UNITED STATES

SECURITIES ANDEXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-KSB

 

(Mark One)

[X] ANNUAL REPORT PURSUANT TO    SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACE OF 1934

For the fiscal yearended June 30, 2005

[ ] TRANSITION REPORT PURSUANT TO    SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transitionperiod from ____ to ____

 

Commission File No. 2-80891-NY

 

MODERN TECHNOLOGYCORP.

(Name of smallbusiness 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 bySection 13 or 15(d) of the Exchange Act during the past 12 months (or forshorter 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 405of Regulation S-B contained in this form and no disclosure will be contained, tothe best of registrant's knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-KSB or anyamendment 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 bynon-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 andoutstanding.

 

 
** 

Part I****Description of Business**
We were incorporated in Nevada in 1982 as a for-profitcorporation. We have never experienced any bankruptcy or similar proceeding. Wehave never by a party to a "reverse merger" or similar transaction. We haveengaged in business categorically similar to our present line of business sinceinception.

We are engaged in aiding both private and public companies inthe areas of business development, financing, product development, corporatestrategy, corporate image and public relations, product distribution andmarketing, and executive management consulting. We collectively refer tocompanies in which we own an equity position, our majority owned subsidiaries,corporate customers and clients as "portfolio companies". We charge for ourservices in cash or equity in the portfolio company. We may also exchange ourservices for revenue sharing of future sales of products or sharing of proceedsfrom the sale of licenses and technologies owned by our portfolio companies. Weseek to grow through strategic acquisitions in addition to generating incomefrom our services.

We seek to build revenues by a model of continuous growth,strategic acquisitions, and commercialization of nascent technology. We seek toimprove operating efficiencies among our portfolio companies through eliminationof cost redundancies and realized synergy between subsidiaries. We also seek tocommercialize new technology and provides to our portfolio companies andsubsidiaries new product lines, operations infrastructure, and significantintellectual 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 acquirethe remaining 49%. The option is valid through December 31, 2009, and can beexercised for $3,500,000, which is payable in cash, stock or a combination ofcash or stock. Sound City, Inc. is a consumer electronics company with customersacross the U.S. Sound City markets audio and video solutions for home and mobileenvironments, including the HD-TV, Plasma TV and LCD TV market segments. As afull service dealer, Sound City provides a wide range of custom homeinstallations addressing numerous applications. With a customer base of over900,000 customers, Sound City is a large electronics mail order companies in theU.S., who distributes its products and solutions through its direct mail and Website channels. Consumers can also find the latest audio, video, car stereo andhome theatre products in Sound City's retail locations, including 12 customshowrooms. 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 isconvertible into shares of common stock of DeMarco. The convertible debenturesbear interest at 10%, matured on March 25, 2003, and are convertible into sharesof 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 forthe common stock on a principal market for the 10 trading days before but notincluding the conversion date. As of May 2, 2005, the $1,500,000 convertibledebenture was convertible into 250,000,000 shares of DeMarco common stock.

We have no formal agreements with this portfolio companyoutside our being a holder of the convertible debenture, although our chairman,Anthony K. Welch, is also the chairman of DeMarco. We have an informal agreementto assist them where practicable to further their plans and efforts, althoughthere are no written agreements to this effect and we are not obligated toperform any services for them.

DeMarco Energy's primary mission is to provide energyefficient technologies to commercial and institutional markets through theapplication of the DeMarco 'Systems' patent. The company owns a systems patentthat was granted on September 3, 1985, known as the Energy Miser System. Thecompany is primarily focusing on providing heating and air conditioning poweredby the thermal properties of managed water systems, which include gray-water,re-use water and potable water systems. DeMarco has exclusive rights to thepatented technology.
**Selecting Portfolio Companies**
We may purchase an equity position, whether minority ormajority, in various companies from time to time. We offer our services to newcustomers, also referred to as portfolio companies, for cash payment. We mayelect 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 weacquire a minority position in a company, we will seek to enter into agreementwith that company whereby we will generate income from our services. If weacquire a minority position in a company, we value that equity using agood-faith estimation of its value based on generally accepted accountingprinciples combined with our internal judgment based on industry and economicfactors not encompassed by traditional accounting principles.

We acquire majority or minority equity positions in portfoliocompanies by purchasing the equity with cash, debt, or purchasing the equity byissuing stock in our company. We may pay for the equity position with acombination of both cash and stock and debt.

When presented with a prospective acquisition, we make agood-faith valuation for the business to be acquired and its future prospects.If the assessment of the prospective acquisition appears to offer a good orreasonable chance to increase our revenues and assets both in the short-term andthe long-term, we will seek to acquire the prospective company.

We find new customers and prospective companies to acquirethrough 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) 236-5928and our facsimile number is (662) 236-7663. This space is provided to us at nocharge by Mr. Church, our CFO and Director.  We lease 1500 square feet ofexecutive 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 spaceand facilities are sufficient to meet our present needs and do not anticipateany difficulty securing alternative or additional space, as needed, on termsacceptable to us. We maintain a website at www.moderntechnologycorp.com. Theinformation 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 foroperations we applied for listing of our Common Stock on theOver-The-Counter-Bulletin Board. We received approval on July 19th, 2004 andtrade 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 pershare for shareholders of record as of March 14, 2004. Distribution wascompleted the week of March 16, 2004.

During October 2001, the Registrant distributed the 403,000 shares it ownedin Scientio to its shareholders. These 403,000 shares represent a dividend ofequity investment stock of $178,864 for the year ended June 30, 2002. TheRegistrant has registered these shares with the Securities and ExchangeCommission with the intention of distributing these shares to the Registrant'sshareholders in the form of a dividend.

During the year ended June 30, 1999, the Registrant was involved in providingconsulting services to Coral Development Corp. During December 1996, theRegistrant purchased 403,000 shares of Coral Development Corp. ("Coral") for$30,300. The Registrant had registered these shares with the Securities andExchange Commission with the intention of distributing these shares to theRegistrants' shareholders in the form of a dividend. As of June 30, 1999, theRegistrant declared a distribution to its shareholders in the form of all of the403,000 shares of Omnicomm Systems Inc. ("Omnicomm") common stock that theRegistrant owned.

 

Management's Discussion and Analysis of Results of Operations.

General

The following information should be read in conjunction with the ConsolidatedAudited Financial Statements and Notes thereto and other information set forthin 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 theuse of forward-looking terminology such as "estimate", "project", "believe","expect", "may", "will", "should", "intends", or "anticipates" or the negativethereof or other variations thereon or comparable terminology, or by discussionsof strategy that involve risks and uncertainties. We wish to caution the readerthat these forward-looking statements, such as statements relating to timing,costs and of the acquisition of, or investments in, existing business, therevenue or profitability levels of such businesses, and other matters containedin this Form 10-K regarding matters that are not historical facts, are onlypredictions.

No assurance can be given that plans for the future will be consummated orthat the future results indicated, whether expressed or implied, will beachieved. While sometimes presented with numerical specificity, these plans andprojections and other forward-looking statements are based upon a variety ofassumptions, which we consider reasonable, but which nevertheless may not berealized. Because of the number and range of the assumptions underlying ourprojections and forward-looking statements, many of which are subject tosignificant uncertainties and contingencies that are beyond our reasonablecontrol, some of the assumptions inevitably will not materialize, andunanticipated events and circumstances may occur subsequent to the date of thisForm 10-KSB. Therefore, our actual experience and results achieved during theperiod covered by any particular projections or forward-looking statements maydiffer substantially from those projected.

Consequently, the inclusion of projections and other forward-lookingstatements should not be regarded as a representation by us or any other personthat these plans will be consummated or that estimates and projections will berealized, and actual results may vary materially. There can be no assurance thatany of these expectations will be realized or that any of the forward-lookingstatements contained herein will prove to be accurate. The Company does notundertake any obligation to update or revise any forward-looking statement madeby it or on its behalf, whether as a result of new information, future events orotherwise.

Overview

We were incorporated in Nevada in 1982 as a for-profitcorporation. We have never experienced any bankruptcy or similar proceeding. Wehave never by a party to a "reverse merger" or similar transaction. We haveengaged in business categorically similar to our present line of business sinceinception.

We are engaged in aiding both private and public companies inthe areas of business development, financing, product development, corporatestrategy, corporate image and public relations, product distribution andmarketing, and executive management consulting. We collectively refer tocompanies in which we own an equity position, our majority owned subsidiaries,corporate customers and clients as "portfolio companies". We charge for ourservices in cash or equity in the portfolio company. We may also exchange ourservices for revenue sharing of future sales of products or sharing of proceedsfrom the sale of licenses and technologies owned by our portfolio companies. Weseek to grow through strategic acquisitions in addition to generating incomefrom our services.

We seek to build revenues by a model continuous growth,strategic acquisitions, and commercialization of nascent technology. We seek toimprove operating efficiencies among our portfolio companies through eliminationof cost redundancies and realized synergy between subsidiaries. We also seek tocommercialize new technology and provides to our portfolio companies andsubsidiaries new product lines, operations infrastructure, and significantintellectual 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 foroperations we applied for listing of our Common Stock on theOver-The-Counter-Bulletin Board. We received approval on July 19th, 2004 andtrade under the symbol MOTG.

On July 31, 2004 as part of our plan of reorganization and ongoing plan foroperations we effected a Reverse Split of the Company's Common Stock on a 1 for15 Basis.
**Results of Operations**
During the fiscal year ended June 30, 2005, the Registrant incurred a netloss of $1,123,816, compared to a net loss of $118,296 for the fiscal year endedJune 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 SoundCity. For the fiscal year ended June 30, 2004, the Registrant's expensesconsisted of officers' salaries, general and administrative expenses, theprincipal items consisting of legal and accounting fees, telephone and insuranceexpenses, a realized gain of $41,714 related to sales of securities whichconsisted primarily of MediCor, Ltd securities (See Note 4 to the FinancialStatements), an unrealized loss from the decline in stock price of our remainingmarketable 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 $24,817related to the Registrant's decision to discontinue the operations of itsPharmavet subsidiary. For the fiscal year ended June 30, 2005, the Registranthad general and administrative expenses of $895,903, officer salaries of $91,100and cost of sales of $2,261,212. 

In comparing fiscal year expense items for fiscal year 2005 with fiscal year2004 items, the Registrant experienced increases in both operating and inofficer's salaries from $24,364 in 2004 to $91,100 in 2005 and an increase ingeneral 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 anet loss of $1,123,816 compared to a net loss of $118,296 for the fiscal yearending June 30, 2004. The increase in net loss is attributable to the expensesassociated 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 ascompared with $31,827 at June 30, 2004. The change can be attributable to theacquisition of Sound City and related operations. During the fiscal year endedJune 30, 2005, we have experienced negative cash flows and have relied primarilyon the Registrant's cash balances to fund our operations. We are not currentlybound by any long or short-term agreements for the purchase or lease of capitalexpenditures. 

Our ability to continue in existence is dependent on our having sufficientfinancial resources to cover operating expenses. We believe we have enough cashand equivalents to cover operations for the next twelve month period.  Inaddition, our auditors included language which qualified their report regardingour 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 conformitywith accounting principles generally accepted in the United States requiresmanagement to make judgments, assumptions and estimates that affect the amountsreported. Note 2 of Notes to the Consolidated

Financial Statements describes the significant accounting policies used inthe preparation of the consolidated financial statements. Certain of thesesignificant accounting policies are considered to be critical accountingpolicies, as defined below.

A critical accounting policy is defined as one that is both material to thepresentation of our financial statements and requires management to makedifficult, subjective or complex judgments that could have a material effect onour financial condition and results of operations. Specifically, criticalaccounting estimates have the following attributes: 1) we are

required to make assumptions about matters that are highly uncertain at thetime 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 amaterial effect on our financial condition or results of

operations.

Estimates and assumptions about future events and their effects cannot bedetermined with certainty. We base our estimates on historical experience and onvarious other assumptions believed to be applicable and reasonable under thecircumstances. These estimates may change as new events occur, as additionalinformation is obtained and as our operating environment changes. These changeshave historically been minor and have been included in the consolidatedfinancial statements as soon as they became known. In addition, our Managementis periodically faced with uncertainties, the outcomes of which are not withinour control and will not be known for prolonged periods of time.

Based on a critical assessment of its accounting policies and the underlyingjudgments and uncertainties affecting the application of those policies, ourManagement believes that our consolidated financial statements are fairly statedin accordance with accounting principles

generally accepted in the United States (GAAP), and present a meaningfulpresentation of our financial condition and results of operations. 

Our Management believes that the following are our critical accountingpolicies:

ESTIMATES IN FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally acceptedaccounting principles requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses duringthe reporting period. Actual results could differ from those estimates.

INCOME TAXES

The Company accounts for income taxes in accordance with Statement ofFinancial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."SFAS 109 has as its basic objective the recognition of current and deferredincome tax assets and liabilities based upon all events that have beenrecognized in the financial statements as measured by the provisions of theenacted tax laws. Valuation allowances are established when necessary to reducedeferred tax assets to the estimated amount to be realized. Income tax expenserepresents the tax payable for the current period and the change during theperiod in the deferred tax assets and liabilities.
**Financial Statements

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
To the Shareholders and Board ofDirectors

Modern Technology Corp.

Oxford, MS

We have audited the accompanying consolidated balance sheetof Modern Technology Corp. and subsidiaries (collectively the "Company") as ofJune 30, 2005 and the related consolidated statements of operations, changes inshareholders' equity and cash flows for each of the two years in theperiod ended June 30, 2005. These financial statements are the responsibility ofthe Company's management. Our responsibility is to express an opinion on thesefinancial statements based upon our audits.

We conducted our audits in accordance with the standards ofthe Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. The Companyis not required to have, nor were we engaged to perform, an audit of itsinternal control over financial reporting. Our audit included consideration ofinternal control over financial reporting as a basis of designing auditprocedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion of the effectiveness of the Company's internal controlover financial reporting. Accordingly, we express no such opinion. An audit alsoincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as wellas evaluating the overall financial statements presentation. We believe that ouraudit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statementspresented above present fairly, in all material respects, the financial positionof Modern Technology Corp. at June 30, 2005, and the results of its operationsand 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 beenprepared assuming that the Company will continue as a going concern. Asdiscussed in Note 11 to the consolidated financial statements, the Company hasincurred losses and negative cash flows from operations in recent years throughJune 30, 2005 and these conditions are expected to continue through June 30,2006, raising substantial doubt about the Company's ability to continue as agoing concern. Management's plans in regard to these matters are also discussedin Note 11. These financial statements do not include any adjustments that mightresult from the outcome of this uncertainty.

 

GREENBERG & COMPANY LLC

Springfield, New Jersey

October 18, 2005

 

See accompanying summary of accounting policies and notes tofinancial statements.

MODERN TECHNOLOGY CORP

NOTES TO THECONSOLIDATED 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 inthe areas of business development, financing, product development, corporatestrategy, corporate image and public relations, product distribution andmarketing, and executive management consulting. We collectively refer tocompanies in which we own an equity position, our majority owned subsidiaries,corporate customers and clients as "portfolio companies". We charge for ourservices in cash or equity in the portfolio company. We may also exchange ourservices for revenue sharing of future sales of products or sharing of proceedsfrom the sale of licenses and technologies owned by our portfolio companies. Weseek to grow through strategic acquisitions in addition to generating incomefrom our services.

We seek to build revenues by a model continuous growth,strategic acquisitions, and commercialization of nascent technology. We seek toimprove operating efficiencies among our portfolio companies through eliminationof cost redundancies and realized synergy between subsidiaries. We also seek tocommercialize new technology and provide to our portfolio companies andsubsidiaries new product lines, operations infrastructure, and significantintellectual capital.

Modern's office was located in New York, but has been relocated toMississippi, with its administrative offices being located in Jackson,Mississippi. 

NOTE 2:         SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING POLICIES

Modern Technology Corp's accounting policies conform to U. S. generallyaccepted accounting principles. Significant policies followed are describedbelow. 

The consolidated financial statements include the accounts of the company andall of its subsidiaries in which a controlling interest is maintained. Allinter-company accounts and transactions have been eliminated. The consolidatedfinancial statements have been prepared in United States Dollars.

On January 24, 2005, the Company purchased 51% of Sound City for $2,000,000with an option to acquire the remaining 49%. The option is valid throughDecember 31, 2009, and can be exercised for $3,500,000, which is payable incash, 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 additionalpro forma, historical financials and other exhibits.

The financial statements reflect various purchase price allocations.  Inaccordance with SFAS No. 141, Business Combinations ("SFAS No. 141"), the totalpurchase price was allocated to the tangible and intangible assets of Sound Citybased upon their estimated fair values at the acquisition date with the excesspurchase price allocated to goodwill. The purchase accounting adjustments madeare based upon currently available information.  Accordingly, the actualadjustment recorded in connection with the final purchase price allocation maybe updated according to SFAS No. 141, and any such changes may be material.

Sound City accounts were properly included in the consolidated financialstatements for the year ended June 30, 2005. 

 

STOCK BASED COMPENSATION

The Company has adopted the provisions of SFAS No. 123, "Accounting forStock-Based Compensation." In accordance with SFAS No. 123, MediCor has electedthe disclosure-only provisions related to employee stock options and follows theintrinsic value method in Accounting Principals Board Opinion (APB) No. 25 inaccounting for stock options issued to employees. Under APB No. 25, compensationexpense, if any, is recognized as the difference between the exercise price andthe fair value of the common stock on the measurement date, which is typicallythe date of grant, and is recognized over the service period, which is typicallythe vesting period.

RECLASSIFICATIONS

Certain items from prior periods within the financial statements have beenreclassified to conform to current period classifications.     

CASH AND CASH EQUIVALENTS

Cash Equivalents consist of highly liquid, short-term investments withoriginal maturities of 90 days or less. The carrying amount reported in theaccompanying balance sheets approximates fair value.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation ofproperty 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 livesof property and equipment are capitalized. Expenditures for maintenance andrepairs 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. generallyaccepted accounting principals requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities at thedate of the financial statements and the reported amounts of revenues andexpenses during the reporting period. Actual results could differ from thoseestimates.

INCOME TAXES

The company accounts for income taxes in accordance with Statement ofFinancial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes"SFAS 109 has as its basic objective the recognition of current and deferredincome tax assets and liabilities based upon all events that may have beenrecognized in the financial statements as measured by the provisions of theenacted tax laws. 

Valuation allowances are established when necessary to reduce deferred taxassets to the estimated amount to be realized. Income tax expense represents thetax payable for the current period and the change during the period in thedeferred tax assets and liabilities.

IMPACT OF NEW ACCOUNTING STANDARDS 

In December 2003, the FASB issued Interpretation No. 46R, "Consolidation ofVariable Interest Entities" (revised December 2003) - an interpretation ofARB No. 51.  A variable interest entity ("VIE") is one where thecontractual or ownership interest in an entity change with changes in theentity's net asset value. This interpretation requires the consolidation of aVIE by the primary beneficiary, and also requires disclosure about VIEs where anenterprise has a significant variable interest but is not the primarybeneficiary. Sound City leases a facility from a Limited Liability Company ("LCC")owned by the minority shareholders.  Under FIN 46R, the LLC is a VIE andthe Company has consolidated the LLC in its consolidated financial statements. The consolidated of this VIE has added $616,049 of assets and $411,404 ofliabilities to our consolidated balance sheet as of June 30, 2005.

In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 onDerivative Instruments and Hedging Activities." SFAS 149 establishes accountingand reporting standards for derivative instruments and for hedging activities.This statement is effective for contracts entered into or modified after June30, 2003. The adoption of SFAS No. 149 did not have a material effect on theCompany's financial position or results from operations.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain FinancialInstruments with Characteristics of Both Liabilities and Equity." SFAS 150changes the accounting for certain financial instruments that, under previousguidance, were accounted for as equity. This statement is effective forfinancial instruments entered into or modified after May 31, 2003 and otherwiseis effective at the beginning of the first interim period beginning afterSeptember 15, 2003. The adoption of SFAS No. 150 did not have a material effecton 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 ofSAB No. 101, "Revenue Recognition," in order to make this interpretive guidanceconsistent with current authoritative accounting and auditing guidance and SECrules and regulations. The changes in SAB No. 104 did not have a material impacton 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 thefair value of share-based payments to employees beginning in 2005. We arecurrently evaluating the impact of this proposed standard on our financialstatements.

REVENUE RECOGNITION

The Company generally recognizes revenue upon shipment when thecollect-ability of the resulting receivable is reasonably assured. The Companyallows credit for products returned within its policy terms. Such returns areestimated 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 arebased on performance. Future events could cause management to conclude thatimpairment indicators exist and that the value of long-lived assets is impaired.When events or circumstances indicate that the carrying amount of an asset maynot be recoverable, the fair value of the asset is compared to its carryingvalue. Impairment losses are measured as the amount by which the carrying valueof an asset exceeds its estimated fair value.

ADVERTISING

Advertising costs are expensed as incurred. Advertising expense for thetwelve months ended June 30, 2005 was $25,872.00.

SHIPPING AND HANDLING COSTS

Amounts billed to customers for shipping costs resulting from a salestransaction are included in Revenues while costs incurred by the Company forshipping and handling are included in cost of goods sold.

 

NOTE 3:         CONCENTRATIONS OFCREDIT RISK

The Company's financial instruments that are exposed to concentrations ofcredit risk consist primarily of cash.

NOTE 4:         MARKETABLE SECURITIES

During the year ended June 30, 2003, the investment in 117,250 shares ofcommon stock of MediCor Ltd. was considered a trading security in accordancewith SFAS No. 115, "Accounting for Certain Investments in Debt and EquitySecurities ("SFAS No. 115")" MediCor Ltd. shares are traded on the NASDover-the-counter bulletin board system. The cost of these shares is $82,520. TheCompany sold all the shares of MediCor Ltd. As of March 31, 2004, the Companyrecognized $41,714 realized gain. As of March 31, 2004, the Company hadliquidated all of its marketable securities or written off all securities deemedworthless. During May 2004, Mr. Welch, CEO and President, contributed $57,677 ofmarketable securities investment pursuant to Modern's plan for reorganization.

On January 24, 2005, the Company entered into a Purchase Agreement whereby wepurchased a $1,500,000 DeMarco Convertible Debenture. The Company follows SFASNo. 115 and has considered these securities to be trading securities.

NOTE 5:         INVESTMENT EQUITYSECURITIES (AT COST) 

As of June 30, 2004, the Company wrote off $1,431 of Daine Common Stockinvestment of 360,000 restricted shares to realized loss when Daine declaredbankruptcy. As of June 30, 2004, all shares of Pharmavet were returned andcancelled. The costs of these shares ($5,000) were credited against DeferredRegistration costs. The Company has established a valuation allowance of$100,000 against its investment in Interactive Medicine Inc. to reflect theuncertainty of the fair market value of the investment. The net investment valuein Interactive Medicine Inc. is zero as of June 30, 2005.

NOTE 6:         STOCK BASEDCOMPENSATION

During the 12 months ended June 30, 2005, the Company issued 2,067,000 sharesof Modern Technology Corp. Common Stock for legal and consulting servicesrendered or to be rendered in the coming year. $355,957 was charged to DeferredCompensation relating to these shares. The amount expensed in the year endingJune 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 twelvemonths ended June 30, 2005, the Company issued 13,000,000 shares of Common Stockto Anthony Welch pursuant to the Reorganization Agreement. The compensationportion of this agreement was valued at $1,300 and charged to expense. Thisstock 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 taxesdiffers form the amount computed by applying the statutory federal income rateas 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 differencesbetween the carrying amounts of assets and liabilities or financial reportingpurposes and amounts used for income tax purposes and the impact of availablenet operating loss carryforwards.

The tax effects of significant temporary differences, which comprise thedeferred 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 inthe year ended June 30, 2024. The tax benefits have been fully reserved due to alack of consistent operating profitability.

NOTE 8: POSTRETIREMENT BENEFITS

The Company does not maintain any employee benefits currently. The Companydoes not maintain a plan for any Postretirement employee benefits; therefore, noprovision 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 towhich we expensed $34,501 in accounting fees during the twelve months ended June30, 2005.  

Our principal office at 1420 N. Lamar Blvd., Oxford, Mississippi 38655 isprovided to us at no charge by Mr. Church, our CFO and Director.  We lease 1,500square 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 fromfour institutional investors to purchase a $1.5 million convertible debenture inDeMarco Energy Systems of America, Inc. Anthony K. Welch, our Chief ExecutiveOfficer and majority shareholder, is the Chief Executive Officer and Chairman ofthe Board of Directors of DeMarco Energy Systems.

Sound City leases a facility from its shareholders. The lease expires June30, 2014. Sound City is responsible for taxes and other expenses on an annualbasis.

Rent expense under this related party lease for the twelve months ended June30, 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 alsohad loans payable to related parties in the amount of $91,314. These loans areunsecured, subordinated, non-interest bearing and are payable demand. The loanspayable to related parties are classified as non-current in the Balance Sheet atJune 30, 2005, because repayment is not anticipated during the next year.

In the normal course of business, Sound City purchases from and sells toSammans Electronics Inc (Sammans). Sammans is owned by a relative of SoundCity's shareholders. For the six months ended June 30, 2005 (date of acquisitionthrough 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 Cityentered into an employment agreement with Kamel Yassin, President andShareholder 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 providecontinuing value and future growth to shareholders executed a plan ofreorganization. The Company entered into a Letter of Agreement with currentPresident and CEO, Anthony Welch, wherein the Company's plans for reorganizationand ongoing plans for operations would be realized through the subsequentactions of new management. The terms of this Agreement provided for theappointment of a new Board of Directors, marketable securities to be depositedin the Company's brokerage account, a Reverse split of the Company's CommonStock, an application for OTCBB listing, issuance of shares to Mr. Welch, andongoing acquisitions and business development to pursue growth. 

NOTE 11: OPERATIONS AND LIQUIDITY

The Company has incurred substantial losses in 2005 and 2004. Until such timethat the Company's products and services can be successfully marketed theCompany will continue to need to fulfill working capital requirements throughthe sale of stock and/or the issuance of debt. The inability of the Company tocontinue its operations as a going concern would impact the recoverability andclassification of recorded asset amounts. 

The ability of the company to continue in existence is dependent on itshaving sufficient financial resources to bring products and services to marketfor marketplace acceptance. As a result of its significant losses, negative cashflows 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, anticipatedrevenues, further planned reductions in operating expenses, and subsequent salesof stock and/or placement of debt instruments will be sufficient to meet itsprojected 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 AssetPurchase Agreement ("Agreement") with Anton Stephens, Dba H-NET ("Hnet"). Nomaterial relationship exists between the parties, other than in respect of theAgreement. Under the terms of the Agreement, MOTG agreed to purchase all of therights, title and interest in, to certain assets owned by Hnet. In exchange forassets delineated under the Agreement, Hnet will receive $500,000 payable in theform of 350,000 shares of MOTG restricted common stock and a ConvertibleDebenture in the amount of $400,000 payable to Anton Stephens. This transactionwas filed under a From 8-K on August 2, 2005 and is hereby incorporated byreference.
**InMarketing Acquisition**
On August 10, 2005 we entered into a Letter of Intent to acquire 51% ofInMarketing Group for an aggregate price of $2,000,000 under a Stock PurchaseAgreement. No material relationship exists between the parties, other than inrespect of the Agreement. The Purchase Price to be paid as follows: $1,000,000to be paid in cash and $1,000,000 to be paid in the form of a ConvertibleDebenture. The purchase price will be adjusted on reasonable terms specified inthe Definitive Agreement pursuant to a pro rata adjustment predicated on aprofitable $11,000,000 in revenues for 2005 generated by the InMarketingsubsidiary. We will have an option to purchase the remaining 49% of InMarketingas part of the agreement. This transaction is under final closing as of thisfiling.
**Capital Raise**
On August 31, 2005, the Company, pursuant to a Securities Purchase Agreementof the same date, entered into Callable Secured Convertible Notes. Under theterms of the notes, the Company borrowed an aggregate of $1,500,000.00 from theHolders 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 theNotes were issued, until due and payable on the Maturity Date. Any unpaidamounts after that date bear an interest of 15% per annum. Interest is payablequarterly and shall commence at September 30, 2005. Holder has the right toconvert any amounts due to Common Stock, at its discretion, at the conversionprice, as set forth under the terms of the Notes. This transaction was filedunder 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 foroperations we applied for listing of our Common Stock on theOver-The-Counter-Bulletin Board. We received approval on July 19, 2004 and tradeunder the symbol MOTG.

On July 31, 2004 as part of our plan of reorganization and ongoing plan foroperations we effected a Reverse Split of the Company's Common Stock on a 1 for15 Basis. These financial statements retroactively reflect the change to theCompany's common stock as a result of the reverse split.

On August 17, 2004, 13 million shares were issued to Anthony Welch and hebecame a 90.6% shareholder.
**Preferred Stock**
We are authorized to issue up to 20,000,000 shares of Preferred Stock, parvalue $.0001. As of June 30, 2005, there were 1,500 shares of preferred stockissued and outstanding.
*SERIES A CONVERTIBLE PREFERRED STOCK*
To obtain funding for our ongoing operations, we entered into a SecuritiesPurchase Agreement with four accredited investors on January 24, 2005 for thesale of (i) $2,000,000 in secured convertible notes; (ii) 1,500 shares of seriesA convertible preferred stock at $1,000 per share and (iii) warrants to buy3,000,000 shares of our common stock. Each share of series A convertiblepreferred stock is convertible into $1,000 of our common stock, at 85% of theaverage of the three lowest intraday trading prices for the common stock on aprincipal market for the 20 trading days before but not including the conversiondate.

The holders of the series A preferred stock are entitled to receive, when, ifand as declared by the Board of Directors, cumulative dividends in the amount ofsix percent (6%) per annum, payable quarterly in arrears. We are obligated torepurchase the shares of series A convertible preferred stock at 130% of thestated value, plus accrued but unpaid dividends, upon written notice from theholders of a majority of the series A convertible preferred stock upon theoccurrence of any of the following events of default: our failure to issueshares of common stock upon conversion by the holder, our failure to timely filea registration statement or have such registration statement declared effective,the assignment or appointment of a receiver to control a substantial part of ourproperty or business, the commencement of a bankruptcy, insolvency,reorganization or liquidation proceeding against our company or the delisting ofour common stock, if the default is not cured with the specified grace period.

All shares of series A convertible preferred stock issued and outstanding onJanuary 24, 2008 shall automatically convert into shares of our common stock inaccordance with the conversion price calculation.
**NOTE 14: LONG-TERM DEBT**
Long-term debt consists of thefollowing:                                                                                June30, 2005
Note payable to Kamel Yassin in the

Original amount of $400,000 bearing

Interest at a rate of 5% per annumwill

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 annumwill

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 loanis

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 Agreementwith GE Capital. Under the Agreement the Company may apply to GE Capital for anextension of credit to purchase inventory. Advances are repaid without interest90 days after the Company receives the funds. Late payments are subject tofinance charges. GE Capital has a security interest in all Company assets. Theamount 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 Agreementwith AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and NewMillennium Capital Partners II, LLC for the sale of (i) $2,000,000 in securedconvertible notes and (ii) warrants to purchase 3,000,000 shares of our commonstock and (iii) entered into a Purchase Agreement whereby we purchased a$1,500,000 DeMarco Convertible Debenture in exchange for 1,500 shares of ourSeries A Convertible Preferred Stock. 

The secured convertible notes bear interest at 8%, mature two years from thedate of issuance, and are convertible into Modern common stock, at theinvestors' option, at the lower of $0.44 or 40% of the average of the threelowest intraday trading prices for the common stock on the Over-The-CounterBulletin Board for the 20 trading days before but not including the conversiondate. The secured convertible notes are secured by the personal guarantee of theshareholder with a collateral of 5.5 million shares of Modern Technology commonstock.

The warrants are exercisable until five years from the date of issuance at apurchase price of $0.40 per share. The investors may exercise the warrants on acashless basis if the shares of common stock underlying the warrants are notthen registered pursuant to an effective registration statement. The fair marketvalue of the warrants on the date of issuance was determined to be $330,000 andis recorded in the consolidated financial statements as a discount on theconvertible notes. The discount will be amortized over the two-year life of thesecured convertible notes. 

The DeMarco convertible debenture is fully matured and bears interest at arate of 10% per annum with interest payments due quarterly. Modern has theoption to convert any unpaid principal into shares of DeMarco common stock atany time after the original issue date. 
**NOTE 17: STOCK PURCHASE AGREEMENT**
On January 24, 2005, the Company entered into a Stock Purchase Agreement withSound City, Inc. The agreement is to purchase 51% of the issued and outstandingshares 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 theagreement, the Company also issued promissory notes in the amounts of $400,000each to Kamel Yassin, President of Sound City and Mervet Yassin, CFO of SoundCity. The promissory notes bear interest from the date of issuance at the rateof 5% per annum simple interest. Interest accrued to June 30, 2005 will bepayable in full on June 30, 2005. Thereafter, interest accrued on the unpaidprincipal during the calendar quarter will be payable quarterly on the last dayof each calendar quarter during the term of the note, with the first suchquarterly interest payment being payable on September 30, 2005. The principaland 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 calculatebasic 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 thecomputation of diluted earnings per share because their effect would beanti-dilutive.
**NOTE 19: COMMITMENTS AND CONTINGENCIES**
Sound City guarantees the mortgage debt of Yassin & Company, LLC, a realestate holding company owned by the stockholders. The amount of outstandingmortgage 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 Shareholderof Sound City, on commercial property owned by them. The amount of outstandingmortgage at June 30, 2005 was $354,470.
**NOTE 20: ACQUISITIONS

 

Sound City**
On January 24, 2005, the Company purchased 51% of Sound City for $2,000,000with an option to acquire the remaining 49%. The option is valid throughDecember 31, 2009, and can be exercised for $3,500,000, which is payable incash, stock or a combination of cash or stock. During the quarter ending March31, 2005, the Company has filed a current report on Form 8-K, containingadditional pro forma, historical financials and other exhibits.

The financial statements reflect various purchase price allocations.  Inaccordance with SFAS No. 141, Business Combinations ("SFAS No. 141"), the totalpurchase price was allocated to the tangible and intangible assets of Sound Citybased upon their estimated fair values at the acquisition date with the excesspurchase price allocated to goodwill. The purchase accounting adjustments madeare based upon currently available information.  Accordingly, the actualadjustment recorded in connection with the final purchase price allocation maybe updated according to SFAS No. 141, and any such changes may be material.

The following table summarizes the components of the total purchase price andthe allocation as of the date of acquisition:

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets ("SFASNo. 142"), goodwill will not be amortized and will be tested for impairment atleast annually.  The amounts contained in the purchase price allocation maychange as additional information becomes available regarding the assets andliabilities acquired.  Any change in the fair value of the net assets willchange 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 thecondensed consolidated results of operations of the Company as if theacquisition had taken place on July 1, 2003.  The pro-forma financialinformation is not necessarily indicative of the results of operations had thetransaction 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 FinancialDisclosure**
None.
**Controls and Procedures**
Based on their evaluation as of a date within 90 days of the filing date ofthis Annual Report on Form 10-KSB, the Company's principal executive officer andprincipal financial officer have concluded that the Company's disclosurecontrols and procedures as defined in Rules 13a-14(c) and 15d-14(c) under theSecurities Exchange Act of 1934 (the Exchange Act) are effective to ensure thatinformation required to be disclosed by the Company in reports that it files orsubmits under the Exchange Act is recorded, processed, summarized and reportedwithin the time periods specified in Securities and Exchange Commission rulesand forms.

There were no significant changes in the Company's internal controls or inother factors that could significantly affect these controls subsequent to thedate of their evaluation and up to the filing date of this Annual Report on Form10-KSB. There were no significant deficiencies or material weaknesses, andtherefore there were no corrective actions taken. It should be noted that anysystem of controls, however well designed and operated, can provide onlyreasonable, and not absolute, assurance that the objectives of the system aremet. In addition, the design of any control system is based in part upon certainassumptions about the likelihood of future events. Because of these and otherinherent limitations of control systems, there can be no assurance that anydesign will succeed in achieving its stated goals under all potential futureconditions, regardless of how remote.
**Part III

Directors, Executive Officers, Promoters and Control Persons; Compliance withSection 16(a) of the Exchange Act**
The executive officers and directors of the Registrant are as follows:
NameAgeTitleTerm ExpiresAnthony Welch37President, CEO and DirectorNext Annual MeetingRobert Church45CFO and DirectorNext Annual Meeting
Anthony Welch and Robert Church were elected to their designated offices onMarch 15, 2004.
**ANTHONY K. WELCH. 

Mr. Welch has been our Chief Executive Officer and Chairmansince March 15, 2004. From October 1999 to October 2003, Mr. Welch was thefounder of, and served as Director and Executive Vice President and consultantto IPVoice Communications, Inc. (currently called NewMarket Technology, Inc. andtrading 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 apersonal 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 Engineeringfrom 1986 to 1988. He holds a NASD Series 65 License [Uniform Investment AdvisorLaw]. Mr. Welch is completing his second-year as a law student in the JurisDoctor 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 Mississippireceived 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)

Fellow Institute of Financial      Consultants (FIFC)

Certified Forensic Consultant      (expected 12/04) (CFC)

Certified Forensic Accountant      (expected 12/04) (Cr.FA)

 
**Professional Associations:

American Institute of CPA's 

Mississippi Society of CPA's

American College of Forensic      Examiners

American College of Forensic      Accountants

Financial Planning Association

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 ofEthics.
**Executive Compensation**
During the fiscal year ended June 30, 2005, management salaries were asfollows:

Anthony K. Welch $91,100

Rob Church $0
**Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters**
a. The following are known to Registrant to be beneficial owners of 5% ormore of the Registrant's common stock.

Title of Class of Common Stock
Name of BeneficialAmount & Nature ofPercentageOwner Beneficial Ownershipof ClassAnthony Welch  1420 N. Lamar Blvd  Oxford, MS 3865513,000,00075.8%   All Officers and  Directors as a Group (3)13,000,00075.8%
b. The shares owned by management are as follows:

Common Stock.
Name of Beneficial Amount & Nature of PercentageOwnerBeneficial Ownershipof ClassAnthony Welch  1420 N. Lamar Blvd  Oxford, MS3865513,000,00090.6%   Robert Church  1420 N. Lamar Blvd  Oxford, MS 3865500%**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 withaffiliated parties.
**Exhibits and Reports on Form 8-K**
Exhibits
**Exhibit No.****Document****Location**Exhibit 31.1Section 302 of the    Sarbanes-Oxley Act of 2002 Certification of Anthony Welch, CEO.IncludedExhibit 31.2Section 302 of the    Sarbanes-Oxley Act of 2002 Certification of Robert Church.IncludedExhibit 32.1Section 906 of the    Sarbanes-Oxley Act of 2002 Certification of Anthony Welch, CEOIncludedExhibit 32.2Section 906 of the    Sarbanes-Oxley Act of 2002 Certification of Robert Church, CFOIncluded
Reports on Form 8-K: The following reports were filed on Form 8-K duringthe 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 registrantcaused this report to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 
**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 theregistrant 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**** |
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