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, 1996
----------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EX-CHANGE 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)
(203) 853-7400
(Registrant's telephone number)
</TABLE>
<TABLE>
<S> <C>
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class 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 $5,004,247
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of December 5, 1996 was $941,238
THE ISSUER WAS NOT INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS
As of December 5, 1996, there were 3,640,458 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 1997 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 coexisting 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.
An important 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.
Wiltek has developed a range of services which allow customers to:
1. Connect dissimilar computer based electronic mail systems such as IBM PROFS
(r), Digital Equipment All-In-One (r), Microsoft Exchange (r) and Microsoft
Mail (r), Lotus Notes (r) and cc:Mail (r), SMTP, etc. 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 (r), MCI Mail (r),
Advantis (IBMMail (r)), 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 devices located throughout the world utilizing our
broadcast and customized facsimile delivery service based in the US and UK.
<PAGE>
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 client/server based electronic messaging and workgroup systems.
Wiltek is focusing on accounts that require assistance in the planning for,
and implementation of, Microsoft Exchange and Windows NT Server. Wiltek is a
Microsoft Solution Provider and is firmly committed to the Microsoft
Backoffice product line.
Microsoft has established itself as the growth arena for business information
systems' needs. This growth is the direct result of marketing strategies and
product deliverables planned and recently executed by Microsoft. The sales
and support strategy deployed by Microsoft for business clients is dependent
upon the use of value added services by Solution Providers. The basis for the
Microsoft Backoffice suite of products is messaging technology.
1997 marks the initial large growth phase of Microsoft provided intranets,
based on the availability of products required by enterprise corporate
computing models. The corporate information systems model requires the
availability of decision making data, open communications, and technology
resource based marketing and operating advantages.
Within the realm of messaging based technologies, use of messaging (e-mail,
fax and directory services) has become a standard operating procedure for
successful large and medium organizations. Small organizations are just
beginning to establish business requirements for these applications, however,
the technology cost and benefit for small organizations does not yet fit the
profile of an attractive market. Wiltek's experience and expertise lands
solidly in the middle of the medium and large organization growth market.
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, 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 grow to 96,000,000 users by
the end of 1997 (International Data Corporation, 1993).
The other important segment 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 acceptance and use of services for broadcast distribution of
application and E-mail generated facsimile.
<PAGE>
The growth in the installed base of E-Mail systems and facsimile devices
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 the TCP/IP protocol.
Format conversion to accommodate the different structures of each E-Mail
system, e.g. IBM PROFS to Microsoft Exchange.
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.
Directory synchronization to transform an individual id or name on one system
into a native appearance on another system. For example, a user's name on
Microsoft Exchange might be "Jay W. Fitzpatrick" but on a PROFS system the
name is limited to 8 characters and therefore might be presented to the PROFS
user community as "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.
<PAGE>
Marketing Strategy and Target Customers
The company has traditionally targeted large multi-national companies that are
likely to have dissimilar computer systems and applications 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 needed 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 is expanding. Large corporations who
are migrating from mainframe computers to LAN and client/server based systems
need significantly more connectivity between the older legacy systems and the
new client/server messaging systems. To facilitate the transmission of
messages and files between those disparate messaging 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 electronic messaging
has broadened the base of 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.
Wiltek's Text-to-Fax and Host-to-Fax Services which began in 1989, now
generate more than $2 million per year in revenue. For its facsimile
services, Wiltek has targeted customers who have high volume (in excess of
10,000 pages per month) or custom fax delivery requirements. An example
client of these services is 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 client/server communications
applications to enhance our service capabilities within the rapidly growing
client/server messaging segment of the market. In addition, the company has
installed UNIX based solutions to provide X.500 Directory Services to its
customers.
<PAGE>
An additional feature added to our facsimile delivery service is the ability
to accept and deliver a customer's message text and attachments natively from
their electronic messaging platform. This service enhancement allows
customers to send faxes natively from Lotus Notes, Lotus cc:Mail, Groupwise,
and Microsoft Exchange. This solution does not require additional hardware or
software; it simply allows customer's to send faxes as if they were sending
a mail item and attachment(s) to another mail user. All document conversions
are transparent to the customer and are performed by the Wiltek Facsimile
delivery service.
Wiltek presently has Microsoft Certified System Engineers and Microsoft
Product Specialists on staff certified in a variety of Microsoft product and
technology such as Windows NT Server, Windows NT Workstation, Microsoft Mail,
Microsoft Exchange, Microsoft SMS, TCP/IP, Windows for Workgroups, etc.
Wiltek's certified engineers and product specialists are located in both the
Connecticut and Swindon facilities. These individuals provide Wiltek's
consulting customers with Microsoft Backoffice planning and implementation
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.
<PAGE>
Revenues
<TABLE>
<CAPTION> Year Ended October 31,
----------------------
1996 1995
---- ----
(In thousands of dollars)
<S> <C> <C>
Communications Services $5004.2 $4,931.1
======= ========
</TABLE>
Communications Services revenue increased by 1.5% in the fiscal year ended
October 31, 1996, an improved economic environment and new consulting services
resulted in increased revenue. Services customers are charged a flat fee
and/or on a usage sensitive basis, depending on the customers contract, and
consulting customers are charged on a time and material basis.
Major Customers
During the fiscal year ended October 31, 1996, two customers, Ford Motor
Company and Sea-Land Service, Inc. each accounted for 10% or more of the
company's total revenues. These customers represented 32% of the total
revenues in 1996. The company is dependent upon these two customers and the
loss of any one of the customers could adversely affect the business of the
company. In fiscal year 1995 three customers each accounted for over 10% of
total revenues. These customers were Ford Motor Company, Sea-Land Service,
Inc., and Advantis representing 41% of the company's total revenues.
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, 1996 and October 31, 1995 these deposits amount to $70,500 and
$112,000 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.
<PAGE>
Information about the company's operation in different geographical areas:
<TABLE>
<CAPTION> Year Ended October 31
(In thousands of dollars)
United
Domestic Kingdom Total
-------- ------- -----
<S> <C> <C> <C>
1996
- ----
Revenues $4,090.9 $ 913.3 $5,004.2
Net Income (Loss) $ 227.5 $ (137.2) $ 90.3
Identifiable Assets $1,391.8 $ 440.7 $1,832.5
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
<FN>
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
$265,500 in 1996 and $231,100 in 1995.
</TABLE>
<PAGE>
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 34 full-time
employees as of October 31, 1996.
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 Control Data Systems, AT&T (r) and Sprint (r). Consulting
competitors are ill-defined due to the infancy of the Microsoft BackOffice (r)
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.
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 1996 and 1995 Wiltek spent $459,100
and $467,400, 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. The Company also occupies 1,200 square
feet at Building 101, Merritt 7 Corporate Park, Norwalk, Connecticut, as a
tenant under a lease expiring July 23, 2001. This space is primarily used for
sales activities. 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, 1998.
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.
<PAGE>
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
----------
1996 High Low
---- ---- ---
<S> <C> <C>
First Quarter 9/16 5/16
Second Quarter 13/16 7/16
Third Quarter 13/16 7/16
Fourth Quarter 19/32 3/8
1995
<CAPTION> High Low
---- ---
<S> <C> <C>
First Quarter 1/4 13/32
Second Quarter 1/3 7/32
Third Quarter 1/4 3/32
Fourth Quarter 23/32 5/32
</TABLE>
(b) Approximate number of equity security holders:
<TABLE>
<CAPTION> Approximate Number of
Record Holders as of
Title of Class December 5, 1996
-------------- ---------------------
<S> <C>
Common Stock, No Par Value 756
</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.
<PAGE>
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 Period to Period
Total Revenues Increase (Decrease)
Year Ended October 31, Years Ended
---------------------- -------------------
1996 1995 1995-96
---- ---- -------
<S> <C> <C> <C>
Net Revenues:
Communication Services 100.0% 100.0% 1.5%
Cost of Services 51.1 57.3 (9.6)
----- -----
Gross Margin 48.9 42.7 16.4
Selling, General and
Administrative Expenses 37.7 36.8 3.9
Research and Development 9.2 9.5 (1.8)
Interest and Dividend
Expense (Income), Net .2 (.1) NM
Loss on Sale of Equipment 11.0 NM
Restructuring Expenses 3.1 NM
---- ---- ----
Net Income (Loss) 1.8% (17.6)% NM
===== ======= =====
<FN> * NM - Not Meaningful
</TABLE>
<PAGE>
Net Revenues
Communication services increased by 1.5% versus 6.3% for the same period in
1995. This growth in new revenue is from consulting services.
Cost of Services and Gross Profit Margins.
The gross profit margin for Communication Services increased by 16.4% 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 37.7% of
total revenues during 1996 as compared to 36.8% 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 $459,100 and $467,400
for the fiscal years ended October 31, 1996 and 1995, respectively. The
reduction in expense of 1.8% for the fiscal year ended October 31, 1996, was
due to decreased depreciation expense and benefit costs which were slightly
offset by an increase in employment fees.
Interest and Dividend Expense (Income), Net
Interest and dividend expense was $11,100 in fiscal 1996, versus revenues of
$3,800 in fiscal 1995. Lower amounts invested for the period resulted in a
decrease in interest income and additional lease obligations resulted in
increased interest expense.
Loss on Sale of Equipment
During fiscal year ended October 31, 1995, a loss on the sale of equipment in
a sale and lease-back transaction resulted in a loss of $552,300.
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 1995 due to an officer accepting a new position in lieu of
retiring. Severance payments amounted to $53,500 and $73,100 for the fiscal
years ended October 31, 1996, and 1995, respectively.
<PAGE>
Liquidity and Cash Flow
Cash and cash equivalents as of October 31 are presented in the following
table:
<TABLE>
<CAPTION> 1996 1995
---- ----
<S> <C> <C>
Cash in banks $ 176,300 $ 134,400
Bank money market funds 231,300 309,800
--------- ---------
$ 407,600 $ 444,200
========= =========
</TABLE>
Cash and cash equivalents decreased by $36,600 during fiscal 1996. The main
cause of the decrease were capital expenditures of $132,400, payments under
capital lease obligations of $99,200 a decrease in accounts payable of
$61,100, and an increase in accounts receivable of $40,800, which were
partially offset by net income, depreciation, and issuance of stock as a
bonus of $90,300, $192,500 and $13,300 respectively.
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.
The company currently has $3,223,000 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 $926,400.
Capital expenditures in fiscal 1996 were $300,800. Purchases for computer
equipment amounted to $99,000, leased equipment amounted to $159,800, and the
remainder of purchases in the amount of $42,000 were for furniture and
fixtures, leasehold improvements, and lab equipment. Capital expenditures in
fiscal 1995 were primarily for computer equipment ($454,700).
Anticipated capital expenditures in 1997 will be approximately $517,000. We
expect that existing cash resources will meet these capital requirements.
The company entered into capital lease obligations totaling $159,800 for the
year ending October 31, 1996. The capital leases were primarily for new
computer equipment. During the fiscal year ended October 31, 1995, the
company 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, 1996, or the twenty-four month period prior
thereto, there were no disagreements on accounting and financial disclosure
practices.
<PAGE>
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 1997 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 55 Chairman
David S. Teitelman 40 President
Boris Frenkiel 57 Vice President & Secretary
F. Spencer Pooley, Jr. 56 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 had 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. Effective April 30, 1996, Mr. Pooley has
retired. He has retained his position as director.
<PAGE>
Item 10. Management Remuneration and Transactions
The information required by this item is contained in the company's proxy
statement for the 1997 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 1997 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.
<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 17 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 30, which immediately precedes such exhibits and is
incorporated herein by reference.
(b) Reports on Form 8-K
There were no reports filed under Form 8-K for the year ended
October 31, 1996.
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
___________________________
David S. Teitelman
President
Date: January 17, 1997
<PAGE>
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>
<S> <C>
JAY W. FITZPATRICK
___________________________________ Date: January 17, 1997
Jay W. Fitzpatrick
Chairman
DAVID S. TEITELMAN
___________________________________ Date: January 17, 1997
David S. Teitelman
President and Chief Executive Officer
BORIS FRENKIEL
___________________________________ Date: January 17, 1997
Boris Frenkiel
Vice President, Director and Secretary
F. SPENCER POOLEY
___________________________________ Date: January 17, 1997
F. Spencer Pooley
Director
GRAEME MACLETCHIE
___________________________________ Date: January 17, 1997
Graeme MacLetchie
Director
</TABLE>
<PAGE>
Wiltek, Inc.
Index to Financial Statements
Covered by Report of Independent Accountants
<TABLE>
<CAPTION> Page Reference
<S> <C>
Report of Independent Accountants 19
Consolidated Balance Sheet at October 31, 1996 20
Consolidated Statements of Operations and Deficit for the Years
Ended October 31, 1996 and 1995 21
Consolidated Statements of Cash Flows for the Years Ended
October 31, 1996 and 1995 22
Notes to the Consolidated Financial Statements 23
Index to Exhibits 32
</TABLE>
<PAGE>
Wiltek, Inc.
Consolidated Balance Sheet
- --------------------------
<TABLE>
<CAPTION> October 31,
1996
-----------
<S> <C>
Current assets
Cash and cash equivalents $ 407,600
Accounts receivable, less allowance for
doubtful accounts - $35,000 774,800
Other current assets 111,100
-----------
Total current assets 1,293,500
Equipment, net 539,000
-----------
Total assets $ 1,832,500
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Obligation under capital lease,
current portion $ 90,900
Accounts payable and accrued expenses 689,600
Deferred income 7,400
----------
Total current liabilities 787,900
----------
Long term liabilities
Obligation under capital lease,
less current portion 88,300
Commitments and contingencies
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 4,826,693 1,608,900
Paid-in capital 5,650,600
Deficit (4,899,300)
Less treasury stock, at cost
1,146,235 shares (1,403,900)
-----------
Total shareholders' equity 956,300
-----------
Total liabilities and shareholders' equity $ 1,832,500
=============
<FN> See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Wiltek, Inc.
Consolidated Statements of Operations and Deficit
- -------------------------------------------------
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------
1996 1995
---- ----
<S> <C> <C>
Net Revenues
Communication services $ 5,004,200 $ 4,931,100
----------- -----------
Costs and Expenses
Cost of communication services 2,558,300 2,829,000
Selling, general and
administrative expenses 1,885,400 1,814,200
Research and development 459,100 467,400
Interest and dividend expense (income), net 11,100 (3,800)
Other expenses (income) (8,400)
Loss on sale of equipment 551,500
Restructuring expenses 151,200
----------- -----------
4,913,900 5,801,100
=========== ===========
Net Income (Loss) 90,300 (870,000)
Deficit at Beginning
of Year (4,989,600) (4,119,600)
------------ ------------
Deficit at End of Year $ (4,899,300) $ (4,989,600)
============= =============
Earnings (Loss) Per Common Share:
Primary $.02 $(.24)
Fully Diluted $.02
Number of Shares used in per share calculation:
Primary 3,890,382 3,577,696
Fully Diluted 3,914,115
<FN> See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Wiltek, Inc.
Consolidated Statements of Cash Flows
- -------------------------------------
<TABLE>
<CAPTION> Year Ended October 31,
----------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 90,300 $ (870,000)
---------- ------------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 192,500 270,000
Issuance of treasury stock as bonus 13,300 21,000
Valuation adjustment of
short-term investments 300
Gain on sale of short-term investments (8,600)
Loss on sale of fixed assets 551,500
(Increase) decrease in accounts
receivable and other current assets (40,800) 6,000
Increase (decrease) in accounts
payable and accrued expenses (61,100) 86,700
---------- ----------
Total adjustments 103,900 926,900
---------- ----------
Net cash provided
by operating activities 194,200 56,900
---------- ----------
Cash flows from investing activities:
Capital expenditures (132,400) (454,700)
Proceeds from sale of investments 141,100
Proceeds from sale of fixed assets 167,500
---------- ----------
Net cash used in investing activities (132,400) (146,100)
---------- ----------
Cash flow from financing activities:
Proceeds from exercise of stock options 800 2,500
Capital lease obligation 158,200
Payments under capital lease obligation (99,200) (39,600)
---------- ----------
Net cash (used in) provided by financing
activities (98,400) 121,100
---------- ----------
Net (decrease) increase in cash and
cash equivalents (36,600) 31,900
Cash and cash equivalents at
beginning of year 444,200 412,300
---------- ----------
Cash and cash equivalents at end of year $ 407,600 $ 444,200
========== ===========
Supplemental disclosures of cash flow
information:
Cash paid during the year for income taxes $ 5,100 $ 5,000
========== ===========
Interest expense $ 18,800 $ 6,600
========== ===========
Noncash investing and financing activities:
Capital expenditures in accounts payable $ 8,600 $ 2,200
========== ===========
Capital lease obligations incurred
for fixed asset acquisitions $ 159,800 $
========== ===========
<FN> See accompanying notes to consolidated financial statements.
</TABLE>
<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, 1996, two customers each accounted
for more than 10% of the Company's total revenues. These customers were Ford
Motor Company (14.3%), and Sea-Land Services, Inc. (17.7%). The company is
dependent upon these two customers and the loss of any one of these customers
could adversely affect the business of the company. Three customers accounts
receivable balances are more that 10% of the outstanding accounts receivable.
These customers in aggregate amount to 48% of the accounts receivable balance.
In the fiscal year ended October 31, 1995, three customers accounted for 10%
or more of the Company's total revenues. The customers were Ford Motor
Company (15%), Sea-Land Service, Inc. (16%) and Advantis (10%). Two customers
accounts receivable balances are more than 10% of the outstanding accounts
receivable. These customers in aggregate amount to 45% of the accounts
receivable balance.
The Company began foreign operations in 1983 when it established its computer
center in London, England. During fiscal year 1996, the U.K. operation's
total revenues were $913,300 with a net loss of $137,200. Included in the
above are $232,300 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 $33,200. Identifiable total assets amounted to $440,700. 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
$285,000 which is subject to concentration of credit risk as it is not
insured. Funds on deposit in the U.K. in the amount of $76,800 are not
insured by the Federal Deposit Insurance Company.
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, 1996 and 1995 were $718,900 and $990,300,
respectively.
<PAGE>
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 to 10 years; automobile - 4 years; leasehold
improvements over the remaining life of the lease. Fixed assets under capital
lease obligations are depreciated over the term of the lease which
approximate the useful life. 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 1996 and 1995,
Wiltek spent $459,100 and $467,400, respectively, on research and software
development.
Taxes: The Company follows the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109).
Income (Loss) Per Share: Income (loss) per share is based on the weighted
average number of common and dilutive common equivalent shares outstanding
during fiscal 1996. Common share equivalents are omitted during fiscal year
1995 since the effect is antidilutive.
Use of Estimates: In preparing the Company's financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities, and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following item is
based on an estimate which is particularly sensitive to change in the near
term: the valuation allowance for the deferred tax asset. It is possible
that changes in this estimate will occur and the effect of such change may
be significant to the financial statements of the Company.
Advertising Costs: Advertising costs are expensed when incurred.
Fair Value of Financial Instruments: Based on borrowing rates currently
available to the Company for capital leases with similar terms and maturities,
the fair value of the Company's capital leases approximates the carrying
value. The carrying values of all other financial instruments potentially
subject to valuation risk, principally cash, accounts receivable and accounts
payable, also approximate fair value because of the short-term maturities of
these investments.
Impairment of Long-Lived Assets: Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS No. 121") establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets. Under provisions of the
Statement, impairment losses are recognized when expected future cash flows
are less than the assets' carrying value. Accordingly, when indicators of
impairment are present, the Company will evaluate the carrying value of
property, plant and equipment in relation to the operating performance
and future undiscounted cash flows of the underlying business. SFAS No. 121
requires analysis of each item on an individual asset-by-asset basis, where
applicable. The amount of the impairment loss is the excess of the carrying
amount of the impaired asset over the fair value of the asset. Generally, fair
value represents the expected future cash flows from the use of the asset or
group of assets, discounted at an interest rate commensurate with the risks
involved.
<PAGE>
Accounting for Stock-Based Compensation: In 1995, the Financial Accounting
Standards Board issued Statement No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). The statement defines a fair value based
method of accounting for an employee stock option. Companies may, however,
elect to adopt this new accounting rule through a pro forma disclosure option,
while continuing to use the intrinsic value based method of accounting
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees."
Under disclosure option, companies must make pro forma disclosures of net
income and earnings per share, as if the fair value method of accounting
described below had been applied.
Under the new fair value method, compensation cost is measured at the grant
date based on the value of the award and is recognized over the service (or
vesting) period. Under the intrinsic value based method, compensation cost
is the excess, if any, of the quoted market price of the stock at grant date
over the amount an employee must pay to acquire the stock.
The adoption of this Statement is required, either through adoption or
disclosure in 1997. The Company has decided to follow the accounting
prescribed by APB opinion No. 25.
Note 2 - Restructuring Plan
The Company began working on a restructuring program during the fiscal year
1995 second quarter. The restructuring charge consists of severance and
related costs in connection with the reduction of approximately 15% of the
Company's workforce or 6 salaried jobs. A Vice President originally
considered as part of the restructuring plan, in the fourth quarter of 1995,
accepted a reduced salary and responsibilities in lieu of retiring.
The status of the restructuring provision follows:
<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
---------
1996 activity (53,500)
---------
Balance at October 31, 1996, included in
accrued severance pay $ 24,600
=========
</TABLE>
<PAGE>
Note 3 - Equipment
<TABLE>
<CAPTION> October 31,
1996
-----------
<S> <C>
Lab equipment $ 27,900
Automobile 4,000
Capital leases 318,000
Furniture and fixtures 18,000
Computer equipment 593,000
Leasehold improvements 358,200
-----------
1,319,100
Less: accumulated depreciation
and amortization 780,100
-----------
$ 539,000
===========
</TABLE>
Note 4 - Accounts Payable and Accrued Expenses
<TABLE>
<CAPTION> October 31,
1996
-----------
<S> <C>
Accounts payable $ 492,100
Accrued payroll, vacations and employee benefits 84,900
Accrued commissions 9,400
Accrued professional fees 33,500
Other accrued expenses 32,100
Accrued severance pay 24,700
Accrued taxes payable 12,900
-----------
Total accounts payable and
accrued expenses $ 689,600
============
</TABLE>
Note 5 - Obligation Under Capital Lease
During the fiscal year ending October 31, 1996, the Company entered into
several capital lease agreements for new computers and furniture totaling
$159,800. The lease terms vary from three to five years, with interest rates
between 11.93% and 26.36%. In the fiscal year ending October 31, 1995, the
Company entered into a sale and lease-back agreement for computers and other
equipment in the amount of $158,200. 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 $139,000 and $39,600 for the fiscal
years ending 1996 and 1995, respectively.
The related future lease minimum payments as of October 31, 1996, are as
follows:
<TABLE>
<CAPTION>
Year Ending October 31 Capital Leases
- ---------------------- --------------
<S> <C>
1997 $104,100
1998 60,700
1999 39,800
2000 7,400
2001 5,600
--------
Net minimum lease payment 217,600
Amount representing interest 38,400
--------
Obligation under capital lease $179,200
========
</TABLE>
<PAGE>
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, 1996.
<TABLE>
<CAPTION>
Common Treasury Stock
Shares Common Paid-In
Issued Stock Capital Deficit Cost Shares
<S> <C> <C> <C> <C> <C> <C>
Balance
at
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
at
10/31/95 4,823,493 1,607,800 5,686,400 (4,989,600) (1,452,700) 1,186,235
--------- --------- --------- ----------- ----------- ---------
Issuance
of
Treasury
Stock
as bonus (35,500) 48,800 (40,000)
Exercise
of Stock
Options 3,200 1,100 (300)
Net Income ------- ______ ______ 90,300 ________ ________
------
Balance
at
10/31/96 4,826,693 $1,608,900 $5,650,600 $(4,899,300) $(1,403,900) 1,146,235
========= ========== ========== ============ ============ =========
</TABLE>
<PAGE>
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 Price
1983 Stock Options of Shares Per Share Total
--------- --------- -----
<S> <C> <C> <C>
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
Cancelled 6,000 $1.03 to $1.3125 6,462
------- ------
Outstanding at 10/31/96 46,000 $1.03 to $1.3125 $ 55,290
======= =======
Exercisable at:
October 31, 1995 52,000 $1.03 to $1.3125 $61,752
October 31, 1996 46,000 $1.03 to $1.3125 $55,290
<FN> No shares were available for future grants at October 31, 1996.
None of the above option prices were less than fair market value at the date
of grant.
</TABLE>
<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 Price
1988 Stock Options of Shares Per Share Total
--------- --------- -----
<S> <C> <C> <C>
Outstanding at 10/31/94 177,000 $1.03 to $2.94 $198,905
Cancelled 500 $2.94 1,470
------- --------
Outstanding at 10/31/95 176,500 $1.03 to $2.94 197,435
------- --------
Cancelled 5,000 $1.03 to $2.94 7,125
------- --------
Outstanding at 10/31/96 171,500 $1.03 to $2.94 $190,310
======= ========
Exercisable at:
October 31, 1995 176,500 $1.03 to $2.94 $197,435
October 31, 1996 171,500 $1.03 to $2.94 $190,310
<FN> No shares were available for future grants at October 31, 1996.
None of the above option prices were less than fair market value at the date
of grant.
</TABLE>
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 Price
Employees of Shares 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
------- --------
Granted 50,000 $.56 28,000
Exercised/Cancelled 78,200 $.25 19,550
------- --------
Outstanding at 10/31/96 488,800 $.25 to $.56 $137,700
======= ========
Exercisable at:
October 31, 1995 517,000 $.25 $129,250
October 31, 1996 488,800 $.25 to $.56 $137,700
<FN> Number shares available for future grants at October 31, 1996: 248,000.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Price
Non-Employees of Shares Per Share Total
--------- --------- -----
<S> <C> <C> <C>
Granted 35,000 $.25 $8,750
Outstanding at 10/31/95 and 10/31/96 35,000 $.25 $8,750
Exercisable at:
October 31, 1995 35,000 $.25 $8,750
October 31, 1996 35,000 $.25 $8,750
<FN> Number of shares available for future grants at October 31, 1996: 65,000.
None of the above option prices were less than fair market value at the date
of grant.
</TABLE>
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 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, 1996. The Company accounts for the investment
tax credit on the flow-through method. In fiscal years ended 1996 and 1995,
included in sales, general and administrative expenses, is tax expense of
$2,900 and $3,400, respectively. Significant components of the Company's
deferred tax assets as of October 31, 1996 are as follows:
Deferred tax assets:
<TABLE>
<S> <C>
Net operating loss carryforward $1,637,800
Investment tax credit carryforward 87,600
----------
Deferred tax asset 1,725,400
Less valuation allowance 1,725,400
Net deferred tax assets $ 0
==========
</TABLE>
Net income (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>
1996 $ 227,500 $(137,200) $ 90,300
1995 $(796,600) $(73,400) $(870,000)
</TABLE>
At October 31, 1996, the Company's U.S. operating loss carryforwards for
financial accounting and Federal tax purposes approximated $3,223,000 and
$2,054,200 for state tax purposes. The Company used $237,600 and $240,300 in
loss carryforwards for federal and state tax purposes, respectively. The loss
carryforward for alternative minimum tax purposes amounts to $3,246,300. The
Company used $213,800 in alternative minimum tax loss carryforward in the year
ending October 31, 1996.The Company's U.K. operating loss carryforwards are
approximately $926,400 for tax purposes.
<PAGE>
At October 31, 1996, investment tax credits of approximately $87,600 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>
Tax Loss Investment Tax
Expiration Carryforwards Credit Carryforwards
- ---------- ------------- --------------------
<S> <C> <C>
1997 $28,500
1998 $585,800 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
--------- -------
$3,223,000 $87,600
========== =======
</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 two 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 $89,500.
Total rental expenses for office space, equipment and automobiles included in
the results of operations for fiscal years ended October 31, 1996 and 1995,
were $278,500 and $258,000 respectively. Minimum rental commitments under
noncancelable leases covering space and equipment are as follows:
<TABLE>
<CAPTION>
Fiscal Year Rental Commitments
----------- ------------------
<S> <C>
1997 $367,300
1998 254,300
1999 209,500
2000 60,900
2001 28,300
--------
$920,300
========
</TABLE>
Note 10 - Related Party Transaction
During the current fiscal year, 40,000 shares of common stock held as treasury
stock were granted by the Board of Directors to one of the officers. During
the fiscal year ending October 31, 1995, 50,000 shares of common stock held
as treasury stock were granted by the Board of Directors to one of the
officers.
<PAGE>
WILTEK, INC.
Index to Exhibits
<TABLE>
<CAPTION>
Sequential Page
Exhibit No. Description Number
- ----------- ----------- ---------------
<C> <S> <C>
22 Subsidiary 33
24/a Consent of independent certified
public accountants 34
</TABLE>
<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.
<PAGE>
Exhibit 24
CONSENT OF INDEPENDENT ACCOUNTANTS
- ----------------------------------
We have issued our report dated December 11, 1996, 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, 1996. We hereby consent to the incorporation by reference of said
reports in the Registration Statements of Wiltek, Inc. on Form S-8 (Reg. No.
33-7271).
GRANT THORNTON, LLP
New York, New York
December 13, 1996
<PAGE>
To the Board of Directors and Shareholders of Wiltek, Inc.
the accompanying consolidated balance sheet of Wiltek, Inc.
and Subsidiary (the "Company") as of October 31, 1996, 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, 1996, 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 11, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 408
<SECURITIES> 0
<RECEIVABLES> 810
<ALLOWANCES> 35
<INVENTORY> 0
<CURRENT-ASSETS> 1294
<PP&E> 1319
<DEPRECIATION> 780
<TOTAL-ASSETS> 1833
<CURRENT-LIABILITIES> 788
<BONDS> 0
1609
0
<COMMON> 0
<OTHER-SE> (652)
<TOTAL-LIABILITY-AND-EQUITY> 1833
<SALES> 5004
<TOTAL-REVENUES> 5004
<CGS> 4914
<TOTAL-COSTS> 4914
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 90
<INCOME-TAX> 0
<INCOME-CONTINUING> 90
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
