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
-------------------- All men's gains are the fruit of venturing.
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Modern Technology Corp Announces 2006 Initiatives and Revenue Guidance for $75,000,000 Wednesday January 4, 5:06 pm ET
OXFORD, MS--(MARKET WIRE)--Jan 4, 2006 -- Modern Technology Corp (OTC BB:MOTG.OB - News) a rapidly growing diversified technology development and acquisition company announced details on its various strategic initiatives and revenue expectations for 2006. Having met its objectives for 2005, the company recaps its successes and sets its vision for the coming new year. The company will release more expansive guidance and updates in the coming days and weeks for each major topic found herein.
ADVERTISEMENT 2005 Growth Goals Met
MOTG met its 2005 goals for acquisitions and business development. The company acquired three entities: Sound City, H-NET, and INmarketing and raised over $4.2 Million in funding.
We expanded our subsidiary Sound City by opening a new retail location and appointing a new General Manager for that location. The new store opening increases the company's retail exposure and prepares the organization for stronger sales growth.
We completed the acquisition of INmarketing. INMarketing adds an estimated $11.5 Million in 2005 revenues and a projected additional $14 Million in revenues for 2006. INmarketing generated $8.7 Million in revenues in 2004 and generated $5.8 Million in revenues in the first half of 2005.
We anticipated closing certain transactions within 2005 to put revenues beyond the $50 Million mark. These transactions are inherently slow and have extended into 2006.
We intend to continue delivering on our promises as stockholders have come to expect.
2006 Revenues Guidance
As stockholders can see, our revenue growth is strong and we anticipate uninterrupted momentum. Our year-end is June 30 and our present projected annualized revenues are approximately $20,000,000 without further acquisitions. We have acquisition targets under consideration that, if completed, will create annualized revenues exceeding $50,000,000 for year-end 2006. If we complete the current transactions we have under consideration, we anticipate passing the $75,000,000 annualized revenue threshold by year-end 2006. If during 2006 we achieve these revenue goals earlier, we will revise our projections upward accordingly.
Earnings Focus
In addition to achieving our revenue targets, our key focus for 2006 is to consolidate our operational infra-structure and eliminate redundant costs areas and reduce overall expenses. These reductions arise from the inherent synergy between our operational subsidiaries. These cost reductions and efficiencies are the culmination of MOTG's efforts and business plan as stated in 2005. The company's one-time expenses related to acquisitions will no longer affect earnings going forward and the company anticipates cash-positive operations and a full return to profitability in 2006 as a result of synergy, consolidation and revenue growth. Subsidiaries that have not been profitable are on a return to profitability and when combined with our current profitable subsidiaries, we are optimistic regarding our 2006 earnings picture.
Acquired Technologies Market Introduction
In June 2005 we announced a strategic alliance agreement with UTEK Corporation. This alliance provides us with nascent, market-ready technologies. We intend to commercialize them through our existing sales and distribution channels. We anticipate significant revenues from these technologies. Of particular note are technologies relating to energy conservation.
Advancement of H-NET technology
Since acquisition of H-NET, MOTG has created a sales and technology support infra-structure, expanded the market scope of the H-NET software technology to service the broader medical industry, and developed key marketing and industry relationships for both marketing and distribution.
During 2006 the H-Net software and related support systems will be marketed in both the USA and Europe with sales and distribution expanding throughout the year.
The H-NET technology is complete, market-proven, and has a long history in the Vision Care industry. The H-NET technology serves the three largest retail vision care chains in the United States.
Energy Conservation Initiatives
International Sales and Marketing of DeMarco Energy Systems
The Energy Conservation and Alternative Energy sectors are rapidly growing sectors in which MOTG has a significant stake through its relationship with DeMarco Energy Systems of America, Inc. (Other OTC:DMES.PK - News). We are developing a worldwide distribution network of geothermal and alternative energy sales channels.
This energy initiative will result in new revenues and exposure for both MOTG and DeMarco Energy. MOTG provides executive consulting, marketing support, business infrastructure and related services while DeMarco Energy provides its patented geo-thermal solutions. MOTG intends to acquire additional energy-related technologies and make them available to DeMarco energy for commercialization as appropriate.
Dividends
MOTG has a history of paying dividends. In 2004 the company distributed a $383,697 cash dividend. In 2001, it paid a stock dividend of 403,000 shares as part of a spin-off transaction and in 1999, it paid a stock dividend of 403,000 shares as part of a spin-off transaction.
MOTG may spin off one or more of its subsidiaries in 2006 if business conditions warrant. We will pay either stock or cash dividends as appropriate. Our long-term plan is for stockholders to realize capital appreciation from their current MOTG holdings and new stock paid to them as spin-off dividends.
About Modern Technology Corp
Modern Technology Corp, a diversified technology development and acquisition company, builds revenues through continuous growth, strategic acquisitions, and commercialization of nascent technology. MOTG improves operating efficiencies through the elimination of cost redundancies and realized synergy between subsidiaries. MOTG also commercializes new technology and provides to its subsidiaries new product lines, operations infrastructure, and significant intellectual capital. The company's mission is to build shareholder value through a model of continuous growth. Web Address: 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.
-------------------- All men's gains are the fruit of venturing.
posted
Ohhyeah, all this is good for a new thread. I started one, but you can do it if you like. This thread is longer than 3 pages though, so we definitely need a new one.
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