<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
November 30, 1997 2-82427-NY
HITK CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3159591
(State or other jurisdiction of (I.R.S. Employee Identification No.)
incorporation or organization)
68 Schraalenburg Road
P. O. Box 233
Harrington Park, New Jersey 07640
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (201) 784-5190
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
----- ------
The number of shares outstanding of each of the registrant's classes of common
stock, as of November 30, 1997, is 3,202,504 shares, all of one class of $0.001
par value common stock.
<PAGE> 2
HITK CORPORATION
FORM 10-Q
QUARTER ENDED NOVEMBER 30, 1997
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
- Consolidated Balance Sheet as of
November 30, 1997 and February 28, 1997 4
- Consolidated Statement of Operations for the
nine months ended November 30, 1997 and 1996 5
- Consolidated Statement of Operations for the
three months ended November 30, 1997 and 1996 6
- Consolidated Statement of Changes in Net Assets for
the nine months ended November 31, 1997 and 1996 7
- Consolidated Statement of Changes in Net Assets for
the three months ended November 30, 1997 and 1996 8
- Notes to Consolidated Financial Statements 9 - 11
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 13
Item 2 - Changes in Securities 13
Item 3 - Defaults upon Senior Securities 13
Item 4 - Submission of Matters to a Vote of Security Holders 13
Item 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8-K 13
SIGNATURES 14
- 2 -
<PAGE> 3
PART I. FINANCIAL INFORMATION
HITK CORPORATION
QUARTER ENDED NOVEMBER 30, 1997
The following financial information is submitted in response to the requirements
of Form 10-Q and does not purport to be financial statements prepared in
accordance with generally accepted accounting principles. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted, although the Company believes the disclosures that are made are
adequate to make the information presented not misleading. Further, in the
opinion of the management, the interim financial statements reflect fairly the
financial position and results of operations for the period indicated.
It is suggested that these interim consolidated financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Company's 1997 Annual Report on Form 10-K for the year ended February 28, 1997,
filed with the Securities and Exchange Commission.
The results of operations for the nine months ended November 30, 1997, are not
necessarily indicative of results to be expected for the entire fiscal year
ending February 28, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
a. Registrant's Form S-18 Registration Statement and Exhibit Book under File
#2-82427-NY as effective May 13, 1983, and Form N-2 Registration Statement under
File #2-94660 as effective August 14, 1985, are incorporated by reference.
b. Forms 8-K dated September 12, 1989, October 21, 1988, April 15, 1988, January
11, 1988, October 30, 1987, August 31, 1987, April 28, 1987 and March 4, 1987
are incorporated by reference.
c. Third amended plan of reorganization under Chapter 11 filed on July 17, 1989,
with the United States Bankruptcy Court for the District of Nevada is
incorporated by reference.
d. Settlement agreement between HITK Corporation and Bell Atlantic
Systems Leasing International, Inc. is incorporated by reference.
e. Order confirming plan of reorganization under Chapter 11 filed on September
13, 1989 with the United States Bankruptcy Court for the District of Nevada is
incorporated by reference.
- 3 -
<PAGE> 4
HITK CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
November 30, 1997 February 28,
(Unaudited) 1997
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalent $ 574,800 $ 13,000
Restricted Cash 25,600 1,854,100
Marketable Securities 17,600 --
Business Development Investments
(Cost $64,600 and $64,600 respectively) -- --
Note Receivable - Net 219,700 219,700
----------- -----------
Total Assets $ 837,700 $ 2,086,800
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses $ 1,008,700 $ 1,417,300
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Common Stock, Par Value $.001 per share
6,250,000 Shares Authorized
3,346,630 Shares Issued and Outstanding 3,400 3,400
Additional Paid-in Capital 5,622,600 5,622,600
Retained Earnings (4,882,100) (4,045,100)
Net Unrealized Appreciation (Depreciation)
on Investments (68,100) (64,600)
----------- -----------
Total 675,800 1,516,300
Less: Treasury Stock 144,126 Shares at Cost 846,800 846,800
----------- -----------
Total Stockholder's Equity (Deficit) (171,000) 669,500
----------- -----------
Total Liabilities and Stockholder's Equity $ 837,700 $ 2,086,800
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
- 4 -
<PAGE> 5
HITK CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
REALIZED GAIN ON INVESTMENTS $ -- $ --
--------- ---------
OTHER INCOME:
Interest Income 66,600 91,000
--------- ---------
Net Investment Income 66,600 91,000
--------- ---------
EXPENSES:
Officer's Salary 90,000 90,000
Stockholder's Services and Reports 6,700 4,900
Professional Fees 26,500 8,200
--------- ---------
Total Operating Expenses 123,200 103,100
--------- ---------
Net Income (Loss) from Operations (56,600) (12,100)
--------- ---------
EXTRAORDINARY ITEMS:
Loss Settlement of Litigation (958,400) --
Gain Settlement Bankruptcy Debts 178,000 --
--------- ---------
Total Extraordinary Items (780,400) --
--------- ---------
UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENTS
Marketable Securities (3,500) --
--------- ---------
Increase (Decrease) in Net Assets
Resulting from Operations $ 840,500 $ (12,100)
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
- 5 -
<PAGE> 6
HITK CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
REALIZED GAIN ON INVESTMENTS $ -- $ --
--------- ---------
OTHER INCOME:
Interest Income 12,600 28,300
--------- ---------
Net Investment Income 12,600 28,300
--------- ---------
EXPENSES:
Officer's Salary 30,000 30,000
Stockholder's Services and Reports 1,100 --
Professional Fees 11,000 800
--------- ---------
Total Operating Expenses 42,100 30,800
--------- ---------
Net Income (Loss) from Operations (29,500) (2,500)
--------- ---------
EXTRAORDINARY ITEMS:
Loss Settlement of Litigation (958,400) --
Gain Settlement Bankruptcy Debts 178,000 --
--------- ---------
Total Extraordinary Items (780,400) --
--------- ---------
UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENTS
Marketable Securities (3,500) --
--------- ---------
Increase (Decrease) in Net Assets
Resulting from Operations $(813,400) $ (2,500)
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
- 6 -
<PAGE> 7
HITK CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CHANGES IN NET ASSETS RESULTING FROM
INVESTMENT ACTIVITIES
Net Income (Loss) from Operations $ (56,600) $ (12,100)
Extraordinary Items (780,400) --
Unrealized Depreciation on Investments (3,500) --
--------- ---------
Increase (Decrease) in Net Assets 840,500 (12,100)
Net Assets - Beginning of Period 669,500 724,300
--------- ---------
Net Assets - End of Period $(171,000) $ (12,200)
========= =========
Net Asset Value Per Outstanding
Share of Common Stock $ (.01) $ .22
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
- 7 -
<PAGE> 8
HITK CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CHANGES IN NET ASSETS RESULTING FROM
INVESTMENT ACTIVITIES
Net Income (Loss) from Operations $ (29,500) $ (2,500)
Extraordinary Items (780,400) --
Unrealized Depreciation on Investments (3,500) --
--------- ---------
Increase (Decrease) in Net Assets (813,400) (2,500)
--------- ---------
Net Assets - Beginning of Period 642,400 714,700
--------- ---------
Net Assets - End of Period (171,000) 712,200
--------- ---------
Net Asset Value Per Outstanding
Share of Common Stock $ (.01) $ .22
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
- 8 -
<PAGE> 9
HITK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1997
NOTE 1 - ORGANIZATION
HITK Corporation (formerly High Technology Capital Corporation) (the "Company")
was organized and incorporated on March 10, 1983, under the laws of the State of
Delaware with authorized capital of 6,250,000 shares of common stock, par value
$.001 per share, after giving effect to a 1:4 reverse stock split effective
December 2, 1986. The Company has registered under the Investment Company Act of
1940 and has elected to be treated as a "Business Development Company".
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION - The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiary, HITK Communications, Inc. All intercompany transactions
have been eliminated.
INCOME TAXES - Deferred income taxes are recorded to reflect the tax
consequences on future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each year end. The tax
benefit to operating losses and tax credit carryforwards are recognized if
management believes, based on available evidence, that is more likely than not
that they will be realized. Investment tax credits are accounted for under the
flow-through method.
CONCENTRATION OF CREDIT RISK - Financial instruments which potentially subject
the Company to a concentration of credit risk principally consist of cash and
cash equivalents in excess of FDIC limits.
ANTICIPATED EFFECT OF RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING
STANDARDS - The Company does not expect the effect of recently issued accounting
standards, when adopted, to have a material impact on its financial position and
results of operations.
NOTE 3 - NOTE RECEIVABLE
Note receivable at November 30, 1997 and February 28, 1997, in the amount of
$219,700 and $219,700 respectively, has been valued by management at what they
consider to be the net realizable value. The principal amount of the note is
$570,000. Monthly payments include interest only at an annual interest rate of
5%, or 5% of the annual gross revenue of the borrower, whichever is less. All
unpaid interest and principal is due June 24, 2015.
- 9 -
<PAGE> 10
HITK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1997
NOTE 4 - CASH AND CASH EQUIVALENTS
Cash equivalents include all highly liquid investments with an original maturity
of three months or less. Cash and cash equivalents consist of:
<TABLE>
<CAPTION>
November 30, 1997 February 28, 1997
----------------- -----------------
<S> <C> <C>
Cash in Banks $ 24,800 $ 13,300
Certificates of Deposit 550,000 --
-------- --------
Total $574,800 $ 13,000
======== ========
</TABLE>
NOTE 5 - RESTRICTED CASH
In accordance with the Third Amended Plan of reorganization filed under Chapter
11 of the Bankruptcy Code, an interest bearing disbursement account shall be
maintained to make payments on all allowed claims only upon order of the
Bankruptcy Court. The balance in this disbursement account at November 30, 1997
and February 28, 1997 was $24,200 and $1,854,100, respectively.
NOTE 6 - INCOME TAXES
The Company filed a consolidated Federal Income Tax Return which included its
wholly owned subsidiaries.
For tax purposes, the Company has a net operating loss carryforward of
approximately $ 7,025,000 which expires as follows:
<TABLE>
<S> <C>
December 31, 2002 $ 3,250,000
2003 605,000
2004 2,480,000
2005 225,000
2006 105,000
2007 65,000
2008 85,000
2009 100,000
2010 55,000
2011 55,000
------------
Total $ 7,025,000
============
</TABLE>
In addition, the Company has a capital loss carryforward in excess of
$5,260,000.
- 10 -
<PAGE> 11
HITK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1997
NOTE 7 - SETTLEMENT OF LITIGATION
During the period ended November 30, 1997, the Company and Bell Atlantic Systems
Leasing International, Inc. (Bell Atlantic), reached a settlement on all claims
between them which was approved by the bankruptcy court. On October 30, 1997,
the Company made a payment to Bell Atlantic for $955,361, ending this
litigation.
During the period ended November 30, 1997, the Company also settled all claims
with the remaining Solar Age shareholders, paying them $3,000.
NOTE 8 - BANKRUPTCY
On October 21, 1988, as a result of Bell Atlantic obtaining an order freezing
all of HITK's assets, the Company was forced to file a voluntary petition under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court, District of Nevada. On September 13, 1989, the Unites States Bankruptcy
Court confirmed HITK's plan of reorganization terminating the bankruptcy
proceedings.
In October, 1997, the Company, with bankruptcy court approval, settled all
disputed claims (except one claim where the individual could not be located) and
made payments on all disputed and undisputed claims in the amount of $278,532.
The Company recorded a net gain of $178,000, as a result of the settlement of
all disputed claims.
- 11 -
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
For the nine months ended November 30, 1997, the Company had a net loss from
operations of $56,600 compared to a net loss of $12,600 for the nine months
ended November 30, 1996. Interest Income declined by $24,400 in 1997, as a
result of two factors. In October 1997, the Company made payments of $1,236,893
settling its litigation and bankruptcy claims. This reduced interest income by
approximately $6,000. In addition, interest payments on the note receivable are
in arrears, and the Company has determined that income will be recorded only as
payments are received until the arrearages have been repaid and interest
payments are current.
Expenses for the nine months ended November 30, 1997, increased by $20,100 over
the nine months ended November 30, 1996. Professional fees, primarily legal,
increased by over $18,000 as a result of settling all litigation and bankruptcy
claims.
On October 30, 1997, the Company took an extraordinary loss of $958,361 as a
result of the bankruptcy court giving final approval to pay Bell Atlantic and
the Solar Age shareholders in settlement of all claims between the Company and
the above parties. In addition, the Company recorded a net gain of $178,012 as a
result of the bankruptcy court approving settlements on all disputed claims and
the payment of those settled claims and undisputed claims. (One disputed claim
remains, but the individual cannot be located.)
During the period ended November 30, 1997, the Company recorded an unrealized
loss of $3,500 on marketable securities.
LIQUIDITY AND WORKING CAPITAL
As of November 30, 1997, cash and cash equivalent were approximately $574,800.
Management intends to liquidate the one remaining disputed claim outstanding
under its plan or reorganization which was approved by the bankruptcy court in
September, 1989. The claim is approximately $25,000. Liquidation of the claim
will satisfy all of the conditions set forth in its reorganization plan.
Concurrently, HITK intends to pursue its claims against third parties arising
out of the Bell Atlantic litigation, and, to the extent possible, to liquidate
its remaining assets.
- 12 -
<PAGE> 13
HITK CORPORATION
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
As of November 30, 1997, HITK had settled with Bell Atlantic and the Solar Age
defendants/counterclaim plaintiffs, and all claims against the Company which
were the subject of the litigation have been dismissed.
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
- 13 -
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
HITK CORPORATION
By: /s/ Robert N. Schuck
-----------------------
Robert N. Schuck
Chief Executive Officer
and President
Dated: March 4, 1998
-------------
- 14-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 600,400
<SECURITIES> 17,600
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 618,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 837,700
<CURRENT-LIABILITIES> 1,008,700
<BONDS> 0
0
0
<COMMON> 7,400
<OTHER-SE> (104,400)
<TOTAL-LIABILITY-AND-EQUITY> 837,900
<SALES> 0
<TOTAL-REVENUES> 66,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 123,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (56,600)
<INCOME-TAX> 0
<INCOME-CONTINUING> (56,600)
<DISCONTINUED> 0
<EXTRAORDINARY> (780,400)
<CHANGES> 0
<NET-INCOME> (840,500)
<EPS-PRIMARY> (.262)
<EPS-DILUTED> (.262)
</TABLE>
