UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A-1
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended May 31, 1989.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (no fee required) for the transition period from
____________________ to _______________________.
Commission file number: 0-17371
HYTK INDUSTRIES, INC.
(Name of Small Business Issuer in Its Charter)
Nevada 88-0182808
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2133 East 9400 South, Suite 151 - Sandy, Utah 84093
(Address of Principal Executive Offices)
(801) 944-0701
(Issuer's Telephone Number, Including Area Code)
Securities Registered Under Section 12(g) of the Exchange Act:
Title of Class: Common Stock, $0.001 Par Value
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 __ No XX
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The issuer had no revenues for the year ended May 31, 1992.
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the average bid and asked prices of such stock, as of August 31,
1997 was $0.00, because the Company's Common Stock was not traded on a stock
market or quotation system.
The number of shares outstanding of the issuer's common stock as of August 31,
1997 was 52,266.
<PAGE>
EXPLANATORY NOTE
The following audited financial statements are hereby provided in
response to a February 23, 1994 Order Instituting Public Administrative
Proceeding Pursuant to Section 21C of the Securities Exchange Act (the "Order").
The Order was the result of the Security Exchange Commission's determination
that the Company had improperly recorded a real estate transaction as a purchase
and leaseback instead of a financing transaction. The Order required the Company
to file audited financial statements which properly account for the transaction
within 90 days of commencing operations.
<PAGE>
Sellers & Associates
CERTIFIED PUBLIC ACCOUNTANT Fax (801) 627-1639
378 Harrison Blvd. Suite 101, Ogden, Utah 84403 (801) 621-8128
INDEPENDENT PUBLIC ACCOUNTANT'S REPORT
Board of Directors
HYTK Industries, Inc. and Subsidiaries
Salt Lake City, Utah
We have audited the accompanying balance sheets of HYTK Industries, Inc. and
Subsidiaries as of May 31, 1989 and 1988 and the related statements of
operations, stockholders' equity, and cash flows for the years ended May 31,
1989, 1988 and 1987. These financial statements are the responsibilities of the
Company's Management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 6 to the financial statements, the Company transferred its
assets in a bulk sale May 20, 1992. An officer of the Company owned 40% of the
acquiring corporation. The acquiring corporation assumed the Company debts
without additional consideration as the debts were equal to or exceeded the
value of the assets transferred. The financial records of the Company were also
transferred to the acquiring corporation. Since that time, the acquiring
corporation has changed ownership and management and the financial records of
the Company through May 31, 1992 have become lost, destroyed, or otherwise made
unavailable by the corporation. Because of this, we have relied primarily on the
prior audits unaudited financial statements of the Company as previously
provided in reports filed with the Securities and Exchange Commission. Although
we have generally satisfied ourselves as to the overall reasonableness of such
financial data, we were unable to satisfy ourselves as the correctness and
accuracy of the statements of cash flows as provided in these financial
statements.
In our opinion, except as explained paragraph, the financial statements referred
to above present fairly, in all material respects, the financial position of
HYTK Industries, Inc. and Subsidiaries as of May 31, 1989 and 1988 and the
results of its operations and its cash flows for the years ended May 31, 1989
and 1988, and 1987 in conformity with generally accepted accounting principles.
The accompanying financial statements have been presented assuming the Company
will continue as a going concern. As discussed in Noted 5 and 6 to the financial
statements, the Company disposed of all its assets May 20, 1992 and has not
generated revenue since. This raises substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
May 20, 1997
<PAGE>
<TABLE>
<CAPTION>
HYTK INDUSTRIES, INC. AND SUSBIDIARIES
Consolidated Balance Sheet
May 31, 1989 and 1988
ASSETS
May 31, 1989 May 31, 1988
------------- -----------
Current Assets:
<S> <C> <C>
Cash and cash equivalents ....................... $ 2,180 $ 6,856
Certificate of deposit .......................... -- 100,000
Accounts receivable trade, less allowance
for doubtful accounts of $10,000 ............. -- 189,224
Accounts receivable, other ...................... 505 400
Notes receivable, related parties ............... 200,000 270,000
Accrued interest ................................ -- 42,986
Inventories ..................................... -- 366,839
Prepaid expenses ................................ -- 40,100
---------- ----------
----------
202,685 1,016,405
---------- ----------
Property, plant and equipment
Equipment ....................................... -- 98,703
Vehicles ........................................ -- 76,562
Leasehold improvements .......................... -- 72,049
Furniture and fixtures .......................... 4,768 15,569
---------- ----------
4,768 262,883
Less accumulated depreciation and amortization .. 477 174,898
---------- ----------
4,291 87,985
---------- ----------
Other Assets:
Investment in marketable securities ............. 118,541 --
Notes receivable, net of allowance for loss
of $75,000 in 1989 and $25,000 in 1988 ....... 25,000 75,000
Deferred registration cost ...................... 70,996 --
Deposits ........................................ -- 6,261
Other assets, discontinued operations,
net of associated liabilities ................ 675,748 --
---------- ----------
890,285 81,261
---------- ----------
TOTAL ASSETS ......................................... $1,097,261 $1,185,651
========== ==========
</TABLE>
See notes to financial statements.
F-1
<PAGE>
<TABLE>
<CAPTION>
HYTK INDUSTRIES, INC. AND SUSBIDIARIES
Consolidated Balance Sheet
May 31, 1989 and 1988
LIABILITIES AND STOCKHOLDERS' EQUITY
May 31, 1989 May 31, 1988
--------- ---------
Current Liabilities:
<S> <C> <C>
Notes payable ....................................... $ -- $ 11,993
Current maturities of long-term debt ................ -- 38,304
Current maturities of liabilities under capital lease -- 13,173
Accounts payable .................................... 18,751 108,640
Accrued profit sharing contribution ................. -- 30,712
Accrued rent, related party ......................... -- 21,955
Other accrued expenses .............................. -- 37,235
Estimated warranty reserve .......................... -- 14,815
Income taxes payable ................................ 28,500 --
Customer prepayments ................................ -- 61,815
----------- -----------
47,251 338,642
----------- -----------
Noncurrent Liabilities:
Notes payable ....................................... -- 15,402
Liabilities under capital leases .................... -- 13,515
Deferred income taxes ............................... 14,300 --
----------- -----------
14,300 28,917
----------- -----------
Commitments and contingencies ............................ -- --
Stockholders' Equity
Preferred stock, par value $.001,
50,000,000 shares authorized,
no share issued and outstanding ................. -- --
Common stock, par value $.001
950,000,000 shares authorized,
issued and outstanding shares
of 17,141 for 1989 and 14,304 for 1988 ........... 17 14
Additional paid-in-capital .......................... 849,345 818,829
Retained earnings (deficit) ......................... 186,348 (376)
----------- -----------
1,035,710 818,467
Less cost of common shares
reacquired for the treasury ....................... -- 375
----------- -----------
----------- -----------
1,035,710 818,092
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY ............... $ 1,097,261 $ 1,185,651
=========== ===========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
HYTK INDUSTRIES, INC. AND SUBSIDIARIES
Statements of Operations
For the Years Ended May 31, 1989, 1988 and 1987
May 31, May 31, May 31,
1989 1988 1987
------------- ------------- -------------
<S> <C> <C> <C>
Revenues .............................................................. $ -- $ 1,798,848 $ 1,608,316
Cost of Goods Sold .................................................... -- 1,164,382 1,087,552
----------- ----------- -------------
Gross Profit .......................................................... -- $ 634,466 $ 520,764
----------- ----------- -------------
Operating Expenses:
Salaries and payroll taxes ....................................... 59,465 237,573 187,360
Advertising ...................................................... -- 30,592 39,992
Professional fees ................................................ 14,247 74,088 105,704
General and administrative ....................................... 17,356 27,307 27,095
Bad debt ......................................................... 50,000 34,365 2,130
Rent and utilities ............................................... 11,160 26,362 40,036
Insurance ........................................................ 691 29,251 25,923
Depreciation and amortization .................................... 477 48,374 57,573
Profit sharing contribution ...................................... -- 30,712 --
Office ........................................................... -- 24,171 19,443
----------- ----------- -------------
153,396 562,795 505,256
----------- ----------- -------------
Operating Income ...................................................... $ (153,396) $ 71,671 $ 15,508
Non-Operating Income (Expense)
Consulting income ................................................ 118,541 -- --
Interest income .................................................. 22,253 42,195 44,155
Interest expense ................................................. -- (15,844) (14,809)
Miscellaneous .................................................... -- 816 2,559
Settlement of disputed payable ................................... -- 2,496 50,036
Loss on disposition of equipment and leasehold improvements ...... -- (3,652) (68,253)
---------- ----------- -------------
140,794 26,011 13,688
----------- ----------- -------------
Income (Loss) from continuing operations
before income taxes and extraordinary item ....................... (12,602) $ 97,682 $ 29,196
Provision for income taxes ............................................ 4,000 21,700 11,139
Gain from discontinued operations, net of income tax benefit .......... 167,226 -- --
----------- ----------- -------------
Income (loss) before extraordinary item ............................... $ 158,624 $ 75,982 $ 18,057
Extraordinary item, reduction of income tax arising from carryforward
of prior year operating loss ..................................... 28,100 21,700 --
----------- ----------- -------------
Net Income (loss) ..................................................... $ 186,724 $ 97,682 $ 18,057
=========== =========== =============
Earnings (loss) per share:
Income (loss) from continuing operations ......................... $ (0.87) $ 6.83 $ 2.04
=========== =========== =============
Income (loss) before extraordinary item .......................... $ 11.00 $ 5.31 $ 1.26
=========== =========== =============
Net income (loss) ................................................ $ 12.95 $ 6.83 $ 1.26
=========== =========== =============
Weighted-average shares outstanding ................................... 14,422 14,304 14,284
</TABLE>
See notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
HYTK INDUSTRIES AND SUBSIDIARIES
Statements of Stockholders' Equity
Years Ended May 31, 1989, 1988 and 1987
Common Stock Treasury Stock
--------------------------------- ------------------------------
Retained
Additional Earnings Total
Number of Paid In Number of (Deficit) Stockholders'
Shares Par Value Capital Shares Par value Accumulated Equity
----------- ------------ ------------ -------------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, May 31, 1986 ....... 14,059 $ 14 $ 791,778 -- $ $ (116,115) $ 675,677
Issuance of common stock
for services ............ 152 -- 5,750 -- -- -- 5,750
Issuance of common stock for
acquired customers ...... 73 -- 20,500 -- -- -- 20,500
Acquisition of common stock
for the treasury upon
forfeiture of rights to
stock issued for services -- -- -- 67 (375) -- (375)
Net income ................... -- -- -- -- -- 18,057 18,057
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances, May 31, 1987 ....... 14,284 $ 14 $ 818,028 67 $ (375) $ (98,058) $ 719,609
Issuance of common stock
under stock bonus plan .. 17 -- 495 -- -- -- 495
Issuance of common stock
for sales performance ... 2 -- 271 -- -- -- 271
Issuance of common stock
for warrant ............. 1 -- 35 -- -- -- 35
Net Income ................... -- -- -- -- -- 97,682 97,682
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances, May 31, 1988 ....... 14,304 $ 14 $ 818,829 67 $ (375) $ (376) $ 818,092
Issuance of common stock
under stock bonus plan .. 6 -- 182 -- -- -- 182
Issuance of common stock ..... 2,679 3 (3) -- -- -- 0
Issuance of common stock
to profit sharing plan .. 152 -- 30,336 (67) 375 -- 30,711
Issuance of common stock
for cash ................ -- -- 1 -- -- -- 1
Net Income ................... -- -- -- -- -- 186,724 186,724
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances, May 31, 1989 ....... 17,141 $ 17 $ 849,345 -- $ -- $ 186,348 $ 1,035,710
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
HYTK INDUSTRIES, INC. AND SUBSIDIARIES
Statements of Cash Flows
For the Years Ended May 31, 1989, 1988, and 1987
May 31, May 31, May 31,
1989 1988 1987
---------- ---------- -----------
Cash Flows From Operating Activities
<S> <C> <C> <C>
Net income .............................................................. 186,724 97,682 $ 18,057
Noncash expenses (income) included in net income :
Depreciation and amortization ........................................ 477 48,374 57,573
Loss on disposition of property ...................................... -- 3,652 68,253
Equipment provision for loss on note receivable ...................... -- 25,000 --
Issuance of common stock for services ................................ 182 766 5,750
Acquisition of marketable securities
for consulting services ............................................. (118,541) -- 22,663
Issuance of stock to profit-sharing and stock bonus plan ............. 30,711 -- --
Change in assets and liabilities:
(Increase) decrease in accounts receivable, trade .................... -- (59,233) 54,026
(Increase) decrease in inventories ................................... -- (10,944) (13,196)
(Increase) decrease in accounts receivable, other .................... (505) -- --
Decrease in other current assets ..................................... 40,100 -- --
(Increase) decrease in other assets,
discontinued operations ............................................ 126,092 -- --
Increase (decrease) in accounts payable
and accrued expenses ................................................ (6,249) 53,824 (63,683)
Increase (decrease) in income taxes payable .......................... 42,800 (11,139) 11,139
Other prepaids, deferrals and accruals, net .......................... -- (48,081) (81,170)
--------- --------- ---------
Net cash provided by (used for) operating activities ......................... 301,791 99,901 79,412
--------- --------- ---------
Cash Flows From Investing Activities
Disbursements on notes receivable ....................................... -- -- (370,000)
Proceeds form sale of equipment ......................................... -- 300 35,845
Purchase of equipment and leasehold improvements ........................ -- (22,178) (90,163)
Change in deposits and other assets ..................................... -- 2,744 (3,735)
Repayment (payment) of note receivable,
related party, net ..................................................... (200,000) -- --
Purchase of equipment ................................................... (4,768) -- --
--------- --------- ---------
Net cash provided by (used for) investing activities ......................... (204,768) (19,134) (428,053)
--------- --------- ---------
Cash Flows From Financing Activities
Proceeds from issuance of common stock .................................. -- 35 20,500
Proceeds from revolving line of credit,
short and long term borrowing .......................................... -- 455,854 374,703
Principal payment on revolving
line of credit and leasehold improvements ............................. -- (534,702) (350,713)
Purchase of treasury stock .............................................. -- -- (375)
Increase in deferred registration costs ................................. (70,995) -- --
Payment of note payable, related party .................................. (25,000) -- --
--------- --------- ---------
Net cash provided by (used for) financing activities ......................... (95,995) (78,813) 44,115
--------- --------- ---------
Increase (decrease) in cash and cash equivalents ............................. 1,028 1,954 (304,526)
Cash and cash equivalents, beginning of year ................................. 1,152 104,902 409,428
--------- --------- ---------
Cash and cash equivalents, end of year ....................................... 2,180 106,856 $ 104,902
========= ========= =========
Supplemental Disclosures Of Cash Flow Information
Cash payments for Interest .............................................. 8,576 15,844 $ 15,007
Cash payment for Income Taxes ........................................... 3,000 9,910 $ --
Supplemental Disclosures of Noncash Information
(Decrease) in other assets, discontinued operations,
net of associated ..................................................... (167,226) 0 --
liabilities ........................................................... 70,995 0 --
</TABLE>
See notes to financial statements.
F-5
<PAGE>
HYTK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended May 31, 1989, 1988 and 1987
Note 1. Nature of Business and Significant Accounting Policies
The Company's operations were in the telecommunications industry
specializing in the sales, installations and maintenance of telephone
systems.
A summary of the Company's significant accounting policies follows:
Principles of consolidation:
HYTK Industries, Inc. was formerly known as Digitel of Las
Vegas, Inc. As of June 1, 1987, the Company's interconnect
operations were transferred to a wholly-owned subsidiary
formed by the Company, Digitel, Inc. , and the Company
operated under the Digitel, Inc. name. HYTK Industries Inc.
acted only as a holding company for its subsidiary.
The consolidated financial statements include the accounts of
HYTK Industries Inc. and its wholly-owned subsidiary, Digitel,
Inc. and US Voice Corporation (fiscal 1989 only). All
significant intercompany accounts and transactions have been
eliminated.
US Voice Corporation, a wholly-owned subsidiary of the
Company, was incorporated on January 12, 1989 to sell voice
mail equipment and to lease voice mail boxes on a monthly
basis. On October 1, 1989, operations of US Voice Corporation
were discontinued.
Ditigel, Inc. operated in the telecommunications industry,
specializing in the sales, installation and maintenance of
telephone and voice mail systems. On June 30, 1992, operations
of Ditigel, Inc. were discontinued.
Inventories:
Inventories consisting of supplies, telephone equipment and
parts are stated at lower of cost (first-in, first-out method)
or market.
Equipment and leasehold improvements:
Equipment and leasehold improvements, including assets
acquired under capital leases, are recorded at cost, and
depreciation and amortization are computed primarily using
accelerated methods over the following estimated useful lives
of the assets:
Years
Equipment 5-10
Vehicles 5
Leasehold improvement 5
Furniture and fixtures 7
Recognition of revenue:
The Company recognizes sale and installation revenue upon the
completion of the installation. Maintenance revenue is
recognized ratably over the term of the maintenance contract.
<PAGE>
Note 1. Nature of Business and Significant Accounting Policies (continued)
Earnings per share data:
Earnings per share have been computed on the basis of the
weighted average number of shares of common stock outstanding
during the year.
Outstanding warrants have not been included in the computation
of income per share as the effect of such would be
anti-dilutive.
Reclassifications:
Certain items in the financial statements for 1987 were
reclassified to be consistent with the classifications adopted
for 1988. This reclassification has no effect on net income or
stockholders' equity.
Deferred registration costs:
Deferred registration costs have been incurred in connection
with a proposed public offering of preferred stock and warrant
offering. Costs incurred in connection with the warrant
offering were offset against the proceeds of that offering.
The preferred stock offering has been abandoned and, as a
result, the deferred registration costs associated with that
offering have been expensed.
Cash equivalents:
The Company considers all certificates of deposits with
maturities of three months or less as of year end to be cash
equivalents.
Note 2. Notes Receivable
On December 31, 1986, the Company entered into a Stock Purchase and
Exchange Agreement with Environmental Communications, Incorporated
(Environmental). This Agreement contemplated the issuance of 4,205
shares of the Company's common stock to the shareholders of
Environmental in exchange for all of the issued and outstanding
capital stock of Environmental. As a result, the businesses of the
two entities would be combined and control of the Company would be
transferred to Environmental's shareholders. The Company advanced
$100,000 to Environmental's shareholders on February 13, 1987.
The promissory note evidencing the advance accrued interest at the
prime rate and was personally guaranteed by Environmental's major
shareholder and president. The accrued interest was due and payable
quarterly beginning May 31, 1987, and the entire principal was due
May 31, 1989. This contemplated business combination has since been
abrogated. For fiscal 1988, an allowance for possible loss was
recorded for 25% of the principal balance on the promissory note.
The note was in default as of May 31, 1989 and management increased
the allowance for possible loss to 75% of the principal balance. In
fiscal 1990, the note was written off as uncollectible.
<PAGE>
<TABLE>
<CAPTION>
Note 3. Notes receivable, related party and Investments in marketable
securities During the year ended May 31, 1987 the Company advanced
funds to Olson Glass Co. of Nevada (Olson) pursuant to various
promissory notes, with interest rate at 14% per annum and due on
demand. As of May 31, 1988, $270,000 principal remained outstanding
plus accrued interest of $42,986. The notes were guaranteed by
Century Manufacturing, Inc. (Century), the parent company of Olson,
and were secured by a deed of trust of real property located in Las
Vegas, Nevada. Prior to April 1, 1988, Olson and Century were both
related to the Company through common ownership and management. The
note and accrued interest were repaid during December 1988.
The May 31, 1989 note receivable was the result of $200,00 advanced
to Joseph Kowal, an unrelated third party, and Beckstead Family
Investment Limited Partnership, in which an officer/director of the
Company was a general partner. Subsequent to May 31, 1989, the
officer/director of the Company divested himself of his entire
interest in the Beckstead Family Investment Limited Partnership. The
$200,000 was used to provide capital in connection with the
acquisition of Above Software, Inc. by Los Angeles Securities Group (
LASG) (subsequently known as Above Technologies, Inc.).
As consideration for advancing Above Technologies, Inc. working
capital funding, and as consideration for consulting services
rendered to Above Technologies, Inc. by the Company, the Company
received a total of 480,588 shares of Above Technologies, Inc. common
stock valued at $118,541. The market value of the stock as of May 31,
1989 was $118,541.
The $200,000 note was non-interest bearing and was originally due the
later of December 31, 1989 or the effective date of a registration
statement of LASG. However, in fiscal 1990, upon approval by the
Company, Joseph Kowal and Beckstead Family Investment Limited
Partnership, as borrowers, assigned their interest in the note
receivable to Dale Lyon Living Trust, an unrelated entity. Upon
transfer of their interest to the purchaser, the purchaser paid
$25,000 to the Company and paid the remaining balance of $175,000 in
monthly installments of $25,000 with interest at eight percent per
annum.
Note 4. Pledged Assets, Notes Payable and Long-Term Debt
Notes payable for fiscal 1988 of $11,993 were due Transamerica
Insurance, in monthly installments of $2,962, including interest,
through October 1988.
Long-term debt for fiscal 1988 consisted of the following:
May 31, 1988
-------------
Bank, 11%, due in monthly installments of $2,112, including
interest, through November 1989, collateralized by leasehold
<S> <C>
improvements with a depreciated cost of approximately $47,600 $ 35,347
GMAC, 22.5%, due in monthly installments of $274,
including interest, through March 1990, collateralized
by vehicles with a depreciated cost of approximately $3950. 4,970
------------------
Subtotal forward $ 40,317
<PAGE>
Note 4. Pledged assets, Notes payable and Long-term debt (continued)
Long-term debt (continued):
May 31, 1988
Subtotal forwarded $ 40,317
GMAC, 15%, due in monthly installments of $750,
including interest, through January 1989, collateralized
by vehicles with a fully depreciated cost 5,738
GMAC, 8.99%, due in monthly installments of $303,
including interest, through April 1989, collateralized
by vehicles with a fully depreciated cost 3,190
GMAC, 15%, due in monthly installments of $171,
including interest, through June 1989, collateralized
by vehicles with a fully depreciated cost 2,005
GMAC, 8.99%, due in monthly installments of $215,
including interest, through May 1989, collateralized
by vehicles with a fully depreciated cost 2,456
-----------
$ 53,706
Less current maturities 38,304
-----------
$ 15,402
===========
</TABLE>
Aggregate maturities of long-term debt were due as follows:
Year ending May 31,
1989 $ 38,304
1990 15,402
---------
$ 53,706
Note 5. Going Concern
The Company has ceased operations and disposed of most of its assets
and is now inactive. Consequently, it is not a going concern. Unless
additional funds and business activity come into the Company, it will
remain inactive.
Note 6. Explanation of Financial Statement Presentation
Pursuant to a May 20, 1992 Asset Purchase Agreement, the Company transferred
nearly all of the assets then owned by Digitel to Southwestern Communications,
Inc., a Nevada corporation f/k/a Western Communications, Inc. ("Southwestern").
By means of this Agreement, the Company sold all of Digitel's machinery,
equipment, tangible personal property, inventory, and accounts receivable to
Southwestern. The only asset not transferred to Southwestern was a Honda
automobile encumbered by a lease contract with Honda Leasing. As consideration
for the transfer, Southwestern assumed approximately $675,000 worth of Digitel's
debts. No additional consideration was paid because the debts to be assumed were
equal to or exceeded the value of the assets transferred. Southwestern provided
notice of this bulk sale pursuant to the provisions of Article 6 of the Uniform
Commercial Code. Prior management indicated that the decision to sell Digitel
was based on the fact that Digitel had experienced net losses in the prior two
years and Digitel's liabilities exceeded its assets at the time of the transfer.
Gordon Beckstead, then the Company's president and director, was a 40% owner of
Southwestern at the time of this transaction.
<PAGE>
During fiscal year 1994, Digitel's articles of incorporation were suspended by
the State of Colorado for failure to file its 1993 annual report. The Company
has no current intentions to revive Digitel's charter and will likely seek to
voluntarily dissolve Digitel in the near future. Accordingly, the Company has
not included Digitel as a consolidated subsidiary on the attached financial
statements. Rather, such activity is reported as "other assets, discontinued
operations, net of associated liabilities " or "other liabilities, discontinued
operations, net of associated assets." Since the baulk sale occurred just prior
to the May 31, 1992 year end, the response to notifications of assumption of
debt of Southwestern extended into the year ended May 31, 1993. Accordingly, the
final disposal of "Other assets, discontinued operations, net of associated
liabilities " and "other liabilities, discontinued operations, net of associated
assets" also extended into the year ended May 31, 1993. Consequently, there are
no liabilities dealing with the bulk transfer subsequent to May 31, 1993.
Prior to the transfer of Digitel, the Company also had made transfers of its
other subsidiaries and interests in U.S. Voice and Cactus Club. As with Digitel,
these activities are also reported as "discontinued operations" in the financial
statements through May 31, 1991.
Note 7. Capitalized Lease Obligations
Equipment and leasehold improvement include amounts for leased assets
which were capitalized as follows:
May 31, 1988
Equipment $ 52,645
Furniture and fixtures 10,132
----------------
$ 62,777
Less accumulated amortization 47,890
----------------
$ 14,887
================
Liabilities under capital lease consisted of the following:
May 31, 1988
13.9%, due in monthly installments of $313,
including interest, through November 1988,
collateralized by equipment with a fully
depreciated cost $ 2,788
14%, due in monthly installments of $224,
including interest, through March 1989,
collateralized by equipment with a fully
depreciated cost 3,011
<PAGE>
22%, due in monthly installments of $449,
including interest, through July 1989,
collateralized by equipment with a depreciated
cost of approximately $3,400 5,155
14%, due in monthly installments of $393,
including interest, through December 1992,
collateralized by equipment with a depreciated
cost of approximately $11,500 15,734
----------------
$ 26,688
Less current maturities 13,173
$ 13,515
Future lease payments, by year and in the aggregate, under capital
leases were due as follows:
Years ending May 31,
1989 $ 14,222
1990 5,614
1991 4,716
1992 4,716
1993 2,751
----------
Total minimum lease payments $ 32,019
Amount representing interest 5,331
----------
Present value of net minimum
lease payments $ 26,688
========
Note 8. Lease Commitments and Related Party Transaction
Ditigel, a subsidiary of the Company, leased office space from
Century Manufacturing, Inc., who was formerly a related party. The
lease provided that the lessees pay all property taxes, insurance
and maintenance plus a current monthly rental of $1,532. The lease
expired September 30, 1991.
The Company leased office space from a related party on a
month-to-month basis. The lease required monthly rentals starting at
$750, with a $15 increase in March of each year until February 1990.
As of May 31, 1989, the monthly rental was $810. During the years
ended May 31, 1988 and 1987, the Company reduced rent expense by
$2,750 and $2,393 through collection of sublease rentals.
The total minimum rental commitment under the above leases was as
follows for the years ending May 31:
1990 $ 25,671
1991 18,381
1992 6,127
$ 50,179
<PAGE>
<TABLE>
<CAPTION>
Note 9. Income Taxes
Deferred income tax provision, resulting from differences between
accounting for financial statement purposes and accounting for tax
purposes were as follows:
1989
Consulting income $ 32,200
Allowance for
uncollectible receivables (22,800)
Deferred salaries 10,000
Warranty reserve (5,100)
---------
$ 14,300
The provision for income taxes included in the accompanying
consolidated statements of operations differs form the statutory
amount for the following:
Years Ended May 31,
1989 1988 1987
Income tax expense
<S> <C> <C> <C>
at statutory federal tax rate $ 79,100 $ 34,189 $ 24,305
Graduated tax rates (5,200) (12,489) (15,204)
Investment tax credit recapture - - 11,139
Other - - (9,101)
------------ ----------- ---------
$ 73,900 $ 21,700 $ 11,139
============== ============ ========
</TABLE>
The credits arising from the utilization of net operating loss carry
forwards were reflected, in the accompanying consolidated statement
of operations, as an extraordinary item
Note 10. Stock Option Plan
The Company adopted a qualified stock option plan under which 179
shares of its $0.001 par value common stock were reserved for
options to employees. Option price would be the fair market value
(110% of fair market value if the optionee had more than 10% voting
control) of the common stock on the date the options are granted.
The term of an option shall be for a period of no longer than ten
years from the date of the grant of the option. No options were
granted and the Plan expired May 20, 1995.
Note 11. Stockholders' Equity
On September 1, 1991 the Company effected a 1-for-140 reverse stock
split of its common stock and on November 1, 1995 the Company
effected a 1-for-40 reverse stock split of its common stock. The par
value of the common stock remained at $.001. All references to
quantities of common stock have been adjusted to reflect both the
1991 and 1995 reverse stock splits.
In February 1986, the Company had a public offering of its
securities, selling 3,130 units, each unit consisting of one share
of common stock and one common stock purchase warrant. Each of these
warrants entitled the holder to purchase one share of common stock
commencing October 17, 1986 through October 17, 1988 at an exercise
price of $.05 per share. These warrants were redeemable in whole or
in part by the Company at a price of $.01 per share ($.005 per
warrant) subject to 30 days prior notice. In connection with the
public offering, the Company sold to the underwriter common stock
purchase warrants which entitled the warrant holder to purchase one
share of the company's common stock for each ten units sold in the
public offering (underwriters warrants totaled 313). Underwriter
warrants were exercisable January 17, 1987 through January 17, 1990
at an exercise price of $.06 per share.
<PAGE>
During the year ended May 31, 1987, the Company issued 152 shares to
certain employees for services performed. Upon these employees'
termination in 1987, the Company acquired 67 of the 152 shares from
the terminated employees for $375 and such amount was charged to
treasury stock. Also during the year ended May 31, 1987, the Company
issued 73 shares for the acquisition of certain contracts and
customers from discontinued telecommunications companies.
On May 4, 1987, the shareholders amended the articles of
incorporation to increase the number of authorized shares from
100,000,000 to 950,000,000 and authorized the creation of 50,000,000
shares of $.001 par value preferred stock. The shares of preferred
stock may be divided into one or more series, with such rights,
preferences, qualifications, limitations and restrictions as may be
determined by the board of Directors. Subsequent to the year end,
the Company's Board of Directors established a Class A Convertible
Preferred Stock (Class A Preferred) and a Class B Convertible
Preferred Stock (Class B Preferred). The shares of Class B Preferred
were nonvoting, carried no dividend rights, were not redeemable, and
were not entitled to share in any assets of the Company if it is
liquidated and each share of Class B Preferred was convertible into
16.667 shares of Class A Preferred.
During the year ended May 31, 1988 the Company approved a stock
bonus plan for its employees. The plan approved 90 shares to be set
aside, 20% to be issued in the current year, and 10% yearly for
eight years. During the years ended May 31, 1989 and 1988, the
Company distributed under this plan 6 and 17 shares, respectively
amounting to $182 and $495 each.
On May 26, 1989, the Company issued 2,679 restricted shares of
common stock to the Workman Family Partnership (WFP), a general
partnership controlled by William Workman, then a director of the
Company, in exchange for its interest in an office and warehouse
complex.
Note 12. Profit-Sharing Trust
During the year ended May 31, 1988, the Company established a
profit-sharing trust for its employees who meet eligibility
requirements set forth in the Plan. The annual contributions to the
Plan were to be determined by the board of Directors, with a maximum
amount equal to 15 percent of gross salaries. The amount of the
contribution for the year ended May 31, 1989 and 1988 were $40,000
and $30,712, respectively.
During the year ended May 31, 1989, the Plan settled the May 31,
1988 accrued profit sharing contribution of $30,711 by issuing 152
shares of the Company's $.001 par value common stock and 67 shares
of its treasury stock.
Note 13. Supplemental data to consolidated statements of cash flows
Excluded from the consolidated statement of cash flows for 1989 were
the effects of certain noncash investing and financing activities as
follows: Acquisition of marketable securities for consulting
services for $118,541.
Note 14. Discontinued operations
During the year ended May 31, 1989, the Company commenced operations
of one of its wholly-owned subsidiaries, US Voice Corporation, which
provided voice mail equipment and leasing of voice mail boxes. US
Voice Corporation incurred a considerable loss during its start-up,
and on October 1, 1989, management decided to discontinue its
operations. The company disposed of its net assets relating to the
operations of US Voice Corporation, resulting in a gain of $2,403.
The Company incurred a loss from discontinued operations of US Voice
Corporation of $50,511 net of an income tax benefit of $22,704 for
the year ended May 31, 1990.
Note 15. Subsequent Events
On September 1, 1991 the Company effected a 1-for-140 reverse stock
split of its common stock and on November 1, 1995 the Company
effected a 1-for-40 reverse stock split of its common stock. All
reference to quantities of common stock have been adjusted to
reflect both the 1991 and 1995 reverse stock splits.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, this 12TH day of September 1997.
HYTK Industries, Inc.
/s/Ken Kurtz
------------
Ken Kurtz, President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
Signature Title Date
President and Director September 12, 1997
/s/Ken Kurtz
------------
Ken Kurtz
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
AUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S MAY 31, 1989
ANNUAL REPORT ON FORM 10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000775351
<NAME> HYTK INDUSTRIES INC
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1989
<PERIOD-START> JUN-01-1988
<PERIOD-END> MAY-31-1989
<EXCHANGE-RATE> 1
<CASH> 2,180
<SECURITIES> 118,541
<RECEIVABLES> 200,505
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 202,685
<PP&E> 4,768
<DEPRECIATION> 477
<TOTAL-ASSETS> 1,097,261
<CURRENT-LIABILITIES> 47,251
<BONDS> 0
0
0
<COMMON> 17
<OTHER-SE> 1,035,693
<TOTAL-LIABILITY-AND-EQUITY> 1,097,261
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 153,396
<OTHER-EXPENSES> 140,794
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (12,602)
<INCOME-TAX> 4,000
<INCOME-CONTINUING> (8,602)
<DISCONTINUED> 167,226
<EXTRAORDINARY> 28,100
<CHANGES> 0
<NET-INCOME> 186,724
<EPS-PRIMARY> 12.95
<EPS-DILUTED> 12.95
</TABLE>
