WILTEK, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheet
at April 30, 1995 3
Consolidated Statement of Operations
for the Three and Six Months Ended April 30, 1995 and 1994 4
Consolidated Statement of Cash Flows
for the Six Months Ended April 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6 - 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 9
PART II. OTHER INFORMATION 10
<PAGE>
<TABLE>
Wiltek, Inc.
Consolidated Balance Sheet
(Unaudited)
ASSETS
<S> <C>
Current Assets
Cash and cash equivalents $ 559,000
Accounts receivable, less
allowance for doubtful
accounts $35,000 876,600
Other current assets 115,000
_______
Total Current Assets 1,550,600
Equipment under capitalized lease 173,700
Equipment, net 211,400
_______
$1,935,700
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and
accrued expenses $1,202,700
Obligation under capitalized lease agreement 86,800
__________
Total Current Liabilities $1,289,500
Long Term Liabilities
Obligation under capitalized lease agreement 86,900
Commitments and Contingent Liabilities
Shareholders' Equity
Preferred Stock 1,000,000 shares authorized
and unissued
Common Stock, stated value $.33-1/3 per share,
9,000,000 shares authorized;
shares issued:
4,813,493 1,604,500
Paid in capital 5,727,200
Deficit (5,258,700)
Less treasury stock at cost
1,236,235 shares (1,513,700)
___________
Total Shareholders' Equity 559,300
_______
$1,935,700
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Wiltek, Inc.
Consolidated Statement of Operations
(Unaudited)
Three Months Ended Six Months Ended
April 30 April 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Revenues
Communication services $1,150,500 $1,165,500 $2,380,400
$2,287,700
Costs and Expenses
Cost of communication services 779,300 720,100 1,563,700
1,396,200
Selling, general and
administrative expenses 460,600 470,200 924,400
900,900
Research and development 113,300 170,100 265,000
311,300
Interest and dividend (income), net (2,200) (5,000) (4,500)
(11,100)
Loss on Sale of Equipment 552,300 600 543,100
3,200
Restructuring Expenses 227,800 227,800
_________ _________ _________
_________
2,131,100 1,356,000 3,519,500
2,600,500
_________ _________ _________
_________
Net Loss (980,600) (190,500) (1,139,100)
(312,800)
Deficit at Beginning of Period (4,278,100) (3,695,000) (4,119,600)
(3,572,700)
___________ ___________ ___________
___________
Deficit at End of Period (5,258,700) (3,885,500) (5,258,700)
(3,885,500)
=========== =========== ===========
===========
Per Common Share and Common
Equivalent Share:
Net loss $ (.27) $ (.05) $ (.32) $
(.09)
=========== =========== ===========
===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Wiltek, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
April 30
1995 1994
<S> <C> <C>
Cash Flow from Operating Activities:
Net (Loss) $(1,139,100)
$(312,800)
____________
__________
Adjustments to reconcile net (loss) to
net cash provided by operating activities:
Depreciation and amortization 189,400 202,100
Valuation adjustment of
short-term investments 300
(200)
Gain on sale of short term
investments (8,600)
Loss on sale of fixed assets 551,500 3,300
(Increase) in accounts
receivable and other current assets (140,500)
(102,400)
Increase in accounts payable
and accrued expenses 542,100 53,200
___________ __________
Total adjustments 1,134,200 156,000
___________ __________
Net cash (used) in operating activities (4,900)
(156,800)
___________ __________
Cash Flows from Investing Activities:
Capital expenditures (157,000)
(93,900)
Proceeds from sale of short term investments 141,100
Proceeds from sale of fixed assets 167,500 7,500
__________ _________
Net cash provided in investing activities 151,600
(86,400)
__________
__________
Net increase (decrease) in cash and
cash equivalents 146,700
(243,200)
Cash and cash equivalents
at beginning of period 412,300 915,700
__________ __________
Cash and cash equivalents at end of period $559,000 $672,500
========== ==========
<FN>
Supplemental Schedule of Non-Cash Investing
and Financial Activities:
The Capital Lease obligation of $173,700 was incurred when the company
entered into a sale lease-back transaction for equipment.
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
WILTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of April 30, 1995, and the related
consolidated statements of operations for the three and six month periods
ended April 1995, and 1994 and the consolidated statement of cash flows
for the six month periods ended April 1995 and 1994 are unaudited; in the
opinion of management, all adjustments necessary for a fair presentation of
such financial statements have been included. Such adjustments consisted only
of normal recurring items. Interim results are not necessarily indicative of
results for a full year.
The financial statements as of April 30,1995 and for the three and six month
periods then ended should be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report on Form 10-KSB for
the year ended October 31, 1994.
The accounting policies followed by the company with respect to the unaudited
interim financial statements are consistent with those stated in the 1994
Wiltek, Inc. Annual Report on Form 10-KSB.
Due to several continuous years of losses, Wiltek has begun the implementation
of a recently developed restructuring plan. The most recent actions taken have
been a workforce reduction of approximately 15%, staff re-training and capital
expenditures to provide the necessary training materials and environment. The
plan's goals are to provide overhead reduction, stability, re-training and new
business opportunity assessment. A new endeavor, beyond the traditional
electronic message switching services, is consulting services for networking
and workflow automation. Staff training and the creation and use of new
marketing materials will facilitate this new endeavor. Wiltek has made a
decision to provide initial training for the Microsoft BackOffice product line.
(Microsoft BackOffice is a trademark name owned by the Microsoft Corporation)
In accordance with a Restructuring Plan approved by the Board of Directors on
March 28, 1995, the Company sold all of its fixed assets as a "Capital Lease
Transaction". This resulted a net loss in the amount of $552,300 for the
quarter. The terms of the lease-back are for 24 months effective May 1, 1995,
with a monthly payment of $7,238. At the end of the lease the company, at its
option, may purchase the leased equipment for fair market value or a maximum of
$23,726. The Company also expensed $227,900 for severance pay and related
employee benefits associated with personnel reductions. The company's
restructuring program is intended to strengthen the company's business, improve
long-term profitability and to enhance shareholder value. These actions are
part of a continuing effort to identify opportunities to improve its cost
structure.
<PAGE>
The company does not engage in a formal risk management program with respect
to foreign currency exposure. Typically the company maintains cash balances in
UK banks to provide for the working capital requirements of Wiltek (UK) Ltd.
As of April 30, 1995 and April 30, 1994 these deposits amounted to $315,200 and
$309,200 respectively. The company receives a portion of its revenue from
foreign revenue sources, incurs service costs in England denominated in UK
pound and has assets and liabilities in the UK. These factors give rise to
currency risks which are dependent upon the fluctuation in exchange rates
between the US dollar and UK pound. Wiltek does not use derivative instruments
to hedge this risk.
Loss per share is computed by dividing the net loss by the weighted average
number of common shares. Common share equivalents are omitted since the effect
is antidilutive.
Effective November 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(SFAS 109). The effect of the adoption of this standard on the Company's
financial statements was insignificant.
In accordance with the SFAS 109, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to temporary
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. However, in view of the
uncertainty as to whether the Company will produce sufficient taxable income
to utilize its deferred tax assets, a 100% valuation allowance has been
established against such deferred tax assets.
In accordance with the terms of contracts with some of its customers, the
Company pays the common carrier communication costs incurred by the customers.
The Company is reimbursed by the customers for these costs. These
reimbursements are reflected as a reduction of expenses in the Company's
consolidated statement of operations and are not included in revenues.
Amounts billed to the Company and subsequently rebilled to the customers during
the six month periods ended April 30, 1995 and 1994 were $529,600 and $503,800
respectively.
<PAGE>
WILTEK, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition and Liquidity
Cash and cash equivalents have increased by $146,700 from $412,300 at
October 31, 1994 to $559,000 at April 30, 1995. The increase in cash is
primarily due to the proceeds from the sale and lease-back of fixed assets of
$167,500 and from the sale of short-term securities of $141,100. These amounts
were offset by net cash used in operating activities of $4,900, and capital
expenditures of $157,000. We expect that the existing resources will meet our
cash requirements through fiscal year 1995.
Results of Operations
For the six months ended April 30, 1995, the Company has incurred a net loss of
$1,139,100 compared to a net loss of $312,800 for the same period last year.
In the three months ended April 30, 1995, we incurred a net loss of $980,600
versus a loss of $190,500 last year. In accordance with a Restucturing Plan
approved by the Board of Directors on March 28,1995, the Company sold fixed
assets as a "Capital Lease Transaction". This resulted in a net loss of
$552,300 for the quarter. The terms of the lease-back are for 24 months
effective May 1, 1995, with a monthly payment of $7238. At the end of the
lease the company, at its option, may purchase the leased equipment for fair
market value or a maximum of $23,726. The Company also expensed $227,900
for severance pay and related employee benefits associated with personnel
reductions. The company's restructuring program is intended to strengthen the
company's business, improve long-term profitability and to enhance shareholder
value. These actions are part of a continuing effort to identify opportunities
to improve its cost structure.
<TABLE>
COMPARISON OF
THREE MONTHS ENDED SIX
MONTHS ENDED
APRIL 30, 1995 AND 1994 APRIL 30,
1995 AND 1994
$ % $
%
<S> <C> <C> <C>
<C>
Net Revenues (15,000) (1) 92,700
4
Cost of Services 59,200 8 167,500
12
Selling, General and
Administrative Expenses (9,600) (2) 23,500
3
Research and Development (56,800) (33) (46,300)
(15)
Interest and Dividend (Income), Net 2,800 56 6,600
59
Other Expense (Income) 551,700 539,900
Restructuring Expense 227,800 227,800
_______ _______
Net Loss 790,100 415 826,300
264
========= =========
</TABLE>
<PAGE>
<TABLE>
Revenues have increased by 4% for the six months ended April 30, 1995 versus
the same periods last year
<CAPTION>
Three Months Ended Six
Months Ended
April 30
April 30
1995 1994 1995
1994
<S> <C> <C> <C>
<C>
Communication Services Revenue $1,150,500 $1,165,500 $2,380,400
$2,287,700
Communication Services Costs 779,300 720,100 1,573,700
1,396,200
__________ __________ __________
__________
Gross Profits $ 371,200 $ 445,400 $ 806,700
$ 891,500
Gross Profit Margins 32% 38% 34%
39%
</TABLE>
The gross profit margins for Communication Services have declined in both
comparative periods due to higher depreciation and telephone charges used in
data communications.
Selling, General and Administrative expense: Lower travel, consulting fees and
advertising expenses were offset by increased salaries and employees benefits
associated with an additional sales person hired during the current period.
Research and Development: The elimination of one executive position during the
period resulted in savings of $18,300. The reduction of outside consulting
services by $22,100 also contributed to lower expenses for this category.
Interest and Dividend Income: Due to current low interest rates available on
short-term investments, and lower investment balances, interest income declined
for the three and six months ended April 30, 1995 when compared with the same
period last year.
Loss on Sale of Equipment: This category included the loss on the sale and
lease-back of fixed assets of $552,300 for the three months ended
April 30, 1995.
Restucturing Expense: In accordance with the Restructuring Plan, $227,800 was
accrued for severance pay and related employee benefits. No payment has been
made from this amount during the reporting period.
Taxes: Due to a loss for the period, Federal or State income tax provisions
are not required.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
b. Reports on Form 8-K - A Form 8-K was filed on March 8, 1995, giving
notice that Jay W. Fitzpatrick left his positions as President and
Treasurer for medical reasons, and will continue to serve as
Chairman of the Board of Directors. Boris Frenkiel assumed
Mr. Fitzpatrick's responsibilities.
A Form 8-K was filed on March 30, 1995, announcing that
David S. Teitelman has assumed the positions of President and CEO
effective March 29, 1995. Boris Frenkiel who had been Wiltek's
interim President since March 8, 1995, returned to his position as
Vice President.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: June 13, 1995 WILTEK, INC.
DAVID S. TEITELMAN
President & CEO
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-1-1994
<PERIOD-END> APR-30-1995
<CASH> 559
<SECURITIES> 0
<RECEIVABLES> 911
<ALLOWANCES> 35
<INVENTORY> 0
<CURRENT-ASSETS> 1551
<PP&E> 892
<DEPRECIATION> 507
<TOTAL-ASSETS> 1956
<CURRENT-LIABILITIES> 1290
<BONDS> 0
<COMMON> 1604
0
0
<OTHER-SE> (1045)
<TOTAL-LIABILITY-AND-EQUITY> 1936
<SALES> 2380
<TOTAL-REVENUES> 2380
<CGS> 3519
<TOTAL-COSTS> 3519
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1139)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1139)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1139)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
</TABLE>
