UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 For the quarterly period
ended: September 30, 1996
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from: to
Commission file number: 0-9019
Teletek, Inc.
(Exact name of registrant as specified in its charter)
Nevada 88-0298190
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1771 E. Flamingo Road, Suite 111A, Las Vegas, Nevada 89119
(Address of principal executive offices) (Zip Code)
(702) 734-4898
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 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 [ ]
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of November 11,
1996: 14,454,398
<PAGE>
TELETEK, INC. AND SUBSIDIARIES
INDEX
Page
No.
Part I. Financial Information 3
Item 1. Financial Statements 3
Consolidated Balance Sheet 3
Consolidated Statements of Operations
(Unaudited) 5
Consolidated Statements of Cash Flows
(Unaudited) 6
Notes to Consolidated Financial
Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10
Part II. Other Information 14
Item 1. Legal Proceedings 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit Index 17
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TELETEK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, September 30,
1996 1996
(Audited) (Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,485,883 $ 4,019,929
Receivables:
Trade accounts, less allowance for
doubtful accounts of $450,000 at
June 30, 1996 and $600,588 at
September 30, 1996 3,820,305 8,026,212
Unbilled trade accounts receivable 8,301,875 6,487,355
Interest receivable 17,280 22,313
Notes receivable 20,000 20,000
Prepaid expenses and other 41,345 84,416
Total current assets 13,686,688 18,660,225
Property and equipment, net 2,393,110 2,788,869
Other assets:
Investment in United Payphone
Services, Inc. 1,817,591 1,817,591
Deposits 480,410 426,370
Notes receivable 169,443 169,443
Goodwill - 840,143
Other 68,976 171,471
Total other assets 2,536,420 3,425,018
$ 18,616,218 $ 24,874,112
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
3
<PAGE>
TELETEK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET, CONTINUED
<TABLE>
<CAPTION>
June 30, September 30,
1996 1996
(Audited) (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Current installments of long-term debt $ 906,510 $ 1,251,845
Accounts payable 7,208,242 9,140,555
Accrued expenses 4,424,318 5,570,608
Deposits 122,900 2,900
Income taxes 123,000 150,002
Total current liabilities 12,784,970 16,115,910
Long-term debt,excluding current
installments 230,082 1,841,234
Total liabilities 13,015,052 17,957,144
Stockholders' equity:
Common stock, $.0001 par value.
Authorized 100,000,000 shares, issued
and outstanding 13,722,883 (June 30)
and 14,454,398 (September 30) shares 1,372 1,445
Class A, convertible preferred stock,
no par value. Authorized 50,000,000
shares, issued and outstanding 0
(June 30) and 0 (September 30) shares - -
Class B, convertible preferred stock,
no par value. Authorized 50,000,000
shares, issued and outstanding 0
(June 30) and 0 (September 30) shares - -
Class C, convertible preferred stock,
no par value. Authorized 50,000,000
shares, issued and outstanding 135
(June 30) and 135 (September 30) shares 70,000 70,000
Additional paid-in capital 11,619,905 12,482,717
Less: Note receivable for common
stock (note 5) - (118,800)
Accumulated deficit (6,090,111) (5,518,394)
Total stockholders'equity 5,601,166 6,916,968
$ 18,616,218 $ 24,874,112
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
4
<PAGE>
TELETEK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended September 30,
1995 1996
<S> <C> <C>
Total revenue $ 3,947,147 $ 23,029,442
Cost of goods sold 2,646,401 20,756,472
Gross profit 1,300,746 2,272,970
Operating expenses:
General and administrative 822,858 1,370,247
Bad debts 35,983 153,786
Depreciation and amortization 31,492 129,422
Total operating expenses 890,333 1,653,455
Income from operations 410,413 619,514
Other income (expense):
Interest income 7,867 34,319
Interest expense - (54,231)
Dividend income 27,331 -
Other, net (10,000) 13,115
Income before income taxes 435,611 612,717
Provision for income taxes - (41,000)
Net income 435,611 571,717
Net income per common share and
common share equivalents (restated
for 1995) (note 6) $ .02 $ .03
Weighted average common shares
outstanding (restated for 1995)
(note 6) 17,936,774 16,534,063
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
5
<PAGE>
TELETEK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended September 30,
1995 1996
<S> <C> <C>
Cash flows from operating activities: $ 435,611 $ 571,717
Net income
Adjustments to reconcile net income
to net cash provided by operating
activities:
Minority interest 10,000 -
Depreciation and amortization 31,492 129,422
Bad debts - 153,786
Changes in assets and liabilities:
(Increase) in accounts receivable - (2,546,908)
(Increase) in prepaid expenses (1,203,972) (43,071)
(Increase) in other asset (194,815) (102,495)
Decrease in deposits - 54,040
Increase (decrease) in accounts
payable (49,551) 1,932,313
Increase in accrued expenses and
other 1,554,464 1,026,290
Increase in income taxes 7,618 27,002
Net cash provided by operating
activities 591,027 1,202,096
Cash flows from investing activities:
Purchase of property and equipment (209,656) (646,971)
Cash paid for subsidiary, net of cash
received - (216,166)
Net cash used in investing activities (209,656) (863,137)
Cash flows from financing activities:
Principle payments on notes payable
and lease obligations (2,310) (261,013)
Proceeds from notes payable and lease
obligations 100,274 2,217,500
Proceeds from issuance of common stock
and additional paid in capital - 238,600
Net cash provided by financing
activities 97,964 2,195,087
Net increase in cash and cash
equivalents 479,335 2,534,046
Cash and cash equivalents at beginning of
period 356,538 1,485,883
Cash and cash equivalents at end of
period $ 835,873 $ 4,019,929
Supplemental disclosures of cash flow
information:
Cash paid for interest $ - $ 39,925
Cash paid for taxes - 13,998
Non cash financing activities:
Stock issued for acquisition of
subsidiary $ - $ 486,875
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
6
<PAGE>
TELETEK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1996
(1) General
Teletek, Inc. (the "Company") has elected to omit
substantially all footnotes to the Consolidated
Financial Statements for the three months ended
September 30, 1996, since there have been no material
changes (other than those reported in footnotes 2
through 7) to the information previously reported by the
Company in their annual report filed on Form 10-K for
the fiscal year ended June 30, 1996.
(2) Unaudited Information
The information furnished herein was taken from the books
and records of the Company without audit. However, such
information reflects all adjustment which are, in the
opinion of management, necessary to properly reflect
the results of the interim period presented. The
information presented is not necessarily indicative of
the results from operations expected for the full fiscal
year.
(3) Acquisitions
In August 1996, the Company purchased all of the capital
stock of SelecTel Corporation, a California corporation
("SelecTel"), in consideration for $270,000 cash, a
$300,000 promissory note bearing interest at 8% per
annum due in two years, $48,000 in prepaid interest,
and 190,000 restricted shares of the Company's common
stock. In October 1996, the Company paid the sellers
$100,000 cash and exchanged the $300,000 promissory
note for a new promissory note in the principal amount
of $60,000. The acquisition was accounted for as a
purchase. Accordingly, the purchase price in excess of
the fair value of the identifiable net assets acquired
($741,914) will be recorded as goodwill and will be
amortized on a straight line basis over the life of
goodwill (five years). SelecTel is a switchless
reseller of long-distance telecommunications services.
SelecTel principally markets such services to hotels
and motels and other similar leisure industry
businesses in approximately 14 states. SelecTel does
not own or lease any switching equipment. The Company
is in the process of integrating SelecTel's customers
into its transmission network. The proforma results of
operations of the Company had SelecTel been acquired as
of the first quarter of fiscal 1997 would be as
follows:
Sales $ 23,437,122
Gross profit 2,314,698
Net income 554,670
Net income per common share .03
7
<PAGE>
In August 1996, the Company purchased substantially all
the assets of Xtel, Inc., a Nevada corporation, dba
Phone Line USA ("Phone Line USA"), for approximately
$145,000, of which approximately $120,000 was paid by
forgiving indebtedness of Phone Line USA to the
Company. Phone Line USA markets disposable prepaid
calling cards which enable the holder to make long
distance telephone calls. Phone Line USA primarily
markets its prepaid calling cards with international
calling capabilities through approximately 100 vending
machines strategically located in major metropolitan
areas of the United States, such as New York, Los
Angeles, San Francisco, Miami, Honolulu and Seattle.
The prepaid calling cards are typically sold in
denominations of $10 and $20.
(4) Working Capital Loan
On August 22, 1996, the Company received a loan in the
amount of $2,000,000 from a private lender, bearing
interest at 8.5% per annum. All accrued and unpaid
interest on the outstanding balance of the loan plus
$25,000 is payable monthly. The loan is due in full
on August 22, 1999. The loan may be used by the
Company for working capital or any other purpose.
(5) Exercise of Stock Options
During the first quarter of fiscal 1997, options
for 541,515 shares of common stock were exercised at
an average price of $.66 per share. Notes receivable
in the aggregate amount of $150,800 were received by
the Company from an executive officer and certain
employees in connection with 228,484 shares.
(6) Prior Period Adjustment
In 1996, the Company discovered certain errors in the
calculation of the weighted average shares outstanding
for the quarter ended September 30, 1995. The weighted
average shares outstanding for that period did not
include the number of shares of the Company's common
stock that could have been (i) converted from the
Company's outstanding preferred stock, or (ii) exercised
from the Company's outstanding options. The correction
of this error resulted in an increase of weighted
average shares outstanding to 17,936,774 shares
fromthe previously reported 7,487,884 shares for the
quarter ended September 30, 1995, and a corresponding
decrease in net income per share to $.02 per share from
the previously reported $.06 per share.
The reduction in the weighted average shares
outstanding to 16,534,063 shares for the quarter ended
September 30, 1996 from 17,936,774 shares for the
quarter ended September 30, 1995 was primarily the
result of the repurchase by the Company of 32,034
shares of common stock and 153,333 shares of Class A
preferred stock from a former officer of the Company.
Class A preferred stock has a conversion rate of 30
shares of common stock for each share of Class A
preferred stock.
8
<PAGE>
(7) Investment in Affiliated Company
The Company's investment in United Payphone at June 30,
1996 and September 30, 1996 is summarized as follows:
<TABLE>
<CAPTION>
June 30, 1996 September 30, 1996
Carrying Carrying
Shares Value Shares Value
<S> <C> <C> <C> <C>
Common stock 992,065 $ -- 992,065 $ --
Preferred stock 727 1,817,591 727 1,817,591
stock
$ 1,817,591 $ 1,817,591
</TABLE>
The Company has an investment in United Payphone
consisting of 19% of United Payphone's common stock. The
Company's carrying value has been reduced to zero as a
result of recording the Company's share of net losses.
During 1994, the Company exchanged a $1,817,591 note
receivable for 727 shares of 6% cumulative convertible
preferred stock of United Payphone, which is
convertible into common stock at a rate equal to 75% of the
average bid price of the common stock for the ten days
prior to the conversion date. The preferred stock is
redeemable by United Payphone at the cash price paid for
the shares plus the amount of any dividends accumulated and
unpaid as of the date of redemption. The Company is
carrying the nonmarketable security at cost. Management
has determined that it is not probable that an impairment
deemed other than temporary has occurred as of the balance
sheet date. See Part I, Item 2. "Management's Discussion
and Analysis of Financial Condition and Results of
Operations - Material Changes in Financial Condition."
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Statement on Forward-Looking Information
Certain information included herein contains statements
that may be considered forward-looking within the meaning of the
Private Securities Litigation Reform Act of 1995, such as
statements relating to anticipated obligations, capital spending
and financing sources. Such forward-looking information involves
important risks and uncertainties that could significantly
affect anticipated results in the future and, accordingly, such
results may differ from those expressed in any forward-looking
statements made herein. These risks and uncertainties include,
but are not limited to, those relating to dependence on
existing management, competition from other long-distance
telecommunication providers, leverage and debt service
(including sensitivity to fluctuations in interest rates), the
outcome of litigation, domestic or global economic conditions,
regulatory requirements, and changes in federal or state tax
laws or the administration of such laws. Further information
on potential factors which could affect the financial condition
and results of operations of the Company are included in
the filings of the Teletek, Inc. (the "Company") with the
Securities and Exchange Commission, including, but not limited
to, the Company's annual report on Form 10-K for the year ended
June 30, 1996.
General
The Company, through its operating subsidiaries, provides
long-distance telecommunication services, consisting primarily
of direct dial international long distance telephone
transmissions from the United States for commercial customers.
Currently, the Company's wholly-owned subsidiaries are Hi-Rim
Communications, Inc. ("Hi-Rim") and SelecTel Corporation
("SelecTel"). In April 1995, the Company sold its controlling
interest in United Payphone Services, Inc. ("United Payphone")
in exchange for the cancellation of 95,292 shares of the
Company's Class A preferred stock. As of June 30, 1996, the
Company owned 992,065 shares or approximately 19% of the
outstanding common stock of United Payphone, and all of
United Payphone's outstanding preferred stock bearing a 6%
cumulative dividend rate. The consolidated financial statements
include Hi-Rim and SelecTel. The Company's investment in
United Payphone is carried at cost plus equity in undistributed
earnings or loss since acquisition. The Company's carrying
value of its investment in United Payphone has been reduced
to zero as a result of recording the Company's share of net
losses. All material intercompany balances have been eliminated
in consolidation.
In 1996, the Company discovered certain errors in the
calculation of the weighted average shares outstanding for the
quarter ended September 30, 1995. The correction of this error
resulted in an increase of weighted average shares outstanding
to 17,936,774 shares from the previously reported 7,487,884
shares for the quarter ended September 30, 1995, and a
corresponding decrease in net income per share to $.02 per
share from the previously reported $.06 per share. See Note 6
to Consolidated Financial Statements above.
10
<PAGE>
The results of operations for the quarter ended September
30, 1996 are not an indication of the Company's future
performance for any subsequent period. Information contained
in this quarterly report is supplemental to disclosures in
the Company's year-end financial report. This management's
discussion and analysis of financial condition and results
of operations should be read in conjunction with the
management's discussion and analysis of financial condition and
results of operations included in the Company's annual report
on Form 10-K for the year ended June 30, 1996, Part II, Item 7.
Material Changes in Results of Operations
Three Months Ended September 30, 1996 and 1995
Revenues
Revenues for the Company increased to approximately $23.0
million for the quarter ended September 30, 1996 from
approximately $3.9 million for the quarter ended September 30,
1995, an increase of approximately $19.1 million or 483%.
Management believes the increase is due to the increase in the
sales staff, the development of customer contacts by the
Company's management, an increase in demand due to the Company's
competitive rates, and the general increase in acceptance of
the Company's services among the Company's target customer
market.
Gross Profit
Gross profit for the quarter ended September 30, 1996
increased to approximately $2.3 million from approximately $1.3
million for the quarter ended September 30, 1995, an increase of
approximately $1.0 million or 75%. The increase in gross profit
reflects the results of the increase in sales of the Company's
long-distance service. Gross profit increased during the first
quarter of fiscal 1997 at a relatively lower rate than
revenues because the Company offered lower rates to its
customers as a competitive measure to increase demand for its
services. The Company's gross profit in the first quarter of
fiscal 1997 was negatively affected by the termination in March
1996 of the Company's relationship with MCI, which at the time
carried approximately 75% of the Company's long-distance
traffic. During the third and fourth quarters of the fiscal
year ended June 30, 1996, the Company expanded its network of
transmission carriers in order to reduce the Company's reliance
on any one carrier and to enable the Company to handle higher
volume customers at lower rates and with improved customer
services. Currently, the Company uses approximately seven
different carriers, none of which handles more than 20%
of the Company's long-distance traffic.
General and Administrative Expenses
General and administrative expenses increased to
approximately $1.4 million for the quarter ended
September 30, 1996, up from $822,858 for the quarter ended
September 30, 1995, a $547,389 or 67% increase. The
increase was principally due to staff increases, and the recent
acquisition of SelecTel.
11
<PAGE>
Interest Expense
For the quarter ended September 30, 1996, interest expense
increased to $54,231 from no interest expense for the quarter
ended September 30, 1995. The increase was principally due
to the purchase of the Company's switching equipment in
September 1996 and interest associated with the Private Loan
(defined below).
Net Income
Net income for the quarter ended September 30, 1996 was
$571,717 compared to net income of $435,611 for the quarter
ended September 30, 1995, a $136,106 or 31% increase. The
increase was principally due to the large increase in revenues
and the resultant increase in gross profit.
Material Changes in Financial Condition
At September 30, 1996, the Company had working capital of
approximately $2.5 million compared to $901,718 at June 30,
1996. Cash and cash equivalents were approximately $4.0 million
at September 30, 1996, compared to approximately $1.5 million
at June 30, 1996. The increase in both working capital and cash
The increase in both working capital and cash is primarily due
to the increase in revenues and a $2.0 million loan (the
"Private Loan") received by the Company in the first quarter of
fiscal 1997.
For the three months ended September 30 1996, net cash
provided by operating activities totaled approximately $1.2
million. Net cash used in investing activities for the same
period totaled $863,137, which consisted primarily of (i) the
acquisition of SelecTel; and (ii) the purchase of
substantially all of the assets of Xtel, Inc., a Nevada
corporation, dba Phone Line USA ( "Phone Line USA"). Net
cash provided by financing activities otaled approximately
$2.2 million for the three months ended September 30, 1996.
Net cash provided by financing activities during this
quarter primarily reflects proceeds from the Private Loan, the
sale of equity as a result of the exercise of options, and
equipment financing.
On November 6 and 7, 1996, 30 persons were indicted by a
federal grand jury for allegedly illegal activities which in
some instances involved the common stock of the Company and
United Payphone. The indictments allege, among other things,
racketeering, conspiracy, securities fraud, wire fraud and
money laundering. Three of the persons indicted are former
officers of the Company and one has provided accounting
services for the Company. Two of the persons indicted are
former officers of United Payphone and the others are
primarily stock promoters and brokers. The indictments state
that the allegedly illegal activities took place over a
four-year period beginning in late 1991. None of the persons
indicted currently holds any position as a director, officer or
employee of the Company or any of its subsidiaries. Although
the indictments described allegedly illegal activities involving
the Company's stock, the Company was not indicted by the
federal grand jury. In addition, none of the current
officers or directors was mentioned in either indictment.
Based on the indictments, the Company has commenced
an internal investigation into the allegations. The
Company intends to cooperate fully with the U.S.
Attorney' s office in the prosecution of this matter.
In addition, the Company is consulting its own
12
<PAGE>
legal counsel with respect to appropriate legal action
against certain persons named in the indictments if the
Company determines there is a basis to the grand jury
allegations.
Although the Company was not indicted, the indictments
could have a material adverse effect on the Company's
financial condition and results of operations. In addition,
the indictments may have a negative impact on the Company's
investment in United Payphone and on the Company's ability
to collect the unpaid principal and accrued interest
pursuant to the terms of promissory notes in the aggregate
principal amount of $169,443 bearing interest at 8% per
annum. As of September 30, 1996, management has determined
that it is not probable that an impairment deemed other than
temporary has occurred; accordingly, the Company did not
discount the value of its investment in United Payphone and
carried the promissory note as fully collectible. See note 7
to unaudited consolidated financial statements above.
The Company is currently arbitrating a dispute with MCI
in connection with the MCI Carrier Agreement. See Part II,
Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operation - Liquidity and Capital
Resources" in the Company's annual report on Form 10-K for
the year ended June 30, 1996.
In August 1996, the Company received the Private Loan
from an unaffiliated third party, bearing interest at 8.5%
per annum. All accrued and unpaid interest on the
outstanding balance of the Private Loan plus a principle
payment of $25, 000 is payable monthly. The Private Loan is
due in full on August 22, 1999. The proceeds from the
Private Loan may be used by the Company for working capital
or any other purpose. As of the date hereof, the Company
has not expended any of the Private Loan proceeds.
In August 1996, the Company purchased all of the
capital stock of SelecTel in consideration for $270,000
cash, a $300,000 promissory note bearing interest at 8% per
annum due in two years, $48,000 in prepaid interest, and
190,000 restricted shares of the Company's common stock. In
October 1996, the Company paid the sellers $100,000 cash and
exchanged the $300, 000 promissory note for a new promissory
note in the principal amount of $60,000. SelecTel is a
switchless reseller of long-distance telecommunications
services. SelecTel principally markets such services to
hotels and motels and other similar leisure industry
businesses in approximately 14 states. SelecTel does not
own or lease any switching equipment. The Company is in the
process of integrating SelecTel' s customers into its
transmission network.
In August 1996, the Company purchased substantially all
of Phone Line USA for approximately $145,000, of which
approximately $120,000 was paid by forgiving indebtedness of
Phone Line USA. Phone Line USA markets disposable prepaid
calling cards which enable the holder to make long-distance
telephone calls. Phone Line USA primarily markets its
prepaid calling cards with international calling
capabilities through approximately 100 vending machines
strategically located in major metropolitan areas of the
United States, such as New York, Los Angeles, San Francisco,
Miami, Honolulu and Seattle. The prepaid calling cards
typically are sold in denominations of $10 and $20.
The Company is currently attempting to
resolve an outstanding obligation to AT&T
Corp. See Part II, Item 7. "Management's Discussion
and Analysis of Financial Conditions and Results
13
<PAGE>
of Operations - Liquidity and Capital Resources" in the
Company's annual report on Form 10-K for the year ended
June 30, 1996.
The Company currently does not have any firm
commitments for any capital expenditures or business
acquisitions. However, subject to certain factors, the
Company's present intention is to purchase an additional
computerized digital network switch during the fiscal year
1997. In addition, the Company continues to monitor
acquisition and expansion opportunities throughout the
United States. The Company expects to be able to meet its
debt obligations and to finance capital expenditures and
expansion opportunities through cash flow from operations,
present and future borrowings, including proceeds available
under the Private Loan, or other sources of public or
private financing.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
United States of America v. Michael G. Swan, et al.,
United States District Court, District of Nevada, Case No.
CR-S-96-288, instituted on November 6, 1996, and United
States of America v. Damon Cozzolino, et al., United States
District Court, District of Nevada, Case No. CR-S-96-287,
instituted on November 6, 1996, and United States of America
v. Jay Wells Nance, et al., United States District Court,
District of Nevada, Case No. CR-S-96-271, instituted on
November 7, 1996 (collectively, the " Indictments"). The
Company has been informed that 30 persons were indicted by a
federal grand jury on November 6 and 7, 1996. The
Indictments allege, among other things, racketeering,
conspiracy, securities fraud, wire fraud, and money
laundering involving the common stock of the Company and
United Payphone. Three of the persons indicted are former
officers of the Company and one has provided accounting
services for the Company. Two of the persons indicted are
former officers of United Payphone and the others are
primarily stock promoters and brokers. The Indictments
state that the alleged illegal activities took place over a
four-year period beginning in late 1991. None of the
persons indicted currently holds any position as a director,
officer or employee of the Company or any of its
subsidiaries. Although the Indictments described illegal
activities involving the Company's stock, the Company was
not indicted by the federal grand jury. In addition, none
of the current officers or directors was mentioned in either
of the Indictments. See Part I, Item 2. "Management's
Discussion and Analysis of Financial Condition and Results
of Operations - Material Changes in Financial Condition"
above.
See also Part I, Item 3. "Legal Proceedings" in the
Company's annual report on Form 10-K for the year ended
June 30, 1996.
ITEM 5. Other Information
In October 1996, the Board of Directors of the Company
adopted resolutions to clarify the terms of bonus compensation
payable to Thomas A. Mills and Wayne J. Godbout.
14
<PAGE>
Messrs. Mills and Godbout each receive a one-time $25,000 bonus
for each increase of $6.0 million in annualized revenues as
compared to the Company's highest prior revenue level.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
Exhibit No. Description
27.01 Financial Data Schedule
(b) Reports on Form 8-K
None
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Teletek, Inc.,
a Nevada corporation
Date: October 31, 1996 By: /s/ John M. Vergiels
John M. Vergiels, Chairman
of the Board, Chief
Executive Officer,
President and Treasurer
(duly authorized officer
and principal financial
officer)
16
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
27.01 Financial Data Schedule 18
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and statements of income of Teletek, Inc., as of and
for the quarter ended September 30, 1996, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,020
<SECURITIES> 0
<RECEIVABLES> 15,156
<ALLOWANCES> 601
<INVENTORY> 0
<CURRENT-ASSETS> 18,660
<PP&E> 2,789
<DEPRECIATION> 129
<TOTAL-ASSETS> 24,874
<CURRENT-LIABILITIES> 16,116
<BONDS> 0
0
70
<COMMON> 1
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 24,874
<SALES> 0
<TOTAL-REVENUES> 23,029
<CGS> 20,756
<TOTAL-COSTS> 20,756
<OTHER-EXPENSES> 1,653
<LOSS-PROVISION> 154
<INTEREST-EXPENSE> 54
<INCOME-PRETAX> 613
<INCOME-TAX> 41
<INCOME-CONTINUING> 572
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 572
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
