Edgar Filing: HY TECH TECHNOLOGY GROUP INC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-KSB

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT

OF 1934

FOR THE FISCAL YEAR ENDED FEBRUARY 29, 2004

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE

ACT OF 1934

FOR THE TRANSITION PERIOD FROM _____________ TO _________________

COMMISSION FILE NUMBER: 000-33231

HY-TECH TECHNOLOGY GROUP, INC.

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(EXACT NAME OF THE COMPANY AS SPECIFIED IN ITS CHARTER)

DELAWARE 95-4868120
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

1840 BOY SCOUT DRIVE, FORT MYERS, FLORIDA 33907
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(239) 851-0111
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(ISSUER TELEPHONE NUMBER)

SECURITIES REGISTERED UNDER SECTION 12(B) OF THE ACT:

TITLE OF EACH CLASS REGISTERED: NAME OF EACH EXCHANGE ON WHICH REGISTERED:
------------------------------- ------------------------------------------
NONE NONE
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SECURITIES REGISTERED UNDER SECTION 12(G) OF THE ACT:

COMMON STOCK, PAR VALUE $.001
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(TITLE OF CLASS)

Indicate by check mark whether the Company (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 Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the Company'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. [X] Yes [ ] No

State issuer's revenues for its most recent fiscal year. $8,985,425 State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.) As of May 31, 2004, approximately $480,000.

As of May 31, 2004, there were 98,677,406 shares of the issuer's $.001 par value
common stock issued and outstanding.

Documents incorporated by reference. There are no annual reports to security
holders, proxy information statements, or any prospectus filed pursuant to Rule
424 of the Securities Act of 1933 incorporated herein by reference.

Transitional Small Business Disclosure format (check one):

[ ] Yes [X] No

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TABLE OF CONTENTS
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ITEM NUMBER AND CAPTION PAGE
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Special Note Regarding Forward-Looking Statements..............................4

PART I

1. Description of Business...............................................5

2. Description of Property...............................................9

3. Legal Proceedings.....................................................9

4. Submission of Matters to a Vote of Security Holders..................10

PART II

5. Market for Common Equity and Related Stockholder Matters.............11

6. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................13

7. Financial Statements.................................................16

8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................16

PART III

9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act....................17

10. Executive Compensation...............................................18

11. Security Ownership of Certain Beneficial Owners and Management.......20

12. Certain Relationships and Related Transactions.......................21

13. Exhibits and Reports on Form 8 K.....................................21

14. Controls and Procedures..............................................23

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain financial information and statements regarding our
operations and financial prospects of a forward-looking nature. Although these
statements accurately reflect management's current understanding and beliefs, we
caution you that certain important factors may affect our actual results and
could cause such results to differ materially from any forward-looking
statements which may be deemed to be made in this report. For this purpose, any
statements contained in this Report which are not statements of historical fact
may be deemed to be forward-looking statements. Without limiting the generality
of the foregoing, words such as, "may", "will", "intend", "expect", "believe",
"anticipate", "could", "estimate", "plan" or "continue" or the negative
variations of those words or comparable terminology are intended to identify
forward-looking statements. There can be no assurance of any kind that such
forward-looking information and statements will be reflective in any way of our
actual future operations and/or financial results, and any of such information
and statements should not be relied upon either in whole or in part in
connection with any decision to invest in the shares.

PART I

ITEM 1. DESCRIPTION OF BUSINESS.

BACKGROUND AND CURRENT PLANS

Beginning in July 2004, Hy-Tech Technology Group, Inc. (the "Company") will
operate under the new name of Innova Holdings. This new name is more synonymous
with the Company's plan to grow by acquisition and to differentiate the Company
with unique technologies.

In July 2004, the Company will increase its authorized shares to 900 million
from 100 million. The increase would allow the company to issue new shares for
acquisitions, or to secure financing for operations or strategic partnerships.

In February 2004, the Company announced it had entered into a Letter of Intent
to acquire Robotic Workspace Technologies, Inc. (RWT). RWT, based in Fort Myers,
Florida, is a privately-held company founded in 1994 to enhance the field of
robotics with commercially available, patented products to improve robot
performance, applicability, and productivity.

In February 2004, the Company announced it had entered into a Letter of Intent
for the sale of its wholly owned subsidiary, Hy-Tech Computer Systems (HTCS) to
Aegis Funds, Inc.

The Company remains in discussion with various financing sources to allow it
access to the financing needed to complement the use of its stock in achieving
these plans.

In February 2004, the Company announced its planned changes which included its
planned acquisition of Robotic Workspace Technologies (RWT) and the intended
divestiture of Hy-Tech Computer Systems (HTCS). Such changes support the
Company's plan to grow by acquisition and differentiate the company with unique
technologies, by converting to e-commerce selling and distribution techniques
and by adding complementary, higher margin services. The Company intends to
raise additional working capital through private placements, public offerings
and/or bank financing.

OUR BUSINESS FROM 1992 THROUGH 2003

HTCS was formed in 1992 in Fort Myers, Florida. as a supplier to the information
technology business. In January 31, 2003, HTCS completed a reverse acquisition
into SRM Networks, an Internet service provider and web hosting business, in
which HTCS was deemed the "accounting acquirer". We have discontinued SRM
Network's Internet business. In connection with the transaction, SRM Networks,
Inc. changed its name to Hy-Tech Technology Group, Inc.

From 1992 through 2002, HTCS was a leading custom systems builder and authorized
distributor of the world's leading computer system and components. HTCS is
headquartered in Fort Myers, Florida and operated seventeen locations throughout
Florida, Alabama, Tennessee, Kentucky, Wisconsin and Colorado. HTCS supplied a
full line of computer components and peripherals and employed technicians
capable of building and servicing systems that range in scope from basic desktop
systems to very sophisticated server applications. Throughout its history, HTCS
had demonstrated its technical capability as an award-winning reseller of the
industry's leading technology products and by earning a variety of
accreditations such as Intel Premier Provider, Microsoft System Builder Gold
Member, Symantec Authorized Education Reseller, and Iomega Premier Partner.

At the end of 2003, management concluded that the existing business was not
viable as a `brick and mortar' operation, and initiated the changes necessary to
adopt the new strategy, including closing the stores, laying off employees and
transferring all business to e-commerce. Negotiations were initiated to acquire
a new business and to divest the old HTCS business.

FISCAL YEAR ENDING FEBRUARY 29, 2004 EVENTS

On April 22, 2003, we entered into an Advisory Agreement (the "Advisory
Agreement") with AltosBancorp Inc. ("Altos") pursuant to which Altos agreed to
act as our exclusive business advisor for a one year period. Altos advised us
regarding equity and debt financings, strategic planning, mergers and
acquisitions, and business developments. The Company and certain of its
principal shareholders agreed to pay Altos the following:

(1) an option to purchase 10,000,000 of the principal shareholders'
shares of Common Stock and an irrevocable proxy to vote all 15,838,448 of their
shares in the event that financing was obtained that the Company used to satisfy
HTCS's obligations to SunTrust Bank'

(2) a cash fee equal to 10% of the gross proceeds of the financing and
warrants to acquire a number of shares of Common Stock equal to 10% of the
Common Stock sold in such financing, such warrants to have an exercise price of
$.01 per share and a term of five years, if Altos introduces the Company to any
provider of equity financing which the Company agreed to;

(3) a cash fee equal to 10% of the gross cash proceeds of the merger
and warrants to acquire a number of shares of Common Stock equal to 10% of the
Common Stock issued in such merger, such warrants to have an exercise price of
$.01 per share and a term of five years, if Altos introduced the Company to any
merger candidate with which the Company closes a transaction;

(4) a cash fee equal to 6% of any debt, 3% of any revolving credit
line, 2% of any credit enhancement instrument and 10% of any revenue producing
contract if Altos introduces the Company to any source of capital, which it
closes. This obligation survives for a period of two years from the date of the
Advisory Agreement;

(5) a retainer fee of $30,000, of which $10,000 was paid upon the
settlement of The Company's obligations to SunTrust Bank and $20,000 was to be
paid when the Company closes a financing of at least $800,000; and

(6) a termination fee equal to 50% of the fee that Altos would have
been paid had the transaction closed in the event that the Company does not
proceed with a transaction arranged by Altos without just cause.

In conjunction with the decision to proceed with the RWT acquisition, the
agreement with Altos has now been concluded.

On April 28, 2003, a merger between the Company and Sanjay Haryama ("SH"), a
Wyoming corporation, was effected. The merger was based upon an Agreement and
Plan of Merger dated April 28, 2003 among the parties. Pursuant to the merger
(i) SH was merged with and into the Company; (ii) the SH shareholder exchanged
1,000 shares of common stock of SH, constituting all of the issued and
outstanding capital stock of SH, for an aggregate of 1,000 shares of the
Company's restricted common stock; and (iii) SH's separate corporate existence
terminated. The SH shareholder was Coachworks Auto Leasing, which is wholly
owned by Jehu Hand. The determination of the number of shares of the Company's
stock to be exchanged for the SH shares was based upon arms' length negotiations
between the parties.

Prior to the merger, SH completed a $1,000,000 financing transaction pursuant to
Rule 504 of Regulation D of the General Rules and Regulations under the
Securities Act of 1933 as amended pursuant to a Convertible Debenture Purchase
Agreement (the "Purchase Agreement") dated April 21, 2003 between SH and an
accredited Colorado investor (the "Investor"). In connection therewith, SH sold
a 1% $1,000,000 Convertible Debenture due April 20, 2008 (the "SH Debenture") to
the Investor. The unpaid principal amount of the SH Debenture was convertible
into unrestricted shares of SH common stock to be held in escrow pending the
repayment or conversion of the SH Debenture. Pursuant to the merger, the Company
assumed all obligations of SH under the SH Debenture and issued the holder
thereof its 1% $1,000,000 Convertible Debenture due April 28, 2008 (the
"Convertible Debenture") in exchange for the SH Convertible Debenture. The
material terms of the Convertible Debenture are identical to the terms of the SH
Convertible Debenture except that the unpaid principal amount of the Convertible

Debenture is convertible into unrestricted shares of the Company's Common Stock
(the "Common Stock"). The per share conversion price for the Convertible
Debenture in effect on any conversion date is the lesser of (a) $0.35 or
one-hundred twenty-five percent (125%) of the average of the closing bid prices
per share of the Company's Common Stock during the five (5) trading days
immediately preceding April 29, 2003 or (b) one hundred percent (100%) of the
average of the three (3) lowest closing bid prices per share of the Company's
Common Stock during the forty (40) trading days immediately preceding the date
on which the holder of the Convertible Debenture provides the escrow agent with
a notice of conversion. The number of shares of the Company's Common Stock
issuable upon conversion is also subject to anti-dilution provisions. The
Investor's right to convert the Convertible Debenture is subject to the
limitation that the Investor may not at any time own more than 4.99% of the
outstanding Common Stock of the Company, unless the Company is in default of any
provision of the Convertible Debenture or the Investor gives seventy five (75)
days advance notice of its intent to exceed the limitation.

Between the date of the merger and the end of November, 2003, the Convertible
Debenture was fully converted to Common Stock of the Company.

On April 28, 2003, the Company announced it had entered into a financing
transaction in which it has received a firm commitment from a private equity
fund for the purchase of a $750,000 convertible debenture from the Company (the
"Second Debenture"). The Second Debenture was not closed and the Company
arranged for alternative financing under a Factoring Line of Credit with
Platinum Funding Corporation.

On April 29, 2003, the Company entered into an agreement called an "Option to
Purchase" ("Settlement Agreement") with SunTrust Bank under which the Company
agreed to settle all pending litigation and satisfy all judgments obtained
against the HTCS subsidiary by SunTrust Bank. The Company agreed to pay a total
of $1.5 million by August 28, 2003 in full settlement of all of SunTrust's
claims of approximately $3.7 million. Under the terms of the Settlement
Agreement, the Company delivered $1.0 million dollars to SunTrust on April 29,
2003. This $1.0 million represents all of the proceeds of the sale of the
Convertible Debenture. The Company also agreed to pay SunTrust three
installments of $65,000 each in June, July and August, and the balance of
$305,000 on or before August 28, 2003. The Company used part of the proceeds
from the Factoring Line of Credit to pay the August 28, 2003 installment of
$305,000 due to SunTrust Bank, and all other amounts were paid.

As a result of this settlement, the Company reduced its current liabilities by
approximately $4.8M, and obtained the ownership of the Sun Trust judgement, per
the Settlement Agreement.

In May 2003, Martin Nielson assumed full time responsibilities as Chief
Executive Office, brought new investors to the company, and was chartered to
transform the Company away from being a custom systems builder. During the
fiscal year, the Company took steps necessary to design the new business
strategy and commenced the implementation of this strategy, which also included
growth by acquisition. Among these steps taken were:

o construction of the details of the new plan which led to the decision
to transform and then divest HTCS

o restructuring of the personnel o reduction of costs and writing off
unproductive assets

o engagement of key professionals

o negotiating with sources of new investment

o identifying and negotiating with acquisition targets

Concurrent with the steps taken, the Company aggressively pursued new financing
from debt and equity sources to increase working capital, further reduce
liabilities, and to help negotiate acquisitions to provide a platform for
growth.

In November, the Company signed an agreement to provide acquisition financing.
This agreement was announced publicly but was never concluded when the lender
failed to perform. The Company announced in its quarterly filing that this it
had doubts that this transaction would close.

At the same time and due to the substantial requirement for capital to keep
inventory in multiple outlets and to finance receivables, the Company faced
significant challenges to produce an adequate return on investment from HTCS.
The Company restructured operations by shifting its sales operations to an
online store operated by a third party. This change was important. It was much
more cost effective and far less capital intensive. We eliminated the overhead
of the local wholesale outlets, and all local costs became variable. Key
employees in the local operations were offered positions with the contracting
company, yet HTCS retained benefit of the sales as part of the deal.

In February 2004, the Company announced its planned changes which included its
planned acquisition of Robotic Workspace Technologies (RWT) and the intended
divestiture of HTCS. Such changes were in keeping with the Company's new plan to
grow by acquisition-to differentiate the company by adding unique technologies,
by converting to e-commerce selling and distribution techniques and by adding
complementary, higher margin services. The Company remains in discussion with
various financing sources to allow it access to the financing needed to
complement the use of its stock in achieving these plans.

HISTORIC PRODUCTS & SERVICES

The products sold by HTCS have been "Hy-Tech" branded computer systems -
desktops, notebooks and servers, computer components and peripherals, computer
storage products; computer operating systems and office software; Compaq
computer systems - desktop and servers; computer service; and computer warranty
work.

The Company is no longer actively selling any of these products.

COMPETITIVE SITUATION

HTCS has different competitors in the two basic markets - the reseller market
and direct to the IT market.

Primary competitors for the reseller customers are the national or large
regional distribution companies. The main advantages of these competitors are
size and price. In its direct sales to IT departments, be they in the
commercial, government or education fields, HTCS competed primarily with the
large computer manufacturers. The large computer manufacturers have the
advantage of size and name recognition. When the IT departments require parts
rather than systems, HTCS competed for this business primarily with on-line
computer components suppliers. These companies treat this business as a
commodity and compete strictly on price. Competition in HTCS's two primary
markets is very active.

INTELLECTUAL PROPERTY

We hold no patents, or trademarks. We do hold the appropriate business licenses
to operate.

GOVERNMENT AUTHORIZATION

The only government approvals required for our operations are local business
licenses.

RESEARCH AND DEVELOPMENT

HTCS developed two web sites for providing technical information to its
customers, selling product to its existing customers, and the second site has
been developed for selling product to the end user customers that we have not
previously targeted.

EMPLOYEES

The Company currently employs no full-time employees.

ITEM 2. DESCRIPTION OF PROPERTY

During fiscal year ended February 29, 2004, HTCS leased two buildings from
related parties. The building located at 1826 Boy Scout Drive, Fort Myers, FL
consists of 4,600 square feet, and HTCS leased it for $3,400.00 monthly. The
lease expires December 31, 2010, and HTCS has the option of extending it for
five more years with a rent escalation equal to the consumer price index
increase over the term of the first lease period. The building located at 1840
Boy Scout Drive, Fort Myers, FL consists of 11,320 square feet, and HTCS leases
it for $6,325 monthly. The lease expires December 31, 2010, and Hy-Tech has an
option to extend it for five years with a rent escalation equal to the consumer
price index increase over the term of the first lease period. Both of these
buildings are owned by Lee Coast Enterprises, Inc. Margaret L. Conklin, (wife of
Craig Conklin), as trustee, owns 33% of the stock of Lee Coast Enterprises.
Susan McNear, (wife of Gary McNear), as trustee, owns 33% of the stock of Lee
Coast Enterprises. Gary McNear is President of Lee Coast Enterprises, Inc. Both
of these buildings are leased at market rates. Gary McNear is our vice
president, chief financial officer, secretary and a director. Craig Conklin is
our vice president, chief operating officer and director.

The following table sets forth the locations, monthly rent and expiration dates
for the leases at our distribution centers:

-------------------- ----------------- ------------ -----------
City Expiration Date Monthly Rent Square Feet
-------------------- ----------------- ------------ -----------
Birmingham, AL 09/30/2003 $2,500.00 3,113.00
-------------------- ----------------- ------------ -----------
Pensacola, FL 12/31/2003 $2,000.00 2,200.00
-------------------- ----------------- ------------ -----------
Knoxville, TN 02/28/2004 $2,585.00 3,000.00
-------------------- ----------------- ------------ -----------
Ocala, FL 09/30/2003 $1,527.54 2,550.00
-------------------- ----------------- ------------ -----------
Lexington, KY 04/30/2004 $2,000.00 3,000.00
-------------------- ----------------- ------------ -----------
Madison, WI 03/31/2005 $2,458.00 2,900.00
-------------------- ----------------- ------------ -----------
Fort Myers, FL 12/31/2010 $6,325.00 11,320.00
-------------------- ----------------- ------------ -----------
Fort Myers, FL 12/31/2010 $3,400.00 4,600.00
-------------------- ----------------- ------------ -----------
West Palm Beach, FL 08/31/2005 $2,337.00 2,850.00
-------------------- ----------------- ------------ -----------
Naples, FL 12/31/2004 $2,170.00 3,000.00
-------------------- ----------------- ------------ -----------
Nashville, TN 03/31/2004 $5,054.00 4,700.00
-------------------- ----------------- ------------ -----------
Colorado Springs, CO 05/31/2005 $2,736.00 3,200.00
-------------------- ----------------- ------------ -----------
Chattanooga, TN 02/28/2004 $2,275.00 2,240.00
-------------------- ----------------- ------------ -----------
Melbourne, FL Monthly occupancy $1,823.00 2,000.00
-------------------- ----------------- ------------ -----------
Sarasota, FL Monthly occupancy $1,718.00 2,200.00
-------------------- ----------------- ------------ -----------
Mobile, AL 03/31/2004 $1,710.00 2,400.00
-------------------- ----------------- ------------ -----------
Louisville , KY 06/30/2004 $1,425.00 2,300.00
-------------------- ----------------- ------------ -----------

ITEM 3. LEGAL PROCEEDINGS

There are multiple lawsuits against HTCS by Vendors seeking to recover money for
product delivered to HTCS.

HYTT is not involved in any other material pending legal proceedings, other than
routine litigation incidental to our business, to which we are a party or of
which any of our property is subject.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

PART II

ITEM 5. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Reports to Security Holders

We are a reporting company with the Securities and Exchange Commission, or SEC.
The public may read and copy any materials filed with the SEC at the SEC's
Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. The
public may also obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The address of that
site is http://www.sec.gov.

Prices of Common Stock

Since February 2002, we have been eligible to participate in the OTC Bulletin
Board, an electronic quotation medium for securities traded outside of the
Nasdaq Stock Market, and prices for our common stock were published on the OTC
Bulletin Board under the trading symbol "SRMW" until such time as our
acquisition of Hy-Tech Technology Group, Inc. on January 31, 2003 when our
symbol became HYTT.

The following table sets forth, for the fiscal quarters indicated, the high and
low closing sales price of our Common Stock as reported on the NASD
Over-the-Counter Bulletin Board for each quarterly period during fiscal year
ended February 29, 2004.

Common Stock
------------------------
Year Ended February 29, 2004 High Low
-------- --------
First quarter $ 1.00 $ 0.12
Second quarter $ 0.19 $ 0.02
Third Quarter $ 0.08 $ 0.04
Fourth Quarter $ 0.07 $ 0.02

There are approximately 50 record holders of common equity.

We have outstanding 98,677,406 shares of our common stock. Of these shares,
98,677,406 shares are freely tradable without restriction under the Securities
Act unless held by our "affiliates" as that term is defined in Rule 144 under
the Securities Act. These shares will be eligible for sale in the public market,
subject to certain volume limitations and the expiration of applicable holding
periods under Rule 144 under the Securities Act. Non-affiliates currently hold
56,246,129 shares of our common stock, or fifty-seven percent (57%), of our
outstanding shares. In general, under Rule 144 as currently in effect, a person
(or persons whose shares are aggregated) who has beneficially owned restricted
shares for at least one year (including the holding period of any prior owner or
affiliate) would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of (1)% of the number of shares of
common stock then outstanding or (2) the average weekly trading volume of the
common stock during the four calendar weeks preceding the filing of a From 144
with respect to such sale. Sales under Rule 144 are also subject to certain
manner of sale provisions and notice requirements and to the availability of
current public information about us. Under Rule 144(k), a person who is not
deemed to have been an affiliate of us at any time during the three months
preceding a sale, and who has beneficially owned the shares proposed to be sold
for at least two years (including the holding period of any prior owner except
an affiliate), is entitled to sell such shares without complying with the manner
of sale, public information, volume limitation or notice provisions of Rule 144.

We can offer no assurance that an active public market in our shares will
develop. Future sales of substantial amounts of our shares in the public market
could adversely affect market prices prevailing from time to time and could
impair our ability to raise capital through the sale of our equity securities.

Dividend Policy

We have never declared or paid any cash dividends on our common stock. We
anticipate that any earnings will be retained for development and expansion of
our business and we do not anticipate paying any cash dividends in the
foreseeable future. Our board of directors has sole discretion to pay cash
dividends based on our financial condition, results of operations, capital
requirements, contractual obligations and other relevant factors.

There are no outstanding options or warrants to purchase, or securities
convertible into, shares of our common stock. There are no outstanding shares of
our common stock that we have agreed to register under the Securities Act for
sale by security holders.

Penny Stock Regulation

Shares of our common stock are subject to rules adopted by the Securities and
Exchange Commission that regulate broker-dealer practices in connection with
transactions in "penny stocks". Penny stocks are generally equity securities
with a price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the Nasdaq system, provided that
current price and volume information with respect to transactions in those
securities is provided by the exchange or system). The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from those rules, deliver a standardized risk disclosure document prepared by
the Securities and Exchange Commission, which contains the following:

o a description of the nature and level of risk in the market for penny
stocks in both public offerings and secondary trading;

o a description of the broker's or dealer's duties to the customer and
of the rights and remedies available to the customer with respect to
violation to such duties or other requirements of securities' laws;

o a brief, clear, narrative description of a dealer market, including
"bid" and "ask" prices for penny stocks and the significance of the
spread between the "bid" and "ask" price;

o a toll-free telephone number for inquiries on disciplinary actions;

o definitions of significant terms in the disclosure document or in the
conduct of trading in penny stocks; and

o such other information and is in such form (including language, type,
size and format), as the Securities and Exchange Commission shall
require by rule or regulation.

Prior to effecting any transaction in penny stock, the broker-dealer also must
provide the customer the following:

o the bid and offer quotations for the penny stock;

o the compensation of the broker-dealer and its salesperson in the
transaction;

o the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
market for such stock; and

o monthly account statements showing the market value of each penny
stock held in the customer's account.

In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
Holders of shares of our common stock may have difficulty selling those shares
because our common stock will probably be subject to the penny stock rules.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION.

BACKGROUND

Beginning in July 2004, Hy-Tech Technology Group, Inc. will operate under the
new name of Innova Holdings. This new name is more synonymous with the Company's
plan to grow by acquisition and to differentiate the company with unique
technologies.

In Feburary 2004, the Company announced it had entered into a Letter of Intent
for the sale of its wholly owned subsidiary, Hy-Tech Computer Systems (HTCS) to
Aegis, Inc.

The Company remains in discussion with various financing sources to allow it
access to the financing needed to complement the use of its stock in achieving
these plans.

There is presently no on-going business being carried on directly by the Company
while it seeks to conclude these two transactions.

CRITICAL ACCOUNTING POLICIES

The Company prepared its consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of

contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period.
Management periodically evaluates the estimates and judgments made. Management
bases its estimates and judgments on historical experience and on various
factors that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates as a result of different assumptions or
conditions.

The following critical accounting policies affect the more significant judgments
and estimates used in the preparation of the Company's consolidated financial
statements.

VENDOR PROGRAMS

Funds received from vendors for price protection, product rebates, marketing and
training, product returns and promotion programs have been recorded as
adjustments to product costs, revenue or sales and marketing expenses according
to the nature of the program. HTCS recorded estimated reductions to revenues for
incentive offerings and promotions.

ACCOUNTS RECEIVABLE

HTCS recognized revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable, and
collectibility wass probable. HTCS recorded estimated reductions to revenue for
incentive offerings and promotions.

In order to determine the value of HTCS's accounts receivable, HTCS recorded a
provision for doubtful accounts to cover probable credit losses. Management
reviews and adjusts this allowance periodically based on historical experience
and its evaluation of the collectibility of outstanding accounts receivable.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined by
using the average cost method. HTCS maintains a perpetual inventory system which
provides for continuous updating of average costs. HTCS evaluates the market
value of its inventory components on a regular basis and reduces the computed
average cost if it exceeds the component's market value. Inventories consist
primarily of computer parts and components purchased from vendors.

INCOME TAXES

HTCS records a valuation allowance to reduce its deferred tax assets to the
amount that is more likely than not to be realized. In the event the Company was
to determine that it would be able to realize its deferred tax assets in the
future in excess of its recorded amount, an adjustment to the deferred tax
assets would be credited to operations in the period such determination was
made. Likewise, should the Company determine that it would not be able to
realize all or part of its deferred tax assets in the future, an adjustment to
the deferred tax assets would be charged to operations in the period such
determination was made.

RESULTS OF OPERATIONS

During the fiscal year ended February 28, 2004 (the "2004 Period") revenues were
$8,985,425, compared to revenues of $23,954,115 during the fiscal year ended
February 28, 2003 (the "2003 Period"). This represents a decrease of
approximately 62.5%. This decrease is due to restrictions on our inventory
purchases that were imposed by our primary lender, SunTrust Bank and the general
decrease in the information technology business that occurred during this
period.

Gross margins were $1,041,770 during the 2004 Period compared to $3,112,371
during the 2003 Period. Gross margins as a percentage of revenues decreased from
approximately 13.0% during the 2003 Period to 11.6% during the 2004 Period. The
decrease in gross margin was due to HTCS having to purchase inventory from
higher cost vendors due to the lack of liquidity that resulted from its lending
arrangements.

General, administrative and selling expenses were $6,461,493 during the 2004
period compared to $4,551,570 during the 2003 period. Included in general,
administrative and selling expenses during the 2004 period was $287,210 of costs
directly related to maintaining the public company.

Interest expense was $482,405 during the 2004 Period and $216,616 during the
2003 Period. This increase was due to higher interest costs associated with the
Factoring Line of Credit entered into with Platinum Funding Corporation in 2004.

Net loss for the 2004 Period was $2,403,201, compared to a net loss of
$1,661,617 for the 2003 Period, due to the factors described above.

LIQUIDITY AND CAPITAL RESOURCES

At February 29, 2004, we had cash of $0, current assets of $114,650 and current
liabilities of $2,585,402. At February 29, 2004, we had negative working capital
of $2,470,752.

On April 29, 2003, we settled our claims with SunTrust pursuant to a Settlement
Agreement for aggregate payments of $1.5 million. Under the terms of the
Settlement Agreement, the Company delivered $1.0 million dollars to SunTrust on
April 29, 2003. This $1.0 million represented all of the proceeds of the sale of
a Convertible Debenture that was issued to a private investor. We also agreed to
pay SunTrust three installments of $65,000 each in June, July and August. The
balance of $305,000 was paid from the portion of proceeds received under the
Factoring Line of Credit with Platinum Funding Corporation.

We are overdue with payments to numerous vendors. As of February 29, 2004, we
had outstanding accounts payable of $2,081,774 and accrued expenses of $367,375,
reflecting our inability to pay our vendors. Our main source of funds during
fiscal year ended February 28, 2003 was our credit facility which was
terminated. During fiscal year ended February 29, 2004, we raised $1.0 million
through the sale the Convertible Debenture. All of the proceeds from the sale of
the Convertible Debenture were used to pay SunTrust. The Company also used part
of the proceeds from the Factoring Line of Credit to pay the remaining
installments due to SunTrust Bank.

Currently, because of both our low stock price and our losses, we have not been
able to raise funds through the sale of our equity securities. We may not be
able to obtain any additional funding, and, if we are not able to raise funding,
we may be unable to continue in business. Furthermore, if we are able to raise
funding in the equity markets, our stockholders will suffer significant dilution
and the issuance of securities may result in a change of control. Management's
plans with respect to these matters include its attempts to settle claims with
vendors where possible. Management cannot provide any assurance that its plans
will be successful in alleviating its liquidity concerns. Further, we cannot
guaranty that additional funding will be available on favorable terms, if at
all. If we are unable to obtain debt and/or equity financing upon terms that our
management deems sufficiently favorable, or at all, it would have a materially
adverse impact upon our ability to pursue our business strategy and maintain our
current operations.

Going Concern Qualification

In their review of our financial statements for the period ended February 28,
2004, included in this report, our independent accountants have noted factors
which raise substantial doubt about our ability to continue as a going concern.
Our accountants have noted that we will require additional working capital to
develop and support our technologies and business until we either (1) achieve a
level of revenues adequate to generate sufficient cash flows from operations; or
(2) obtain additional financing necessary to support our working capital
requirements.

ITEM 7. FINANCIAL STATEMENTS

The audited financial statements, together with the independent accountants
report thereon of Malone & Bailey, PLLC appears herein, immediately following
the Exhibits to this Report.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

Effective March 5, 2003, the client-auditor relationship between Hy-Tech
Technology Group, Inc., formerly SRM Networks and Quintanilla, a Professional
Accountancy Corporation ("Quintanilla") ceased as the former accountant was
dismissed. On that date, the Company engaged Malone & Bailey, PLLC as its
principal independent public accountant. The decision to engage Malone & Bailey,
PLLC was made by the Company's Finance and Audit Committee in accordance with
Section 301 of the Sarbanes-Oxley Act of 2002. The change is based on the
relocation of the Company's principal place of business from California to
Florida.

Malone & Bailey, PLLC is succeeding Quintanilla. Quintanilla's report on the
financial statements of SRM Networks since its inception on June 8, 2001 through
December 31, 2001 and any later interim period up to and including the date the
relationship with Quintanilla ceased, did not contain any adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles.

In connection with the audit of SRM Network's first and most recent fiscal year
ending December 31, 2001 and any later interim period, including the interim
period up to and including the date the relationship with Quintanilla ceased,
there have been no disagreements with Quintanilla on any matters of accounting
principles or practices, financial statement disclosure of auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of
Quintanilla would have caused Quintanilla to make reference to the subject
matter of the disagreements in connection with its report on the Company'
financial statements. Since the Company's inception on June 8, 2001, there have
been no reportable events as defined in Item 301(a)(1)(v) of Regulation S-K.

The Company has authorized Quintanilla to respond fully to any inquiries of any
new auditors hired by the Company relating to their engagement as the Company's
independent accountant. The Company has requested that Quintanilla review the
disclosure and Quintanilla has been given an opportunity to furnish the Company
with a letter addressed to the Commission containing any new information,
clarification of the Company's expression of its views, or the respect in which
it does not agree with the statements made by the Company herein.

The Company has not previously consulted with Malone & Bailey, PLLC regarding
either (i) the application of accounting principles to a specified transaction,
either completed or proposed; or (ii) the type of audit opinion that might be
rendered on the Company's financial statements; or (iii) any matter that was
either the subject matter of a disagreement (as defined in Item 304(a)(1)(iv) of
Regulation S-K and the related instructions) between the Company and
Quintanilla, the Company's previous independent accountant, as there were no
such disagreements or another reportable event (as defined in Item 304(a)(1)(v)
of Regulation S-K) from the Company's inception through December 31, 2001 and
any later interim period, including the interim period up to and including the
date the relationship with Quintanilla ceased. The Company has not received any
written or oral advice concluding there was an important factor to be considered
by the Company in reaching a decision as to an accounting, auditing, or
financial reporting issue. Malone & Bailey, PLLC has reviewed the disclosure
required by Item 304(a) before it was filed with the Commission and has been
provided an opportunity to furnish the Company with a letter addressed to the
Commission containing any new information, clarification of the Company's
expression of its views, or the respects in which it does not agree with the
statements made by the Company in response to Item 304(a). Malone & Bailey, PLLC
did not furnish a letter to the Commission.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.

Our directors and principal executive officers are as specified on the following
table:

Name Age Position
================= === ==========================================================
Martin Nielson 52 Previously Chief Executive Officer and Chairman of the
Board of Directors; Director
Gary F. McNear 59 Chief Financial Officer, Vice President, Secretary and
Director
Craig W. Conklin 54 Chief Operating Officer, Vice President and Director
================= === ==========================================================

MARTIN NIELSON was our Chief Executive Officer and Chairman of the Board of
Directors since May 2003. He resigned effective June 1, 2004. Mr. Nielson is a
principal of Altos Bancorp, Inc., serving as its Chairman and Chief Executive
Officer since November 2002. He has also served as Chief Executive Officer and
director of Inclusion Inc. since September 2000. Mr. Nielson and Altos were
instrumental in assisting the Company in the negotiations that led to the
Company's settlement of its litigation with SunTrust Bank and in securing the
financing that funded that settlement. Mr. Nielson will continue as a director
of the Company. Mr. Nielson is a senior executive with extensive experience in
operations and finance. He has been a business builder for 30 years with such
companies as Gap, Businessland, and Corporate Express and now will bring that
very relevant fast-growth, public company experience to Hy-Tech.

Altos, which is an outgrowth of Nielson's M&A practice during his ten years in
London is engaged in providing investment banking and business development
services to growth oriented, emerging companies throughout the United States and
Europe. Altos had been retained by the Company to act as its business advisor,
but that contract has now been concluded to coincide with the planned
acquisition of RWT.

GARY F. MCNEAR has been our Chief Financial Officer, Vice President, Secretary
and Director since May 2003. From January 2003, through May 2003 he served as
Chief Executive Officer and Director of the Company. Mr. McNear has served as
the Chief Executive Officer, Chairman of the Board, and Treasurer of Hy-Tech
Computer Systems since HTCS's inception in November 1992, and was a founding
shareholder. Mr. McNear has also served as Secretary of Hy-Tech Computer Systems
since March 2001. Hy-Tech Computer Systems aquired us in a reverse acqusition in
January 2003. Mr. McNear's duties include banking relationships, cash
management, and financial reporting. Mr. McNear's formal education is in
Industrial Administration at Iowa State University. Mr. McNear is a former
officer and pilot in the U.S. Air Force, and a former airline pilot.

CRAIG W. CONKLIN has been our Chief Operating Officer, Vice President and
Director since May 2003. From January 2003 through May 2003, he served as
President and Director of the Company. Mr. Conklin has served as President and
Director of Hy-Tech Computer Systems since HTCS's inception in November 1992,
and was a founding shareholder. Hy-Tech Computer Systems aquired us in a reverse
acqusition in January 2003. Mr. Conklin's duties include marketing and
operations of the Company. Mr. Conklin holds a B.S. in engineering from the
Dartmouth College, and an MBA from the Amos Tuck School of business. Mr. Conklin
was formerly employed by Owens-corning Fiberglas, inc. and he successfully
operated and sold Golf & Electric Carriages, Inc., a local distributorship for
Club Car Golf Carts.

There is no family relationship between any of our officers or directors. There
are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining any of our officers or directors from engaging in or continuing any
conduct, practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor involving a
security, or any aspect of the securities business or of theft or of any felony.
Our officers and directors serve the same functions of our wholly-owned
subsidiary HTCS.

Our directors will serve until the next annual meeting of stockholders. Our
executive officers are appointed by our Board of Directors and serve at the
discretion of the Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance. We believe that our
officers, directors, and principal shareholders have filed all reports required
to be filed on, respectively, a Form 3 (Initial Statement of Beneficial
Ownership of Securities), a Form 4 (Statement of Changes of Beneficial Ownership
of Securities), or a Form 5 (Annual Statement of Beneficial Ownership of
Securities).

ITEM 10. EXECUTIVE COMPENSATION

Any compensation received by our officers, directors, and management personnel
will be determined from time to time by our board of directors. Our officers,
directors, and management personnel will be reimbursed for any out-of-pocket
expenses incurred on our behalf.

Summary Compensation Table

The table set forth below summarizes the annual and long-term compensation for
services payable to our executive officers during the years ending February 28,
2003, 2002 and 2001. Our board of directors may adopt an incentive stock option
plan for our executive officers which would result in additional compensation.

SUMMARY COMPENSATION TABLE

Long Term Compensation
-----------------------------------------------
Annual Compensation Awards Payouts
------------------------------------------- ------------------------ --------------------
Restricted Securities All Other
Other Annual Stock Underlying LTIP Compen-
Name & Salary Bonus Compensation Awards Options/ Payouts sation
Principal Position Year ($) ($) ($) ($) SARs (#) ($) ($)
------------------------ ----- -------- ------- -------------- ---------- ---------- -------- ----------

Gary F. McNear, 2003 -75,000- -0- -0- -0- -0- -0- -0-
Chief Executive Officer
and Director
2002 -0- -0- -0- -0- -0- -0- -0-

2001 -0- -0- -0- -0- -0- -0- -0-

Restricted Securities All Other
Other Annual Stock Underlying LTIP Compen-
Name & Salary Bonus Compensation Awards Options/ Payouts sation
Principal Position Year ($) ($) ($) ($) SARs (#) ($) ($)
------------------------ ----- -------- ------- -------------- ---------- ---------- -------- ----------
Craig W. Conklin, 2003 -75,000- -0- -0- -0- -0- -0- -0-
President and Director
2002 -0- -0- -0- -0- -0- -0- -0-

2001 -0- -0- -0- -0- -0- -0- -0-

Compensation of Directors.

Our directors receive no compensation for their service on our board of
directors.

On April 28, 2003, we entered into an employment agreement with Gary F. McNear,
our Chief Financial Officer, Vice President, Secretary and Director. Mr. McNear
is paid a base salary of $1,500 per week, and is also paid $500 per week for
each week during any month in which earnings (defined as "EBITDA") exceeds 5% of
our sales. The agreement is for a term of two years. The agreement restricts Mr.
McNear from competing with us, soliciting our customers or employees, and
interfering with our business during the term of the agreement and for one year
thereafter. Mr. McNear agreed to keep our business trade secrets confidential
and not to make use of them. In the event we terminate Mr. McNear without cause,
we must pay him severance, consisting of our choice of $250,000 or 250,000
shares of our common stock. Under the agreement, Mr. McNear was also granted an
option to acquire 500,000 shares of our common stock, at a price of $.01 per
share, expiring five years from the date of grant. The options vest at the rate
of 25% per year provided Mr. McNear remains our employee, and 25% of the options
also vest during any quarter in which earnings (defined as "EBITDA") exceeds 5%
of our sales.

On April 28, 2003, we entered into an employment agreement with Craig W.
Conklin, our Chief Operating Officer, Vice President, and Director. Mr. Conklin
is paid a base salary of $1,500 per week, and is also paid $500 per week for
each week during any month in which earnings (defined as "EBITDA") exceeds 5% of
our sales. The agreement is for a term of two years. The agreement restricts Mr.
Conklin from competing with us, soliciting our customers or employees, and
interfering with our business during the term of the agreement and for one year
thereafter. Mr. Conklin agreed to keep our business trade secrets confidential
and not to make use of them. In the event we terminate Mr. Conklin without
cause, we must pay him severance, consisting of our choice of $250,000 or
250,000 shares of our common stock. Under the agreement, Mr. Conklin was also
granted an option to acquire 500,000 shares of our common stock, at a price of
$.01 per share, expiring five years from the date of grant. The options vest at
the rate of 25% per year provided Mr. Conklin remains our employee, and 25% of
the options also vest during any quarter in which earnings (defined as "EBITDA")
exceeds 5% of our sales.

In January 2003, Craig W. Conklin, our President, and Gary F. McNear, our Chief
Executive Officer, entered into a consulting agreement with Hy-Tech Computer
Systems relating to the negotiation of a reduced loan amount due SunTrust Bank.
Pursuant to the consulting agreement, Hy-Tech Computer Systems agreed to pay
each of Messrs. Conklin and McNear six percent of the discounted amount of the
loan due SunTrust Bank. In consideration for six percent of the discounted
amount, Messrs. Conklin and McNear agreed to forego any compensation due them
for the past two years.

Options Granted During Fiscal Year Ending February 29, 2004

The following table sets forth information concerning stock options granted to
our executive officers and directors named in the summary compensation table for
the fiscal year ending February 28, 2004:

Percentage of Total of
Number of Options Granted to
Shares Underlying Employees During Exercise Price
NAME Options Granted Fiscal Year Per Share Expiration Date
--------------- ----------------- -------------------- --------------- ---------------

Gary F. McNear None _________ _________ _________

Craig W. Conklin

Options Exercised In Last Fiscal Year and Fiscal Year-End Option Values

Shares Number of Shares Underlying Value of Unexercised
Acquired on Value Unexercised Options at In-the-Money Options at
Name Exercise Realized Fiscal Year-End Fiscal Year-End
-------------- ----------- ---------- ----------------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------- ------------- ----------- -------------

Gary F. McNear 0 0 0 __________ 0 0

Craig W. Conklin 0

None of our directors or officers was granted or exercised an option during the
fiscal year ended February 29, 2004.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth certain information regarding the beneficial
ownership of our common stock as of May 31, 2004, by each person or entity known
by us to be the beneficial owner of more than 5% of the outstanding shares of
common stock, each of our directors and named executive officers, and all of our
directors and executive officers as a group. Beneficial ownership has been
determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934,
as amended. Generally, a person is deemed to be the beneficial owner of a
security if he has the right to acquire voting or investment power within 60
days.

--------------------------------------------------------------------- ------------------------------------ --------------------
Name and Address of Beneficial Owner Amount and Nature of Beneficial Percent of Class
Ownership
--------------------------------------------------------------------- ------------------------------------ --------------------

Altos Bancorp, Inc. 10,000,000 10%
101 First Street, #493
Los Altos, CA 94022
--------------------------------------------------------------------- ------------------------------------ --------------------
Martin Nielson, formerly Chief Executive Officer and Chairman of __0_______ (2) _0__%
the Board of Directors, now Director
Hy-Tech Technology Group, Inc.
1840 Boy Scout Drive
Fort Myers, Florida 33907
--------------------------------------------------------------------- ------------------------------------ --------------------
Gary F. McNear, Chief Financial Officer, Vice President, Secretary 5,176,948 (3) _5.2__%
and Director
Hy-Tech Technology Group, Inc.
1840 Boy Scout Drive
Fort Myers, Florida 33907
--------------------------------------------------------------------- ------------------------------------ --------------------
Craig W. Conklin, Chief Operating Officer, Vice President and 5,176,948 (4) 5.2%
Director
Hy-Tech Technology Group, Inc.
1840 Boy Scout Drive
Fort Myers, Florida 33907
--------------------------------------------------------------------- ------------------------------------ --------------------

(1) On April 29, 2003, the Gary F. McNear Revocable Trust ("Gary
Trust"), the Susan M. McNear Revocable Trust ("Susan Trust"), the Craig M.
Conklin Revocable Trust ("Craig Trust") and the Margaret L. Conklin Revocable
Trust ("Margaret Trust") (collectively the "Trusts") entered into a Stock Option
and Irrevocable Proxy Agreement with Altos. Gary McNear is the Chief Financial
Officer, Vice President, Secretary and Director of The Company and Susan McNear
is his wife. Craig M. Conklin is the Chief Operating Officer, Vice President and
a Director of the Company and Margaret Conklin is his wife. The Trusts own an
aggregate of 15,838,444 shares of the Company's Common Stock. The Trusts granted
to Altos an option to acquire 10,000,000 of their shares of Common Stock for
$.01 per share for a period of three years. The Trusts also granted to Altos an
irrevocable proxy to vote their shares. The irrevocable proxy is for a term of
three years with respect to the 10,000,000 shares of Common Stock held by the
Trusts that are subject to the option to purchase and for a term of six months
with respect to the 5,838,444 shares of Common Stock held by the Trusts that are
not subject to the option to purchase. The following table summarizes the
options and proxies granted by the Trusts to Altos:

--------------- ----------------------------- ------------------------------ ---------------------------
Shares Subject to Altos Shares Subject to Three Year Shares Subject to Six
Option Proxy Month Proxy
--------------- ----------------------------- ------------------------------ ---------------------------

Gary Trust 3,959,612 3,959,612 -
--------------- ----------------------------- ------------------------------ ---------------------------
Susan Trust 1,040,388 1,040,388 2,919,224
--------------- ----------------------------- ------------------------------ ---------------------------
Craig Trust 3,959,612 3,959,612 -
--------------- ----------------------------- ------------------------------ ---------------------------
Margaret Trust 1,040,388 1,040,388 2,919,224
--------------- ----------------------------- ------------------------------ ---------------------------
Total 10,000,000 10,000,000 5,838,448
--------------- ----------------------------- ------------------------------ ---------------------------

(2) Mr. Nielson is deemed to be the beneficial owner of the shares of
common stock owned by Altos by virtue of being an affiliate of Altos.

(3) Includes 2,959,224 shares owned by the Susan Trust that are subject
to the Altos proxy for six months from April 29, 2003, but which are not subject
to the Altos option to purchase and may be sold subject to the proxy. Does not
include option for 500,000 shares granted under employment agreement, no portion
of which is vested.

(4) Includes 2,959,224 shares owned by the Margaret Trust. that are
subject to the Altos proxy for six months from April 29, 2003, but which are not
subject to the Altos option to purchase and may be sold subject to the proxy.
Does not include option for 500,000 shares granted under employment agreement,
no portion of which is vested.

As of May 31, 2004, there were 98,677,406 shares of the Company's stock issued
and outstanding.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

HTCS currently leases a building from related parties. The building located at
1840 Boy Scout Drive, Fort Myers, FL consists of 11,320 square feet, and HTCS
leases it for $6,325 monthly. The lease expires December 31, 2010, and Hy-Tech
has an option to extend it for five years with a rent escalation equal to the
consumer price index increase over the term of the first lease period. Due to
non-payment of rents, HTCS and the landlord have agreed to an early termination
of this lease on July 31, 2004. This building is owned by Lee Coast Enterprises,
Inc. Margaret L. Conklin, (wife of Craig Conklin), as trustee, owns 33% of the
stock of Lee Coast Enterprises. Susan McNear, (wife of Gary McNear), as trustee,
owns 33% of the stock of Lee Coast Enterprises. This building was leased at
market rates. Gary McNear is our vice president, chief financial officer,
secretary and a director. Craig Conklin is our vice president, chief operating
officer and director.

In April 2002, Bradley Conklin, the son of our President Craig W. Conklin,
Margaret Conklin, the wife of our President Craig W. Conklin, and Susan McNear,
the wife of our Chief Executive Officer Gary McNear, loaned Hy-Tech Computer
Systems, our wholly-owned subsidiary, an aggregate of $105,000 which loan bears
interest at 6%, is due on December 31, 2003, and was secured by second mortgages
on the building occupied by Hy-Tech Computer System's Tallahassee, Florida
store. This building was sold in August of 2003, and all mortgages paid off at
closing of the transaction.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibit No.

---------------

2.1 Exchange Agreement (1)

2.1 Agreement and Plan of Merger dated as of April 29,2003 between The Company
and Sanjay Haryama (4)

2.2 Certificate of Merger between The Company and Sanjay Haryama as filed with
the Delaware Secretary of State on April 29, 2003. (4)

3.1 Articles of Incorporation (2)

3.2 Bylaws (2)

3.3 Certificate of Amendment (3)

10.1 Advisory Agreement between The Company and Altos Bancorp Inc. dated April
22, 2003 (5)

10.2 Stock Option and Irrevocable Proxy Agreement among Altos Bancorp, Inc., the
Gary F. McNear Trust, the Susan M. McNear Trust, the Craig W. Conklin Trust
and the Margaret L. Conklin Trust (5)

10.3 Convertible Debenture Purchase Agreement dated as of April 21, 2003 between
Sanjay Haryama and HEM Mutual Assurance LLC. (4)

10.4 Convertible Debenture Purchase Agreement dated as of April 28, 2003 between
The Company and HEM Mutual Assurance Fund Limited. (4)

10.5 Option Purchase Agreement between The Company and SunTrust Bank (4)

10.6 Employment Agreement with Gary F. McNear

10.7 Employment Agreement with Craig W. Conklin

31.1 Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Executive Officer

31.2 Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Financial Officer

32.1 Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section
1350

32.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section
1350

---------------
(1) Incorporated by reference to the Form 8-K filed on February 4, 2003.

(2) Incorporated by reference to the Form SB-2 filed on August 7, 2001.

(3) Incorporated by reference to the Form 10-KSB filed on April 24, 2003.

(4) Incorporated by reference to the Form 8-K filed on May 13, 2003.

(b) Reports on Form 8-K

A report on Form 8-K was filed on February 4, 2003, relating to the acquisition
of Hy-Tech Computer Systems, Inc. and the change in control to the former
Hy-Tech Computer Systems shareholders.

A report on Form 8-K and an amended Form 8-K were filed on March 10 and March 13
of 2003, respectively, relating to a change in auditors from Quintanilla, a
Professional Accountancy Corporation to Malone & Bailey, PLLC.

A report on Form 8-K was filed on May 13, 2003, relating to a change in control,
item 1, involving the acquisition by Altos of a controlling interest in the
Company and relating to other events, item 5, involving a financing of the
Company and a settlement with SunTrust Bank.

ITEM 14. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures. Our chief executive
officer, after evaluating the effectiveness of the Company's "disclosure
controls and procedures" (as defined in the Securities Exchange Act of 1934
Rules 13a-14(c) and 15-d-14(c)) as of a date (the "Evaluation Date") within 90
days before the filing date of this annually report, has concluded that as of
the Evaluation Date, our disclosure controls and procedures were adequate and
designed to ensure that material information relating to us and our consolidated
subsidiaries would be made known to them by others within those entities.

(b) Changes in internal controls. There were no significant changes in our
internal controls or to our knowledge, in other factors that could significantly
affect our disclosure controls and procedures subsequent to the Evaluation Date.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned in the
City of Fort Myers, Florida, on July 20,2004.

HY-TECH TECHNOLOGY GROUP, Inc.

By: /s/ Martin Nielson
------------------------------------
Martin Nielson

Its: Chief Executive Officer and Director

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Company and in the capacities and on the
dates indicated.

By: /s/ Gary F. McNear July 20,2004
------------------------------------
Gary F. McNear
Its: Chief Financial Officer, Vice
President, Secretary and Director

By: /s/ Craig W. Conklin July 20,2004
------------------------------------
Craig W. Conklin
Its: Chief Operating Officer, Vice
President and Director

By: /s/ Martin Nielson July 20,2004
------------------------------------
Martin Nielson
Its: Chief Executive Officer and Director

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Hy-Tech Technology Group, Inc.
Fort Myers, Florida

We have audited the accompanying consolidated balance sheet of Hy-Tech
Technology Group, Inc. as of February 29, 2004, and the related consolidated
statements of operations, shareholders' deficit, and cash flows for each of the
two years then ended. These consolidated financial statements are the
responsibility of Hy-Tech's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Hy-Tech
Technology Group, Inc. as of February 29, 2004, and the results of its
consolidated operations and its cash flows for each of the two years then ended,
in conformity with accounting principles generally accepted in the United States
of America.

The accompanying financial statements have been prepared assuming that Hy-Tech
will continue as a going concern. As discussed in Note 2 to the financial
statements, Hy-Tech has incurred losses for the years ended February 29, 2004
and February 28, 2003 totaling $4,246,527 and $1,661,617 and had negative
working capital of $2,470,752 as of February 29, 2004. These conditions raise
substantial doubt about Hy-Tech's ability to continue as a going concern.
Management's plans in regard to this matter are also described in Note 2. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.

Malone & Bailey, PLLC
Houston, Texas
www.malone-bailey.com

June 25, 2004

F-1

HY-TECH TECHNOLOGY GROUP, INC.
CONSOLIDATED BALANCE SHEETS
FEBRUARY 29, 2004

ASSETS

Current Assets

Accounts receivable, net $ 45,431
Inventories, net 56,868
Prepaid expenses 12,351
------
Total current assets 114,650

Property and equipment, net 10,000
Other assets 524
-----------
Total assets $ 125,174
===========

LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities

Bank overdraft $ 17,249
Accounts payable 2,083,264
Accrued expenses 369,901
Current portion of loans payable 93,626
Sales taxes payable 21,362
-----------
Total current liabilities 2,585,402

Long-term liabilities

Convertible debt 733,300
-----------
Total liabilities 3,318,702
-----------

Commitment and contingencies

Shareholders' deficit
Preferred stock, $.0001 par value, 32,000,000 shares
authorized, no shares issued and outstanding -
Common stock, $.001 par value, 900,000,000 shares authorized,
83,443,656 shares issued and outstanding 83,444
Additional paid in capital 3,982,942
Accumulated deficit (7,259,914)
-----------
Total shareholders' deficit (3,193,528)
-----------
Total liabilities and shareholders' deficit $ 125,174
===========

See accompanying summary of accounting policies
and notes to consolidated financial statements.

F-2

HY-TECH TECHNOLOGY GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED FEBRUARY 29, 2004 AND FEBRUARY 28, 2003

2004 2003
------------ ------------
Net revenues $ 8,985,425 $ 23,954,115
Cost of revenues 7,943,655 20,841,744
------------ ------------
Gross margin 1,041,770 3,112,371

General, administrative and selling 6,461,493 4,551,570
------------ ------------

Loss from operations (5,419,723) (1,439,199)
------------ ------------

Other income (expense):

Other income (expense) -- (5,802)
Gain on settlement of debt 1,655,601 --
Interest expense (482,405) (216,616)
------------ ------------
1,173,196 (222,418)
------------ ------------

Net loss $ (4,246,527) $ (1,661,617)
============ ============

Net loss per share:
Net loss - basic and diluted $ (0.08) $ (0.10)
============ ============

Weighted average shares outstanding:

Basic and diluted 52,042,676 16,967,699
============ ============

See accompanying summary of accounting policies
and notes to consolidated financial statements.

F-3

HY-TECH TECHNOLOGY GROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
YEARS ENDED FEBRUARY 29, 2004 AND FEBRUARY 28, 2003

Common Stock Additional
------------------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
---------- --------- ----------- ------------ -----------

Balance,
February 28, 2002 16,000,000 $ 16,000 $ 689,500 $ (1,089,586) $ (384,086)
Issuance of common stock
in connection with
recapitalization 8,027,501 8,028 (689,500) (262,184) (943,656)

Net loss - - - (1,661,617) (1,661,617)
---------- --------- ----------- ------------ -----------
Balance,
February 28, 2003 24,027,501 24,028 - (3,013,387) (2,989,359)
Issuance of common stock
for services 30,352,827 30,353 1,899,283 - 1,929,636
Issuance of common stock
for conversion of debt 27,563,328 27,563 1,806,923 - 1,834,486
Issuance of common stock
for advances 1,500,000 1,500 276,736 - 278,236

Net loss - - - (4,246,527) (4,246,527)
---------- --------- ----------- ------------ -----------
Balance,
February 29, 2004 83,443,656 $ 83,444 $ 3,982,942 $ (7,259,914) $(3,193,528)
========== ========= =========== ============ ===========

See accompanying summary of accounting policies
and notes to consolidated financial statements.

F-4

HY-TECH TECHNOLOGY GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED FEBRUARY 29, 2004 AND FEBRUARY 28, 2003

2004 2003
----------- -----------

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(4,246,527) $(1,661,617)
Adjustments to reconcile net loss to cash provided by
(used in ) operating activities:
Depreciation and amortization 411,476 351,886
Bad debt expense 47,791 217,940
Gain on settlement of debt (1,655,601) --
Common stock for services 1,929,636 --
Non-cash interest expense 834,486 --
Impairment 245,555 --
Changes in assets and liabilities:
Accounts receivable 1,375,153 663,307
Inventories 1,682,830 942,392
Other receivables 10,200 22,834
Prepaid and other assets 90,570 4,961
Accounts payable 114,545 296,368
Accrued expenses (18,250) (501,251)
----------- -----------
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES 821,864 336,820
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Disposition of assets 210,310 --
Capital expenditures (34,261) (468,335)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES 176,049 (468,335)
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds (payments) on line of credit (1,230,399) (184,000)
Proceeds from advances -- 195,236
Proceeds (payments) from loans payable - shareholders (105,000) 105,000
Proceeds from loans 1,733,300 228,400
Payments of loans payable (1,560,963) (113,934)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES (1,163,062) 230,702
----------- -----------

NET INCREASE (DECREASE) IN CASH (165,149) 99,187
Cash, beginning of period 165,149 65,962
----------- -----------
Cash, end of period $ -- $ 165,149
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ -- $ 216,616
=========== ===========
Supplemental disclosure of non-cash transactions:
Issuance of common stock for convertible debt $ 1,000,000 $ --
Issuance of common stock for shareholder advances $ 278,236 $ --
Stock issued for net liabilities in recapitalization $ -- $ 943,656

See accompanying summary of accounting policies
and notes to consolidated financial statements.

F-5

HY-TECH TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS AND BASIS OF PRESENTATION

Nature of business.

Hy-Tech Computer Systems, Inc. ("Hy-Tech") is a wholly owned subsidiary of
Hy-Tech Technology Group, Inc. ("HYTT"). Hy-Tech was incorporated in Florida on
May 22, 1991. Hy-Tech is a distributor of computers and computer parts to
customers who specialize in computer maintenanceHy-Tech had nine locations in
Florida, three locations in Tennessee, two locations in Alabama, two locations
in Kentucky, one location in Wisconsin and one location in Colorado. Hy-Tech has
sold or liquidated all of its stores during the year ended February 28, 2004 and
retuned any unsold inventory to its Ft. Myers warehouse. Subsequent to February
2004, Hy-Tech liquidated all of its remaining inventory and property and
equipment in June 2004 at a public auction. Hy-Tech is currently looking for
merger or acquisition candidates.

Principles of Consolidation

The consolidated financial statements include the accounts of HYTTs wholly owned
subsidiary. All significant intercompany transactions and balances have been
eliminated. HYTT's consolidated financial statements include the results of
operations from the respective dates of acquisition through divestiture or
February 28, 2004, as applicable.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the balance sheet. Actual results could differ from
those estimates.

Cash and Cash Equivalents

Cash equivalents include highly liquid, temporary cash investments having
original maturity dates of three months or less.

Inventories

Inventories consist of components of computer hardware and prepackaged software
and are stated at the lower of cost, determined by average cost method, or
market.

Other Receivables

Other receivables consist primarily of credits generated upon Hy-Tech's return
of products to the vendor or original equipment manufacturer which are under
warranty.

Long-Lived Assets

F-6

Property, plant and equipment are stated at cost less accumulated depreciation.
Major renewals and improvements are capitalized; minor replacements, maintenance
and repairs are charged to current operations. Depreciation is computed by
applying the straight-line method over the estimated useful lives of machinery
and equipment (3 to 39 years). Leasehold improvements are amortized over the
shorter of the useful life of the improvement or the life of the related lease.

Revenue Recognition

Hy-Tech's revenue is generated primarily from the sale of computer equipment to
resellers and end users. Hy-Tech recognizes revenue when persuasive evidence of
an arrangement exists, delivery has occurred, the sales price is fixed or
determinable, and collectibility is probable.

Hy-Tech recognizes product sales generally at the time the product is shipped.
Concurrent with the recognition of revenue, Hy-Tech provides for the estimated
cost of product warranties and reduces revenue for estimated product returns.
Sales incentives are generally classified as a reduction of revenue and are
recognized at the later of when revenue is recognized or when the incentive is
offered. When other significant obligations remain after products are delivered,
revenue is recognized only after such obligations are fulfilled. Shipping and
handling costs are included in cost of goods sold.

Hy-Tech's suppliers generally warrant the products distributed by Hy-Tech and
allow returns of defective products, including those that have been returned to
Hy-Tech by its customers. Hy-Tech does not independently warrant the products
that it distributes, but it does provide warranty services on behalf of the
supplier.

Advertising

Costs incurred in connection with advertising are charged to expense as
incurred. Advertising expense was approximately $10,751 and $50,701 for the
years ended February 29, 2004 and February 28, 2003, respectively.

Income Taxes

The asset and liability approach is used to account for income taxes by
recognizing deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
basis of assets and liabilities. Hy-Tech records a valuation allowance to reduce
the deferred tax assets to the amount that is more likely than not to be
realized.

Basic Loss per Share

Basic loss per share has been calculated based on the weighted average number of
shares of common stock outstanding during the period.

Fair Value of Financial Instruments

The recorded amounts of cash and cash equivalents, short-term borrowings,
accounts payable and accrued expenses approximate their respective fair values
because of the short maturity of those instruments and the variable nature of
any underlying interest rates. The rates of fixed obligations approximate the
rates of the variable obligations. Therefore, the fair value of these loans has
been estimated to be approximately equal to their carrying value.

F-7

Concentrations of Credit Risk

Financial instruments which potentially subject Hy-Tech to concentrations of
credit risk consist primarily of cash, cash equivalents, and trade accounts
receivable. Hy-Tech maintains its cash and cash equivalents with high quality
financial institutions as determined by Hy-Tech's management. To reduce risk of
trade accounts receivable, ongoing credit evaluations of customers' financial
condition are performed, guarantees or other collateral may be required and
Hy-Tech maintains a broad customer base.

Recent Accounting Pronouncements

Hy-Tech does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on Hy-Tech's results of operations,
financial position or cash flow.

NOTE 2 - FINANCIAL CONDITION AND GOING CONCERN

For the years ended February 29, 2004 and February 28, 2003, Hy-Tech incurred
net losses totaling $4,246,527 and $1,661,617, respectively, and at February 29,
2004 had negative working capital of $2,470,752. Because of these recurring
losses, Hy-Tech announced its restructure of the operations which included
shifting its sales operations to an online store operated by a third party. As a
result of this change, the Company eliminated the overhead of the local
wholesale outlets and all its local costs became variable.

In February 2004, the Company announced its planned changes which included its
planned acquisition of Robotic Workspace Technologies (RWT) and the intended
divestiture of Hy-Tech Computer Systems (HTCS). Such changes support the
Company's plan to grow by acquisition and differentiate the company with unique
technologies, by converting to e-commerce selling and distribution techniques
and by adding complementary, higher margin services. The Company remains in
discussion with various financing sources to allow it access to the financing
needed to complement the use of its stock in achieving these plans. The Company
intends to raise additional working capital through private placements, public
offerings and/or bank financing.

There are no assurances that Hy-Tech will be able to obtain additional financing
through private placement, public offerings and/or bank financing necessary to
support Hy-Tech's plan. No assurance can be given that financing will be
available, or if available, will be on terms acceptable to Hy-Tech. If adequate
financing is not available Hy-Tech may be required to curtail its operations.
These conditions raise substantial doubt about Hy-Tech's ability to continue as
a going concern. The consolidated financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might be necessary
should Hy-Tech be unable to continue as a going concern. As of June 25, 2004,
Hy-Tech had not closed on the acquisition of RWT.

NOTE 3 - ACCOUNTS RECEIVABLE

Hy-Tech's trade accounts receivable are shown net of allowance for doubtful
accounts of $369,765 at February 29, 2004 as follows:

Accounts receivable $ 415,196
Less: Allowance for doubtful accounts 369,765
-----------
$ 45,431

F-8

During fiscal year ended February 29, 2004, the Company entered into a Factoring
Line of Credit with Platinum Financing Corporation. Interest expense under this
Factoring Line of Credit for the fiscal year ended February 29, 2004 totaled
$385,987.

Hy-Tech maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. If the
financial condition of Hy-Tech's customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required.

NOTE 4 - PROPERTY AND EQUIPMENT

As of February 29, 2004, all property and equipment was reclassified as an asset
held for sale. Hy Tech held an action for their remaining assets in June 2004 in
which the assets sold for $10,000.

Depreciation and amortization expense was $411,477 and $351,886 for the years
ended February 29, 2004 and February 28, 2003, respectively.

NOTE 5 - LINE OF CREDIT

Hy-Tech had a $4,000,000 revolving line of credit with a financial institution.
The line of credit is collateralized by Hy-Tech's accounts receivable and
inventories. In February 2003, Hy-Tech agreed to pay SunTrust Bank $1,500,000 by
April 11, 2003 to settle the outstanding balances on the $4,000,000 revolving
line of credit and promissory notes. Hy-Tech paid $300,000 and failed to make
the remainder of $1,200,000 by April 11, 2003 and SunTrust Bank then obtained a
judgment on April 14, 2003 for failure to make required payments and failure to
meet its borrowing base requirements. Hy-Tech renegotiated the settlement terms,
for a total of $1,500,000 and recorded a gain of $1,665,810. Under the terms of
the Settlement Agreement, Hy-Tech paid $1 million dollars to SunTrust on April
29, 2003. This $1 million represented all of the proceeds of the sale of a
convertible debenture that was issued to a private investor. The remaining
balance was paid by July 2003.

NOTE 6 - CONVERTIBLE DEBT

In January 2004, Hy-Tech issued convertible debentures of $203,000 due in
November 2005. The convertible debentures are convertible into common stock at
$0.03 per share.

In November 2003, Hy-Tech issued convertible debentures of $300,000 due in
November 2005. The convertible debentures are convertible into common stock at
$0.03 per share.

Hy-Tech has convertible debentures of $230,000 past due as of November 30, 2003.
The convertible debentures are convertible into common stock at $.10 per share.

NOTE 7 - INCOME TAXES

For the year ended February 28, 2004, Hy-Tech incurred a net loss and,
therefore, has no tax liability. The net deferred tax asset generated by the
loss carry-forward has been fully reserved.

F-9

For the period prior to January 2003, Hy-Tech elected to have its income taxed
under Section 1362 of the Internal Revenue Code and a similar section of the
Florida income tax law (S Corporation election). These laws provide that, in
lieu of corporate income taxes, Hy-Tech's taxable income will be passed through
to the shareholders of the corporation and taxed at the individual level.
Therefore, no federal income taxes were provided for those periods in the
financial statements.

NOTE 9 - RELATED PARTY TRANSACTIONS

Hy-Tech had leased two buildings from related parties. The building located at
1826 Boy Scout Drive, Fort Myers, FL consists of 4,600 square feet, and Hy-Tech
leased it for $3,400.00 monthly. The building located at 1840 Boy Scout Drive,
Fort Myers, FL consists of 11,320 square feet, and Hy-Tech leased it for $6,325
monthly. Both of these buildings are owned by Lee Coast Enterprises, Inc.
Margaret L. Conklin, (wife of Craig Conklin), as trustee, owns 33% of the stock
of Lee Coast Enterprises. Susan McNear, (wife of Gary McNear), as trustee, owns
33% of the stock of Lee Coast Enterprises. Gary McNear is President of Lee Coast
Enterprises, Inc. Both of these buildings are leased at market rates. Gary
McNear is our vice president, chief financial officer, secretary and a director.
Craig Conklin is our vice president, chief operating officer and director. In
June 2004, Hy-Tech reached a settlement for $50,000 to terminate the remainder
of these leases.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

Hy-Tech is in default of several leases and has terminated its largest lease as
noted above. Rental expense for the operating leases for the years ended
February 29, 2004 and February 28, 2003 was $564,388 and $572,784, respectively.

Future minimum lease payments under non-cancelable operating leases (with
initial or remaining lease terms in excess of one year) as of February 28, 2004
are approximately $70,672. The $70,672 was accrued as of February 29, 2004 since
all leases were abandoned except for the Ft. Myers location which was settled in
June 2004.

Litigation, Claims, Assessments

Hy-Tech has a number of overdue accounts payable to its suppliers and other
trade creditors, and is in the process of negotiating payment terms. Numerous
creditors have sent demand letters and threatened litigation against the
Hy-Tech. Two significant actions have been commenced against us as of the date
of this report. One is an action commenced in the Circuit Court of Lee County,
Florida by Uneec Technology, Inc. in which it seeks to recover $116,180 for
goods sold and delivered to Hy-Tech. The second is an action commenced in the
circuit Court of Lee County, Florida by Hyundai Imagequest America to recover
$51,075 for goods sold and delivered to Hy-Tech. Hy-Tech believes it can settle
these litigations and other creditors' claims after it obtains secured
financing.

F-10

We are not involved in any other material pending legal proceedings, other than
routine litigation incidental to our business, to which we are a party or of
which any of our property is subject.

Contingency

Hy-Tech assumed certain net liabilities when it merged with SRM Networks, Inc.
and in resolving those liabilities issued 2,000,000 common shares to a financial
institution who had loaned $700,000 to SRM Networks, Inc. Hy-Tech was notified
that the shareholders of SRM Networks, Inc. were being prosecuted by the United
States Attorney. Accordingly, management determined that Hy-Tech should not
settle this liability since the proceeds were issued to a party designated by
the shareholders or a United Kingdom entity. Hy-Tech has cancelled such shares
as of February 29, 2004. Hy-Tech believes that it has valid defenses with
respect to the cancellation of such shares. Nevertheless, it is possible that
cash flows or results of operations could be materially affected in any
particular period by the unfavorable resolution of this contingency.

NOTE 11 - SUBSEQUENT EVENTS

In Feburary 2004, the Company announced it had entered into a Letter of Intent
for the sale of its wholly owned subsidiary, Hy-Tech Computer Systems (HTCS) to
Aegis, Inc. As of June 25, 2004, this transaction had not closed.

F-11