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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, 1999 2-82427-NY
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HITK CORPORATION
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(Exact name of registrant as specified in its charter)
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<CAPTION>
Delaware 13-3159591
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<S> <C>
(State or other jurisdiction of (I.R.S. Employee Identification No.)
incorporation or organization)
</TABLE>
<TABLE>
<S> <C>
68 Schraalenburg Road
Harrington Park, New Jersey 07640
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (201) 784-5190
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</TABLE>
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, 1999, is 3,346,630 shares, all of one class of $0.001
par value common stock.
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HITK CORPORATION
FORM 10-Q
QUARTER ENDED November 30, 1999
TABLE OF CONTENTS
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PAGE
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PART I - FINANCIAL INFORMATION
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Item 1 - Financial Statements
- Consolidated Balance Sheet as of
November 30, 1999 and February 28, 1999 4
- Consolidated Statement of Operations for the
nine months ended November 30, 1999 and 1998 5
- Consolidated Statement of Changes in Net Assets for
the nine months ended November 30, 1999 and 1998 6
- Notes to Consolidated Financial Statements 7 - 9
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
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PART II - OTHER INFORMATION
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Item 1 - Legal Proceedings 11
Item 2 - Changes in Securities 11
Item 3 - Defaults upon Senior Securities 11
Item 4 - Submission of Matters to a Vote of Security Holders 11
Item 5 - Other Information 11
Item 6 - Exhibits and Reports on Form 8-K 11
SIGNATURES 12
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PART I. FINANCIAL INFORMATION
HITK CORPORATION
QUARTER ENDED November 30, 1999
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 1999 Annual Report on Form 10-K for the year ended February 28, 1999,
filed with the Securities and Exchange Commission.
The results of operations for the nine months ended November 30, 1999, are not
necessarily indicative of results to be expected for the entire fiscal year
ending February 28, 2000.
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.
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HITK CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS
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November 30, February 28,
1999 1999
(Unaudited)
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CURRENT ASSETS:
Cash and Cash Equivalent $ 533,330 $ 655,500
Marketable Securities
(Cost $14,982 and $14,982, respectively) 2,626 5,600
Other Investments
(Cost $52,800 and $52,800 respectively) -- --
Note Receivable - Net 2,200 7,700
Other Current Assets 1,000 7,300
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Total Assets $ 539,156 $ 676,100
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LIABILITIES AND STOCKHOLDER'S EQUITY
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CURRENT LIABILITIES:
<S> <C> <C>
Accounts Payable and Accrued Expenses $ 1,211,489 $ 1,211,400
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 4,775,800 4,775,800
Retained Earnings (5,387,321) (5,252,300)
Net Unrealized Appreciation (Depreciation)
on Investments (64,212) (62,200)
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Total Stockholder's Equity (Deficit) (672,333) (535,300)
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Total Liabilities and Stockholder's Equity $ 539,156 $ 676,100
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See Notes to Consolidated Financial Statements.
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HITK CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
(UNAUDITED)
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<CAPTION>
1999 1998
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REALIZED GAIN ON INVESTMENTS $ -- $ 50,300
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OTHER INCOME:
Interest Income 20,900 35,600
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Net Investment Income 20,900 85,900
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EXPENSES:
Officer's Compensation 134,000 90,000
Stockholder's Services and Reports 1,200 2,700
Professional Fees -- 93,200
Office 20,621 22,800
Bad Debt Expense -- 249,800
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Total Expenses 155,821 458,500
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Net Income (Loss) from Operations (134,921) (372,600)
Other Income
Gain-settlement bankruptcy debt 23,700
Insurance proceeds 150,000
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Total extraordinary items 173,700
UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENTS
Marketable Securities (100) (14,800)
Business development 10,500
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Total (100) 4,300
Increase (Decrease) in Net Assets
Resulting from Operations $(135,021) $(203,200)
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
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HITK CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
(UNAUDITED)
1999 1998
Realized Gain on Investments --- --
Other Income:
Interest Income 6,237 9,100
Net Investment Income 6,237 9,100
EXPENSES:
Officer's Salary 30,000 30,000
Stockholder's Services and Reports 900
Professional Fees --- 60,200
Office 2,045 4,400
Bad Debt Expense 140,300
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Total Expenses (32,045) 235,800
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Net Income (Loss) from Operations (25,808) (185,500)
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OTHER INCOME:
Gain Settlement Bankruptcy Debts 23,700
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UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENTS
Marketable Securities (4,700)
--
Total (4,700)
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Increase (Decrease) in Net Assets
Resulting from Operations $(25,808) $ (81,400)
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See Notes to Consolidated Financial Statements.
HITK CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
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1999 1998
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CHANGES IN NET ASSETS RESULTING FROM
INVESTMENT ACTIVITIES
Net Income (Loss) from Operations $(133,959) $(372,600)
Extraordinary items 173,700
Unrealized depreciation on investments (3,074) (4,300)
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Increase (Decrease) in Net Assets (137,033) (203,200)
Net Assets - Beginning of Period (535,300) (190,600)
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Net Assets - End of Period, as previously Reported $(672,333) $(393,800)
========= =========
Net Asset Value Per Outstanding
Share of Common Stock $ (.20) $ (.01)
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
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HITK CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 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
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.
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.
PRIOR PERIOD ADJUSTMENT - The net assets at the end of the period, May 31, 1998,
have been restated reducing the net assets by $190,800. This is a correction of
an error of $120,000 of officers compensation which should have been accrued
beginning January 1, 1990, instead of January 1, 1991, and $70,800 in legal
expense not previously recognized relating to the Bell Atlantic litigation and
other fees in connection with bankruptcy and other proceedings.
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HITK CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CHANGE IN CLASSIFICATION- Certain items from the May 31, 1998 Financial
Statements have been reclassified to correspond to their classification May 31,
1999.
NOTE 3 - NOTES RECEIVABLE
Note receivable at November 30, 1999, in the amount of $2,200, 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 recorded an
allowance of $219,700 in 1998, for the principal not previously reserved. All
principal and accrued interest under the note is due June 24, 2015, and has 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 being
due September 1, 1999. None of the payments were made and the Company 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, with eight monthly installments of
$1,322.23. The balance remaining at November 30, 1999 is $2,200.
NOTE 4 - 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 $ 7,208,000 which expires as follows:
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HITK CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1999
NOTE 4 - INCOME TAXES (CONTINUED)
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<CAPTION>
<S> <C> <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
2013 97,000
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Total $7,208,000
==========
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NOTE 5 - GOING CONCERN
As of November 30, 1999, the Company had a stockholders deficit of $672,333.
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 in
1997.
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 publicly held companies which are currently dormant shells. These
assets had previously been written off. (C) Negotiate a reduction of liabilities
with certain creditors, including $1,031,489,000 in deferred compensation to the
CEO/President and $180,000 in fees to the VP/Director of the Company.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
For the nine months ended November 30, 1999, the Company had a net loss from
operations of $133,959 compared to a loss from operations of $203,200 for the
nine months ended November 30, 1998. Net investment income decreased by $65,000
from $85,900 to $20,900 for the nine months ended November 30, 1999, $35,600 as
a result of a decrease in interest income and an $50,300 gain realized in 1998
on the sale of securities.
Operating expenses for the nine months ended November 30, 1999 were $154,759
compared to $458,500 for the nine months ended November 30, 1998, a decrease of
$303,741. In 1998, the Company wrote off $249,800 in bad debt expense. Officers
compensation increased by $44,000.
LIQUIDITY AND WORKING CAPITAL
At November 30, 1999, the Company had a working capital deficit of $672,333.
This is an increase of $133,033 from February 28, 1999, due to the loss in the
nine month period ended November 30, 1998.
The Company's ability to continue as a going concern are dependent on several
factors. (A) The Company intends to pursue claims arising out of Bell Atlantic
litigation. (B) Liquidate certain assets, and (C) Negotiate reduction of
liabilities with certain creditors, including $1,031,489 of deferred
compensation to the CEO/President of the Company, and $180,000 in legal fees to
a Director and Officer of the Company.
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HITK CORPORATION
PART II - OTHER INFORMATION
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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
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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: 02/17/2000
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 533,330
<SECURITIES> 2,626
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 539,156
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 539,156
<CURRENT-LIABILITIES> 1,211,489
<BONDS> 0
0
0
<COMMON> 3,400
<OTHER-SE> (675,733)
<TOTAL-LIABILITY-AND-EQUITY> 539,156
<SALES> 0
<TOTAL-REVENUES> 20,900
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 154,758
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (133,858)
<INCOME-TAX> 0
<INCOME-CONTINUING> (133,858)
<DISCONTINUED> 0
<EXTRAORDINARY> (100)
<CHANGES> 0
<NET-INCOME> (133,958)
<EPS-BASIC> (.020)
<EPS-DILUTED> (.020)
</TABLE>
