SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For Three Months Ended March 31, 2000
Commission File Number 0-3296
ETHIKA CORPORATION
(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0440887
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
11249 W. 103rd Drive
Westminster, Colorado 80021
(Address of Principal Executive Office)
Registrant's telephone number including area code: (303) 637 2351
Former name, former address, and former fiscal year, if changed since last
report: NONE.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
CLASS Outstanding at May 10, 2000
Common Stock, $1.00 par value 28,360,346
<PAGE>
ETHIKA CORPORATION
INDEX
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets - March 31, 2000 and December 31, 1999 3
Consolidated statements of operations for the three months
ended March 31, 2000 and 1999 4
Consolidated statements of cash flows for the three months
ended March 31, 2000 and 1999 5
Notes to consolidated financial statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports of Form 8-K 8
Signatures 8
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Ethika Corporation
Balance Sheet
(Unaudited)
March 31, December 31,
2000 1999
-------------- ----------------
Cash and cash equivalents $ 26,761 $ 21,922
Note receivable 46,832 69,515
Investment securities - trading 17,330 48,523
-------------- ----------------
Total current assets 90,923 139,960
Note receivable - -
-------------- ----------------
-------------- ----------------
Total assets $ 90,923 $ 139,960
============== ================
Accounts payable and Accrued expenses $ 28,771 $ 30,793
-------------- ----------------
Common stock 28,511,458 28,511,458
Discount on common stock (16,166,028) (16,166,028)
Accumulated deficit (12,282,121) (12,235,151)
-------------- ----------------
63,309 110,279
Less : treasury stock (1,157) (1,112)
-------------- ----------------
Total stockholders' equity 62,152 109,167
-------------- ----------------
Total liabilities and stockholders' equity $ 90,923 $ 139,960
============== ================
The accompanying notes are an integral part of these financial statements
3
<PAGE>
Ethika Corporation
Statement of Operations
(Unaudited)
Three Months ended March 31,
2000 1999
-------------- ----------------
General and administrative expenses $ (17,093) $ (17,849)
Interest income 1,317 14
Unrealized loss on investments (31,194) -
-------------- ----------------
Loss from operations (46,970) (17,835)
Income taxes 0 0
-------------- ----------------
Net (loss) $ (46,970) $ (17,835)
============== ================
Basic and diluted earnings per share: $ (0.002) $ (0.001)
============== ================
The accompanying notes are an integral part of these financial statements
4
<PAGE>
Ethika Corporation
Statement of Cash Flows
(Unaudited)
Three Months ended March 31,
2000 1999
---------------- ---------------
Cash Flows from Operating activities
Net Loss $ (46,970) $ (17,835)
Adjustments to reconcile net (loss) to
net cash provided by operating activities
(Gain) loss on investments 31,194 -
Decrease in accounts payable (2,025) (6,000)
---------------- ---------------
Net cash (used by) operating activities (17,801) (23,835)
---------------- ---------------
Cash flows from investing activities
Payment received on notes receivable 22,685 12,000
---------------- ---------------
Net cash provided by investing activities 22,685 12,000
---------------- ---------------
Cash flows from financing activities
Purchase of treasury stock (45) -
---------------- ---------------
Net cash (used by) financing activities (45) -
---------------- ---------------
Net (decrease) in cash and cash equivalents 4,839 (11,835)
Cash and cash equivalents-beginning of period 21,922 48,318
---------------- ---------------
Cash and cash equivalents-end of period $ 26,761 $ 36,483
================ ===============
Supplemental Cash Flow Information
Cash paid for interest $ - $ -
================ ===============
Schedule of Non-Cash Investing and
Financing Activities None None
================ ===============
The accompanying notes are an integral part of these financial statements
5
<PAGE>
ETHIKA CORPORATION
Notes to Unaudited Consolidated Financial Statements
For the three months ended March 31, 2000.
NATURE OF OPERATIONS
Ethika Corporation (the "Corporation") has no present operations other than the
holding of certain assets. The Corporation is seeking a privately held business
with whom it can reorganize so as to take advantage of the Corporation's status
as publicly held corporation.
BASIS OF PRESENTATION
The un-audited financial statements contain all adjustments considered necessary
by Management to make the financial statements not misleading.
NOTE RECEIVABLE
During 1995, the Corporation entered into leasing activities which consist of
the leasing of fry cook units to be placed in various locations and operated by
the lessee. On March 12, 1999, the Corporation entered into an agreement with
the Parent Corporation of the lessee, whereby the Corporation assigned its
leases to the Parent Corporation for a non interest bearing promissory note in
the amount of $128,000 plus a $12,000 cash payment. The note provides for
sixteen monthly installments of $8,000 beginning on April 15, 1999. The
Corporation recorded the note at present value of $144,198 imputing interest at
8.00%. The Corporation recognized a loss of $27,292 on this transaction.
LAWSUIT SETTLEMENT
On September 20, 1998, the Registrant was served with the Third Amended
Complaint in an action entitled Jeffrey Allard, et al v. Kidztime TV, Inc., et
al in Colorado District Court, Jefferson County, Colorado. On July 6, 1999, the
Registrant entered into and closed a settlement agreement on its previously
disclosed Legal Proceedings of Jeffrey Allard, et al v. Kidztime TV, Inc., et al
in Colorado District Court, Jefferson County, Colorado. The settlement releases
all of the plaintiffs claims against the Registrant and any potential claims
against the Registrant's management. The terms of the offer were the payment of
$100,000 and the issuance of 5,000,000 shares of restricted common stock. The
legal proceedings are to be dismissed with prejudice.
GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. For the twelve month period ended
December 31, 1999 the Company incurred a loss from operations of $99,963 and had
an accumulated deficit of $12,235,151 that raise substantial doubt about its
ability to continue as a going concern.
6
<PAGE>
Item 2 - Management's Plan of Operations
The Registrant did not have any revenue from operations during the fiscal year
ended December 31, 1998 nor during the current fiscal year. The accompanying
financial statements have been prepared assuming that the Company will continue
as a going concern. Having investment income as its only source of income,
raises substantial doubt about the ability of the Company to continue as a going
concern.
The Registrant's plan of operations is seek out a privately held business with
whom the Registrant can reorganize so as to take advantage of the Registrant's
status as a publicly held corporation. In order to facilitate this objective,
the Registrant held a Shareholder's Meeting in June 1999 and adopted certain
measures to facilitate a reorganization. The measures approved by the
Shareholders authorized the Board of Directors to take the following actions
pursuant to a reorganization of the Registrant:
1. Increase the size of the Board of Directors to seven members
2. Amend the Articles of Incorporation to Change the Name of the
Corporation
3. Declare a reverse split of up to 50 to 1.
As of the date of this report, Management has evaluated several potential
reorganizations. However as of the date of this report, there has been no
decision to proceed on any reorganization nor has any agreement been reached on
even principal terms of such a reorganization.
Liquidity and Capital Resources
The Registrant has reduced its overhead expenses to approximately $6,000 per
month and is paying $1,000 per month against its account payable to its former
auditor. The Registrant receives $8,000 per month in payment of its note
receivable from Alanco Environmental Resources Corporation and from these funds
the Registrant expects to have sufficient cash resources for its reduced
operations through July 2000.
In September, 1999 the Registrant received a royalty payment of $7,244 from Text
Retrieval Systems, Inc., pursuant to the Registrant's February, 1998 sale of its
former subsidiary. The royalty payment is on each subscription of Text Retrieval
Systems, Inc.'s HR Comply product and will continue until such time that the
Registrant has been paid a total of $1,500,000.
7
<PAGE>
Part II Other Information:
Item 6 - Exhibits and Reports on 8K
(a) Exhibits: (27) Financial Data Schedule
(b) none
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Ethika Corporation
------------------
(Registrant)
Date: May 10, 2000 /s/Dennis Brovarone
-------------------
President
8
<PAGE>
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