WILTEK, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheet -
at January 31, 1997 3
Consolidated Statement of Operations and Accumulated Deficit
for the Three Months Ended January 31, 1997 and 1996 4
Consolidated Statement of Cash Flows
for the Three Months Ended January 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6 - 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 9
PART II. OTHER INFORMATION 10
<PAGE>
<TABLE>
Wiltek, Inc.
Consolidated Balance Sheet
(Unaudited)
January 31,
1997
ASSETS Unaudited
<S> <C>
Current Assets
Cash and cash equivalents $310,600
Accounts receivable, less
allowance for doubtful
accounts $35,000 1,004,100
Other current assets 104,500
Total Current Assets 1,419,200
Equipment, net 556,100
$1,975,300
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Obligation under capital lease, current portion $91,800
Accounts payable and
accrued expenses 658,100
Deferred income 6,900
Total Current Liabilities 756,800
Long-Term Liabilities
Obligation under capital lease, less current portion 111,900
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:
4,826,693 1,608,900
Paid in capital 5,650,700
Deficit (4,749,100)
Less treasury stock at cost
1,146,235 shares (1,403,900)
Total Shareholders' Equity 1,106,600
$1,975,300
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
Wiltek, Inc.
Consolidated Statement of Operations
and Accumulated Deficit
(Unaudited)
Three Months Ended
January 1997
1997 1996
<S> <C>
Net Revenues
Communication services $1,520,800 $1,240,300
Costs and Expenses
Cost of communication services 808,500 617,100
Sales 245,800 252,800
General and administrative 199,000 202,800
Research and development 112,200 99,700
Interest expense 5,100 1,600
1,370,600 1,174,000
Net Income 150,200 66,300
Accumulated Deficit at Beginning
of Period (4,899,300) (4,989,600)
Accumulated Deficit at End of Period $(4,749,100) $(4,923,300)
Earnings Per Common Share:
Primary $ .04 $ .02
Fully Diluted .04 .02
Number of shares used in per
share calculation:
Primary 3,667,125 3,850,311
Fully Diluted 3,806,596 3,945,035
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
Wiltek, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
January 1997
1997 1996
<S> <C> <C>
Cash Flow from Operating Activities:
Net Income $ 150,200 $66,300
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 59,500 43,700
(Increase) in accounts receivable
and other current assets (222,700) (78,100)
(Decrease) in accounts payable
and accrued expenses (26,800) (137,500)
Total adjustments (190,000) (171,900)
Net cash (used) in operating activities (39,800) (105,600)
Cash Flows from Investing Activities:
Capital expenditures (18,700) (46,800)
Net cash (used) in investing activities (18,700) (46,800)
Cash Flows from Financing Activities:
Proceeds from exercise of stock options 200
Payment under capital lease obligations (38,500) (20,700)
Net cash (used) in financing activities (38,500) (20,500)
Net decrease in cash and
cash equivalents (97,000) (172,900)
Cash and cash equivalents
at beginning of period 407,600 444,200
Cash and cash equivalents at end of period $310,600 $271,300
Supplemental disclosure of cash flow information
Cash paid during the quarter for:
Interest 9,100 3,200
Income taxes 1,400 1,100
Supplemental schedule of non-cash investing and financing activities
During the first quarter ending January 31, 1997, capital lease obligations of
$63,000 were incurred when the Company entered into leases for new equipment.
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.
<FN>
See accompanying notes to consolidated financial statements.
<FN>
WILTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
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The consolidated balance sheet as of January 31, 1997, and the related
consolidated statements of operations and accumulated deficit for the three
month periods ended January 31, 1997, and 1996 and the consolidated statement
of cash flows for the three month periods ended January 31, 1997 and 1996 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 re
The financial statements as of January 31,1997 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, 1996.
The accounting policies followed by the company with respect to the unaudited
interim financial statements are consistent with those stated in the 1996
Wiltek, Inc. Annual Report on Form 10-KSB.
<PAGE>
The company does not engage in a formal risk management program with respect
to foreign currency exposure. Typically the company maintains cash balances
in UK banks to provide for the working capital requirements of Wiltek (UK)
Ltd. As of January 31, 1997 and January 31, 1996 these deposits amounted to
$45,600 and $25,400, 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 U
Earnings per common share is based on the weighted average number of common
and dilutive common equivalent shares outstanding.
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. To offset t
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 re-billed to the customers during the
three month period ended January 31, 1997 and 1996 were $119,400
During the quarter ended January 31, 1997, one customer accounted for more
than 10% of the Company's total revenues. This customer accounted for 19.2%
of revenues.
During the quarter ended January 31, 1996, two customers accounted for 10% or
more of the Company's total revenues. These customers accounted for 21% and
15.3% of revenues.
<PAGE>
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 $97,000 from $407,600 at October
31, 1996. The decrease in cash was due to net cash used in operating
activities of $39,800, capital expenditures during the period of $18,700 and
payments under capital lease obligations of $38,500. The main cause of the
decrease in cash used in operating activities was due to the increase in
accounts receivable of $222,700 which was offset by net income and
depreciation in the amounts of $150,200 and $59,500, respectively. Capital
Results of Operations
Communication services revenue increased by $280,500 during the first quarter
ended January 31, 1997 when compared to the same period last year. An
improved economic environment and 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:
<TABLE>
COMPARISON OF
THREE MONTHS ENDED
JANUARY 31, 1997 AND 1996
$ %
<S> <C> <C>
Net Revenues 280,500 23
Cost of Services 191,400 31
Sales expense (7,000) (3)
General and
Administrative expense (3,800) (2)
Research and Development expense 12,500 13
Interest expense 3,500 219
Net Income 83,900 127
</TABLE>
<TABLE>
<PAGE>
Revenues from operations have increased by 23% during the three months ended
January 31, 1997, versus the same period last year due to new consulting
services.
<CAPTION>
Three Months Ended
January 31
1997 1996
<S> <C> <C>
Communication Services Revenue $1,520,800 $1,240,300
Communication Services Costs 808,500 617,100
Gross Profit $ 712,300 $ 623,200
Gross Profit Margins 47% 50%
</TABLE>
The gross profit margin for Communication Services has decreased by 3% in the
current reporting period. As the result of increased consulting activity
which is less profitable than communication services, the gross profit margin
decreased.
Sales: The company's selling expenses amounted to 16.1% of total revenues in
the first quarter of 1997 as compared to 20.3% during the same period last
year. The reduction in expense is due to the elimination of one sales
position.
General and Administrative: The company's G&A expenses amounted to 13.1% of
total revenues in the first quarter of 1997 as compared to 16.3% during the
same period last year. 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.
Research and Development: The increase in expense for the first three months
compared to the same period last year is the result of the addition of one
executive position.
Interest expense: Due to current low interest rates available on cash
balances, interest income declined for the three months ended January 31,
1997. 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.
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
b. Reports on Form 8-K.
A form 8-K was filed on January 21, 1997, announcing that Wiltek, Inc. has
appointed the following individuals as officers of the company:
David Peter Holst-Grubbe - Vice President, Sales
William P. Bunce - Vice President, Marketing
Kevin C. Carathanasis - Vice President, Services.
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, 1997 WILTEK, INC.
DAVID S. TEITELMAN
______________________________
David S. Teitelman
President
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