<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, 1998 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, 1998, is 3,116,075 shares, all of one class of $0.001
par value common stock.
<PAGE> 2
HITK CORPORATION
FORM 10-Q
QUARTER ENDED NOVEMBER 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
- Consolidated Balance Sheet as of
November 30, 1998 and February 28, 1998 4
- Consolidated Statement of Operations for the
nine months ended November 30, 1998 and 1997 5
- Consolidated Statement of Operations for the
three months ended November 30, 1998 and 1997 6
- Consolidated Statement of Changes in Net Assets for
the nine months ended November 31, 1998 and 1997 7
- Consolidated Statement of Changes in Net Assets for
the three months ended November 30, 1998 and 1997 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
</TABLE>
- 2 -
<PAGE> 3
PART I. FINANCIAL INFORMATION
HITK CORPORATION
QUARTER ENDED NOVEMBER 30, 1998
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 1998 Annual Report on Form 10-K for the year ended February 28, 1998,
filed with the Securities and Exchange Commission.
The results of operations for the nine months ended November 30, 1998, are not
necessarily indicative of results to be expected for the entire fiscal year
ending February 28, 1999.
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, 1998 February 28,
(Unaudited) 1998
----------- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalent $ 670,600 $ 568,800
Restricted Cash -- 25,900
Marketable Securities 8,700 29,700
Other Investments
(Cost $54,000 and $64,600 respectively) -- --
Note Receivable - Net of Allowance of
$319,500 and $179,200 11,400 219,700
Other Current Assets 7,200 1,600
----------- -----------
Total Assets $ 697,900 $ 845,700
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses $ 1,091,700 $ 1,036,300
----------- -----------
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 (5,112,700) (4,913,800)
Net Unrealized Appreciation (Depreciation)
on Investments (60,300) (56,000)
----------- -----------
Total (453,000) 656,200
Less: Treasury Stock 230,105 Shares at Cost 846,800 846,800
----------- -----------
Total Stockholder's Equity (Deficit) (393,800) (190,600)
----------- -----------
Total Liabilities and Stockholder's Equity $ 697,900 $ 845,700
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
- 4 -
<PAGE> 5
HITK CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
REALIZED GAIN ON INVESTMENTS $ 50,300 $ --
--------- ---------
OTHER INCOME:
Interest and Dividends 35,600 66,600
--------- ---------
Net Investment Income 85,900 66,000
--------- ---------
EXPENSES:
Officer's Salary 90,000 90,000
Stockholder's Services and Reports 2,700 6,700
Professional Fees 93,200 26,500
Office 22,800 --
Bad Debt Expense 249,800 --
--------- ---------
Total Operating Expenses 458,500 123,200
--------- ---------
Net Income (Loss) from Operations (372,600) (56,600)
--------- ---------
EXTRAORDINARY ITEMS:
Loss Settlement of Litigation -- (958,400)
Gain Settlement Bankruptcy Debts 23,700 178,000
Insurance Proceeds 150,000 --
--------- ---------
Total Extraordinary Items 173,700 (780,400)
--------- ---------
UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENTS
Marketable Securities (14,800) (3,500)
Other Investments 10,500 --
--------- ---------
Total (4,300) (3,500)
--------- ---------
Increase (Decrease) in Net Assets
Resulting from Operations $(203,200) $(840,500)
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
- 5 -
<PAGE> 6
HITK CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
REALIZED GAIN ON INVESTMENTS $ -- $ --
--------- ---------
OTHER INCOME:
Interest Income 9,100 12,600
--------- ---------
Net Investment Income 9,100 12,600
--------- ---------
EXPENSES:
Officer's Salary 30,000 30,000
Stockholder's Services and Reports 900 1,100
Professional Fees 60,200 11,000
Office 4,400 --
Bad Debt Expense 140,300 --
--------- ---------
Total Operating Expenses (235,800) 42,100
--------- ---------
Net Income (Loss) from Operations (185,500) (29,500)
--------- ---------
EXTRAORDINARY ITEMS:
Loss Settlement of Litigation -- (958,400)
Gain Settlement Bankruptcy Debts -- 178,000
Insurance Proceeds 150,000 --
--------- ---------
Total Extraordinary Items 150,000 (780,400)
--------- ---------
UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENTS
Marketable Securities (4,700) (3,500)
--------- ---------
Increase (Decrease) in Net Assets
Resulting from Operations $ (81,400) $(813,400)
========= =========
</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, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CHANGES IN NET ASSETS RESULTING FROM
INVESTMENT ACTIVITIES
Net Income (Loss) from Operations $(372,600) $ (56,600)
Extraordinary Items 173,700 (780,400)
Unrealized Depreciation on Investments (4,300) (3,500)
--------- ---------
Increase (Decrease) in Net Assets (203,200) (840,500)
Net Assets - Beginning of Period (190,600) 669,500
--------- ---------
Net Assets - End of Period $(393,800) $(171,000)
========= =========
Net Asset Value Per Outstanding
Share of Common Stock $ (.01) $ (.01)
========= =========
</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, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CHANGES IN NET ASSETS RESULTING FROM
INVESTMENT ACTIVITIES
Net Income (Loss) from Operations $(226,700) $ (29,500)
Extraordinary Items 150,000 (780,400)
Unrealized Depreciation on Investments (4,700) (3,500)
--------- ---------
Increase (Decrease) in Net Assets (81,400) (813,400)
--------- ---------
Net Assets - Beginning of Period (312,400) 642,400
--------- ---------
Net Assets - End of Period (393,800) (171,000)
--------- ---------
Net Asset Value Per Outstanding
Share of Common Stock $ (.01) $ (.01)
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
- 8 -
<PAGE> 9
HITK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1998
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, 1998 and February 28, 1998, in the amount of
$11,400 and $219,700 respectively, has been valued by management at what they
consider to be the net realizable value. For the period ended November 30, 1998,
the Company set up an additional reserve for bad debt of $249,800, since the two
notes are in default and the collection of any principal and interest is not
determinable. The principal amount of one 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, 1998
NOTE 3 - NOTE RECEIVABLE (CONTINUED)
In July, 1998, the Company loaned $30,000 payable in twelve monthly installments
of $2,630.13, including principal and interest at 9.5%, the final payment due
September 1, 1999. None of the payments were ever made and the Company has set
up a reserve for bad debts of $30,000 since collection of the principal and
interest cannot be determined.
In May, 1998, the Company loaned $15,000 payable in twelve monthly installments,
interest of 10.5% only for three months, eight monthly installments of $1,322.23
with a balloon payment of $5,220.49 due May 25, 1999.
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, 1998 February 28, 1998
----------------- -----------------
<S> <C> <C>
Cash in Banks $ 670,600 $ 568,800
</TABLE>
NOTE 5 - RESTRICTED CASH
In accordance with the Third Amended Plan of reorganization filed under Chapter
11 of the Bankruptcy Code, all proceeds from the sale of assets were deposited
into an interest bearing disbursement account from which the Company made
payments on all allowed claims. The balance in this disbursement account at
February 28, 1998 was $25,900. In 1998, the bankruptcy proceedings ended and the
account was closed.
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 $ 7,885,000 which expires as follows:
- 10 -
<PAGE> 11
HITK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1998
NOTE 6 - INCOME TAXES (CONTINUED)
<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
2012 860,000
------------
Total $ 7,885,000
============
</TABLE>
NOTE 7 - BANKRUPTCY
In June, 1998, an order was entered by the Bankruptcy Court closing the
bankruptcy proceedings.
NOTE 8 - GOING CONCERN
At November, 1998, liabilities exceeded assets by $352,600.
The management of the Company intends to take the following actions to alleviate
the going concern problem: (A) Liquidate certain assets; and (B) Negotiate
reduction of liabilities with certain creditors, including $955,000 of deferred
compensation to the CEO/President and $154,200 in legal fees to a Director of
the Company.
- 11 -
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
For the nine months ended November 30, 1998, the Company had a net loss from
operations of $372,600 compared to a net loss from operations for the nine
months ended November 30, 1997 of $56,600. In 1998, the Company realized a gain
of $40,300 from the sale of its shares in other investments which had previously
been written off as a worthless security. Interest income declined to $35,600
from $66,000 as a result of paying bankruptcy and litigation claims of
$1,236,700 in 1997.
Operating Expense for the nine months ended November 30, 1998 were $458,500, an
increase of $294,100 from 1997. The Company wrote off $250,000 as bad debt
expense on notes receivable which are in arrears and collection on those notes
of principal and interest cannot be determined. Professional fees, primarily
legal, increased by $66,700 includes payment of the bankruptcy court fees, sale
of shares in a business development company and efforts to collect on notes
receivable.
In 1997, the Company had an extraordinary loss on settlement of litigation of
$958,400 and a gain on settlement of bankruptcy debts of $178,000. In 1998, the
Company had a gain of $23,700 on the settlement of the final bankruptcy debts
and collected insurance proceeds of $150,000 related to litigation which was
settled in 1997.
LIQUIDITY AND WORKING CAPITAL
As of November 30, 1998, the Company had a working capital deficit of $393,800.
This is an increase of $203,200 from February 28, 1998 due to the loss for the
nine months ended November 30, 1998. The Company's ability to continue as a
going concern is dependent on several factors: (A) Liquidation of assets
including share in public companies no longer traded, and (B) Negotiate
reduction of liabilities with certain creditors, including $920,000 of deferred
compensation to the CEO/President of the Company and $154,200 in legal fees to a
Director and Officer of the Company.
- 12 -
<PAGE> 13
HITK CORPORATION
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None
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: July 7, 1999
- 14-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> NOV-30-1998
<CASH> 670,600
<SECURITIES> 8,700
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 697,900
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 697,900
<CURRENT-LIABILITIES> 1,091,700
<BONDS> 0
0
0
<COMMON> (393,800)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 697,900
<SALES> 0
<TOTAL-REVENUES> 85,900
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 458,500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (226,700)
<INCOME-TAX> 0
<INCOME-CONTINUING> (226,700)
<DISCONTINUED> 0
<EXTRAORDINARY> 173,700
<CHANGES> (4,700)
<NET-INCOME> (372,600)
<EPS-BASIC> (.026)
<EPS-DILUTED> (.026)
</TABLE>
