, retaining a 50,000 share ownership interest in Scientio. As a result, the outstanding shares of Scientio was reduced to 661,900 shares from approximately 2.2 million shares. Scientio is presenting offering itself as a reporting trading public company for merger with a private company. During the six month period ended June 30, 2002, the Registrant purchased 117,250 shares of Scientio for $82,075 (70 cents per share). The Registrant presently owns 17.7% of the outstanding shares of Scientio.
The Registrant signed a consulting agreement on March 19, 2001 with Interactive Medicine, Inc. ("Interactive"), a Florida based development stage company engaged in the healthcare Internet business. The Registrant invested $100,000 and received 790,604 shares of Interactive, representing a 5% ownership interest in Interactive. 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 a medical specialty network used by doctors and other healthcare providers. For the nine month period ended September 30, 2001, Interactive generated revenues of $238,481 with a net loss of $160,839.
Interactive, on February 11, 2002, filed a form SB-2 registration statement to register the shares owned by the Registrant under the Securities Act, for distribution and trading. Upon the effective date of the filed Registration Statement, the Registrant intends to distribute its 790,604 share position in Interactive to its shareholders in a transaction similar to the Omnicomm and Scientio distributions discussed earlier in this management's discussion. Management of the Registrant has no knowledge as to whether Interactive intends to complete the registration process. No assurance can be given that Interactive's Registration Statement will be declared effective and the Registrant will be able to distribute its shares in Interactive to the Registrant's shareholders.
During March 1999, the Registrant established a subsidiary entitled Excess Materials, Inc. ("Excess Materials"). Excess was an electronic internet marketplace for corporate buyers and sellers of industrial supplies, equipment, metals, textile items and animal hides. Excess was to derive its revenues from commissions paid by the seller on completed transactions. During the fiscal year ended June 30, 2002, the Registrant closed down the operations of Excess and liquidated the company. Excess did not generate any revenues during its approximate 3 year history. At the time of its termination, Excess had approximately 620 registered members.
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). At the time of merger, the Registrant owned 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, 2002, the Registrant generated net income of $12,079. Its revenue for the year ended June 30, 2002 was derived from interest income of $8,287 and gain on securities sales (sale of Lite King shares) of $102,430 and an unrealized gain- trading securities (Lite King shares) of $14,814. The Registrant's revenues of $125,531 for the year ended June 30, 2002 has been offset by the following expenses: Officers' salaries of $38,578 and general and administrative expenses, consisting of those generated by the Registrant's 70% owned subsidiary, Excess Materials Inc., office salaries, and accounting and legal fees totaling $71,549. There was also income tax expense of $3,325.
For the year ended June 30, 2001, the Registrant generated a net loss of $27,996 which can be attributed primarily to expenses generated by the Registrant's 70% owned subsidiary, Excess Materials Inc.
Item 2.
Item 2. Properties.
As of June 30, 2002, the Registrant owned no property. The Registrant utilizes some space in the home of Arthur and Anne Seidenfeld, president and treasurer-secretary of the Registrant.
Item 3.
Item 3. Legal Proceedings.
None.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5.
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- 379 shareholders of record as of August 26, 2002.
Dividends:
During October 2001, the Registrant distributed the 403,000 shares it owned in Scientio to its shareholders. These 403,000 shares represent a dividend of equity investment stock of $178,864 for the year ended June 30, 2002. The Registrant has 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.
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.
Item 6. Selected Financial Data
For the Year ended June 30,
2002 2001 2000 1999 1998 -------- --------- --------- -------- -------- Total Revenues $125,531 $ 101,200 $ 43,812 $266,984 $102,991 Operating Income (Loss) before tax 15,404 (23,400) (42,326) 144,323 28,160 Net Income (Loss) 12,079 (27,996) (39,216) 103,105 16,198 Net Income (Loss) Per share NIL NIL NIL $.01 NIL Total Assets 586,225 759,174 788,106 902,861 752,417 Long Term Debt -0- -0- -0- -0- -0- Dividends 178,864 -0- -0- 30,300 -0-
Item 7.
Item 7. Management's Discussion and Analysis of Results of Operations.
During the fiscal year ended June 30, 2002, the Registrant had generated net income of $12,079. Its revenues for the year ended June 30, 2002 was derived from interest income of $8,287, gain on securities sales (sale of shares in Lite King) of $102,430 and unrealized gain from trading securities (Lite King) of $14,814. The Registrant's revenues of $125,531 have been offset by the following: officers' salaries of $38,578 and general and administrative expenses, primarily attributable to its former 70% owned subsidiary, Excess Materials (no longer in business) and accounting and legal fees totaling $71,549. During the fiscal year, income tax expenses amounted to $3,325.
During the fiscal year ended June 30, 2001, the Registrant had a net loss of $27,996. Its revenue for the year ended June 30, 2001 was derived from the realized gain from trading securities (sale of shares in Omnicomm Systems) amounting to $65,683 and from interest income of $35,517. The loss can be attributed primarily to expenses related to the Registrant's former 70% owned subsidiary, Excess Materials, which is no longer in existence.
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 former 70% owned subsidiary, Excess Materials.
At June 30, 2002, the Registrant's total assets amounted to $586,225 as compared with $759,174 at June 30, 2001. The decline of $172,949 can be attributable to the distribution of a dividend of Equity Investment Stock (shares in Scientio, Inc) amounting to $178,864 to the Registrant's shareholders during the fiscal year ended June 30, 2002.
Item 8.
Item 8. Financial Statements
Attached.
Item 9.
Item 9. Changes In and Disagreement With Accountants on Accounting and Financial Disclosure.
None.
PART III
Item 10.
Item 10. Directors and Executive Officers.
The executive officers and directors of the Registrant are as follows:
Name Age Title Term Expires - ---- --- ----- ------------ Arthur Seidenfeld 51 President and Director Next Annual Meeting
Anne Seidenfeld 89 Treasurer, Secretary and Director Next Annual Meeting
Gerald Kaufman 61 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 Company 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 is president, treasurer and director of Scientio, Inc., a publicly traded company. He 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., newly established company engaged in wind energy research and development activities. From 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 was president of Excess Materials Inc, a 70% owned subsidiary of the Registrant engaged in the internet commerce field from 1999 until early 2002 when Excess Materials operated were closed and the company liquidated.
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 was treasurer and secretary of Excess Materials Inc until Excess Material's operations were terminated and the company liquidated. 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.
Item 11. Management Executive Compensation.
During the fiscal year ended June 30, 2002, management salaries were as follows:
Anne Seidenfeld - Treasurer/Secretary $7,200 Arthur Seidenfeld- President $31,378
During the year ended June 30, 2001, Anne Seidenfeld, pursuant to an oral agreement with the Company earned $7,200 as an annual salary. Arthur Seidenfeld, the Registrant's present earned a salary of $31,378, pursuant to an oral agreement with the Company.
PART IV
Item 12.
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
Amount & Nature of Percentage Name of Beneficial Owner 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.
Amount & Nature of Percentage Name of Beneficial Owner Beneficial Ownership of Class - ------------------------ -------------------- ---------- Arthur Seidenfeld 9,654,820 47.9%
Anne Seidenfeld 2,426,500 12.0%
Item 13.
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.
Item 14. Exhibits
Financial Statements and Schedules and Reports on Form 8-K.
ACCOUNTANT'S REPORT CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2002 AND JUNE 30, 2001 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD JULY 1, 1999 TO JUNE 30, 2002. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 2002, 2001, AND 2000 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2002, 2001, 2000. 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 3, 2002
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 Sept. 3, 2002
Anne Seidenfeld Treasurer, Secretary and Director Sept. 3, 2002
Gerald Kaufman Director Sept. 3, 2002
MODERN TECHNNOLOGY CORP.
FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
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 6-11
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, 2002 and 2001 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, 2002. 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 auditing standards generally accepted in the United States of America. 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, 2002 and 2001, and the consolidated results of its operations and cash flows for the three years in the period ended June 30, 2002, in conformity with accounting principles generally accepted in the United States of America.
GREENBERG & COMPANY LLC
Springfield, New Jersey July 15, 2002
Page 1 of 11
MODERN TECHNOLOGY CORP. CONSOLIDATED BALANCE SHEETS June 30, 2002 2001 ---------- ---------- A S S E T S CURRENT ASSETS Cash and Cash Equivalents $ 378,556 $ 472,617 Investments, Trading Securities 20,739 -0- --------- --------- 399,295 472,617 --------- ---------
EQUIPMENT - At Cost 15,660 15,405 Less: Accumulated Depreciation (13,136) (12,005) --------- --------- 2,524 3,400 --------- --------- OTHER ASSETS Investments, At Cost 184,406 116,800 Investments, at Equity -0- 26,508 Other Assets -0- 443 Goodwill, net -0- 139,406 --------- --------- 184,406 283,157 --------- --------- TOTAL ASSETS $ 586,225 $ 759,174 ========= =========
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
CURRENT LIABILITIES Accrued Expenses $ 3,200 $ 5,500 Income Tax Payable -0- 3,564 --------- --------- Total Current Liabilities 3,200 9,064 --------- --------- MINORITY INTEREST -0- 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 85,849 252,634 --------- --------- 583,025 749,810 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 586,225 $ 759,174 ========= =========
See accompanying summary of accounting policies and notes to financial statements. Page 2 of 11
MODERN TECHNOLOGY CORP. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD JULY 1, 1999 TO JUNE 30, 2002
Common Stock Total Par Stock- # of Value Paid-In Retained holders' Shares $.0001 Capital Earnings Equity ---------- ------ -------- -------- --------
BALANCES AT JULY 1, 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) ---------- ------ -------- -------- -------- BALANCES AT JUNE 30, 2001 20,150,000 2,015 495,161 252,634 749,810
Dividends of Equity Investment Stock (178,864) (178,864)
Net Income (Loss) For the Year Ended June 30, 2002 12,079 12,079 ---------- ------ -------- -------- -------- BALANCES AT JUNE 30, 2002 20,150,000 $2,015 $495,161 $ 85,849 $583,025 ---------- ------ -------- -------- --------
See accompanying summary of accounting policies and notes to financial statements. Page 3 of 11
MODERN TECHNOLOGY CORP. CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended June 30, 2002 2001 2000 ---------- ---------- ---------- REVENUES
Interest Income $ 8,287 $ 35,517 $ 43,812 Realized Gain-Trading Securities 102,430 65,683 -0- Unrealized Gain - Trading Securities 14,814 -0- -0- ---------- ---------- ---------- 125,531 101,200 43,812 ---------- ---------- ---------- EXPENSES
Officers' Salaries 38,578 26,660 7,000 General and Administrative Expenses 71,549 54,745 79,138 Equity in Loss of Affiliate -0- 15,314 -0- Goodwill amortization -0- 27,881 -0- ---------- ---------- ---------- 110,127 124,600 86,138 ---------- ---------- ----------
INCOME (LOSS) BEFORE TAXES 15,404 (23,400) (42,326) Income Tax Expense (Benefit) 3,325 4,596 (3,110) ---------- ---------- ---------- NET INCOME (LOSS) $ 12,079 $ (27,996) $ (39,216) ========== ========== ==========
INCOME (LOSS) PER SHARE - BASIC AND DILUTED NIL NIL NIL ========== ========== ========== NUMBER OF WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED 20,150,000 20,150,000 20,150,000 ========== ========== ==========
See accompanying summary of accounting policies and notes to financial statements. Page 4 of 11
MODERN TECHNOLOGY CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended June 30, 2002 2001 2000 --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ 12,079 $(27,996) $(39,216) Adjustments to Reconcile Net Income to Net Cash Provided By (Used In) Operating Activities: Depreciation & Amortization 16,530 28,879 832 Equity in Loss of Affiliate -0- 15,314 -0- Realized Gain (102,430) (65,683) -0- Unrealized Gain (14,814) -0- Changes in Assets and Liabilities: Decrease (Increase) in Other Current Assets -0- 5,000 17,360 Decrease (Increase) in Other Assets 443 120 (85) Increase (Decrease) Accrued Expenses and Taxes (6,164) (936) (75,839) -------- -------- -------- Net Cash Provided By (Used In) Operating Activities (94,356) (45,302) (96,948) -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital Expenditures (255) (1,905) -0- (Purchase) Sale of Securities 110,904 165,683 -0- Purchase of Investment at Equity (110,354) (309,109) -0- -------- -------- -------- Net Cash (Used In) Provided By Investing Activities 295 (145,331) -0- -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Capital Contribution - Minority Interest -0- -0- 300 -------- -------- -------- Net Cash (Used In) Provided By Financing Activities -0- -0- 300 -------- -------- -------- Net Increase (Decrease) in Cash and Cash Equivalents (94,061) (190,633) (96,648) Cash and Cash Equivalents, Beginning of Year 472,617 663,250 759,898 -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF YEAR $378,556 $472,617 $663,250 ======== ======== ======== Supplemental Disclosures Of Cash Flow Information Cash Paid During The Period For: Taxes $ 3,440 $ 1,033 $ 40,405 Interest -0- $ -0- $ -0-
Noncash Investing and Financial Transactions: Conversion of Notes Receivable to Investment $ -0- $100,000 $ -0- Dividend of Equity Investment Stock $178,864 $ -0- $ -0-
See accompanying summary of accounting policies and notes to financial statements. Page 5 of 11
MODERN TECHNOLOGY CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2002, 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
In April 1999 the Company formed a subsidiary named Excess Materials Inc. (Excess). Excess accounts are included in the consolidated financial statements at March 31, 2002 and June 30, 2001, and 2000. 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.
Excess was dissolved during March 2002. All income and expenses through dissolution have been incorporated into Modern's books. As of March 31, 2002, $1,425 net assets of Excess were transferred to Modern and Modern recognized a $354 loss upon dissolution.
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 11
MODERN TECHNOLOGY CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2002, 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.
Page 7 of 11
MODERN TECHNOLOGY CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2002, 2001 AND 2000 (Continued)
ADVERTISING
Advertising costs are expensed as incurred. Advertising expense for the years ended June 30, 2002, 2001, and 2000 was $-0-, $2,345, and $-0-, respectively.
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, 2002 and June 30, 2001, the Company had deposits in various financial institutions totaling a bank balance of $400,937 and $592,796, respectively. Of the bank balance, up to $2,955 and $4,127 was covered by federal depository insurance. The remaining balance was uninsured and uncollateralized. At times during the year and at June 30, 2002 and June 30, 2001, 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 $378,556 and $472,617 at June 30, 2002 and June 30, 2001 respectively.
NOTE 4: MARKETABLE SECURITIES
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.
During the quarter ended December 31, 2001, the investment in 701,071 shares of common stock of Lite King Corp. (LKC) was considered a trading security in accordance with Financial accounting Standard (FAS) 115. LKC shares are traded on the NASD over the counter bulletin board system. The cost of these shares is $14,021. During the year ended June 30, 2002, 423,693 shares of LKC stock were sold generating a realized gain of $102,430. The total unrealized gain on LKC stock was $14,814 at June 30, 2002.
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MODERN TECHNOLOGY CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2002, 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, 2002 2001 -------- -------- Investment in 360,000 restricted shares in Daine Industries, Inc. $ 1,431 $ 15,900
Investment in 117,250 (18%) restricted shares in Scientio Inc. 82,075 -0-
Investments 5% of total shares in Interactive Medicine Inc. 100,000 100,000
Investments in other restricted securities 900 900 -------- -------- $184,406 $116,800 ======== ========
NOTE 6: INVESTMENT IN EQUITY SECURITIES (At Equity)
Investments in Non Marketable Equity Securities consist of the following: June 30, June 30, 2002 2001 -------- -------- Investment in 20% of total shares in Scientio Inc. $ -0- $ 26,508 -------- -------- $ -0- $ 26,508 ======== ========
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 $183,352 and $167,287 at September 30, 2001 and June 30, 2001, respectively. Goodwill was being amortized over three years using straight line. Goodwill amortization was $15,279 for six months ended December 31, 2001 and $27,881 during the year ended June 30, 2001.
During the first week of October 2001, the stock of Scientio Inc. was distributed to the shareholders of Modern as a taxable dividend. The total dividend was $178,864. Modern did not recognize any gain or loss on the distribution of Scientio Inc. stock. As of June 30, 2002 Modern owned 117,250 restricted shares in Scientio Inc. Page 9 of 11
MODERN TECHNOLOGY CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2002, 2001 AND 2000 (Continued)
NOTE 7: INCOME TAX EXPENSE (BENEFIT)
The provision for income taxes is comprised of the following:
6/30/02 6/30/01 6/30/00 ------- ------- ------- Current $ 3,325 $ 6,633 $ 405 Deferred -0- (2,037) (3,515) ------- ------- ------- $ 3,325 $ 4,596 $(3,110) ======= ======= =======
The provision for income taxes differs from the amount computed by applying the statutory federal income rate as follows:
6/30/02 6/30/01 6/30/00 ------- ------- ------- Expected statutory amount $ 1,938 $ -0- $ -0- Net operating loss -0- (2,037) (3,515) State income taxes, net of federal benefit 1,387 3,655 405 ------- ------- ------- $ 3,325 $ 4,596 $(3,110) ======= ======= =======
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. 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:
6/30/02 6/30/01 ------- ------- Deferred tax assets: Net operating loss carry forwards $18,000 $18,000 Amortization of Intangibles 8,412 8,412 Investment loss 4,620 4,620 ------- ------- Gross deferred tax assets 31,032 31,032 Valuation allowance (31,032) (31,032) ------- ------- Net deferred tax assets $ -0- $ -0- ======= =======
The 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.
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MODERN TECHNOLOGY CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2002, 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 47.9% of the outstanding shares of Modern Technology Corp. Anne Seidenfeld, Treasurer, Secretary and a director of the Company, owns approximately 12% of the outstanding shares of Modern Technology Corp. Anne Seidenfeld is Arthur Seidenfeld's mother. There were no related party transactions.
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