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Modern Technology Corp Announces Positive 12 Month Results and Issues Guidance Thursday November 10, 4:00 pm ET
OXFORD, MS--(MARKET WIRE)--Nov 10, 2005 -- Modern Technology Corp (OTC BB:MOTGE.OB - News) a diversified technology development and acquisition company announced today year-end June 20, 2005 pro forma revenues of $12,242,487. (Form 10K-SB, Financial Statements, Note 20)
The company reports $6,861,170 in Assets and positive Stockholder Equity. The company's expenses have been large due in part to interest expense and the extraordinary initial costs associated with acquisitions. The company's current growth pattern anticipates positive Earnings-Per-Share within the coming year.
We had 6-month revenues for the year ended June 30, 2005 of $3,078,145. Because of SEC accounting rules, these six-month revenues include only the revenues from the actual date of acquisition of Sound City and stockholders are reminded the majority of Sound City's revenues will be generated in the latter part of 2005 during the busiest sales season. With the opening of this subsidiary's new location, we expect revenue to be in line with expectations.
Anthony Welch, Modern Technology Corp's Chairman, said, "As you can see, our growth is rapid and we gain momentum with each passing day. With our current candidates for new acquisitions and internal growth from operations, we feel confident in our ability to deliver outstanding results for 2005. As we acquire and grow, we consistently improve margins through eliminating cost redundancies and therefore increase earnings with each passing quarter. We are rapidly approaching our long-term goals of a true economy-of-scale operation."
The company previously announced its acquisition of InMarketing Group, Inc. The Closing of this acquisition is in its final stages and is expected to be announced formally in the very near future with full disclosure filings for financial results. This acquisition adds an estimated $11 Million in 2005 profitable revenues and a projected additional $13 Million in profitable revenues for 2006. InMarketing Group generated $8.7 Million in profitable revenues in 2004 and generated a profitable $5.8 Million in the first half of 2005.
The company exceeded its 2004 projections for year-end assets of $4,000,000 and revenues of $10,000,000.
The company's current revenue projections for 2005 year-end are expected to be in excess of $20,000,000. This projection does not include other acquisitions under consideration. It must be noted that we have transactions under consideration may propel the company beyond $50,000,000 for 2005.
Continuing Growth:
In June 2005 the company announced a strategic alliance agreement with UTEK Corporation. This alliance provides the company with nascent, market-ready technologies. The company intends to commercialize them through its existing sales and distribution channels. The company has market-ready technology already under consideration for immediate acquisition. The company projects significant revenues from these technologies.
The company's subsidiary Sound City (www.soundcity.com), is doubling its retail footprint and continues to add product lines. InMarketing Group is expected to continue its strong year-on-year growth and profitability. The company expects ongoing synergy-based cost reductions as well as increased revenue growth resulting from the synergies between the subsidiaries.
Planned National Exchange Listing:
The company intends to list on a national exchange. The company anticipates listing its stock on a national exchange concurrently with meeting the qualification criteria or through a strategic acquisition of a qualifying company. The company expects to meet this goal within the next 12 months, or sooner.
Stockholder Dividends:
In 2004 the company declared and paid a $383,697 cash dividend. In October of 2001, the company declared and paid a stock dividend of 403,000 shares and on June 30, 1999, the company distributed a stock dividend of 403,000 shares as part of a spin-off transaction.
The company intends to pay dividends as appropriate and as part of its anticipated subsidiary spin-off strategy. As the company's subsidiaries mature and grow, a public spin-off transaction will be considered. Each stockholder in MOTG would receive stock in the new public spin-off company in addition to stock they already own in MOTG. The company's long-term plan is for stockholders to realize strong capital appreciation from their MOTG stock as well as the stock paid to them as part of the spin-off transactions.
This guidance is the company's best, good faith estimate based on current conditions and numerous assumptions about the company's industry, its access to financing, the competitive and regulatory landscape and its ability to successfully consummate the acquisitions under consideration.
About Modern Technology Corp.
Founded in 1982, Modern Technology Corp is a diversified technology development and acquisition company, building revenues by strategic acquisition and commercialization of nascent commercial technology and by the acquisition of synergistic operating companies. MOTG commercializes technology and provides to its subsidiaries new product lines, operations infrastructure, and significant intellectual capital. The company's mission is to consistently build shareholder value through accretive acquisitions of emerging technology or acquiring operating companies capable of benefiting from technology infrastructure enhancements or new product lines. For more information, visit: http://www.moderntechnologycorp.com.
Safe-Harbor Statement
This press release contains statements (such as projections regarding future performance) that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to those detailed from time to time in the Company's filings with the Securities and Exchange Commission.
Contact:
Company Contact: Megan Peterson 1-662.236.5928
-------------------- All men's gains are the fruit of venturing.
~Herodotus Posts: 339 | From: Southern California | Registered: Aug 2005
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACE OF 1934
For the fiscal year ended June 30, 2005
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission File No. 2-80891-NY
MODERN TECHNOLOGY CORP.
(Name of small business issuer in its charter)
Nevada
11-2620387
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1420 N. Lamar Blvd., Oxford, M.S.
38655
(Address of principal executive offices)
(Zip Code)
Issuer's Telephone Number: (662) 236-5928
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form and no disclosure will 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-KSB or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for the most recent fiscal year: $3,078,145
The aggregate market value of voting and non-voting common equity held by non-affiliates as of October 31, 2005, was approximately $1,200,194.
On October 31, 2005, there were 32,605,631 shares of common stock issued and outstanding.
Part I
Description of Business
We were incorporated in Nevada in 1982 as a for-profit corporation. We have never experienced any bankruptcy or similar proceeding. We have never by a party to a "reverse merger" or similar transaction. We have engaged in business categorically similar to our present line of business since inception.
We are engaged in aiding both private and public companies in the areas of business development, financing, product development, corporate strategy, corporate image and public relations, product distribution and marketing, and executive management consulting. We collectively refer to companies in which we own an equity position, our majority owned subsidiaries, corporate customers and clients as "portfolio companies". We charge for our services in cash or equity in the portfolio company. We may also exchange our services for revenue sharing of future sales of products or sharing of proceeds from the sale of licenses and technologies owned by our portfolio companies. We seek to grow through strategic acquisitions in addition to generating income from our services.
We seek to build revenues by a model of continuous growth, strategic acquisitions, and commercialization of nascent technology. We seek to improve operating efficiencies among our portfolio companies through elimination of cost redundancies and realized synergy between subsidiaries. We also seek to commercialize new technology and provides to our portfolio companies and subsidiaries new product lines, operations infrastructure, and significant intellectual capital.
Our sources of revenue are primarily from:
* Consolidated revenues of our portfolio companies which we own in majority;
* Management and consulting fees we may charge our portfolio companies;
* Revenue sharing agreements we may have with our portfolio companies;
* Royalty and licensing proceeds from the sale of technology rights we may own in whole or in part with our portfolio companies;
* Proceeds from the sale of securities we may own in our portfolio companies;
* Proceeds from the interest and payment of debt we may hold in our portfolio companies; and
* Proceeds from the conversion of debt we may hold in our portfolio companies into marketable securities and subsequent sale of same.
OUR PORTFOLIO COMPANIES AS OF June 30, 2005
Sound City
We presently own 51% of Sound City with an option to acquire the remaining 49%. The option is valid through December 31, 2009, and can be exercised for $3,500,000, which is payable in cash, stock or a combination of cash or stock. Sound City, Inc. is a consumer electronics company with customers across the U.S. Sound City markets audio and video solutions for home and mobile environments, including the HD-TV, Plasma TV and LCD TV market segments. As a full service dealer, Sound City provides a wide range of custom home installations addressing numerous applications. With a customer base of over 900,000 customers, Sound City is a large electronics mail order companies in the U.S., who distributes its products and solutions through its direct mail and Web site channels. Consumers can also find the latest audio, video, car stereo and home theatre products in Sound City's retail locations, including 12 custom showrooms. Sound City operates a web site a the following address: http://www.soundcity.com.
DeMarco Energy Systems of America, Inc.
We are the holder of an outstanding convertible debenture in the amount of $1,500,000 issued by DeMarco Energy Systems of America. The debenture is convertible into shares of common stock of DeMarco. The convertible debentures bear interest at 10%, matured on March 25, 2003, and are convertible into shares of Demarco common stock, at the selling stockholders' option, at the lower of (i) $0.15 or (ii) 60% of the average of the three lowest intraday trading prices for the common stock on a principal market for the 10 trading days before but not including the conversion date. As of May 2, 2005, the $1,500,000 convertible debenture was convertible into 250,000,000 shares of DeMarco common stock.
We have no formal agreements with this portfolio company outside our being a holder of the convertible debenture, although our chairman, Anthony K. Welch, is also the chairman of DeMarco. We have an informal agreement to assist them where practicable to further their plans and efforts, although there are no written agreements to this effect and we are not obligated to perform any services for them.
DeMarco Energy's primary mission is to provide energy efficient technologies to commercial and institutional markets through the application of the DeMarco 'Systems' patent. The company owns a systems patent that was granted on September 3, 1985, known as the Energy Miser System. The company is primarily focusing on providing heating and air conditioning powered by the thermal properties of managed water systems, which include gray-water, re-use water and potable water systems. DeMarco has exclusive rights to the patented technology.
Selecting Portfolio Companies
We may purchase an equity position, whether minority or majority, in various companies from time to time. We offer our services to new customers, also referred to as portfolio companies, for cash payment. We may elect to take equity in the portfolio company as payment for our services.
We also seek to grow our revenues and assets by acquisitions. We seek to obtain a majority equity position in any company we acquire. If we acquire a minority position in a company, we will seek to enter into agreement with that company whereby we will generate income from our services. If we acquire a minority position in a company, we value that equity using a good-faith estimation of its value based on generally accepted accounting principles combined with our internal judgment based on industry and economic factors not encompassed by traditional accounting principles.
We acquire majority or minority equity positions in portfolio companies by purchasing the equity with cash, debt, or purchasing the equity by issuing stock in our company. We may pay for the equity position with a combination of both cash and stock and debt.
When presented with a prospective acquisition, we make a good-faith valuation for the business to be acquired and its future prospects. If the assessment of the prospective acquisition appears to offer a good or reasonable chance to increase our revenues and assets both in the short-term and the long-term, we will seek to acquire the prospective company.
We find new customers and prospective companies to acquire through out network of relationships within the business community.
Description of Property
We maintain our principal office at 1420 N. Lamar Blvd., Oxford, Mississippi 38655. Our telephone number at that office is (662) 236-5928 and our facsimile number is (662) 236-7663. This space is provided to us at no charge by Mr. Church, our CFO and Director. We lease 1500 square feet of executive and administrative offices at 1237 State Rd 30 E, Oxford MS 38655. The lease expires on January 30, 2006. This office space is rented to us for $850 per month by Mr. Welch, our CEO. We believe that our current office space and facilities are sufficient to meet our present needs and do not anticipate any difficulty securing alternative or additional space, as needed, on terms acceptable to us. We maintain a website at www.moderntechnologycorp.com. The information contained on that website is not deemed to be a part of this filing.
Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse affect on our business, financial condition or operating results.
Submission of Matters to a Vote of Security Holders
None.
Part II
Market for Common Equity and Related Stockholder Matters
In March 2004 and as part of our plan of reorganization and ongoing plan for operations we applied for listing of our Common Stock on the Over-The-Counter-Bulletin Board. We received approval on July 19th, 2004 and trade under the symbol MOTG.
Number of Shareholders- 380 shareholders of record as of June 30, 2005.
Dividends:
On March 13, 2004, the Registrant declared a cash dividend of $0.01543 per share for shareholders of record as of March 14, 2004. Distribution was completed the week of March 16, 2004.
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.
Management's Discussion and Analysis of Results of Operations.
General
The following information should be read in conjunction with the Consolidated Audited Financial Statements and Notes thereto and other information set forth in this report.
Forward-Looking Statements
Statements contained in this Form 10-K that are not historical fact are "forward looking statements". These statements can often be identified by the use of forward-looking terminology such as "estimate", "project", "believe", "expect", "may", "will", "should", "intends", or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. We wish to caution the reader that these forward-looking statements, such as statements relating to timing, costs and of the acquisition of, or investments in, existing business, the revenue or profitability levels of such businesses, and other matters contained in this Form 10-K regarding matters that are not historical facts, are only predictions.
No assurance can be given that plans for the future will be consummated or that the future results indicated, whether expressed or implied, will be achieved. While sometimes presented with numerical specificity, these plans and projections and other forward-looking statements are based upon a variety of assumptions, which we consider reasonable, but which nevertheless may not be realized. Because of the number and range of the assumptions underlying our projections and forward-looking statements, many of which are subject to significant uncertainties and contingencies that are beyond our reasonable control, some of the assumptions inevitably will not materialize, and unanticipated events and circumstances may occur subsequent to the date of this Form 10-KSB. Therefore, our actual experience and results achieved during the period covered by any particular projections or forward-looking statements may differ substantially from those projected.
Consequently, the inclusion of projections and other forward-looking statements should not be regarded as a representation by us or any other person that these plans will be consummated or that estimates and projections will be realized, and actual results may vary materially. There can be no assurance that any of these expectations will be realized or that any of the forward-looking statements contained herein will prove to be accurate. The Company does not undertake any obligation to update or revise any forward-looking statement made by it or on its behalf, whether as a result of new information, future events or otherwise.
Overview
We were incorporated in Nevada in 1982 as a for-profit corporation. We have never experienced any bankruptcy or similar proceeding. We have never by a party to a "reverse merger" or similar transaction. We have engaged in business categorically similar to our present line of business since inception.
We are engaged in aiding both private and public companies in the areas of business development, financing, product development, corporate strategy, corporate image and public relations, product distribution and marketing, and executive management consulting. We collectively refer to companies in which we own an equity position, our majority owned subsidiaries, corporate customers and clients as "portfolio companies". We charge for our services in cash or equity in the portfolio company. We may also exchange our services for revenue sharing of future sales of products or sharing of proceeds from the sale of licenses and technologies owned by our portfolio companies. We seek to grow through strategic acquisitions in addition to generating income from our services.
We seek to build revenues by a model continuous growth, strategic acquisitions, and commercialization of nascent technology. We seek to improve operating efficiencies among our portfolio companies through elimination of cost redundancies and realized synergy between subsidiaries. We also seek to commercialize new technology and provides to our portfolio companies and subsidiaries new product lines, operations infrastructure, and significant intellectual capital.
Our sources of revenue are primarily from:
* Consolidated revenues of our portfolio companies which we own in majority;
* Management and consulting fees we may charge our portfolio companies;
* Revenue sharing agreements we may have with our portfolio companies;
* Royalty and licensing proceeds from the sale of technology rights we may own in whole or in part with our portfolio companies;
* Proceeds from the sale of securities we may own in our portfolio companies;
* Proceeds from the interest and payment of debt we may hold in our portfolio companies; and
* Proceeds from the conversion of debt we may hold in our portfolio companies into marketable securities and subsequent sale of same.
In March 2004 and as part of our plan of reorganization and ongoing plan for operations we applied for listing of our Common Stock on the Over-The-Counter-Bulletin Board. We received approval on July 19th, 2004 and trade under the symbol MOTG.
On July 31, 2004 as part of our plan of reorganization and ongoing plan for operations we effected a Reverse Split of the Company's Common Stock on a 1 for 15 Basis.
Results of Operations
During the fiscal year ended June 30, 2005, the Registrant incurred a net loss of $1,123,816, compared to a net loss of $118,296 for the fiscal year ended June 30, 2004. Its revenues for the year ended June 30, 2005 were $3,078,145. These revenues include only the revenues from the date of acquisition of Sound City. For the fiscal year ended June 30, 2004, the Registrant's expenses consisted of officers' salaries, general and administrative expenses, the principal items consisting of legal and accounting fees, telephone and insurance expenses, a realized gain of $41,714 related to sales of securities which consisted primarily of MediCor, Ltd securities (See Note 4 to the Financial Statements), an unrealized loss from the decline in stock price of our remaining marketable securities of $33,922, a $7,830 Loss on Writedown of Investment and a $19,307 Loss on Writedown of Worthless Loan with an overall loss of $24,817 related to the Registrant's decision to discontinue the operations of its Pharmavet subsidiary. For the fiscal year ended June 30, 2005, the Registrant had general and administrative expenses of $895,903, officer salaries of $91,100 and cost of sales of $2,261,212.
In comparing fiscal year expense items for fiscal year 2005 with fiscal year 2004 items, the Registrant experienced increases in both operating and in officer's salaries from $24,364 in 2004 to $91,100 in 2005 and an increase in general and administrative expenses from $50,940 in 2004 to $895,903 in 2005. The reason for the change was an increase of business activity for the period, due primarily to the acquisition of Sound City.
During the fiscal year ended June 30, 2005, the Registrant had generated a net loss of $1,123,816 compared to a net loss of $118,296 for the fiscal year ending June 30, 2004. The increase in net loss is attributable to the expenses associated with acquisitions and related costs.
During the fiscal year, income tax expenses amounted to $0.
Liquidity and Capital Resources
At June 30, 2005, the Registrant's total assets amounted to $6,861,170 as compared with $31,827 at June 30, 2004. The change can be attributable to the acquisition of Sound City and related operations. During the fiscal year ended June 30, 2005, we have experienced negative cash flows and have relied primarily on the Registrant's cash balances to fund our operations. We are not currently bound by any long or short-term agreements for the purchase or lease of capital expenditures.
Our ability to continue in existence is dependent on our having sufficient financial resources to cover operating expenses. We believe we have enough cash and equivalents to cover operations for the next twelve month period. In addition, our auditors included language which qualified their report regarding our ability to continue as a going concern in their report dated October 18, 2005.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions and estimates that affect the amounts reported. Note 2 of Notes to the Consolidated
Financial Statements describes the significant accounting policies used in the preparation of the consolidated financial statements. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.
A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: 1) we are
required to make assumptions about matters that are highly uncertain at the time of the estimate; and 2) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of
operations.
Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. In addition, our Management is periodically faced with uncertainties, the outcomes of which are not within our control and will not be known for prolonged periods of time.
Based on a critical assessment of its accounting policies and the underlying judgments and uncertainties affecting the application of those policies, our Management believes that our consolidated financial statements are fairly stated in accordance with accounting principles
generally accepted in the United States (GAAP), and present a meaningful presentation of our financial condition and results of operations.
Our Management believes that the following are our critical accounting policies:
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.
Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
Modern Technology Corp.
Oxford, MS
We have audited the accompanying consolidated balance sheet of Modern Technology Corp. and subsidiaries (collectively the "Company") as of June 30, 2005 and the related consolidated statements of operations, changes in shareholders' equity and cash flows for each of the two years in the period ended June 30, 2005. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis of designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion of the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements presented above present fairly, in all material respects, the financial position of Modern Technology Corp. at June 30, 2005, and the results of its operations and cash flows for each of the two years then ended in conformity with U.S. generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 11 to the consolidated financial statements, the Company has incurred losses and negative cash flows from operations in recent years through June 30, 2005 and these conditions are expected to continue through June 30, 2006, raising substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 11. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
GREENBERG & COMPANY LLC
Springfield, New Jersey
October 18, 2005
See accompanying summary of accounting policies and notes to financial statements.
MODERN TECHNOLOGY CORP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005
NOTE 1: ORGANIZATION AND NATURE OF OPERATIONS
Modern Technology Corp (Modern) is a Nevada Corporation.
We are engaged in aiding both private and public companies in the areas of business development, financing, product development, corporate strategy, corporate image and public relations, product distribution and marketing, and executive management consulting. We collectively refer to companies in which we own an equity position, our majority owned subsidiaries, corporate customers and clients as "portfolio companies". We charge for our services in cash or equity in the portfolio company. We may also exchange our services for revenue sharing of future sales of products or sharing of proceeds from the sale of licenses and technologies owned by our portfolio companies. We seek to grow through strategic acquisitions in addition to generating income from our services.
We seek to build revenues by a model continuous growth, strategic acquisitions, and commercialization of nascent technology. We seek to improve operating efficiencies among our portfolio companies through elimination of cost redundancies and realized synergy between subsidiaries. We also seek to commercialize new technology and provide to our portfolio companies and subsidiaries new product lines, operations infrastructure, and significant intellectual capital.
Modern's office was located in New York, but has been relocated to Mississippi, with its administrative offices being located in Jackson, Mississippi.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING POLICIES
Modern Technology Corp's accounting policies conform to U. S. generally accepted accounting principles. Significant policies followed are described below.
The consolidated financial statements include the accounts of the company and all of its subsidiaries in which a controlling interest is maintained. All inter-company accounts and transactions have been eliminated. The consolidated financial statements have been prepared in United States Dollars.
On January 24, 2005, the Company purchased 51% of Sound City for $2,000,000 with an option to acquire the remaining 49%. The option is valid through December 31, 2009, and can be exercised for $3,500,000, which is payable in cash, stock or a combination of cash or stock. During the year ending June 30, 2005, the Company has filed current reports on Form 8-K, containing additional pro forma, historical financials and other exhibits.
The financial statements reflect various purchase price allocations. In accordance with SFAS No. 141, Business Combinations ("SFAS No. 141"), the total purchase price was allocated to the tangible and intangible assets of Sound City based upon their estimated fair values at the acquisition date with the excess purchase price allocated to goodwill. The purchase accounting adjustments made are based upon currently available information. Accordingly, the actual adjustment recorded in connection with the final purchase price allocation may be updated according to SFAS No. 141, and any such changes may be material.
Sound City accounts were properly included in the consolidated financial statements for the year ended June 30, 2005.
STOCK BASED COMPENSATION
The Company has adopted the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." In accordance with SFAS No. 123, MediCor has elected the disclosure-only provisions related to employee stock options and follows the intrinsic value method in Accounting Principals Board Opinion (APB) No. 25 in accounting for stock options issued to employees. Under APB No. 25, compensation expense, if any, is recognized as the difference between the exercise price and the fair value of the common stock on the measurement date, which is typically the date of grant, and is recognized over the service period, which is typically the vesting period.
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.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation of property and equipment is provided using straight-line and accelerated methods. The estimated useful lives are as follows:
Years
Furniture, fixtures and equipment 5 - 7
Transportation equipment 5
Leasehold improvements 31.5
Expenditures for major renewals and betterment that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.
Depreciation on expense was $11,795 and $3,156 for 2005 and 2004, respectively.
ESTIMATES IN FINANCIAL STATEMENTS
The preparation of financial statements in conformity with U. S. generally accepted accounting principals 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 may 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.
IMPACT OF NEW ACCOUNTING STANDARDS
In December 2003, the FASB issued Interpretation No. 46R, "Consolidation of Variable Interest Entities" (revised December 2003) - an interpretation of ARB No. 51. A variable interest entity ("VIE") is one where the contractual or ownership interest in an entity change with changes in the entity's net asset value. This interpretation requires the consolidation of a VIE by the primary beneficiary, and also requires disclosure about VIEs where an enterprise has a significant variable interest but is not the primary beneficiary. Sound City leases a facility from a Limited Liability Company ("LCC") owned by the minority shareholders. Under FIN 46R, the LLC is a VIE and the Company has consolidated the LLC in its consolidated financial statements. The consolidated of this VIE has added $616,049 of assets and $411,404 of liabilities to our consolidated balance sheet as of June 30, 2005.
In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS 149 establishes accounting and reporting standards for derivative instruments and for hedging activities. This statement is effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS No. 149 did not have a material effect on the Company's financial position or results from operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS 150 changes the accounting for certain financial instruments that, under previous guidance, were accounted for as equity. This statement is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after September 15, 2003. The adoption of SFAS No. 150 did not have a material effect on the Company's financial position or results from operations.
In December 2003, the SEC issued Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition," which codifies, revises, and rescinds certain sections of SAB No. 101, "Revenue Recognition," in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The changes in SAB No. 104 did not have a material impact on the Company's financial position or results of operations.
On March 31, 2004, the FASB issued an exposure draft, "Share-Based Payment, an Amendment of SFAS No. 123 and 95." The exposure draft proposes to expense the fair value of share-based payments to employees beginning in 2005. We are currently evaluating the impact of this proposed standard on our financial statements.
REVENUE RECOGNITION
The Company generally recognizes revenue upon shipment when the collect-ability of the resulting receivable is reasonably assured. The Company allows credit for products returned within its policy terms. Such returns are estimated and an allowance for product returns is recorded at the time of sale, as necessary.
IMPAIRMENT OF LONG-LIVED ASSETS
The company regularly reviews long-lived assets for indicators of impairment. Management's judgments regarding the existence of impairment indicators are based on performance. Future events could cause management to conclude that impairment indicators exist and that the value of long-lived assets is impaired. When events or circumstances indicate that the carrying amount of an asset may not be recoverable, the fair value of the asset is compared to its carrying value. Impairment losses are measured as the amount by which the carrying value of an asset exceeds its estimated fair value.
ADVERTISING
Advertising costs are expensed as incurred. Advertising expense for the twelve months ended June 30, 2005 was $25,872.00.
SHIPPING AND HANDLING COSTS
Amounts billed to customers for shipping costs resulting from a sales transaction are included in Revenues while costs incurred by the Company for shipping and handling are included in cost of goods sold.
NOTE 3: CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash.
NOTE 4: MARKETABLE SECURITIES
During the year ended June 30, 2003, the investment in 117,250 shares of common stock of MediCor Ltd. was considered a trading security in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities ("SFAS No. 115")" MediCor Ltd. shares are traded on the NASD over-the-counter bulletin board system. The cost of these shares is $82,520. The Company sold all the shares of MediCor Ltd. As of March 31, 2004, the Company recognized $41,714 realized gain. As of March 31, 2004, the Company had liquidated all of its marketable securities or written off all securities deemed worthless. During May 2004, Mr. Welch, CEO and President, contributed $57,677 of marketable securities investment pursuant to Modern's plan for reorganization.
On January 24, 2005, the Company entered into a Purchase Agreement whereby we purchased a $1,500,000 DeMarco Convertible Debenture. The Company follows SFAS No. 115 and has considered these securities to be trading securities.
NOTE 5: INVESTMENT EQUITY SECURITIES (AT COST)
As of June 30, 2004, the Company wrote off $1,431 of Daine Common Stock investment of 360,000 restricted shares to realized loss when Daine declared bankruptcy. As of June 30, 2004, all shares of Pharmavet were returned and cancelled. The costs of these shares ($5,000) were credited against Deferred Registration costs. The Company has established a valuation allowance of $100,000 against its investment in Interactive Medicine Inc. to reflect the uncertainty of the fair market value of the investment. The net investment value in Interactive Medicine Inc. is zero as of June 30, 2005.
NOTE 6: STOCK BASED COMPENSATION
During the 12 months ended June 30, 2005, the Company issued 2,067,000 shares of Modern Technology Corp. Common Stock for legal and consulting services rendered or to be rendered in the coming year. $355,957 was charged to Deferred Compensation relating to these shares. The amount expensed in the year ending June 30, 2005 was $91,473 consisting of $63,023 for the current period and $28,750 for obligations for the year ending June 30, 2004. During the twelve months ended June 30, 2005, the Company issued 13,000,000 shares of Common Stock to Anthony Welch pursuant to the Reorganization Agreement. The compensation portion of this agreement was valued at $1,300 and charged to expense. This stock based compensation is accounted for in accordance with SFAS No. 123.
NOTE 7: INCOME TAX EXPENSE (BENEFIT)
The provision for income taxes is comprised of the following:
06/30/05 06/30/04
Current $-0- $-0-
Deferred -0- -0-
$-0- $-0-
The provision for income taxes differs form the amount computed by applying the statutory federal income rate as follows:
06/30/05 06/30/04
Expected statutory amount $ -0- $ -0-
Net operating loss -0- -0-
State income taxes, net
Of federal benefit -0- -0-
$ -0- $ -0-
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities or financial reporting purposes and amounts used for income tax purposes and the impact of available net operating loss carryforwards.
The tax effects of significant temporary differences, which comprise the deferred tax assets, are as follows:
06/30/05 06/30/04
Deferred tax assets:
Net operating loss
Carryforwards $293,231 $129,070
Gross deferred tax assets 293,231 129,070
Valuation allowance (293,231) (129,070)
Net deferred tax assets $----0---- $----0----
The net operating loss of approximately $1,155,000 begins to expire in the year ended June 30, 2024. The tax benefits have been fully reserved due to a lack of consistent operating profitability.
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
Robert Church, our CFO, is also a Partner of Church, DeVoe & Associates to which we expensed $34,501 in accounting fees during the twelve months ended June 30, 2005.
Our principal office at 1420 N. Lamar Blvd., Oxford, Mississippi 38655 is provided to us at no charge by Mr. Church, our CFO and Director. We lease 1,500 square feet of executive and administrative offices at 1237 State Rd 30 E, Oxford MS 38655, for $850 per month from Mr. Welch, our CEO.
On January 24, 2005, we utilized $1.5 million of financing we received from four institutional investors to purchase a $1.5 million convertible debenture in DeMarco Energy Systems of America, Inc. Anthony K. Welch, our Chief Executive Officer and majority shareholder, is the Chief Executive Officer and Chairman of the Board of Directors of DeMarco Energy Systems.
Sound City leases a facility from its shareholders. The lease expires June 30, 2014. Sound City is responsible for taxes and other expenses on an annual basis.
Rent expense under this related party lease for the twelve months ended June 30, 2005 totaled $24,000.
Future minimum annual rent is as follows:
2006 192,000
2007 197,760
2008 203,693
2009 209,804
Thereafter 1,147,292
$ 1,950,549
At June 30, 2005, Sound City had a Demand Promissory Note (the "Note") payable to its shareholders in the amount of $1,126,798. The note is unsecured, subordinated, non-interest bearing and is payable upon demand. Sound City also had loans payable to related parties in the amount of $91,314. These loans are unsecured, subordinated, non-interest bearing and are payable demand. The loans payable to related parties are classified as non-current in the Balance Sheet at June 30, 2005, because repayment is not anticipated during the next year.
In the normal course of business, Sound City purchases from and sells to Sammans Electronics Inc (Sammans). Sammans is owned by a relative of Sound City's shareholders. For the six months ended June 30, 2005 (date of acquisition through the year ended June 30, 2005), purchases from Sammans totaled $5,370. and sales to Sammans totaled $17,365.
Pursuant to the stock sale agreement dated January 24, 2005, Sound City entered into an employment agreement with Kamel Yassin, President and Shareholder of Sound City, for a $200,000 annual salary for a five-year term.
NOTE 10: LETTER OF AGREEMENT
On March 10, 2004, prior management through its desire and plan to provide continuing value and future growth to shareholders executed a plan of reorganization. The Company entered into a Letter of Agreement with current President and CEO, Anthony Welch, wherein the Company's plans for reorganization and ongoing plans for operations would be realized through the subsequent actions of new management. The terms of this Agreement provided for the appointment of a new Board of Directors, marketable securities to be deposited in the Company's brokerage account, a Reverse split of the Company's Common Stock, an application for OTCBB listing, issuance of shares to Mr. Welch, and ongoing acquisitions and business development to pursue growth.
NOTE 11: OPERATIONS AND LIQUIDITY
The Company has incurred substantial losses in 2005 and 2004. Until such time that the Company's products and services can be successfully marketed the Company will continue to need to fulfill working capital requirements through the sale of stock and/or the issuance of debt. The inability of the Company to continue its operations as a going concern would impact the recoverability and classification of recorded asset amounts.
The ability of the company to continue in existence is dependent on its having sufficient financial resources to bring products and services to market for marketplace acceptance. As a result of its significant losses, negative cash flows from operations, and accumulated deficits for the periods ending June 30, 2005, there is doubt about the Company's ability to continue as a going concern.
Management believes that its current available working capital, anticipated revenues, further planned reductions in operating expenses, and subsequent sales of stock and/or placement of debt instruments will be sufficient to meet its projected expenditures for a period of at least twelve months from June 30, 2005.
NOTE 12: SUBSEQUENT EVENTS
H-NET Acquisition
On July 10, 2005, Modern Technology Corp. ("MOTG") entered into an Asset Purchase Agreement ("Agreement") with Anton Stephens, Dba H-NET ("Hnet"). No material relationship exists between the parties, other than in respect of the Agreement. Under the terms of the Agreement, MOTG agreed to purchase all of the rights, title and interest in, to certain assets owned by Hnet. In exchange for assets delineated under the Agreement, Hnet will receive $500,000 payable in the form of 350,000 shares of MOTG restricted common stock and a Convertible Debenture in the amount of $400,000 payable to Anton Stephens. This transaction was filed under a From 8-K on August 2, 2005 and is hereby incorporated by reference.
InMarketing Acquisition
On August 10, 2005 we entered into a Letter of Intent to acquire 51% of InMarketing Group for an aggregate price of $2,000,000 under a Stock Purchase Agreement. No material relationship exists between the parties, other than in respect of the Agreement. The Purchase Price to be paid as follows: $1,000,000 to be paid in cash and $1,000,000 to be paid in the form of a Convertible Debenture. The purchase price will be adjusted on reasonable terms specified in the Definitive Agreement pursuant to a pro rata adjustment predicated on a profitable $11,000,000 in revenues for 2005 generated by the InMarketing subsidiary. We will have an option to purchase the remaining 49% of InMarketing as part of the agreement. This transaction is under final closing as of this filing.
Capital Raise
On August 31, 2005, the Company, pursuant to a Securities Purchase Agreement of the same date, entered into Callable Secured Convertible Notes. Under the terms of the notes, the Company borrowed an aggregate of $1,500,000.00 from the Holders of the Notes. The Notes each bear a Maturity Date of August 31, 2008, with interest accruing on any unpaid principal at 9% per annum from the date the Notes were issued, until due and payable on the Maturity Date. Any unpaid amounts after that date bear an interest of 15% per annum. Interest is payable quarterly and shall commence at September 30, 2005. Holder has the right to convert any amounts due to Common Stock, at its discretion, at the conversion price, as set forth under the terms of the Notes. This transaction was filed under a Form 8-K on September 19, 2005 and is hereby incorporated by reference.
NOTE 13: COMMON STOCK AND PREFERRED STOCK
Common Stock
March 2004 as part of our plan of reorganization and ongoing plan for operations we applied for listing of our Common Stock on the Over-The-Counter-Bulletin Board. We received approval on July 19, 2004 and trade under the symbol MOTG.
On July 31, 2004 as part of our plan of reorganization and ongoing plan for operations we effected a Reverse Split of the Company's Common Stock on a 1 for 15 Basis. These financial statements retroactively reflect the change to the Company's common stock as a result of the reverse split.
On August 17, 2004, 13 million shares were issued to Anthony Welch and he became a 90.6% shareholder.
Preferred Stock
We are authorized to issue up to 20,000,000 shares of Preferred Stock, par value $.0001. As of June 30, 2005, there were 1,500 shares of preferred stock issued and outstanding.
SERIES A CONVERTIBLE PREFERRED STOCK
To obtain funding for our ongoing operations, we entered into a Securities Purchase Agreement with four accredited investors on January 24, 2005 for the sale of (i) $2,000,000 in secured convertible notes; (ii) 1,500 shares of series A convertible preferred stock at $1,000 per share and (iii) warrants to buy 3,000,000 shares of our common stock. Each share of series A convertible preferred stock is convertible into $1,000 of our common stock, at 85% of the average of the three lowest intraday trading prices for the common stock on a principal market for the 20 trading days before but not including the conversion date.
The holders of the series A preferred stock are entitled to receive, when, if and as declared by the Board of Directors, cumulative dividends in the amount of six percent (6%) per annum, payable quarterly in arrears. We are obligated to repurchase the shares of series A convertible preferred stock at 130% of the stated value, plus accrued but unpaid dividends, upon written notice from the holders of a majority of the series A convertible preferred stock upon the occurrence of any of the following events of default: our failure to issue shares of common stock upon conversion by the holder, our failure to timely file a registration statement or have such registration statement declared effective, the assignment or appointment of a receiver to control a substantial part of our property or business, the commencement of a bankruptcy, insolvency, reorganization or liquidation proceeding against our company or the delisting of our common stock, if the default is not cured with the specified grace period.
All shares of series A convertible preferred stock issued and outstanding on January 24, 2008 shall automatically convert into shares of our common stock in accordance with the conversion price calculation.
NOTE 14: LONG-TERM DEBT
Long-term debt consists of the following: June 30, 2005
Note payable to Kamel Yassin in the
Original amount of $400,000 bearing
Interest at a rate of 5% per annum will
Be due and payable on December 31,
2006. $ 400,000
Note payable to Mervet Yassin in the
Original amount of $400,000 bearing
Interest at a rate of 5% per annum will
Be due and payable on December 31,
2006. 400,000
Note payable to Valley National Bank
in the original amount of $300,000,
payable in monthly installments of
$5,742.46 including interest at 5.5%.
The loan is secured by the personal
Guarantee of the shareholders and a
mortgage on property owned by the
shareholders. The note will be fully
paid May, 2008. 186,078
Note payable to BMW Financial in the
original amount of $20,741, payable
in monthly installments of $419.53
Including interest at 3.9%. The loan is
secured by transportation equipment. The
note will be fully paid May, 2008. 13,850
999,928
Less: current portion 65,362
$ 950,528
NOTE 15: INVENTORY LINE OF CREDIT
As of March 31, 2005, Sound City had a $750,000 Inventory Security Agreement with GE Capital. Under the Agreement the Company may apply to GE Capital for an extension of credit to purchase inventory. Advances are repaid without interest 90 days after the Company receives the funds. Late payments are subject to finance charges. GE Capital has a security interest in all Company assets. The amount due as of June 30, 2005 was $177,856 and is included in accounts payable.
As of May 2, 2005 this line of credit has been reduced to $200,000.
NOTE 16: SECURITIES PURCHASE AGREEMENT
On January 24, 2005, the Company entered into a Securities Purchase Agreement with AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners II, LLC for the sale of (i) $2,000,000 in secured convertible notes and (ii) warrants to purchase 3,000,000 shares of our common stock and (iii) entered into a Purchase Agreement whereby we purchased a $1,500,000 DeMarco Convertible Debenture in exchange for 1,500 shares of our Series A Convertible Preferred Stock.
The secured convertible notes bear interest at 8%, mature two years from the date of issuance, and are convertible into Modern common stock, at the investors' option, at the lower of $0.44 or 40% of the average of the three lowest intraday trading prices for the common stock on the Over-The-Counter Bulletin Board for the 20 trading days before but not including the conversion date. The secured convertible notes are secured by the personal guarantee of the shareholder with a collateral of 5.5 million shares of Modern Technology common stock.
The warrants are exercisable until five years from the date of issuance at a purchase price of $0.40 per share. The investors may exercise the warrants on a cashless basis if the shares of common stock underlying the warrants are not then registered pursuant to an effective registration statement. The fair market value of the warrants on the date of issuance was determined to be $330,000 and is recorded in the consolidated financial statements as a discount on the convertible notes. The discount will be amortized over the two-year life of the secured convertible notes.
The DeMarco convertible debenture is fully matured and bears interest at a rate of 10% per annum with interest payments due quarterly. Modern has the option to convert any unpaid principal into shares of DeMarco common stock at any time after the original issue date.
NOTE 17: STOCK PURCHASE AGREEMENT
On January 24, 2005, the Company entered into a Stock Purchase Agreement with Sound City, Inc. The agreement is to purchase 51% of the issued and outstanding shares of common stock of Sound City, Inc. for an aggregate purchase price of $2,000,000 and to provide $700,000 in funding to Sound City, Inc. As part of the agreement, the Company also issued promissory notes in the amounts of $400,000 each to Kamel Yassin, President of Sound City and Mervet Yassin, CFO of Sound City. The promissory notes bear interest from the date of issuance at the rate of 5% per annum simple interest. Interest accrued to June 30, 2005 will be payable in full on June 30, 2005. Thereafter, interest accrued on the unpaid principal during the calendar quarter will be payable quarterly on the last day of each calendar quarter during the term of the note, with the first such quarterly interest payment being payable on September 30, 2005. The principal and accrued interest will be due and payable on December 31, 2006.
NOTE 18: EARNINGS PER SHARE
A reconciliation of weighted average shares outstanding, used to calculate basic loss per share, to weighted average shares outstanding assuming dilution, used to calculate diluted loss per share, follows:
9,085,193 and 0 common equivalent shares have been excluded from the computation of diluted earnings per share because their effect would be anti-dilutive.
NOTE 19: COMMITMENTS AND CONTINGENCIES
Sound City guarantees the mortgage debt of Yassin & Company, LLC, a real estate holding company owned by the stockholders. The amount of outstanding mortgage debt at June 30, 2005 was $411,404.
In addition, Sound City also guarantees the mortgage debt of Kamel Yassin, President and Shareholder of Sound City, and Mervet Yassin, CFO and Shareholder of Sound City, on commercial property owned by them. The amount of outstanding mortgage at June 30, 2005 was $354,470.
NOTE 20: ACQUISITIONS
Sound City
On January 24, 2005, the Company purchased 51% of Sound City for $2,000,000 with an option to acquire the remaining 49%. The option is valid through December 31, 2009, and can be exercised for $3,500,000, which is payable in cash, stock or a combination of cash or stock. During the quarter ending March 31, 2005, the Company has filed a current report on Form 8-K, containing additional pro forma, historical financials and other exhibits.
The financial statements reflect various purchase price allocations. In accordance with SFAS No. 141, Business Combinations ("SFAS No. 141"), the total purchase price was allocated to the tangible and intangible assets of Sound City based upon their estimated fair values at the acquisition date with the excess purchase price allocated to goodwill. The purchase accounting adjustments made are based upon currently available information. Accordingly, the actual adjustment recorded in connection with the final purchase price allocation may be updated according to SFAS No. 141, and any such changes may be material.
The following table summarizes the components of the total purchase price and the allocation as of the date of acquisition:
In accordance with SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"), goodwill will not be amortized and will be tested for impairment at least annually. The amounts contained in the purchase price allocation may change as additional information becomes available regarding the assets and liabilities acquired. Any change in the fair value of the net assets will change the amount of the purchase price allocable to goodwill.
The following adjustments have been reflected in the balance sheet.
(a) To reflect goodwill.
The following unaudited pro-forma financial information reflects the condensed consolidated results of operations of the Company as if the acquisition had taken place on July 1, 2003. The pro-forma financial information is not necessarily indicative of the results of operations had the transaction been effected on July 1, 2003.
For the Twelve Months Ended
June 30
2005
2004
Net sales $
12,242,487 $
8,072,776
Net income (loss)
(951,278 )
(277,750 ) Diluted (loss) earnings per common share
(0.04 )
(0.21 )
NOTE 21: CONVERTIBLE NOTES PAYABLE
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Controls and Procedures
Based on their evaluation as of a date within 90 days of the filing date of this Annual Report on Form 10-KSB, the Company's principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the Exchange Act) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation and up to the filing date of this Annual Report on Form 10-KSB. There were no significant deficiencies or material weaknesses, and therefore there were no corrective actions taken. It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Part III
Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
The executive officers and directors of the Registrant are as follows: Name Age Title Term Expires Anthony Welch 37 President, CEO and Director Next Annual Meeting Robert Church 45 CFO and Director Next Annual Meeting
Anthony Welch and Robert Church were elected to their designated offices on March 15, 2004.
ANTHONY K. WELCH.
Mr. Welch has been our Chief Executive Officer and Chairman since March 15, 2004. From October 1999 to October 2003, Mr. Welch was the founder of, and served as Director and Executive Vice President and consultant to IPVoice Communications, Inc. (currently called NewMarket Technology, Inc. and trading on the OTCBB under the symbol "NMKT"). From April 2002 to April 2004, Mr. Welch through his professional advisory firm, Maxim Advisors, LLC and in a personal capacity, advised various corporate and private clients on mergers, acquisitions, public listing processes, financing, and strategic consulting. Mr. Welch attended the University of Mississippi school of Electrical Engineering from 1986 to 1988. He holds a NASD Series 65 License [Uniform Investment Advisor Law]. Mr. Welch is completing his second-year as a law student in the Juris Doctor program at Concord School of Law.
Robert Church
Prior five years of professional activities: Owner/Partner of Church-Devoe, PLLC, a professional accountancy firm.
Mr. Church hold a BBA in Accountancy from the University of Mississippi received in 1980.
He holds the following certifications:
Certified Public Accountant (Texas and Mississippi) (CPA)
Certified Financial Planner (CFP)
Personal Financial Specialist (AICPA)
Qualified Financial Planner (IAQFP)
Certified Fraud Examiner (CFE)
Certified Divorce Planner (CDP)
Certified Divorce Specialist (CDS)
Certified Divorce Financial Analyst (CDFA)
Certified Valuation Analyst (CVA)
Chartered Business Administrator (CBA)
Certified Financial Consultant (CFC)
Chartered Trust and Estate Planner (CTEP)
Chartered Financial Management Analyst (CFMA)
Certified HealthCare Business Consultant (CHBC)
Certified Healthcare Consultant (CHC)
Diplomate American College of Forensic Examiners (DABFE)
Diplomate American College of Forensic Accountants (DABFA)
National Association of Certified Valuation Analysts
Association of Certified Fraud Examiners
Institute of Financial Consultants
American Academy of Financial Management
Institute of Certified Professional Business Consultants
American Association of Healthcare Consultants
College of Divorce Specialists
Institute of Certified Healthcare Business Consultants
MENSA
Institute of Certified Divorce Planners
Financial Divorce Association
Code of Ethics: At this time, the Company has not adopted a Code of Ethics.
Executive Compensation
During the fiscal year ended June 30, 2005, management salaries were as follows:
Anthony K. Welch $91,100
Rob Church $0
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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 Amount & Nature of Percentage Owner Beneficial Ownership of Class Anthony Welch 1420 N. Lamar Blvd Oxford, MS 38655 13,000,000 75.8%
All Officers and Directors as a Group (3) 13,000,000 75.8%
b. The shares owned by management are as follows:
Common Stock. Name of Beneficial Amount & Nature of Percentage Owner Beneficial Ownership of Class Anthony Welch 1420 N. Lamar Blvd Oxford, MS38655 13,000,000 90.6%
Robert Church 1420 N. Lamar Blvd Oxford, MS 38655 0 0%
Certain Relationships and Related Transactions
Robert Church, our CFO, is also a Partner of Church, DeVoe & Associates to which we expensed $34,501 in accounting fees during the twelve months ended June 30, 2005.
Our principal office at 1420 N. Lamar Blvd., Oxford, Mississippi 38655 is provided to us at no charge by Mr. Church, our CFO and Director. We lease 1,500 square feet of executive and administrative offices at 1237 State Rd 30 E, Oxford MS 38655, for $850 per month from Mr. Welch, our CEO.
On January 24, 2005, we utilized $1.5 million of financing we received from four institutional investors to purchase a $1.5 million convertible debenture in DeMarco Energy Systems of America, Inc. Anthony K. Welch, our Chief Executive Officer and majority shareholder, is the Chief Executive Officer and Chairman of the Board of Directors of DeMarco Energy Systems.
We have no policy regarding entering into transactions with affiliated parties.
Exhibits and Reports on Form 8-K
Exhibits Exhibit No. Document Location Exhibit 31.1 Section 302 of the Sarbanes-Oxley Act of 2002 Certification of Anthony Welch, CEO. Included Exhibit 31.2 Section 302 of the Sarbanes-Oxley Act of 2002 Certification of Robert Church. Included Exhibit 32.1 Section 906 of the Sarbanes-Oxley Act of 2002 Certification of Anthony Welch, CEO Included Exhibit 32.2 Section 906 of the Sarbanes-Oxley Act of 2002 Certification of Robert Church, CFO Included
Reports on Form 8-K: The following reports were filed on Form 8-K during the last quarter of the fiscal year ended June 30, 2005:
Current Report filed April 11, 2005, Item 9.01
Principal Accountant Fees and Services
Audit Fees: $27,987.00
Audit-Related Fees: $4,000.00
Tax Fees: $4,500.00
All Other Fees: $0.00
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MODERN TECHNOLOGY CORP
/s/ Anthony Welch
Anthony Welch, CEO, Chairman
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Anthony Welch
Anthony Welch, President, CEO, Chairman
Dated: November 9, 2005
/s/ Robert Church
Robert Church, CFO, Director
Dated November 9, 2005
-------------------- All men's gains are the fruit of venturing.
~Herodotus Posts: 339 | From: Southern California | Registered: Aug 2005
| IP: Logged |
quote:Originally posted by MB: Ok, I am here and happy...where is that Gapper thread..we are definitely moving north...
I already put MOTG in it, lol. Questions are, how fast will this soar?, how high will it go?, and when to take the profits?
Posts: 725 | From: litte rock AR | Registered: Oct 2005
| IP: Logged |
posted
Here's some "HOLY CRAP!" highlights for your viewing puh-leasyuhhh:
"The company exceeded its 2004 projections for year-end assets of $4,000,000 and revenues of $10,000,000."
"It must be noted that we have transactions under consideration may propel the company beyond $50,000,000 for 2005."
"The company intends to list on a national exchange. The company anticipates listing its stock on a national exchange concurrently with meeting the qualification criteria or through a strategic acquisition of a qualifying company. The company expects to meet this goal within the next 12 months, or sooner."
"The company intends to pay dividends as appropriate and as part of its anticipated subsidiary spin-off strategy. As the company's subsidiaries mature and grow, a public spin-off transaction will be considered. Each stockholder in MOTG would receive stock in the new public spin-off company in addition to stock they already own in MOTG."
The point is guys... we've got some nice runs and some nasty manipulations by the MMs coming up. Hold your course. Resist the temptation of cashing out with some meager profits when it's obvious that this company has got it together... so this is a long term investment. I know that's not a normal thing to say with pennies, but I believe this may be our next mover to Nasdaq.
Woo hoooo!!!!!
-------------------- Life is like a roll of toilet paper. The closer it gets to the end, the faster it goes.
posted
Dammit, Warped, I'm not liking the mental picture of you singing 'Boom shakka lakka'! Especially now that I keep saying it in my head too!
-------------------- I have taken a vow of poverty, so if you want to irritate me, send money. Posts: 1032 | From: DFW | Registered: Oct 2005
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Why do I get different information when I look at MOTG vs what I'm used to seeing with MOTGE? I thought they were the same.
Posts: 209 | Registered: Sep 2005
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The 'E' is put on when a company is late filing. Same company, just the e notifying everyone that they're late. You currently will not find any info under 'MOTG', only 'MOTGE'. Probably Monday it will be back to MOTG.
-------------------- I have taken a vow of poverty, so if you want to irritate me, send money. Posts: 1032 | From: DFW | Registered: Oct 2005
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-------------------- I have taken a vow of poverty, so if you want to irritate me, send money. Posts: 1032 | From: DFW | Registered: Oct 2005
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-------------------- I have taken a vow of poverty, so if you want to irritate me, send money. Posts: 1032 | From: DFW | Registered: Oct 2005
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posted
Ohhh, I think you've got one too many 0's in front of the whole number.
-------------------- I have taken a vow of poverty, so if you want to irritate me, send money. Posts: 1032 | From: DFW | Registered: Oct 2005
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posted
I was thinking of setting .20 in case I cant watch it tomorrow, but I dont want to miss out on alot more if it goes that high, so I dunno....
Posts: 725 | From: litte rock AR | Registered: Oct 2005
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share price of maybe .21 and not .021? I'm just trying to make sure I don't need to go back for more LASIK. Not trying to be rude, sorry if it came across that way.
Posts: 209 | Registered: Sep 2005
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Don't forget the In-Market acq... when that is done and announced (which I have heard is VERY soon), some are saying this would be valued at more like .50.
Hey Tech1, you crack me up...
Boom shakka lakka!
-------------------- Life is like a roll of toilet paper. The closer it gets to the end, the faster it goes.
posted
Hate to be a naysayer, but MOTGE doesn't pass the sniff test yet. CEO spent 3 years studying Electrical Engineering (not enough, I studied it too). Now he's going to law school. CEO and accountant receiving payments when the company is losing money. Dividends being paid in cash and stock. Paying dividends just decreases total assets of the company. Mr. Yassin getting $200K a year for Sound City. Their intent to keep selling stock and taking on more debt to cover the losses.
I will hold my MOTGE stock for awhile, but I'm not thinking too positive just yet. They seem to be talking about the future too much and not enough about today.
Posts: 352 | From: Marietta, GA | Registered: Nov 2005
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Penny with real assets..real revenues...come on people..we are practically the blue chip of the pennies..lol
Posts: 908 | Registered: Dec 2004
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Yeah, SKYman..if your talking about the million spent on business costs aquiring new avenues..thats a good loss...means they are in the process of broadening their portfolio. IMO JB
Posts: 244 | Registered: Oct 2005
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I'd like to see at least one of my stocks go up this year. I'm in at 0.066, so I hope this is the one. One day my wife is going to find one of my AMTD statements and beat me over the head with it if I don't start making some profit somewhere soon. I keep telling her that we're well positioned, but I leave out the part about slowly losing most of it as the share prices drop. Hopefully, this will be the one. If they are truly serious about a listing on a national exchange, that is huge. GLTA
Posts: 170 | Registered: Jul 2005
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Otto: That was a great pr..the only thing that would have made it better was to see the inmarket on it..but as it says...they couldn't include it due to timing and regs of the SEC... That 7 million in shareholder value is going to go along way IMO JB
Posts: 244 | Registered: Oct 2005
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Let's start talking about NASDAQ. Your stock must have a minimum price of $4 to make it on their sheets. MOTG where talking about getting their symbol on the sheets. Bring out your brains.. and let's all combine them. Should we hold long term... since NASDAQ is in discussion?
Posts: 293 | Registered: Nov 2005
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Thanks, the PR was easier to understand then the 10K. Got alittle worried when they kept mentionin the net loss vs last year. Should be fun to watch from here, considering the closing price (rotten Nite). Hope this can keep the MMs from holding this back.
Posts: 170 | Registered: Jul 2005
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