UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended November 30, 1997
[ ] 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) (Zip Code)
(801) 944-0701
(Issuer's Telephone Number, Including Area Code)
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 XX No
The number of shares outstanding of Registrant's common stock ($0.001 par value)
as of November 30, 1997 was 52,266.
Total of Sequentially Numbered Pages: 6
Exhibit Index on Page: 6
<PAGE>
TABLE OF CONTENTS
PART 1
ITEM 1. FINANCIAL STATEMENTS .............................................. 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ......... 3
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K .................................. 4
SIGNATURES ........................................................ 5
INDEX TO EXHIBITS ................................................. 6
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
Unless otherwise indicated, the term "Company" refers to HYTK
Industries, Inc. and its former subsidiaries and predecessors. Unaudited interim
financial statements including a balance sheet for the Company as of the fiscal
quarter ended November 30, 1997 and statements of operations and statements of
cash flows for the interim period up to the date of such balance sheet and the
comparable period of the preceding fiscal year are attached hereto as Pages F-1
through F-5 and are incorporated herein by this reference.
<PAGE>
HYTK INDUSTRIES, INC.
Unaudited Balance Sheet
November 30, 1997
ASSETS
Current Assets ............................................. $ --
Other Assets ............................................... --
-----------
TOTAL ASSETS ............................................... $
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses ................. $ 15,013
-----------
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,
52,266 issued and outstanding .................... 52
Additional paid-in-capital ............................ 1,108,846
Retained earnings (deficit) ........................... (1,123,911)
-----------
Total Stockholders' equity ................................. (15,013)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................. $ --
===========
See notes to unaudited financial statements.
F-1
<PAGE>
<TABLE>
<CAPTION>
HYTK INDUSTRIES, INC.
Unaudited Statements of Operations
For the Quarters and the Six Months Ended November 30, 1997 and 1996
Quarter Ended Six Months Ended
November 30, November 30, November 30, November 30
1997 1996 1997 1996
------------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues ................................. $ -- $ -- $ -- $ --
--------------- -------- -------- ----------
General and administrative expenses ...... -- -- -- 20,900
--------------- -------- -------- ----------
-- -- -- (20,900)
--------------- -------- -------- ----------
Non-Operating Income (Expense)
Gain on sale of interest in property -- -- -- 83,606
Interest expense .................... -- -- 29 --
--------------- -------- -------- ----------
Total non-operating income (expenses) -- -- 29 83,606
Net Income (loss) ........................ $ -- $ -- (29) $ 62,706
=============== ======== ======== ==========
Earnings (loss) per share:
Net income (loss) ................... (0.00) (0.00) (0.00) 1.20
=============== ======== ======== ==========
Weighted-average shares outstanding ...... 52,266 52,266 52,266 52,266
See notes to unaudited financial statements.
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
HYTK INDUSTRIES
Unaudited Statements of Stockholders' Equity
November 30, 1997
Common Stock
---------------------------------- Retained
Additional Earnings Total
Number of Paid In (Deficit) Stockholders'
Shares Par Value Capital Accumulated Equity
-------------- ---------------- ----------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, May 31, 1996 .................. 52,266 $ 52 $ 1,108,846 $(1,186,588) $ (77,690)
Net Income ............................. -- -- -- 62,706 62,706
----------- ----------- ----------- ----------- -----------
Balance, May 31, 1997 .................. 52,266 52 1,108,846 (1,123,882) (14,984)
Net Loss ............................... -- -- -- (29) (29)
----------- ----------- ----------- ----------- -----------
Balance, November 30, 1997 ............. 52,266 $ 52 $ 1,108,846 $(1,123,911) $ (15,013)
=========== =========== =========== =========== ===========
See notes to unaudited financial statements.
F-4
</TABLE>
<PAGE>
HYTK INDUSTRIES, INC.
Unaudited Statements of Cash Flows
For the Six Months Ended November 30, 1997 and 1996
Six Months Ended
November 30, November 30,
1997 1996
--------------- -----------
Cash Flows From Operating Activities
Net income (loss) ................................. $ (29) $ 62,706
Noncash expenses included in net income (loss):
Services paid with common stock ................ -- --
Increase (decrease) in accounts
payable and accrued expenses .................. 29 (35,206)
-------- --------
Net cash provided by (used for)
operating activities .................................. -- 27,500
-------- --------
Cash Flows From Investing Activities
Net cash provided by (used for)
investing activities .................................. -- --
-------- --------
Cash Flows From Financing Activities
Repayment of note payable, related party .......... -- (27,500)
-------- --------
Net cash provided by (used for)
financing activities .................................. -- (27,500)
-------- --------
Increase (decrease) in cash and cash equivalents ....... -- --
Cash and cash equivalents, beginning of year ........... -- --
-------- --------
Cash and cash equivalents, end of year ................. $ -- $ --
======== ========
Supplement Disclosures of Cash Flow Information
Cash payments for Interest ........................ $ -- $ --
Cash payment for Income Taxes ..................... $ -- $ --
See notes to unaudited financial statements.
F-4
<PAGE>
HYTK INDUSTRIES, INC.
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE FISCAL QUARTER ENDED NOVEMBER 30, 1997
1. Basis of Presentation
The accompanying consolidated unaudited condensed financial statements have
been prepared by management in accordance with the instructions in Form 10-QSB
and, therefore, do not include all information and footnotes required by
generally-accepted accounting principles and should, therefore, be read in
conjunction with the Company's Annual Report to Shareholders on Form 10-KSB for
the fiscal year ended May 31, 1997. These statements do include all normal
recurring adjustments which the Company believes necessary for a fair
presentation of the statements. The interim operations results are not
necessarily indicative of the results for the full year ended May 31, 1998.
4. Additional footnotes included by reference
Except as indicated in Notes 1 above, there have been no other material
changes in the information disclosed in the notes to the financial statements
included in the Company's Annual Report on Form 10-KSB for the year ended May
31, 1997. Therefore, those footnotes are included herein by reference.
F-5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Company was incorporated in 1982 under the name Digitel of Las
Vegas, Inc. From 1982 until May 1992, the Company's primary operations involved
the sale, installation, and servicing of commercial telephone systems. In 1986,
the Company transferred all assets related to its primary operations to a newly
formed subsidiary, Digitel, Inc., a Colorado corporation ("Digitel"). Beginning
in 1989, the Company made attempts to expand its operations into other business
sectors.
From January 1989 to October 1989, the Company sold and leased voice
mailbox equipment through its wholly-owned subsidiary, U.S. Voice. These
operations were unsuccessful largely as a result of unforeseen initial start-up
costs and revenues that did not meet the Company's expectations. In October
1989, the Company transferred all of the assets of U.S. Voice to an affiliate.
In July 1990, the Company acquired 100% of the outstanding capital
stock of Cactus Club, a manufacturer of mens sportswear. The Company acquired
Cactus Club with the intention of diversifying its business holdings and moving
away from telecommunications-related operations. Cactus Club required an
immediate cash infusion of $500,000 which the Company had intended to provide
through the proceeds of a warrant offering which the Company was then
conducting. In September 1990, the Company's Common Stock was delisted from the
NASDAQ Small Cap Market. After the Common Stock was delisted, the Company ceased
receiving cash proceeds from the exercise of the previously issued warrants. The
Company did not have an alternative method of financing the cash requirements of
Cactus Club. Accordingly, in October 1990, the Company transferred all of the
assets of Cactus Club to an unaffiliated third party.
On May 20, 1992, the Company transferred substantially all of the
assets of Digitel to Western Communications, Inc. (n/k/a Southwestern
Communications, Inc.), an affiliated entity. The Company sold the assets of
Digitel in exchange for Southwestern's assumption of an equivalent amount of
Digitel's liabilities. At the time of this transfer Digitel's liabilities
exceeded its assets. Digitel had experienced recurring losses and the Company's
management did not believe that it had the resources necessary to reverse this
trend. The sale of Digitel's assets was structured as a bulk transfer under
Article 6 of the Uniform Commercial Code, and notice of the sale was delivered
to Digitel's creditors, most of whom were suppliers.
After the transfers of U.S. Voice, Cactus Club, and Digitel, the
Company's only significant asset was an interest in a parcel of commercial real
estate located at 3900 West Russell Road in Las Vegas, Nevada (the "Russell Road
Property"). The Company had title to the property but leased the property back
to a former owner under what was intended to be a sale-leaseback arrangement.
This interest in the property was assigned to the Company by an affiliate in
exchange for the Company's issuance of Common Stock. From May 1992 to April
1995, the lease of this property was the only source of revenues generated by
the Company.
<PAGE>
In April 1995, the Company transferred its interest in the property to
another affiliate. At the time of this transfer, the first mortgage holder on
the property was threatening foreclosure and the Company was in danger of not
realizing the full value of the property as a result of the impending forced
sale. Therefore, the Company transferred the Russell Road Property in exchange
for the transferee's assumption of the debt obligations on the property and
promise to distribute to the Company 50% of the first $100,000 in net proceeds
realized from the eventual sale of the property and 10% of additional net
proceeds realized. On July 23, 1996, the Russell Road Property was sold. The
Company received $83,606 as a result of the sale. The cash derived from the sale
was used to reduce the Company's liabilities. The Russell Road Property was the
last substantial asset owned by the Company.
The interest in the Russell Road Property was the last material asset
of the Company. The Company has not realized any cash inflow in the past five
years, excepting the cash realized from the April 1996 sale of the Russell Road
Property.
Since the sale of the Russell Road Property, the Company has been
searching for a viable candidate for merger or acquisition. The Company lacks
any significant cash flow or assets and the Company's intent is therefore to
issue shares of its common stock as consideration for any subsequent merger or
acquisition. This will likely result in substantial future dilution of the
current ownership interest of the Company's shareholders. If the Company effects
a future merger or acquisition, it will need financing to satisfy the cash
requirements of its merger/acquisition partner. The nature and extent of these
requirements will depend upon the kind of business acquired by the Company.
Given the Company's limited cash flow and history of operating losses, there is
a substantial risk that the Company will not be able to raise the capital
necessary to make a subsequent merger or acquisition successful. The Company
intends to raise capital primarily through private offerings of its common stock
and can provide no assurances that it will be able to generate sufficient
capital in this manner.
In December 1997 and subsequent to the end of quarter, the Company
approached Sharpe Capital (a broker-dealer registered with the National
Association of Securities Dealers) with regard to making a market in the
Company's common stock on behalf of the Company and its shareholders. On
December 16, 1997, Sharpe Capital submitted an application pursuant to Section
15c2-11 of the Securities Exchange Act with the NASD to trade the Company's
Common Stock on the OTC Bulletin Board. This application is currently pending.
The Company has been able to satisfy many of its obligations by issuing
shares of its common stock. Accordingly, the Company has been able to meet its
obligations without expenditures of its cash flows. The Company intends to
continue this practice, but the Company can provide no assurances that it will
continue to be able to satisfy its obligations in this manner.
The Company does not currently have any full or part time employees,
aside from its remaining officer and director. The Company is substantially
dependent upon that individual who has no formal compensation arrangement with
the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index to Exhibits. Exhibits required to be attached by Item 601 of
Regulation S-B are listed in the Index to Exhibits beginning on page 6
of this Form 10-QSB. The Index to Exhibits is incorporated herein by
this reference.
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K
during the quarter ended November 30, 1997.
<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 16TH day of January 1998.
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
- --------- ----- ----
/s/ Ken Kurtz President and Director January 17, 1998
- ---------------
Ken Kurtz
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NUMBER DESCRIPTION
3(i) * The Company's Articles of Incorporation (incorporated herein by
reference to the Exhibits to the Company's Registration Statement
on Form S-18, Registration No. 2-99737-LA ).
3(i) * The Company's Bylaws, as amended (incorporated herein by
reference to the Exhibits to the Company's Registration Statement
on Form S-18, Registration No. 2-99737-LA).
MATERIAL CONTRACTS
10(i)(a) * September 1, 1995 Consulting Agreement executed by and between
the Company and Canton Financial Services Corporation
(incorporated herein by reference to the Company's Form 10-KSB
for fiscal year ended May 31, 1992).
10(i)(b) * April 22, 1995 Deed of Trust executed by BeckWork, LLC. for the
benefit of the Company (incorporated herein by reference to the
Company's Form 10-KSB for fiscal year ended May 31, 1992).
10(i)(c) * May 20, 1992 Asset Purchase Agreement executed by and between the
Company and Western Communications (incorporated herein by
reference to the Company's Form 10-KSB for fiscal year ended May
31, 1992).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
UNAUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S NOVEMBER
30,1997 QUARTERLY REPORT ON FORM 10-QSB 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> 6-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> NOV-30-1997
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 15,013
<BONDS> 0
0
0
<COMMON> 52
<OTHER-SE> (15,065)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 29
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (29)
<INCOME-TAX> 0
<INCOME-CONTINUING> (29)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (29)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
