<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-KSB
[Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-2401
--------------------------
WILTEK, INC.
(Name of small business issuer in its charter)
<TABLE>
<S> <C>
CONNECTICUT 06-0625999
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
542 WESTPORT AVE, NORWALK, CT 06851
(Address of principal executive offices) (Zip code)
</TABLE>
Registrant's telephone number, including area code: (203) 853-7400
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
None None
</TABLE>
--------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of class)
--------------------------
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes _X_ 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 registrant's knowledge. In definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. ( )
The issuer's revenue for its most recent fiscal year was $4,931,100
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of December 19, 1995 was $1,177,400
THE ISSUER WAS NOT INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS
As of January 16, 1996, there were 3,637,258 shares of Common Stock, No Par
Value outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Information with respect to Directors, Management Remuneration and Security
Ownership of Certain Beneficial Owners and Management are contained in the
Company's Proxy Statement for the 1996 Annual Meeting of Stockholders and
incorporated by reference in Part III.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
WILTEK, INC.
FORM 10-KSB
PART I
ITEM 1. BUSINESS
GENERAL
Wiltek, Inc., (Wiltek or the "company"), is a Connecticut corporation which
was organized in 1947. The company's principal offices are located at 542
Westport Avenue, Norwalk, CT 06851. Wiltek (UK) Ltd. is a wholly owned
subsidiary which was organized in England in 1983 to provide Wiltek services to
international users. Wiltek (UK) Ltd. is located at 2 Apple Walk, Swindon,
England.
Wiltek provides outsourcing connectivity services to companies migrating
between or co-existing with multiple disparate messaging platforms. Wiltek
performs all design required for the implementation and operation of its
worldwide message and data communication services. These services enable
Wiltek's customers to seamlessly communicate, with electronic mail, among all
intra- and inter-company messaging systems both private and public. All issues
of incompatible applications, systems, platforms, networks, protocols and
formats are eliminated for Wiltek's customers and their respective trading
partners.
Another feature provided to Wiltek's customers is directory synchronization.
Wiltek's directory synchronization services enable customers' multiple internal
messaging systems to have all user address information presented in a complete,
native format to all participating systems. This service feature also allows
external trading partner systems to participate in the directory synchronization
process.
In addition to the communication and directory synchronization services
described above, Wiltek has also developed a consulting and system integration
organization. This unit is chartered to assist customers in the movement to
Microsoft's-Registered Trademark- LAN based electronic messaging and workgroup
systems. Wiltek is focusing on accounts that require assistance in the planning
for, and implementation of, Microsoft Mail-Registered Trademark-, Microsoft
Exchange-Registered Trademark- and Windows NT Server-Registered Trademark-.
Wiltek is a Microsoft Solution Provider and is firmly committed to the Microsoft
BackOffice-Registered Trademark- product line.
Wiltek has developed a range of services which allowed customers to:
1. Connect dissimilar computer based electronic mail systems such as IBM
PROFS-Registered Trademark-, Digital Equipment
All-In-One-Registered Trademark-, Microsoft Mail, Lotus
Notes-Registered Trademark- and cc:Mail-Registered Trademark-. Generally,
these systems operate within different divisions of the same company or
in the customers' trading partner facilities.
2. Communicate with public E-Mail services (AT&T Mail-Registered Trademark-,
MCI Mail-Registered Trademark-, Advantis-Registered Trademark- (IBMMail,
etc.), the Internet and X.400 services to allow users of host-based and
client/server systems to correspond with E-Mail users outside of their
company.
3. Access facsimile and telex devices located throughout the world.
WILTEK'S MARKET
The market for Wiltek's electronic mail connectivity services is a result of
the explosive growth in the installation of E-Mail systems throughout the world.
In its broadest sense, electronic mail or messaging includes the electronic
communication between individuals who use mainframe computers, mid-range
systems, client/server platforms, personal computers, public electronic mail,
facsimile or telex machines to send and/or receive information. Although the
primary information type communicated via electronic mail is text created by
individuals, more and more frequently it includes attached files created by
computer based applications such as spreadsheets, database segments,
2
<PAGE>
executable code, video clips or formatted documents such as purchase orders. The
worldwide installed base of computer based E-Mail users (mailboxes) is estimated
to be 34,950,000 in 1993 and is projected to grow to 96,000,000 users by the end
of 1997 (International Data Corporation, 1993).
The other important component of Wiltek's market is the need to collect text
from E-Mail users or from computer based data files and deliver this information
to facsimile machines. This market (sometimes referred to as "text-to-fax" or
"host computer-to-fax) has grown dramatically with the worldwide installation of
more than 20,000,000 facsimile machines in the last decade.
The growth in the installation base of E-Mail systems and facsimile
terminals represents a significant opportunity for providers of gateway or
connectivity software and services. Every time an E-Mail document or attached
file needs to move from one type of system to a different system, computer or
device it will require some or all of the following translations:
- Protocol conversion to change the transmission method, e.g. from an IBM
SNA protocol to an X.25 protocol.
- Format conversion to accommodate the different structures of each E-Mail
system, e.g. IBM PROFS to Microsoft Mail.
- Transmission speed conversion because the sending systems operate at
different transmission speeds than the receiving devices.
- Code conversion to convert from one encoding standard to another, e.g.
ASCII to EBCDIC.
- Address translation to transform an individual ID or name on one system
to a different ID on another system. For example, a user's name on
Microsoft Mail might be "Jay W. Fitzpatrick" but on a PROFS system the
name is limited to 8 characters and therefore might be "JWFITZFP."
Organizations who use electronic mail have the option of buying hardware and
software which they install and operate or to connect their different systems to
a service provider like Wiltek to perform the functions outlined above. The
magnitude of the market for these connectivity capabilities has grown as a
result of the following factors:
1. The increased size of the E-Mail and fax installed base.
2. The number of companies using E-Mail is no longer limited to large
corporations.
3. The growing number of different types of E-Mail systems.
4. Corporations are moving from large, mainframe based computers to PC's,
LANs, and client/ server platforms.
5. The need to synchronize directories of users among dissimilar systems has
been more clearly recognized.
6. The use of E-Mail has grown from an intra-enterprise application to one
that crosses company boundaries to trading partners, i.e. suppliers and
customers.
MARKETING STRATEGY AND TARGET CUSTOMERS
The company has traditionally targeted large multi-national companies that
are likely to have dissimilar computer systems in multiple locations. Such
companies have been plagued with inter-divisional communication problems because
their computer strategies in the previous decade often differed from division to
division, resulting in computer systems that need to communicate with each
other. Wiltek's customer list contains over 35 large corporations, a majority of
whom are Fortune 500 companies.
As a result of the development by Wiltek of LAN connectivity and Directory
Synchronization services, as well as Microsoft BackOffice related consulting
services, the company's potential market
3
<PAGE>
is expanding. Large corporations who are migrating from mainframe computers to
LAN based systems need significantly more connectivity between the older legacy
systems and the new LAN E-Mail systems. To facilitate the transmission of
messages between those disparate E-Mail systems, users are requiring directory
services which incorporate the addresses of all of the users on other computers
into their individual local directories. This process, known as Directory
Synchronization is provided by Wiltek. In addition, the lower cost of hardware
and software for LAN E-Mail has broadened the base of E-Mail users from large,
international corporations (typically the top 1,000 companies), to the much
larger market represented by mid-size and small companies. The downsizing of
staff in large organizations and the relatively unsophisticated technical
capabilities of smaller companies also enhances the attractiveness of using an
outsourcing service like Wiltek rather than an in-house hardware/software
solution.
As an outgrowth of Wiltek's ability to connect to various computer systems,
the company recognized the need to offer computer to facsimile services. For its
facsimile services, Wiltek has targeted customers who have high volume (in
excess of 10,000 pages per month) fax delivery requirements. Examples of users
of these services are a food manufacturer who sends shipping acknowledgments to
its customers and a steel company who transmits price quotes to its customers.
NEW SERVICES AND PRODUCTS
Wiltek's research and development activities are directed toward enhancing
existing services and creating new services to meet customers' data
communication needs. The company's research and development primarily involves
the creation of computer software and the customization and integration of
purchased software. The company's efforts are generally customer driven. As new
requirements arise, Wiltek develops new software or adapts existing software to
provide a solution.
The company has recently installed new LAN and PC communications software to
provide increased service capability to the rapidly growing LAN E-Mail segment
of the market. In addition, the company has installed UNIX based hardware and
software that enables it to provide X.500 Directory Services to its customers.
Wiltek presently has Microsoft Certified Professionals (MCP) on staff
certified in Windows NT Server, Windows NT Workstation, Microsoft Mail and
Windows for Workgroups-Registered Trademark-. Additional personnel have
significant experience in Microsoft Exchange. Wiltek's MCPs are located in both
the U. S. and U. K. These individuals provide Wiltek's consulting customers with
Microsoft BackOffice assistance. Wiltek concentrates efforts towards
infrastructure and application design and development within the Microsoft NT
Server, Exchange and Mail environments. Application work includes software
development (utilizing Visual languages) to address application migration and
workflow automation within large organizations.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
(IN THOUSANDS OF
DOLLARS)
Communication Services............................................. $ 4,931.1 $ 4,637.9
</TABLE>
Communications Services revenue increased by 6.3% in the fiscal year ended
October 31, 1995, an improved economic environment and new consulting services
resulted in increased revenue. Customers are charged a flat fee and/or on a
usage sensitive basis, depending on the customer's contract.
MAJOR CUSTOMERS
During the fiscal year ended October 31, 1995, three customers, Ford Motor
Company, Sea-Land Service, Inc. and Advantis, each accounted for 10% or more of
the company's total revenues. These customers represented 41% of the total
revenues in 1995. The company is dependent upon these three customers and the
loss of any one of the customers could adversely effect the business of the
company. In fiscal year 1994 three customers each accounted for over 10% of
total revenues. These customers were Ford Motor Company, Sea-Land Service, Inc.,
and FX Concepts, Inc., representing 48% of the company's total revenues.
4
<PAGE>
FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
The company began foreign operations in 1983 in England to provide services
to its customers outside of the United States. Operations outside the United
States are subject to the usual risks and limitations attendant upon investments
in foreign countries, such as fluctuations in currency values, exchange control
regulations, wage and price controls, employment regulations, effects of foreign
investment laws and other domestic and foreign governmental policies affecting
United States companies doing business abroad. 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 October 31, 1995 and
October 31, 1994 these deposits amount to $112,000 and $113,400 respectively.
The company receives a portion of its revenue from foreign revenue sources,
incurs service costs in England, denominated in UK pounds, 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. All
currency figures are expressed in US dollars.
Information about the company's operation in different geographical areas:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
----------------------------------
UNITED
DOMESTIC KINGDOM TOTAL
---------- ---------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
1995
- -------------------------------------------------------------------
Revenues........................................................... $ 3,805.4 $ 1,125.7 $ 4,931.1
Net Loss........................................................... $ (796.6) $ (73.4) $ (870.0)
Identifiable Assets................................................ $ 1,215.2 $ 513.8 $ 1,729.0
1994
- -------------------------------------------------------------------
Revenues........................................................... $ 3,382.9 $ 1,255.0 $ 4,637.9
Net Loss........................................................... $ (531.7) $ (15.2) $ (546.9)
Identifiable Assets................................................ $ 1,839.3 $ 519.7 $ 2,359.0
</TABLE>
Included in the above are U.S. management costs allocated to U.K. operations
and net interest expense charged to Wiltek (U.K.) Ltd. in the amount of $231,100
in 1995 and $291,100 in 1994.
NET SALES BACKLOG
The company believes that sales backlog is not a meaningful indication of
future revenue because most of its revenue is derived from short-term contracts
for communications services and services are generally initiated within 90 days
of receipt of an order.
EMPLOYEES
The company and its subsidiary Wiltek (U.K.) Ltd. employed 32 full-time
employees as of October 31, 1995.
COMPETITION
The office automation and communications field in which the company operates
is highly competitive and characterized by rapid changes due to technological
improvements and developments. Both low-cost commodity and high-cost custom
providers of services exist within the company's marketplace. Major service
competitors include CDS-Registered Trademark-, AT&T-Registered Trademark- and
Sprint-Registered Trademark-. Consulting competitors are ill-defined due to the
infancy of the Microsoft BackOffice-Registered Trademark- product line from a
corporate acceptance and implementation standpoint. Despite the competition, the
company believes that its high level of capability in software development,
network management and cost effectiveness make it competitive in the industry.
5
<PAGE>
RESEARCH AND DEVELOPMENT
The company's research and development activities are directed toward
enhancing existing services and creating new services, including consulting
services for networking and workflow automation to meet customers' data
communication needs. During fiscal years 1995 and 1994 Wiltek spent $467,400 and
$579,400, respectively, on research and software development.
ITEM 2. PROPERTIES
The company occupies a portion of a three-story building at 542 Westport
Avenue, Norwalk, Connecticut, as a tenant under a lease expiring December 31,
1999. The space consists of approximately 15,000 square feet and is utilized for
offices and a computer center. Additionally, the company is leasing
approximately 3,500 square feet in Swindon, England for the Wiltek (U.K.)
computer center under a lease which expires February 1, 1997.
ITEM 3. LEGAL PROCEEDINGS
The company is not involved in any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report through the
solicitation of proxies or otherwise.
6
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
(a) The following table shows the range of closing bid prices for the Common
Stock, in the over-the-counter market for the fiscal quarters indicated, as
reported by NASDAQ. The quotations represent prices in the over-the-counter
market between dealers in securities, do not include retail markup, markdown or
commission and do not necessarily represent actual transactions:
<TABLE>
<CAPTION>
BID PRICES
--------------------
1995 HIGH LOW
- ------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
First Quarter.................................................................. 5/16 1/4
Second Quarter................................................................. 1/4 3/16
Third Quarter.................................................................. 1/8 1/8
Fourth Quarter................................................................. 7/16 3/8
<CAPTION>
1994 HIGH LOW
- ------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
First Quarter.................................................................. 7/16 1/3
Second Quarter................................................................. 7/16 3/16
Third Quarter.................................................................. 7/16 3/16
Fourth Quarter................................................................. 7/16 3/16
</TABLE>
(b) Approximate number of equity security holders:
<TABLE>
<CAPTION>
APPROXIMATE NUMBER OF
RECORD HOLDERS (AS OF
TITLE OF CLASS JANUARY 16, 1996)
- ---------------------------------------------------------------------- -------------------------
<S> <C>
Common Stock, No Par Value............................................ 772
</TABLE>
(c) Dividends
The company has not paid cash dividends on its Common Stock. The payment of
dividends is at the discretion of Wiltek's Board of Directors. The company plans
to reinvest its cash flow in its business and does not anticipate payment of
cash dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SUMMARY
The following table sets forth for the periods indicated (i) percentages of
certain items to net revenue of the company and (ii) the percentage increases
(decreases) of such items as compared to the prior period:
<TABLE>
<CAPTION>
RELATIONSHIP TO
TOTAL REVENUES PERIOD TO PERIOD
YEAR ENDED OCTOBER INCREASE (DECREASE)
31, YEARS ENDED
-------------------- -------------------
1995 1994 1994-95
--------- --------- -------------------
<S> <C> <C> <C>
Net Revenues:
Communication Services............................................... 100.0% 100.0% 6.3%
Cost of Services....................................................... 57.3 61.4 (.6)
--------- ---------
Gross Margin........................................................... 42.7 38.6 17.4
Selling, General and Administrative Expenses........................... 36.8 38.2 2.5
Research and Development............................................... 9.5 12.5 (19.3)
Interest and Dividend Income, Net...................................... (.1) (.4) (79.6)
Other Expense (Income)................................................. .1
Loss on Sale of Equipment.............................................. 11.0
Restructuring Expenses................................................. 3.1
--------- ---------
Net Loss............................................................. (17.6)% (11.8)% 59.1%
--------- --------- -----
--------- --------- -----
</TABLE>
7
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NET REVENUES
Communication services increased by 6.3% versus 1.5% for the same period in
1994. This growth in revenue is due to the addition of new customers during the
year and new revenue from consulting services.
COST OF SERVICES AND GROSS PROFIT MARGINS
The gross profit margin for Communication Services increased by 17.4% in the
current fiscal year when compared to last year. The increase in profit margin is
primarily due to higher revenues and lower salary and benefits costs and
depreciation expense.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The company's sales, general and administrative expenses amounted to 36.8%
of total revenues during 1995 as compared to 38.2% during the same period last
year. These percentages are higher than that of other large companies in the
industry. As revenue grows, the company's goal will be to bring these costs in
line with industry standards.
RESEARCH AND DEVELOPMENT
Expenditures for research and development amounted to $467,400 and $579,400
for the fiscal years ended October 31, 1995 and 1994, respectively. The
reduction in expense for the fiscal year ended October 31, 1995, is due to the
elimination of one executive position resulting in a savings of 19.3%.
INTEREST AND DIVIDEND INCOME
Interest and dividend income was $3,800 in fiscal 1995 and $18,600 in fiscal
1994. Lower amounts invested for the period resulted in a decrease in interest
income of 79.6%.
LOSS ON SALE OF EQUIPMENT
A loss on the sale of equipment in a sale and lease-back transaction
resulted in a loss of $552,300 which was partially offset by a gain from the
sale of a vehicle of $800.
RESTRUCTURING EXPENSE
In accordance with a restructuring plan implemented in April 1995, $227,800
was accrued for severance pay and related employee benefits, $76,600 was
reversed in the fourth quarter due to an officer accepting a new position in
lieu of retiring. $73,100 in payments have been made from this amount during the
reporting period.
LIQUIDITY AND CASH FLOW
Cash and cash equivalents as of October 31 are presented in the following
table:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash in banks....................................................... $ 134,400 $ 332,000
Bank money market funds............................................. 309,800 80,300
----------- -----------
$ 444,200 $ 412,300
----------- -----------
----------- -----------
</TABLE>
Cash and cash equivalents increased by $31,900 during fiscal 1995. The sale
of short-term investments of $141,100, sale of fixed assets of $167,500, capital
lease obligation of $158,200 and increased payables of $86,700 were partially
offset by new computer purchases of $454,700 and payments under lease obligation
of $39,600. (See Note 11 to consolidated financial statements for more about
liquidity matters).
During fiscal 1994 cash and cash equivalents decreased by $503,400. A net
loss of $546,900 was partially offset by $406,000 in depreciation expense
included in that loss. Capital expenditures of $182,900 and an increase in
accounts receivable of $219,800 were the main causes of the decrease in cash.
8
<PAGE>
The company currently has $3,460,600 in net operating loss carryforwards for
U.S. tax purposes which will begin to expire in 1997. See note 8 to the
Consolidated Financial Statements for additional details. Wiltek (U.K.) Ltd. has
a tax loss carryforward of $842,600.
Capital expenditures in fiscal 1995 were primarily for computer equipment
($454,700). In fiscal year 1994 computer equipment was purchased for $154,300.
Other equipment expenditures totalled $28,600.
Anticipated capital expenditures in 1996 will be approximately $262,000. We
expect that existing cash resources will meet these capital requirements.
The company has entered into a capital lease obligation arising from a sale
and lease-back transaction. The company received net proceeds of $153,500 in
exchange for fixed assets with a net book value of $705,800. The lease is for
two years, ending April, 1997.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Consolidated Financial Statements annexed hereto and Item 6 above.
ITEM 8. DISAGREEMENT ON ACCOUNTING AND FINANCIAL DISCLOSURE
During the year ended October 31, 1995, or the twenty-four month period
prior thereto, there were no disagreements on accounting and financial
disclosure practices.
9
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PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a)Identification of directors
Information with respect to the directors is contained in the company's
proxy statement for the 1996 Annual Meeting of Shareholders and is incorporated
herein by reference pursuant to General Instruction G(3).
(b)Identification of executive officers
The names, ages and positions of all executive officers of the company are
listed below along with a brief description of their business experience. All
officers are appointed by the Board annually to serve for the ensuing year.
<TABLE>
<CAPTION>
NAME AGE POSITIONS AND OFFICES
- ------------------------- --- --------------------------------
<S> <C> <C>
Jay W. Fitzpatrick 54 Chairman
David S. Teitelman 39 President
Boris Frenkiel 56 Vice President & Secretary
F. Spencer Pooley, Jr. 55 Vice President
</TABLE>
Mr. Fitzpatrick came to the company as Treasurer from Exxon Corporation in
1969 and was elected to the additional offices of Secretary in 1970 and Vice
President in 1971. He was elected President, Treasurer and Director in 1983 and
Chairman of the Board in 1994. Effective March 7, 1995, Mr. Fitzpatrick resigned
his positions of President, CEO and Treasurer for medical reasons and retained
his position as Chairman of the Board of Directors.
Mr. Teitelman came to the company in 1982 and served in a variety of
positions including software engineering, operations and systems engineering. He
became Director of Marketing and Systems Engineering in 1994. On April 1, 1995
he was selected to become President and CEO of the company.
Mr. Frenkiel rejoined Wiltek as Vice President of Operations in 1983 after a
five year period during which time he was a Vice President of General DataCom
and National CSS corporations. Prior to that he was Vice President of Field
Services for Wiltek from 1973 until 1978 and Vice President of Engineering from
1970 to 1973. He was appointed to Wiltek's Board of Directors in 1994.
Mr. Pooley has been a Vice President of the company since 1970. He was
employed by AT&T Bell Laboratories from 1964 to 1969. He was appointed to
Wiltek's Board of Directors in 1994.
ITEM 10. MANAGEMENT REMUNERATION AND TRANSACTIONS
The information required by this item is contained in the company's proxy
statement for the 1996 Annual Meeting of Shareholders and is incorporated herein
by reference pursuant to General Instruction G(3).
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is contained in the company's proxy
statement for the 1996 Annual Meeting of Shareholders and is incorporated herein
by reference pursuant to General Instruction G(3).
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
10
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a)The following documents are filed as part of this report:
(1) Financial Statements
The consolidated financial statements filed as part of this
report are as listed in the Index to Financial Statements on page
13 which immediately precedes such statements.
(2) Exhibits
A list of the exhibits required by Item 601 of Regulation S-K
filed as part of this report is set forth in the Index to
Exhibits on page 25, which immediately precedes such exhibits and
is incorporated herein by reference.
(b)Reports on Form 8-K
Form 8-K was filed on March 8, 1995 reporting that J. W. Fitzpatrick has
left his position as President and Treasurer of the company for medical reasons.
He will continue to serve as Chairman of the Board of Directors. On March 30,
1995, an 8K was filed reporting that David S. Teitelman has assumed the
positions of President and CEO at Wiltek.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
WILTEK, INC.
By ___________________________________
David S. Teitelman
PRESIDENT
Date: January 25, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated:
<TABLE>
<C> <S> <C>
-----------------------------
Jay W. Fitzpatrick Chairman Date: January 25, 1996
----------------------------- President and Chief
David S. Teitelman Executive Officer Date: January 25, 1996
Vice President,
----------------------------- Director and Date: January 25, 1996
Boris Frenkiel Secretary
----------------------------- Vice President and
F. Spencer Pooley Director Date: January 25, 1996
-----------------------------
Graeme MacLetchie Director Date: January 25, 1996
</TABLE>
12
<PAGE>
WILTEK, INC.
INDEX TO FINANCIAL STATEMENTS
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS
<TABLE>
<CAPTION>
PAGE REFERENCE
-------------------
<S> <C>
Report of Independent Accountants................................................................. 14
Consolidated Balance Sheet at October 31, 1995.................................................... 15
Consolidated Statements of Operations and Deficit for the Years Ended October 31, 1995 and 1994... 16
Consolidated Statements of Cash Flows for the Years Ended October 31, 1995 and 1994............... 17
Notes to the Consolidated Financial Statements.................................................... 18
Index to Exhibits................................................................................. 24
</TABLE>
13
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Wiltek, Inc.
We have audited the accompanying consolidated balance sheet of Wiltek, Inc.
and Subsidiary (the "Company") as of October 31, 1995, and the related
consolidated statements of operations and deficit and cash flows for each of the
two years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Wiltek, Inc.
and Subsidiary as of October 31, 1995, and the consolidated results of their
operations and their consolidated cash flows for each of the two years then
ended, in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
New York, New York
December 26, 1995
14
<PAGE>
WILTEK, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
OCTOBER 31,
1995
---------------
<S> <C>
Current assets
Cash and cash equivalents...................................................................... $ 444,200
Accounts receivable, less allowance for doubtful accounts -- $35,000........................... 746,700
Other current assets........................................................................... 98,400
---------------
Total current assets......................................................................... 845,100
Equipment, net................................................................................... 430,700
---------------
Total assets................................................................................. $ 1,720,000
---------------
---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Obligation under capital lease, current portion................................................ $ 79,100
Accounts payable and accrued expenses.......................................................... 742,300
Deferred income................................................................................ 7,200
---------------
Total current liabilities.................................................................... 828,600
---------------
Long term liabilities
Obligation under capital lease, less current portion........................................... 39,500
Commitments and contingent liabilities
Shareholders' equity
Preferred stock, 1,000,000 shares authorized and unissued
Common stock, stated value $.33-1/3 per share,
common shares authorized 9,000,000; shares issued 4,823,493................................... 1,607,800
Paid-in capital................................................................................ 5,686,400
Deficit........................................................................................ (4,989,600)
Less treasury stock, at cost 1,186,235 shares.................................................. (1,452,700)
---------------
Total shareholders' equity................................................................... 851,900
---------------
Total liabilities and shareholders' equity................................................... $ 1,720,000
---------------
---------------
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE>
WILTEK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Net Revenues
Communication services.......................................................... $ 4,931,100 $ 4,637,900
Costs and Expenses
Cost of communication services.................................................. 2,829,000 2,847,800
Selling, general and administrative expenses.................................... 1,814,200 1,770,100
Research and development........................................................ 467,400 579,400
Interest and dividend income, net............................................... (3,800) (18,600)
Other expenses (income)......................................................... (8,400) 6,100
Loss on sale of equipment....................................................... 551,500
Restructuring expenses.......................................................... 151,200
-------------- --------------
5,801,100 5,184,800
-------------- --------------
Net Loss.......................................................................... (870,000) (546,900)
Deficit at Beginning of Year...................................................... (4,119,600) (3,572,700)
-------------- --------------
Deficit at End of Year............................................................ $ (4,989,600) $ (4,119,600)
-------------- --------------
-------------- --------------
Weighted Average Shares Outstanding............................................... 3,577,696 3,577,258
-------------- --------------
Per Common Share:
Net Loss........................................................................ $ (.24) $ (.15)
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE>
WILTEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................................ $ (870,000) $ (546,900)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization..................................................... 270,000 406,000
Issuance of treasury stock as bonus............................................... 21,000
Valuation adjustment of short-term investments.................................... 300 (300)
Gain on sale of short term investments............................................ (8,600)
Loss on sale of fixed assets...................................................... 551,500 6,400
(Increase) Decrease in accounts receivable and other current assets............... 6,000 (219,800)
Increase in accounts payable and accrued expenses................................. 86,700 20,900
------------ ------------
Total adjustments..................................................................... 926,900 213,200
------------ ------------
Net cash provided (used) from operating activities.................................... 56,900 (333,700)
------------ ------------
Cash flows from investing activities:
Capital expenditures................................................................ (454,700) (182,900)
Proceeds from sale of investments................................................... 141,100
Proceeds from sale of fixed assets.................................................. 167,500 13,200
------------ ------------
Net cash used in investing activities................................................. (146,100) (169,700)
------------ ------------
Cash flow from financing activities:
Proceeds from exercise of stock options............................................. 2,500
Capital lease obligation............................................................ 158,200
Payments under capital lease obligation............................................. (39,600)
------------ ------------
Net cash provided from financing activities........................................... 121,100
------------ ------------
Net increase (decrease) in cash and cash equivalents................................ 31,900 (503,400)
Cash and cash equivalents at beginning of year...................................... 412,300 915,700
------------ ------------
Cash and cash equivalents at end of year.............................................. $ 444,200 $ 412,300
------------ ------------
------------ ------------
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes.......................................... $ 5,000 $ 8,800
------------ ------------
------------ ------------
Non cash investing and financing
Capital expenditures in accounts payable............................................ $ 2,200 $ 158,100
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE>
WILTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ACCOUNTING POLICIES AND PRACTICES
GENERAL: The Company operates exclusively in one industry segment (line of
business): The design and management of data communication networks and
services.
During the fiscal year ended October 31, 1995, three customers each
accounted for more than 10% of the Company's total revenues. These customers
were Ford Motor Company 15%, Advantis 10% and Sea-Land Services, Inc. 16%.
In the fiscal year ended October 31, 1994, three customers accounted for 10%
or more of the Company's total revenues. The customers were Ford Motor Company
19.0%, Sea-Land Service, Inc. 16.6% and FX Concepts, Inc. 12.4%.
The Company began foreign operations in 1983 when it established its
computer center in London, England. During fiscal year 1995, the U.K.
operation's total revenues were $1,125,700 with a net loss of $73,400. Included
in the above are $204,600 in U.S. management costs allocated to U.K. operations
and intercompany net interest expense charged to Wiltek (U.K.) Ltd. in the
amount of $26,500. Identifiable total assets amounted to $513,800. The U.S.
dollar is the functional currency of the U.K. operation.
CONSOLIDATION: The accompanying consolidated financial statements include
the accounts of the Company and its subsidiary, Wiltek (U.K.) Ltd. All
significant intercompany transactions have been eliminated in consolidation.
CASH EQUIVALENTS: For purposes of the statement of cash flows, the Company
considers all highly liquid instruments including money market funds and
certificates of deposit with original maturities of three months or less to be
cash equivalents. The Company currently has on deposit approximately $180,000
which is subject to concentration of credit risk as it is not insured.
INVESTMENTS: In May 1993, the FASB issued Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). SFAS 115 addresses the accounting and reporting for
investments in equity securities that have readily determinable fair values and
for all investments in debt securities. SFAS 115 is effective for fiscal years
beginning after December 15, 1993. The impact on the Company's financial
statements was not material.
REVENUE RECOGNITION: Customers are invoiced at the beginning of the month
for fixed rate services and at the end of the month for usage sensitive
services. Revenue is recognized when services are performed.
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. The reimbursement is
reflected as a reduction of expenses in the Company's consolidated statement of
operations and is not included in revenues. Amounts billed to the Company and
subsequently rebilled to the customers during the fiscal years ended October 31,
1995 and 1994 were $990,300 and $1,027,100, respectively.
EQUIPMENT: Equipment is carried at cost. Major renewals and betterments are
charged to the equipment accounts while replacements, maintenance and repairs
which do not improve or extend the life of the respective assets are expensed
currently. The Company follows the policy of providing for depreciation of
equipment over the estimated useful lives: computer equipment 5 years; furniture
and fixtures 8-10 years; automobile 4 years; leasehold improvements over the
remaining life of the lease. Depreciation on fixed assets under the sale and
lease-back transaction are depreciated over the term
18
<PAGE>
of the lease, two years. When equipment is retired or otherwise disposed of, the
related cost and accumulated depreciation and amortization are eliminated from
the accounts and the resulting profit or loss is credited or charged to income.
RESEARCH AND DEVELOPMENT: The Company's research and development activities
are directed toward enhancing existing services and creating new services to
meet customers' data communication needs. During fiscal years 1995 and 1994,
Wiltek spent $467,400 and $579,400, respectively, on research and software
development.
TAXES: 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.
LOSS PER SHARE: Loss per share is based on the weighted average number of
common shares. Common share equivalents are omitted since the effect is
antidilutive.
NOTE 2 -- RESTRUCTURING PLAN
The Company began working on the proposed restructuring program during the
fiscal year 1995 second quarter. The restructuring charge consists of severance
and related costs in connection with the planned reduction of approximately 15%
of the Company's workforce or 6 salaried jobs, to execute the restructuring
program. A Vice President originally considered as part of the restructuring
plan, in the fourth quarter accepted a reduced salary and responsibilities in
lieu of retiring. It is anticipated that these actions will be implemented over
the next twelve months and the Company expects to realize annualized pretax
savings of approximately $151,200 upon full implementation. However, there can
be no assurance that the Company will realize these savings.
The status of the restructuring provision at year end was:
<TABLE>
<S> <C>
Initial provision................................................ $ 227,800
1995 activity.................................................... (73,100)
Reversal of Officer severance and related employee benefits...... (76,600)
---------
Balance at October 31, 1995, included in accrued severance pay... $ 78,100
---------
---------
</TABLE>
NOTE 3 -- EQUIPMENT
<TABLE>
<CAPTION>
OCTOBER 31,
1995
---------------
<S> <C>
Sale and lease-back equipment................................................ $ 158,200
Furniture and Fixtures....................................................... 11,500
Computer equipment........................................................... 494,000
Leasehold improvements....................................................... 354,600
---------------
1,018,300
Less: accumulated depreciation and amortization.............................. 587,600
---------------
Computer and other equipment, net....................................... $ 430,700
---------------
---------------
</TABLE>
NOTE 4 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
OCTOBER 31,
1995
---------------
<S> <C>
Accrued taxes payable........................................................ $ 13,200
Accounts payable............................................................. 461,000
Accrued payroll, vacations and employee benefits............................. 122,000
Accrued commissions.......................................................... 12,700
Accrued professional fees.................................................... 33,500
Other accrued expenses....................................................... 15,400
Accrued severance pay........................................................ 84,500
---------------
Total accounts payable and accrued expenses.................................. $ 742,300
---------------
---------------
</TABLE>
19
<PAGE>
NOTE 5 -- OBLIGATION UNDER CAPITAL LEASE
In April 1995, the Company entered into a sale and lease-back agreement for
computers and other equipment in the amount of $158,200. This resulted in a net
loss of $552,300 for the second quarter and the fiscal year end. The terms of
the sale and lease-back agreement are for 24 months effective May 1, 1995, with
a monthly payment of $7,238 at an interest rate of 9.1695%. 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. Accumulated depreciation amounted to
$39,600 for the fiscal year 1995.
The related future lease minimum payments as of October 31, 1995, are as
follows:
<TABLE>
<CAPTION>
CAPITAL
YEAR ENDING OCTOBER 31 LEASES
- ------------------------------------------------------------------------------- -------------
<S> <C>
1996........................................................................... $ 86,700
1997........................................................................... 41,700
-------------
Net minimum lease payment...................................................... 128,400
Amount representing interest................................................... 9,800
-------------
Obligation under capital lease................................................. $ 118,600
-------------
-------------
</TABLE>
NOTE 6 -- CHANGES IN SHAREHOLDERS' EQUITY AND OPTIONS
Set forth below is a summary of changes in shareholders' equity for the two
years ended October 31, 1995.
<TABLE>
<CAPTION>
COMMON TREASURY STOCK
SHARES COMMON PAID-IN ---------------------------
ISSUED STOCK CAPITAL DEFICIT COST SHARES
----------- ------------- ------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance 10/31/93................. 4,813,493 $ 1,604,500 $ 5,727,200 $ (3,572,700) $ (1,513,700) 1,236,235
Net Loss......................... (546,900)
----------- ------------- ------------- -------------- -------------- -----------
Balance 10/31/94................. 4,813,493 1,604,500 5,727,200 (4,119,600) (1,513,700) 1,236,235
----------- ------------- ------------- -------------- -------------- -----------
Issuance of Treasury Stock as
bonus........................... (40,000) 61,000 (50,000)
Exercise of Stock Options........ 10,000 3,300 (800)
Net Loss......................... (870,000)
----------- ------------- ------------- -------------- -------------- -----------
Balance 10/31/95................. 4,823,493 $ 1,607,800 $ 5,686,400 $ (4,989,600) $ (1,452,700) 1,186,235
----------- ------------- ------------- -------------- -------------- -----------
----------- ------------- ------------- -------------- -------------- -----------
</TABLE>
NOTE 7 -- STOCK OPTIONS
At the 1984 Annual Meeting of shareholders, the 1983 Stock Option Plan was
approved. An aggregate of 500,000 shares was authorized under the plan.
<TABLE>
<CAPTION>
NUMBER
1983 STOCK OPTIONS OF SHARES PRICE PER SHARE TOTAL
- ------------------------------------------------------------------- --------- -------------------- -----------
<S> <C> <C> <C>
Outstanding at 10/31/93............................................ 293,000 $1.00 to $1.75 $ 314,024
Cancelled.......................................................... 2,000 $1.3125 2,625
--------- -----------
Outstanding at 10/31/94............................................ 291,000 $1.00 to $1.75 311,399
--------- -----------
Cancelled/Expired.................................................. 239,000 $1.01 to $1.75 249,647
--------- -----------
Outstanding at 10/31/95............................................ 52,000 $1.03 to $1.3125 $ 61,752
--------- -----------
Exercisable at:
October 31, 1994................................................... 291,000 $1.00 to $1.75 $ 311,399
October 31, 1995................................................... 52,000 $1.03 to $1.3125 $ 61,752
</TABLE>
No shares were available for future grants at October 31, 1995.
None of the above option prices were less than fair market value at the date
of grant.
20
<PAGE>
At the 1989 Annual Meeting of shareholders, the 1988 Stock Option Plan was
approved. An aggregate of 400,000 shares was authorized under the plan.
<TABLE>
<CAPTION>
NUMBER
1988 STOCK OPTIONS OF SHARES PRICE PER SHARE TOTAL
- ---------------------------------------------------------------------- --------- ----------------- -----------
<S> <C> <C> <C>
Outstanding at 10/31/93............................................... 187,500 $1.03 to $2.94 $ 220,225
Cancelled............................................................. 10,500 $1.03 to $2.94 21,320
--------- -----------
Outstanding at 10/31/94............................................... 177,000 198,905
--------- -----------
Cancelled............................................................. 500 $2.94 1,470
--------- -----------
Outstanding at 10/31/95............................................... 176,500 $1.03 to $2.94 $ 197,435
--------- -----------
Exercisable at
October 31, 1994...................................................... 177,000 $1.03 to $2.94 $ 198,905
October 31, 1995...................................................... 176,500 $1.03 to $2.94 $ 197,435
</TABLE>
No shares were available for future grants at October 31, 1995.
None of the above option prices were less than fair market value at the date
of grant.
1994 STOCK OPTIONS
At the 1995 Annual Meeting of Shareholders, the 1994 Stock Option Plans for
employees (750,000 shares) and non-employees (100,000 shares) were approved. An
aggregate of 850,000 shares were authorized under the plan.
<TABLE>
<CAPTION>
NUMBER
EMPLOYEES OF SHARES PRICE PER SHARE TOTAL
- ------------------------------------------------------------------------- --------- ----------------- -----------
<S> <C> <C> <C>
Outstanding at 10/31/94.................................................. 427,000 $ .25 $ 106,750
Granted.................................................................. 178,000 $ .25 44,500
Exercised/Cancelled...................................................... 88,000 $ .25 22,000
--------- -----------
Outstanding at 10/31/95.................................................. 517,000 $ .25 $ 129,250
--------- -----------
Exercisable at 10/31/95.................................................. 517,000 $ .25 $ 129,250
</TABLE>
Number of shares available for future grants at October 31, 1995 223,000.
<TABLE>
<CAPTION>
NUMBER
NON-EMPLOYEES OF SHARES PRICE PER SHARE TOTAL
- ------------------------------------------------------------------------- --------- ----------------- -----------
<S> <C> <C> <C>
Granted.................................................................. 35,000 $ .25 $ 8,750
Outstanding at 10/31/95.................................................. 35,000 $ .25 $ 8,750
</TABLE>
Number of shares available for future grants at October 31, 1995 65,000.
None of the above option prices were less than fair market value at the date
of grant.
NOTE 8 -- INCOME TAXES
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and the amounts used for income tax purposes. 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. The Company anticipates utilizing its deferred tax assets
only to the extent of its deferred tax liabilities. Therefore, the Company has
established a valuation allowance to reduce its net deferred tax asset to zero
at October 31, 1995. The Company accounts for the investment tax credit on the
flow-through method. In
21
<PAGE>
fiscal year ended 1995 and 1994 included in sales, general and administrative
expenses, is tax expense of $3,400 and $6,050 respectively. Significant
components of the Company's deferred tax assets as of October 31, 1995 are as
follows:
Deferred tax assets:
<TABLE>
<S> <C>
Net Operating loss carryforward................................ $ 1,718,547
Investment tax credit carryforward............................. 129,800
-----------
Deferred tax asset............................................. 1,848,347
-----------
Less valuation allowance..................................... (1,848,347)
Net deferred tax assets........................................ $ 0
-----------
-----------
</TABLE>
Net loss before and after income taxes for the two fiscal year periods was
as follows:
<TABLE>
<CAPTION>
DOMESTIC UNITED KINGDOM TOTAL
------------ --------------- ------------
<S> <C> <C> <C>
1995............................................. $ (796,600) $ (73,400) $ (870,000)
1994............................................. $ (531,700) $ (15,200) $ (546,900)
</TABLE>
At October 31, 1995, the Company's U.S. operating loss carryforwards for
financial accounting and Federal tax purposes approximated $3,460,600 and
$2,294,500 for state tax purposes. The Company's U.K. operating loss
carryforwards are approximately $842,600 for tax purposes.
At October 31, 1995, investment tax credits of approximately $129,800 are
available to reduce future taxes on taxable income after the future tax benefits
arising from existing operating loss carryforwards have been realized. According
to the provisions of the Tax Reform Act of 1986, this carryforward was reduced
by 35% effective July 1, 1987. The U.S. tax loss carryforwards and investment
tax credit carryforwards expire as follows:
<TABLE>
<CAPTION>
INVESTMENT TAX
TAX LOSS CREDIT
EXPIRATION CARRYFORWARDS CARRYFORWARDS
- --------------------------------------------------------- ------------- -------------------
<S> <C> <C>
1995..................................................... $ 5,300
1996..................................................... 36,900
1997..................................................... $ 210,300 28,500
1998..................................................... 612,800 22,400
1999..................................................... 354,900 18,400
2000..................................................... 14,400
2001..................................................... 3,900
2007..................................................... 404,400
2008..................................................... 628,100
2009..................................................... 474,800
2010..................................................... 775,000
------------- ----------
$ 3,460,600 $ 129,800
------------- ----------
------------- ----------
</TABLE>
The Tax Reform Act of 1986 enacted a complex set of rules (Internal Revenue
Code Section 382) limiting the utilization of net operating loss carryforwards
to offset future taxable income following a corporate "ownership change."
Generally, this occurs when there is a greater than 50% change in ownership.
NOTE 9 -- COMMITMENTS AND CONTINGENT LIABILITIES
There are in effect annual employment agreements with three officers of the
Company which call for a base compensation to be mutually agreed upon at renewal
and upon failure to reach agreement will terminate, with the officer, in certain
circumstances, being entitled to a severance payment in an amount equal to
one-half of his then current annual base compensation. The minimum aggregate
payouts under such contracts approximate $210,200.
22
<PAGE>
Total rental expenses for office space, equipment and automobiles included
in the results of operations for fiscal years ended October 31, 1995 and 1994,
were $258,000 and $240,500 respectively. Minimum rental commitments under
noncancelable leases covering space and equipment are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR RENTAL COMMITMENTS
- ------------------------------------------------------------------------- -------------------
<S> <C>
1996..................................................................... 313,400
1997..................................................................... 203,400
1998..................................................................... 139,200
1999..................................................................... 135,100
2000..................................................................... 21,700
----------
$ 812,800
----------
----------
</TABLE>
NOTE 10 -- RELATED PARTY TRANSACTION
The Company paid consulting fees of $29,160 to an officer and director in
fiscal year 1994 and no amount was paid for the fiscal year ending October 31,
1995.
During the current fiscal year, 50,000 shares of common stock held as
treasury stock were granted by the Board of Directors to one of the officers.
NOTE 11 -- LIQUIDITY MATTERS
During fiscal 1995 the Company's liquidity and capital resources were
adversely affected by operating losses. The Company has reduced costs and
increased monthly revenues over the last twelve months to mitigate the impact of
these losses on cash flow. Although there can be no assurance that these
measures will be successful, the Company believes that the steps it has taken
will provide sufficient liquidity to fund current operations and its planned
growth.
23
<PAGE>
WILTEK, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL PAGE
EXHIBIT NO. DESCRIPTION NUMBER
- --------------- ------------------------------------------------------------------------------------- -----------------
<C> <S> <C>
22 Subsidiary........................................................................... 31
24/a Consent of independent certified public accountants.................................. 32
27 Financial data schedule..............................................................
</TABLE>
24
<PAGE>
EXHIBIT 22
WILTEK, INC.
SUBSIDIARY
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION
- -------------------------------------------------------------------------------------------- --------------------
<S> <C>
Wiltek (U.K.) Ltd........................................................................... United Kingdom
</TABLE>
The corporation listed is a direct subsidiary of Wiltek, which owns 100% of
the voting securities. The subsidiary is included in the consolidated financial
statements.
25
<PAGE>
EXHIBIT 24
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated December 26, 1995, accompanying the
consolidated financial statements incorporated by reference or included in the
Annual Report of Wiltek, Inc. and subsidiary on Form 10-KSB for the year ended
October 31, 1995. We hereby consent to the incorporation by reference of said
report in the Registration Statements of Wiltek, Inc. and subsidiary on Form
S-8 (Reg. No. 33-7271).
GRANT THORNTON LLP
New York, New York
December 26, 1995
26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<CASH> 444
<SECURITIES> 0
<RECEIVABLES> 782
<ALLOWANCES> 35
<INVENTORY> 0
<CURRENT-ASSETS> 845
<PP&E> 1,463
<DEPRECIATION> 594
<TOTAL-ASSETS> 1,720
<CURRENT-LIABILITIES> 829
<BONDS> 0
1,608
0
<COMMON> 0
<OTHER-SE> (757)
<TOTAL-LIABILITY-AND-EQUITY> 1,720
<SALES> 4,931
<TOTAL-REVENUES> 4,931
<CGS> 5,098
<TOTAL-COSTS> 5,098
<OTHER-EXPENSES> 703
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (870)
<INCOME-TAX> 0
<INCOME-CONTINUING> (870)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (870)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
