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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1996
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
THE EXCHANGE ACT
For the transition period from to
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Commission file number 0-2401
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WILTEK, INC.
(Exact name of small business issuer as specified in its charter)
CONNECTICUT 06-0625999
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
542 Westport Ave., Norwalk, CT 06851
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(Address of principal executive offices)
(203) - 853-7400
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(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed since last
report)
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
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State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding at March 7, 1996
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Common Stock No Par Value 3,637,858 shares
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WILTEK, INC.
INDEX
PAGE NO.
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PART I. FINANCIAL INFORMATION
Consolidated Balance Sheet -
at January 31, 1996 3
Consolidated Statement of Operations and Accumulated
Deficit for the Three Months Ended January 31,
1996 and 1995 4
Consolidated Statement of Cash Flows for the
Three Months Ended January 31, 1996 and 1995 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
2
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Wiltek, Inc.
CONSOLIDATED BALANCE SHEET
(Unaudited)
January 31,
1996
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ASSETS Unaudited
Current Assets
Cash and cash equivalents $ 271,300
Accounts receivable, less
allowance for doubtful
accounts $35,000 835,500
Other current assets 87,700
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Total Current Assets 1,194,500
Equipment, net 468,400
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$ 1,662,900
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Obligation under capital lease, current portion $ 90,600
Accounts payable and
accrued expenses 604,900
Deferred income 7,100
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Total Current Liabilities 702,600
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Long-Term Liabilities
Obligation under capital lease, less current portion 41,900
Commitments and Contingent Liabilities
Shareholders' Equity
Preferred Stock 1,000,000 shares authorized
and unissued
Common Stock, stated value $.33-1/3 per share,
9,000,000 shares authorized;
shares issued:
4,824,093 1,608,000
Paid in capital 5,686,400
Deficit (4,923,300)
Less treasury stock at cost
1,186,235 shares (1,452,700)
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Total Shareholders' Equity 918,400
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$ 1,662,900
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See accompanying notes to consolidated financial statements.
3
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Wiltek, Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
AND ACCUMULATED DEFICIT
(Unaudited)
Three Months Ended
January 1996
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1996 1995
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Net Revenues
Communication services $1,240,300 $1,229,900
Costs and Expenses
Cost of communication services 617,100 784,400
Selling, general and
administrative expenses 455,600 463,800
Research and development 99,700 151,700
Interest and dividend (income), net 1,600 (2,300)
Other expense (income) (9,200)
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1,174,000 1,388,400
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Net Income (Loss) 66,300 (158,500)
Accumulated Deficit at Beginning
of Period (4,989,600) (4,119,600)
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Accumulated Deficit at End of Period ($4,923,300) ($4,278,100)
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Earnings Per Common Share:
Primary $ .02 $ (.04)
Fully Diluted .02
Number of shares used in per
share calculation:
Primary 3,820,830 3,577,258
Fully Diluted 3,853,759
See accompanying notes to consolidated financial statements.
4
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Wiltek, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
January 1996
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1996 1995
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CASH FLOW FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 66,300 $(158,500)
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Adjustments to reconcile net (loss) to
net cash provided by operating activities:
Depreciation and amortization 43,700 75,800
Valuation adjustment of
short-term investments 200
Gain on sale of fixed assets (900)
Gain on sale of short term investments (8,600)
(Increase) in accounts receivable
and other current assets (78,100) (168,200)
Increase (Decrease) in accounts payable
and accrued expenses (137,500) 42,200
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Total adjustments (171,900) (59,500)
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Net cash (used) in operating activities (105,600) (218,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (46,800) (44,400)
Proceeds from sale of investments 141,100
Proceeds from sale of fixed assets 14,100
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Net cash from (used) in investing activities (46,800) 110,800
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 200
Payment under capital lease obligation (20,700)
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Net cash provided from financing activities (20,500)
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Net decrease in cash and
cash equivalents (172,900) (107,200)
Cash and cash equivalents
at beginning of period 444,200 412,300
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Cash and cash equivalents at end of period $271,300 $305,100
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the quarter for:
Interest 3,200
Income taxes 1,100 100
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the first quarter ending January 31, 1996, capital lease obligation of
$34,500 was incurred when the Company entered into a lease for new equipment.
See accompanying notes to consolidated financial statements.
5
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WILTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of January 31, 1996, and the related
consolidated statements of operations and accumulated deficit for the three
month periods ended January 31, 1996, and 1995 and the consolidated statement of
cash flows for the three month periods ended January 31, 1996 and 1995 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 January 31, 1996 and for the three 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, 1995.
The accounting policies followed by the company with respect to the unaudited
interim financial statements are consistent with those stated in the 1995
Wiltek, Inc. Annual Report on Form 10-KSB.
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
January 31, 1996 and January 31, 1995 these deposits amounted to $25,413 and
$208,110, 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.
Earnings (loss) per common share were determined by dividing net earnings (loss)
by the weighted average of common and common equivalent shares outstanding.
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.
6
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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 reimbursements
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 three month period ended
January 31, 1996 and 1995 were $189,400 and $276,900, respectively.
One customer represents 29% of the accounts receivable balance as of January
31, 1996. Two customers each accounted for more than 10% of the Company's
total revenues, these customers accounted for 21% and 15.3%.
During the quarter ended January 31, 1995, three customers accounted for 10% or
more of the Company's total revenues, these customers accounted for 16.9%, 15.8%
and 14.7%.
7
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WILTEK, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition and Liquidity
Cash and cash equivalents have decreased by $172,900 from $444,200 at October
31, 1995. The decrease in cash was largely due to net cash used in operating
activities of $105,600 and capital expenditures during the period of $46,800.
Capital expenditures for the second quarter are expected to increase by
approximately $67,000. We expect that existing cash resources and external
financing will meet these capital requirements.
Results of Operations
Communication services revenue increased by $10,400 during the first quarter
ended January 31, 1996 when compared to the same period last year. An improved
economic environment and new consulting services resulted in increased revenues.
The period to period increases (decreases) in the principal items included in
the Consolidated Statement of Operations and Accumulated Deficit is summarized
below:
COMPARISON OF
THREE MONTHS ENDED
JANUARY 31, 1996 AND 1995
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$ %
- -
Net Revenues 10,400 1
Cost of Services (167,300) (21)
Selling, General and
Administrative Expenses (8,200) (2)
Research and Development (52,000) (34)
Interest Expense, Net 3,900 170
Other Expense 9,200 100
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Net Income 224,800 242
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8
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Revenues from operations have increased by 1% during the three months ended
January 31, 1996, versus the same period last year due to new consulting
services.
THREE MONTHS ENDED
JANUARY 31
1996 1995
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Communication Services Revenue $1,240,300 $1,229,900
Communication Services Costs 617,100 784,400
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Gross Profit $ 623,200 $ 445,500
Gross Profit Margins 50% 36%
The gross profit margin for Communication Services has increased by 14% in the
current reporting period. The increase in the profit margin was primarily due
to higher revenues and reductions in salary and depreciation expenses following
last year's restructuring plan.
Selling, General and Administrative Expenses: There was no significant change
in the three months ended January 31, 1996, compared to the same period last
year.
The company's SG&A expenses amounted to 36.7% of total revenues in the first
quarter of 1996 as compared to 38.4% 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: The reduction in expense for the first three months
compared to the same period last year is the result of the elimination of one
executive position.
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 months ended January 31, 1996.
Wiltek did not receive dividends due to the sale of investments during the first
quarter of 1995.
Interest income is offset by an increase in interest expense due to the Company
entering into capital lease obligations.
Taxes: Due to losses in prior periods and the use of net loss carry forward for
the three month period, Federal or State income tax provisions are not
provided.
9
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PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
b. Reports on Form 8-K - There were no reports on Form 8-K filed for the
three months ended January 31, 1996.
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: March 7, 1996 WILTEK, INC.
/s/ David S. Teitelman
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David S. Teitelman
President
10
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