<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[ X ] Annual Report Pursuant to 13 or 15(d) of the Securities and Exchange
Act of 1934
For the Fiscal Year Ended Commission File Number
February 28, 1999 2-82427-NY
----------------- ----------
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
HITK CORPORATION
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3159591
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation of organization) Number)
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
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this 10K or any amendment to this Form
10K. [ ]
The aggregate market value of the voting stock held by non-affiliates (1) of the
registrant based on no bid price of such stock, as of May 27, 1999 is $0.
The number of shares outstanding of each of the registrant's classes of common
stock, as of May 15, 1999 is 3,116,075 shares, all of one class of $.001 par
value Common Stock.
(1) Affiliated for purposes of this item refer to those persons who are
currently officers, directors and/or owners of 5 percent or more of the
Company's outstanding Common Stock.
<PAGE> 2
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.
b. Forms 8-K dated October 21, 1988, April 15, 1988, January 11, 1988, October
30, 1987, August 31, 1987, April 29, 1987 and March 4, 1987 are incorporated by
reference into Part II, Item 8 of this report.
c. Third amended plan of reorganization under Chapter 11 filed on July 14, 1989
and confirmed on September 13, 1989 with the United States Bankruptcy Court for
the District of Nevada is incorporated by reference into Part II, Item 8 of this
report.
d. Settlement agreement between HITK Corporation and Bell Atlantic 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.
(Balance of Page Left Intentionally Blank)
-2-
<PAGE> 3
HITK CORPORATION
FORM 10-K/A
FISCAL YEAR ENDED FEBRUARY 28, 1999
TABLE OF CONTENTS
PAGE
PART I
Item 1 - Business 4 - 5
Item 2 - Properties 5
Item 3 - Legal Proceedings 5
Item 4 - Submission of Matters to a Vote of Security Holders 5
PART II
Item 5 - Market for Registrant's Common Stock and
Related Stockholder Matters 6
Item 6 - Selected Financial Data 7
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 8 - Financial Statements and Supplementary Data 9 - 18
Item 9 - Changes in and Disagreement with Accountants on
Accounting and Financial Disclosure 19
PART III
Item 10 - Directors and Executive Officers of the Registrant 20 - 21
Item 11 - Executive Compensation 21
Item 12 - Security Ownership of Certain Beneficial
Owners and Management 22
Item 13 - Certain Relationships and Related Transactions 22
PART IV
Item 14 - Exhibits, Financial Statements, Schedules, and
Reports on Form 8-K 23 - 25
SIGNATURES 26
- 3 -
<PAGE> 4
FORM 10-K/A
PART I
ITEM 1 - BUSINESS
--------------------
GENERAL DEVELOPMENT
-------------------
HITK 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.
The Company commenced operations on June 1983. The Company was engaged in the
following lines of business: consulting as to methods of obtaining financing and
providing limited financing to prospective clients on a debt basis through the
lending of Company funds; and taking equity positions in its clients.
In accordance with the Investment Company Act of 1940 ("the 1940 Act") and as a
consequence of the Company having investment security value in excess of 40% of
the value of its own assets, the Company became a non-diversified closed-end
investment company and elected to be treated as a "Business Development Company"
under the 1940 Act.
On November 9, 1984, the Company filed a notification of election to be treated
as a Business Development Company under the 1940 Act. The 1940 Act restricts the
Company's business purpose, its venture capital investment activities and the
various types of companies in which it may invest. The Company must generally
comply with these provisions in order to maintain its qualification to elect
treatment as a Business Development Company. The investment objectives and
policies may be changed by the Company's Board of Directors without prior
approval of the holders of a majority of the outstanding voting securities,
except for the Company's policies to operate as a Business Development Company
under the 1940 Act, and its policies regarding leveraging its investment
activities.
INVESTMENT OBJECTIVES AND POLICIES
----------------------------------
The primary investment objective of the Company was to seek long-term capital
appreciation by making debt and equity investments in new and emerging companies
which the Company believed would offer long-term growth possibilities.
CURRENT STATUS OF OPERATIONS
----------------------------
On October 21, 1988 the Company filed a voluntary petition under Chapter 11 of
the United States Bankruptcy Code. On September 13, 1989, the United States
Bankruptcy Court for the District of Nevada entered an order confirming the
Company's plan of reorganization. Pursuant to the plan, the Company liquidated
virtually all of its assets and escrowed the proceeds from such sale in a
disbursement account from which the claims of its creditors were to be paid. In
1997, the Company settled all litigation in which it was involved and paid all
bankruptcy claims according to the terms of its plan. In June, 1998, the
bankruptcy court entered an order closing HITK's bankruptcy proceedings.
- 4 -
<PAGE> 5
EMPLOYEES
---------
On February 28, 1999, there were two people employed by the Company.
ITEM 2. PROPERTIES
---------------------
Not Applicable.
ITEM 3. LEGAL PROCEEDINGS
---------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------------------------------------------------------------
None.
- 5 -
<PAGE> 6
HITK 10-K
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
------------------------------------------------------------------------------
(a) Market Information - The Company's common stock (all of which is one class,
$.001 par value) is traded in the pink sheets. There has been no closing bid
price of the stock since June 24, 1993.
Fiscal Years Ended
------------------
<TABLE>
<CAPTION>
February 28, February 28,
Quarter Ended 1999 1998
------------- ------------------------ ------------------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
May 31 No Bid No Bid No Bid No Bid
August 31 No Bid No Bid No Bid No Bid
November 30 No Bid No Bid No Bid No Bid
February 28 No Bid No Bid No Bid No Bid
</TABLE>
(b) Holders - The approximate number of holders of record of the Company's
common stock as of February 28, 1999 amounts of 1,066 inclusive of those
brokerage firms and/or clearing houses holding the Company's common stock for
their clients (with each such brokerage and/or clearing house being considered
as one holder). The Company believes the total number of stockholders to be
approximately 3,000.
(c) Dividends - The Company has not paid or declared any cash dividends upon its
common stock since its inception, and by reason of its contemplated financial
requirements, does not anticipate paying any cash dividends on its common stock
in the near future.
(Balance of Page Left Intentionally Blank)
- 6 -
<PAGE> 7
ITEM 6 - SELECTED FINANCIAL DATA
--------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 28,
---------------------------------------------
1997 1996 1995 1999 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross Investment Income $ 92,400 $ 86,400 $ 113,100 $ 136,800 $ 94,200
Costs and Expenses 513,800 174,800 167,900 169,900 190,700
----------- ----------- ----------- ----------- -----------
Net Investment Income
(Loss) (421,400) (88,400) $ (58,100) $ (33,100) $ (96,500)
----------- ----------- ----------- ----------- -----------
Extraordinary Gain
(Loss) 273,700 (780,300) -- (25,000) $ --
----------- ----------- ----------- ----------- -----------
Unrealized
Appreciation
(Depreciation)
on Investments (6,200) 8,600 -- -- $ (29,500)
----------- ----------- ----------- ----------- -----------
Increase (Decrease) in
Net Assets Resulting
from Investment
Activities $ (153,900) $ (860,100) $ (54,800) $ (58,100) $ (126,000)
----------- ----------- ----------- ----------- -----------
Net Increase
(Decrease) in Net
Asset Value $ (153,900) $ (860,100) $ (54,800) $ (58,100) $ (126,000)
----------- ----------- ----------- ----------- -----------
Increase(Decrease)in
Net Assets Per Share(1) $ (.05) $ (.27) $ (.01) $ (.02) $ (.04)
----------- ----------- ----------- ----------- -----------
Balance Sheet:
Cash and Cash
Equivalents $ 655,500 $ 568,800 $ 13,000 $ 12,200 $ 15,800
----------- ----------- ----------- ----------- -----------
Restricted Cash -- 25,900 $ 1,854,100 $ 1,787,000 $ 1,682,600
----------- ----------- ----------- ----------- -----------
Investments 13,300 249,400 $ 219,700 $ 219,700 $ 222,800
----------- ----------- ----------- ----------- -----------
Total Assets 676,100 845,700 $ 2,086,800 $ 2,018,900 $ 1,921,200
----------- ----------- ----------- ----------- -----------
Total Liabilities 1,020,600 1,036,300 $ 1,417,300 $ 1,294,600 $ 1,138,800
----------- ----------- ----------- ----------- -----------
Net Assets Applicable
to Outstanding
Common Shares (1) (344,500) (190,600) $ 669,500 $ 724,300 $ 782,400
----------- ----------- ----------- ----------- -----------
Net Tangible Book Value (344,400) (190,600) $ 669,500 $ 724,300 $ 782,400
----------- ----------- ----------- ----------- -----------
Net Tangible Book
Value Per Share (1) $ (.11) $ (.06) $ .21 $ .22 $ .24
----------- ----------- ----------- ----------- -----------
(1) Number of Shares
Outstanding at
End of Period 3,116,075 3,202,504 3,202,504 3,202,504 3,202,504
=========== =========== =========== =========== ===========
</TABLE>
- 7 -
<PAGE> 8
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
--------------------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
RESULTS OF OPERATIONS
---------------------
For the year ended February 28, 1999, the Company had a net decrease in assets
of $153,900 compared to a net decrease of $860,100 and $54,800 for the years
ended February 28, 1998 and 1997.
NET INVESTMENT INCOME
---------------------
In 1999, the Company recorded a realized gain on investments of $49,100. In
1999, the Company had interest and dividend income of $43,300 compared to
$86,400 and $113,100 in 1998 and 1997. In October, 1997, the Company made
payments of $1,237,000 which settled its litigation and bankruptcy claims. This
reduced interest income in 1999 by $43,000 and in 1998 by approximately $21,000.
In addition, interest payment on notes receivable ceased in August, 1998,
further reducing interest income. In 1998, interest payments were in arrears and
income was recorded only when payments were received.
EXTRAORDINARY ITEMS
-------------------
In 1999, the Company recorded the following extraordinary items: (1) Gain on
settlement of bankruptcy debts of $23,700, (2) Insurance proceeds of $150,000
from the settlement of an insurance claim related to the Bell Atlantic
litigation, and (3) Forgiveness of $100,000 in debt due the CEO/President of the
Company. In 1998, the extraordinary items were made up of two components
relating to the Company settling its litigation with Bell Atlantic Systems
Leasing International, Inc., for $955,300 and the Solar Age shareholders for
$3,000, and the Bankruptcy Court approving settlement of all claims both
disputed and undisputed, which resulted in a gain of $178,000.
OPERATING EXPENSES
------------------
Operating expenses for the three years ended February 28, 1999, were $513,800,
$174,800 and $167,900, respectively. The increase in 1999, over 1998 and 1997,
of approximately $340,000 was composed of two main components. The Company
recorded an allowance for bad debt expense of $249,700 related notes receivable
and additional professional fees and court costs in closing the bankruptcy of
$70,000. Other operating expenses increased by approximately $20,000.
LIQUIDITY AND WORKING CAPITAL
-----------------------------
As of February 28, 1999, the Company had a stockholders deficit of $344,500.
This is a result of recurring operating losses and the extraordinary loss of
$955,361 recorded from the settlement between Bell Atlantic and the Company.
The Management of the Company intends to take the following actions to alleviate
the continuing going concern problem. (A) Litigate collection on notes which are
in default that the Company has recorded a 100% reserve. (B) Sell the Company
shares in shell corporations which had previously been written off. (C)
Negotiate a reduction of liabilities with certain creditors including $845,000
in deferred compensation to the CEO/President and $155,000 in legal fees to
VP/Director of the Company.
ITEM 8 - FINANCIAL STATEMENTS
-------------------------------
- 8 -
<PAGE> 9
INDEPENDENT AUDITOR'S REPORT
----------------------------
The Board of Directors
HITK Corporation
I have audited the accompanying balance sheet of HITK Corporation as
of February 28, 1999 and 1998, and the related statements of operations and
changes in net assets for the three years then ended, and the schedule listed in
the index at Item 14. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of HITK Corporation at
February 28, 1999 and February 29, 1998, and the results of its operations and
changes in its net assets for the years then ended in conformity with generally
accepted accounting principles. The schedule referred to above presents fairly,
in all material respects, when read in conjunction with the related financial
statements, the information therein set forth.
- 9 -
<PAGE> 10
The accompanying Financial Statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 6, the Company
settled the litigation with Bell Atlantic Systems Leasing International, Inc.,
resulting in a loss of $955,361. As a result of this settlement and continuing
losses from operations, the Company has a deficit stockholders equity of
$(344,500). This condition raises substantial doubt about the Company's ability
to continue as a going concern. Management's plan with regard to these matters
are described in Note 9. These Financial Statements do not include any
adjustments that might result.
/s/ Sanford Feibusch
--------------------------
Sanford Feibusch
Certified Public Accountant
Monsey, New York
May 20, 1999
- 10 -
<PAGE> 11
HITK CORPORATION
----------------
BALANCE SHEET
-------------
AS OF FEBRUARY 28, 1999 AND 1998
--------------------------------
<TABLE>
<CAPTION>
ASSETS
1999 1998
---- ----
ASSETS:
<S> <C> <C>
Cash and Cash Equivalents $ 655,500 $ 568,800
Restricted Cash -- 25,900
Marketable Securities (Cost $14,982
and $21,122, respectively) 5,600 29,700
Other Investments
(Cost $52,900 and $64,600, respectively) -- --
Notes Receivable - Net of allowance for doubtful
accounts of $319,500 and $69,700 respectively) 7,700 219,700
Other Current Assets 7,300 1,600
----------- -----------
Total Assets $ 676,100 $ 845,700
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES:
--------------------
Accounts Payable and Accrued Expenses $ 1,020,600 $ 1,036,300
----------- -----------
COMMITMENTS AND CONTINGENCIES
-----------------------------
STOCKHOLDER'S EQUITY (DEFICIT):
-------------------------------
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 (5,061,500) (4,913,800)
Net Unrealized Appreciation (Depreciation)
on Investments (62,200) (56,000)
----------- -----------
Total 502,300 656,200
Less: Treasury Stock 230,105 Shares at Cost 846,800 846,800
----------- -----------
Total Stockholder's Equity (Deficit) (344,500) (190,600)
----------- -----------
Total Liabilities and Stockholder's Equity $ 676,100 $ 845,700
=========== ===========
</TABLE>
See Notes to Financial Statements.
- 11 -
<PAGE> 12
HITK CORPORATION
----------------
STATEMENT OF OPERATIONS
-----------------------
FOR THE YEARS ENDED
-------------------
FEBRUARY 28, 1999, 1998 AND 1997
--------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Realized Gain (Loss) on Investments $ 49,100 $ -- $ --
--------- --------- ---------
OTHER INCOME:
-------------
Interest and Dividends 43,300 86,400 113,100
--------- --------- ---------
Net Investment Income (Loss) 92,400 86,400 113,100
--------- --------- ---------
EXPENSES:
---------
Officer's Salary 120,000 120,000 120,000
Stockholder's Services and Reports 2,700 2,700 2,700
Other General and Administrative Expenses 141,400 52,100 45,200
Bad Debt Expense 249,700 -- --
--------- --------- ---------
Total Expenses 513,800 174,800 167,900
--------- --------- ---------
Net Income (Loss) from Operations
before provision for income taxes
and extraordinary items (421,400) (88,400) (54,800)
--------- --------- ---------
Provision for incomes taxes -- -- --
Net Income (Loss) before extraordinary items (421,400) (88,400) (54,800)
--------- --------- ---------
EXTRAORDINARY ITEMS (NET OF INCOME TAXES):
------------------------------------------
Loss on Settlement of Litigation -- (958,300) --
Gain Settlement Bankruptcy Debts 23,700 78,000 --
Forgiveness of Debt 100,000 -- --
Insurance Proceeds 150,000 -- --
--------- --------- ---------
Total Extraordinary Items 273,700 (780,300) --
--------- --------- ---------
Net Income (Loss) $(147,700) $(868,700) $(54,800)
========= ========= =========
Income (Loss) per share before
extraordinary items $(.14) $(.03) $(.02)
--------- --------- ---------
Extraordinary Items $ .09 $(.24)
--------- --------- ---------
Net Income (Loss) per share $(.05) $(.27) $ .02
========= ========= =========
Average share common stock outstanding 3,116,075 3,202,504 3,202,504
========= ========= =========
</TABLE>
See Notes to Financial Statements.
- 12 -
<PAGE> 13
HITK CORPORATION
----------------
STATEMENT OF CHANGES IN NET ASSETS
----------------------------------
FOR THE YEARS ENDED
-------------------
FEBRUARY 28, 1999, 1998 AND 1997
--------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
INCREASE IN NET ASSETS RESULTING
--------------------------------
FROM INVESTMENT ACTIVITIES:
---------------------------
Net Income(Loss) from Operations $(421,400) $ (88,400) $ (54,800)
Extraordinary Items 273,700 (780,300) --
Net Unrealized Appreciation
(Depreciation) on Investments (6,200) 8,600 --
--------- --------- ---------
Increase (Decrease) in Net Assets (153,900) (860,100) (54,800)
Net Assets - Beginning of Year (190,600) 669,500 724,300
--------- --------- ---------
Net Assets - End of Year $(344,500) $(190,600) $ 669,500
========= ========= =========
</TABLE>
See Notes to Financial Statements.
- 13 -
<PAGE> 14
HITK CORPORATION
----------------
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
--------------------------------------------
FOR THE YEARS ENDED FEBRUARY 28, 1999, 1998 AND 1997
----------------------------------------------------
<TABLE>
<CAPTION>
Net Unrealized
Number of Additional Appreciation Total
Shares Common Paid-In Retained (Depreciation) Treasury Stockholder's
Issued Stock Capital Earnings on Investments Stock Equity
--------- ----------- ------------ -------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance-March 1, 1996 3,346,630 $ 3,400 $ 5,622,600 $(3,990,300) $ (64,600) $ 846,800 $ 724,300
Net (Loss) for the Year
Ended February 28, 1997 (54,800) (54,800)
--------- ----------- ----------- ----------- ----------- ----------- -----------
3,346,630 3,400 5,622,600 (4,045,100) (64,600) 846,800 669,500
Net (Loss) for the Year
Ended February 28, 1998 (868,700) 8,600 (860,100)
--------- ----------- ----------- ----------- ----------- ----------- -----------
3,346,630 3,400 5,622,600 (4,913,800) (56,000) 846,800 (190,600)
Net (Loss) for the Year
Ended February
28, 1999 (147,700) (6,200) (153,900)
--------- ----------- ----------- ----------- ----------- ----------- -----------
Balance
February 28, 1999
3,346,630 $ 3,400 $ 5,622,600 $(5,061,500) $ (62,200) $ 846,800 $ (344,500)
========= =========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
- 14 -
<PAGE> 15
HITK CORPORATION
----------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FEBRUARY 28, 1999
-----------------
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. The Company has authorized capital of 6,250,000 shares of common
stock, par value $.001 per share. 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
---------------------------------------------------
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amount of assets and liabilities and disclosures
of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. The
most significant estimates relate to the valuation allowance in connection with
deferred tax assets. Actual results could differ from those estimates.
VALUATION OF ASSETS - Management has valued all securities and receivables at
what they consider to be their net realizable value. An allowance will be
recorded when value of the asset has been impaired. Investments which have
market quotations which are readily available are stated at market value, which
is determined using the last reported sales price on its principal exchange.
Investments which have market quotations which are readily available are stated
at market value, which is determined using the last reported sales price on its
principal exchange.
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.
CASH AND CASH EQUIVALENTS - Cash equivalents include all highly liquid
investments with an original maturity of three months or less.
PER SHARE DATA - The Company has adopted the standards set by the Financial
Accounting Standards Board and computes earnings per share data in accordance
with SFAS No. 128 "Earnings per Share." The basic per share data has been
computed on the loss for the period divided by the historic weighted average
number of shares of common stock outstanding. All potentially dilutive
securities have been excluded from the computation since they would be
antidilutive.
- 15 -
<PAGE> 16
HITK CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1999
NOTE 3 - NOTES RECEIVABLE
-------------------------
Note receivable at February 28, 1999 and 1998, in the amount of $7,700 and
$219,700 respectively, has been valued by management at what they consider to
be the net realizable value.
The Company has a note receivable with a principal amount of $570,000 which
they had acquired for $289,500 and had previously set up a reserve for $69,800.
In August, 1998, the borrower ceased making payment, and collection of the
principal and unpaid interest cannot be determined. The Company has recorded an
allowance of $219,700 in 1999, for the principal not previously reserved. The
note is due June 24, 2015, with an annual interest rate of 9.5%.
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 made and the Company
has recorded an allowance 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 - 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 plan assets were
deposited in an interest bearing disbursement account from which the Company
was to make payments on all allowed claims only upon order of the Bankruptcy
Court. The balance in this disbursement account at February 28, 1998 was
$25,900. The account was closed in 1998.
- 16 -
<PAGE> 17
HITK CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1999
NOTE 5 - INCOME TAXES
---------------------
There is no provision for federal or state income taxes for the year ended 1999,
1998 and 1997, since the Company has incurred operating losses. Additionally,
the Company has reserved fully for any potential future tax benefits resulting
from its carryforward operating losses. Deferred tax assets at February 28,
1999, 1998 and 1997 consist of the following:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Reserve for doubtful accounts $ 127,800 $ 27,800 $ 27,900
Unrealized loss on investments 24,900 22,400 22,200
Net operating loss carryforward 2,883,200 2,844,400 2,500,400
---------- ---------- ----------
3,035,900 2,894,100 2,550,500
Valuation allowance 3,035,900 2,894,100 2,250,500
---------- ---------- ----------
$ -0- $ -0- $ -0-
========== ========== ==========
</TABLE>
As of February 28, 1999, the Company had net unused operating loss carryforwards
of approximately $7,208,000 which expire in various years from 2002 through
2013.
NOTE 6 - SETTLEMENT OF LITIGATION
---------------------------------
In March, 1997, subject to Bankruptcy Court approval, the Company and Bell
Atlantic Systems Leasing International, Inc. (Bell Atlantic) entered into a
settlement agreement pursuant to which Bell Atlantic agreed to compromise its
claims against the Company which were in excess of $4,000,000 for payment of the
sum of $955,361. In addition, the Company and Bell Atlantic released all claims
as against the other. In October, the Bankruptcy Court entered an order
approving the settlement and authorized the Company to pay Bell Atlantic the
settlement amount, which has been recorded in the financial statements as an
extraordinary loss resulting from settlement of litigation.
In 1997, the Bankruptcy Court also approved the settlement agreement between the
Company and the Solar Age shareholders which was the subject of the litigation
entitled HITK Corporation v. Allen Schwanke, et.al., pursuant to which the Solar
Age shareholders compromised their claims as against the Company for the payment
of $3,000.
In September, 1998, the Company settled a claim with its insurance company and
collected $150,000 related to the Bell Atlantic litigation.
- 17 -
<PAGE> 18
HITK CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1999
NOTE 7 - 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 Bankruptcy Court approved the settlement entered into
between the Company and Bell Atlantic, and approved the payment to Bell Atlantic
of $955,361 from the disbursement account. During 1997, pursuant to objections
filed by the Company, the Bankruptcy Court entered a series of orders which
disposed of all but one of the disputed claims. The total amount disbursed by
the Company on the claims of all creditors other than the claim of Bell Atlantic
and the one remaining disputed claimant was $283,532, which was less than the
amount previously recorded, and resulted in an extraordinary gain of $178,000 on
the settlement of these claims.
In 1998, the remaining disputed claim was dismissed and the Company recorded an
extraordinary gain on the settlement of bankruptcy debts.
In June, 1998, an order was entered by the Bankruptcy Court closing the
bankruptcy proceedings.
NOTE 8 - RELATED PARTY TRANSACTIONS
On January 3, 1999, the Company entered into an agreement with Mr. Robert N.
Schuck, Chief Executive Officer and President of the Company, whereby Mr. Schuck
forgave $100,000 of indebtedness due him in exchange for shares of stock in
several dormant companies for which there is no bid price, and which the Company
had previously written off as worthless securities.
- 18 -
<PAGE> 19
HITK CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1999
NOTE 9 - GOING CONCERN
As of February 28, 1999, the Company had a stockholders deficit of $344,500.
This is a result of recurring operating losses and the extraordinary loss of
$955,361 recorded from the settlement between Bell Atlantic and the Company.
The Management of the Company intends to take the following actions to alleviate
the continuing going concern problem. (A) Litigate collection on notes which are
in default that the Company has recorded as 100% reserve. (B) Sell the Company's
shares in corporations which had previously been written off. (C) Negotiate a
reduction of liabilities with certain creditors, including $845,000 in deferred
compensation to the CEO/President and $155,000 in legal fees to VP/Director of
the Company.
- 19 -
<PAGE> 20
ITEM 9. - CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
None.
(Balance of Page Left Intentionally Blank)
- 20 -
<PAGE> 21
HITK 10-K
PART III
ITEM 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
<TABLE>
<CAPTION>
Name Age Director Since
---- --- --------------
<S> <C> <C>
Robert N. Schuck 62 1986
Herbert Maslo 61 1990
John Gitlin 56 1997
</TABLE>
Directors are elected to serve until the next annual meeting of stockholders and
until their successors have been elected and have qualified.
(b) Identification of Executive Officers
<TABLE>
<CAPTION>
Name Age Office Officer Since
---- --- ------ -------------
<S> <C> <C> <C>
Robert N. Schuck 62 C.E.O./President 1987/1986
John Gitlin 56 V. President 1997
</TABLE>
Officers are appointed to serve until the meeting of the Board of Directors
following the next annual meeting of stockholders and until the successors have
been elected and have qualified.
(c) The following is a brief account of the business experience of each officer
and/or director of the Company during the past ten years.
Robert N. Schuck has been an officer of the Company since September, 1985. In
May, 1986, he was elected President and a director of the Company. In addition,
Mr. Schuck is an officer and/or director of various affiliates of the Company.
Mr. Schuck has been a director of Power Tech Systems, Inc. since September,
1988. Mr. Schuck had been Executive Vice President and a director of Executive
Telecard Ltd. from 1989 to 1997, and is President and a director of Cathel
Partners, Inc., a publicly-held corporation in which HITK is 53.27% stockholder.
Herbert Maslo has been a director of the Company since March, 1990. In March,
1990, he became a director and President of Power Tech Systems, Inc. Prior to
that, Mr. Maslo had retired from New York Telephone, a division of Nynex, after
23 years where he held various engineering positions including central office
planning, installations and engineering as a project manager. Mr. Maslo holds a
B.A. Degree in Mechanical Engineering from the Newark College of Engineering.
- 21 -
<PAGE> 22
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
John Gitlin has been a director of the Company since January, 1997, and an
Officer since October, 1997. From 1978 to 1982, Mr. Gitlin held the position of
staff attorney with the United States Department of Justice, Antitrust Division.
From 1982 through April of 1994, Mr. Gitlin was a partner in the law firm of
Fischer, Gitlin & Sanger in Dallas, Texas. From May, 1994, to 1997, Mr. Gitlin
held the position of Secretary with Executive Telecard, Ltd.
ITEM 11 - EXECUTIVE COMPENSATION
The following represents a schedule of the most highly compensated executive
officers or directors of the Company to whom the total remuneration required to
be disclosed exceeds $60,000. and all directors and officers of the Company as a
group.
<TABLE>
<CAPTION>
Name of Individual Capacities in Cash and Equivalent
or Persons in Group Which Served Forms of Compensation
------------------- ------------ ---------------------
<S> <C> <C>
All Officers as a group
(1 person) N/A None.
</TABLE>
(a) Stock Options
During the fiscal year 1999, there were no options available
for the directors and officers listed as a group in the
Executive Compensation Table.
(b) Termination of Employment and Change of Control Arrangement
The Company has no compensatory plan or arrangement with
respect to any individual named in the Executive Compensation
Table (Item 11) which results or will result from the
resignation, retirement or any other termination of such
individual's employment with the Company or from a change in
control of the Company or a change in the individual's
responsibilities following a change in control.
- 22 -
<PAGE> 23
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The individuals listed below are known to the Company to be beneficial owners of
more than 5% of the 3,116,075 shares of the Company's outstanding common stock
(all of which are $.001 par value) as of February 28, 1999.
<TABLE>
<CAPTION>
Number of Shares
Name and Address Owned of Record Percent of Common
of Beneficial Owner and Beneficially Stock Outstanding
------------------- ---------------- -----------------
<S> <C> <C>
Deborah Isaacson 395,500 12.35%
------
Robert N. Schuck 587,891 18.87%
------
</TABLE>
(B) SECURITY OWNERSHIP OF MANAGEMENT
The table presented below represents the number of shares and percentage of
common stock outstanding of the Company owned by each of the Directors and
Officers of the Company as of the year ended February 28, 1999.
<TABLE>
<CAPTION>
Name and Address Shares Owned of Percent of Common
of Beneficial Owner Record and Beneficially Stock Outstanding
------------------- ----------------------- -----------------
<S> <C> <C>
Robert N. Schuck
68 Schraalenburg Road 587,891 18.87%
Harrington Park, NJ 07640
</TABLE>
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No additional information other than that already indicated in this 10-K and
those documents incorporated by reference herein.
- 23 -
<PAGE> 24
FORM 10-K
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT, SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(a)(1) The following financial statements and schedules are included in Part
II, Item 8:
Report of Independent Certified Public Accountants 9 - 10
Financial Statements:
Consolidated Balance Sheet as of February 28, 1999 and 1998 11
Consolidated Statement of Operations for the three years
ended February 28, 1999. 12
Consolidated Statement of Changes in Net Assets for the three
years ended February 28, 1999. 13
Consolidated Statement of Changes in Stockholders' Equity for
the three years ended February 28, 1999. 14
Notes to Consolidated Financial Statements. 15 - 19
(a)(2) The following financial schedules for the year 1999 are
submitted herewith:
Schedule I - Investment in Securities of Affiliated
and Unaffiliated Issuers 25
</TABLE>
All other schedules are omitted as they are note
applicable or are not required, or the information is
given in the financial statements.
- 24 -
<PAGE> 25
HITK CORPORATION
INVESTMENTS IN SECURITIES OF AFFILIATES
AND UNAFFILIATED ISSUERS
FEBRUARY 28, 1999
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF FAIR VALUE
ACQUISITION COMMON STOCK ----------------------
AFFILIATES DATE OWNED PER SHARE TOTAL COST
---------- ---- ----- --------- ----- ----
<S> <C> <C> <C> <C> <C>
NONRESTRICTED SHARES
PUBLIC COMPANIES:
Cathel Partners, Inc.
(previously, B. C.
Communications) February 1987 250,055 $ - $ - $52,800
Total $52,800
=======
NON AFFILIATES
NONRESTRICTED SHARES
PUBLIC COMPANIES:
PTI Holdings, Inc. April 1998 2,000 2.813 5,626 14,982
Total Value of Affiliates
and Nonaffiliates $5,626 $67,782
========= =======
</TABLE>
- 25 -
<PAGE> 26
INVESTMENT CHARACTERISTICS DISCLOSURE STATEMENT
Pursuant to Section 64(b) (1) of the Investment Company Act of 1940, a business
development company is required to describe the risk factors involved in an
investment in the securities of such company due to the nature of its investment
portfolio. Accordingly, the Company states that:
The fundamental earnings object is dependent upon the growth in value of the
usually small and/or immature companies in which the Company invests. The
Company's investment portfolio includes securities which, in addition to being
unable to pay dividends, are subject to legal or contractual restrictions on
resale, which restrictions adversely affect the liquidity and marketability of
such securities.
The Company's Business Development Investments were, in the main, planned to
take several years (4 to 7) to mature with the result that common stock
stockholders may not experience in the next few years, if ever, any gain
(whether through stock price appreciation or dividend distribution) on their
investment.
- 26 -
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities 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
Dated: September 25, 2000 BY: /S/ Robert N. Schuck
Robert N. Schuck
Chief Executive Officer
President
and a Director
Pursuant to requirements of the Securities Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dated indicated.
Dated: September 25, 2000 BY: /S/ Robert N. Schuck
Robert N. Schuck
Chief Executive Officer
President
and a Director
Dated: September 25, 2000 BY: /S/ Herbert Maslo
Herbert Maslo
Director
Dated: September 25, 2000 BY: /S/ John Gitlin
John Gitlin
Director
- 27 -
