<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-KSB
[XX] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required] For Fiscal Year Ended
December 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required] For the transition period___to___.
Commission File No. 0-13670
TELETRAK ADVANCED TECHNOLOGY SYSTEMS, INC.
(Name of Small Business Issuer in Its Charter)
<TABLE>
<S> <C>
Delaware 13-3187778
(State of other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
537 Steamboat Road
Greenwich, Connecticut 06830
(Address of principal executive (Zip Code)
offices)
</TABLE>
Registrant's telephone number, including area code: (203) 629-1400
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01
(Title of Class)
Check 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 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 pursuant to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or in any
amendment to this Form 10-KSB. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant at February 14, 1997 was approximately $233,333, based on the
average of the bid and asked prices as reported by the NASD Electronic Bulletin
Board. For these purposes, the term "affiliates" is deemed to mean the officers
and directors of the registrant and Helm Resources, Inc.
The registrant's revenues for the year ended December 31, 1996 were $0. At
February 14, 1997 there were 21,647,000 shares of common stock outstanding.
Documents Incorporated by Reference: None
Transitional Small Business Format: Yes No X
--- ---
Page 1 of 20 pages. No exhibits filed herewith.
<PAGE> 2
PART I
ITEM 1. BUSINESS
Teletrak Advanced Technology Systems, Inc. (herein "Teletrak" or the "Company"),
a Delaware corporation, was organized in January 1983 as a wholly-owned
subsidiary of Helm Resources, Inc. ("Helm") to develop and market computer
software products. Helm is the beneficial owner of 59.9% of the common stock. At
the present time, the Company has no operating assets or operations.
Historically, the Company's principal business activity had been the marketing
of optical data software and the development of enhancements thereto to provide
mass data storage capability in multimedia applications that combine data,
voice, image and text on mass storage erasable and nonerasable optical disks
(the "System"). In the fall of 1993, the Company assigned to an Atlanta-based
corporation all of its rights to sell, manufacture, develop and distribute its
products in exchange for a royalty, while retaining title, copyright and other
proprietary rights to the System. As a result of this assignment of rights, in
1993 the Company classified its activities related to the marketing and
development of the System as discontinued operations. To date, no significant
revenues have been derived from the assignment of revenues, and the Company does
not anticipate that it will receive any significant revenues from this
arrangement in the future. In addition, at the present time, the technology of
the System is obsolete.
Management is maintaining the Company's corporate shell with a view towards a
possible merger or combination with another entity in order to utilize the
Company's net operating loss. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
During 1995 and 1996, the Company realized no revenues, and a net loss of
$32,900 and $27,600, respectively.
EMPLOYEES
Since January 1, 1994, the Company has had no employees. All financial and
accounting services are performed by employees of Helm. All other management
decisions are reviewed by the Company's Board of Directors.
ITEM 2. PROPERTIES
The Company shares office space in New York, New York and Greenwich, Connecticut
for its corporate headquarters with other affiliates of Helm. The Company does
not pay any rent to Helm or its affiliates for this space.
ITEM 3. LEGAL PROCEEDINGS: None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: None.
Page 2 of 20 pages. No exhibits filed herewith.
<PAGE> 3
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
(a) MARKET INFORMATION
The following table sets forth the bid and ask prices for the Company's common
stock for the prior two year period:
<TABLE>
<CAPTION>
Ask Bid
<S> <C> <C>
1995
First Quarter $ .02 $.005
Second Quarter .02 .005
Third Quarter .02 .005
Fourth Quarter .02 .005
1996
First Quarter $ .02 $.005
Second Quarter .045 .01
Third Quarter .04 .015
Fourth Quarter .04 .04
</TABLE>
The ask and bid prices cited herein for 1995 and 1996 have been obtained from
the Electronic Bulletin Board quotation system of the NASD.
At February 14, 1997, the bid and ask prices for the Company's common stock, as
obtained from the Electronic Bulletin Board of the NASD, were $.04 and $.04,
respectively.
(b) HOLDERS
The Company is advised by American Stock Transfer & Trust Company, its transfer
agent, that there were approximately 300 holders of record of the Company's
common stock at March 15, 1997.
(c) DIVIDEND POLICY
The Company has never paid any dividends. Since the Company is inactive, it will
not pay any cash dividends in the foreseeable future.
Page 3 of 20 pages. No exhibits filed herewith.
<PAGE> 4
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Introduction
At the present time, the Company has no operating assets or operations.
Management is engaged in efforts to locate additional businesses or operations
in related and unrelated enterprises which could be merged into or acquired by
the Company. No assurance can be given, however, that management will be
successful in these efforts.
RESULTS OF OPERATIONS
1996 COMPARED TO 1995
The Company had no revenues in 1995 and 1996.
Selling, general and administrative expenses consist of expenses associated with
maintaining the Company's records and statutory requirements which are expected
to continue in the future.
Interest expense is interest on advances from affiliates.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company financed its operations and operating deficits with
advances from Helm Resources, Inc. and its subsidiaries ("Helm"), the beneficial
owner of 59.9% of the Company's common stock, and the proceeds of private
placements of common stock. During 1996, Helm made no advances to the Company.
The Company presently has recorded $231,000 in accrued expenses and $891,000 due
to Helm. With respect to the accrued expenses, the Company is working with its
creditors to arrange settlements of amounts owing and/or deferrals of payments.
No assurance can be given that the Company will be successful in these efforts.
As for the amount owing to Helm, Helm has agreed not to demand payment until
after December 31, 1997. Accordingly, no amounts are payable to Helm during
1997.
There can be no assurance that Helm will provide any additional financing to the
Company other than in connection with minimal ongoing corporate expenses, or
that additional financing will be available on terms acceptable to the Company
or that the Company will be able to operate profitably in the future. The
Company has sought and continues to seek joint venture arrangements, merger
opportunities and capital injections. Management presently is engaged in efforts
to locate additional businesses or enterprises which could be merged into or
acquired by the Company. No assurance can be given, however, that management
will be successful in these efforts.
Page 4 of 20 pages. No exhibits filed herewith.
<PAGE> 5
ITEM 7. FINANCIAL STATEMENTS
The financial statements required by this item are set forth herein at the page
numbers indicated below:
Page Number
-----------
Statement in Lieu
Accountant's Report....................... F-1
Balance Sheet at December 31, 1996........ F-2
Statements of Operations for the years
ended December 31, 1996 and 1995.......... F-3
Statements of Stockholders'
Deficiency for the years ended
December 31, 1996 and 1995................ F-4
Statements of Cash Flows for the years
ended December 31, 1996 and 1995.......... F-5
Notes to Consolidated Financial
Statements................................ F-6
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No change in accountants or disagreements requiring disclosure pursuant to
applicable regulations took place during the Company's two most recent fiscal
years.
BDO Seidman was not engaged to perform an audit of the 1996 Financial Statements
as pursuant to Paragraph 210.3-11 of Regulation S-X promulgated by the
Securities and Exchange Commission, audited financial statements are not
required to be included in the Company's Annual Report on Form 10-KSB due to its
status as an inactive registrant.
[The rest of this page intentionally left blank.]
Page 5 of 20 pages. No exhibits filed herewith.
<PAGE> 6
PART III
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
The directors, nominees for director and executive officers of the Company are
set forth below. The directors serve and the nominees serve, if and when
elected, until the next annual shareholders' meeting and until their successors
are elected and qualified. The Company believes that during 1996 all filing
requirements applicable to its directors and officers, and the beneficial owners
of more than 10% of the Company's equity securities, under Section 16 of the
Securities Exchange Act of 1934 were complied with.
<TABLE>
<CAPTION>
Name, Principal Occupation Over the Past Five Director of
Years and Other Directorships of Individual Age Company Since
- --------------------------------------------- --- -------------
<S> <C> <C>
Herbert M. Pearlman ............................ .............................. 64 1983
Mr. Pearlman has been the Chairman of the Board of Directors of the Company
since March l983. Since 1980, he has served as President, Chief Executive
Officer and Chairman of the Board of Directors of Helm Resources, Inc. ("Helm"),
a public holding company. Since March l984, Mr. Pearlman has been Chairman of
InterSystems, Inc. ("ISI"), a public company engaged in providing custom
compounding and packaging and distribution services to the thermoplastic resin
industry, and in the manufacture and sale of sampling and weighing devices to
the agricultural and other industries. Mr. Pearlman is Chairman of the Board of
Directors of Seitel, Inc. ("Seitel"), a public company engaged in acquiring and
marketing seismic information to the oil and gas industry. In March 1990, he
became Chairman of the Board of Directors of Unapix Entertainment, Inc.
("Unapix"), which is engaged in marketing and distributing films and television
products.
Joseph J. Farley ................................. ............................ 74 1983
Mr. Farley was elected President of the Company in April l983 and served in that
capacity until April 1990, at which time he became Chairman of the Executive
Committee. In December 1991, Mr. Farley resumed the position of President and
Chief Executive officer following the retirement of the existing President. From
l982 until February 1991, he served as Vice-President of Marketing and
Engineering for Helm. Mr. Farley has been a Director of Helm since l982. Prior
to his employment at Helm, he was a senior executive with International Business
Machines Corporation where he was employed for 32 years and held various
positions in engineering, marketing and field engineering.
David S. Lawi ................................... ............................. 61 1983
Mr. Lawi has been Secretary of the Company since January 1983, Secretary and a
Director of Helm since l980, a Director and the Secretary of ISI since March
l984 and Chairman of its Executive Committee since 1986, and a Director of
Seitel since 1982. In 1989 he was elected Chairman of Seitel's Executive
Committee. In 1990 he became a Director and Secretary-Treasurer of Unapix.
</TABLE>
Page 6 of 20 pages. No exhibits filed herewith.
<PAGE> 7
<TABLE>
<S> <C> <C>
William Lerner ................................ ............................... 63 1985
Mr. Lerner is an attorney engaged in the private practice of Law. From May 1990
until December 1990, he was General Counsel to Hon Development Company, a
California real estate development company. Mr. Lerner has been a director of
Helm since 1985 and a director of Seitel since l984. Mr. Lerner is also a
director of Rent-Way, Inc., the owner of a chain of retail stores in the
rental-purchase industry, and a director of Micros-to-Mainframes, Inc., a
provider of advanced technology services and computer equipment to Fortune 2000
companies with headquarters and significant operations in the states of New
Jersey, New York and Connecticut.
Daniel T. Murphy .............................. ............................... 58 1988
Mr. Murphy has been Executive Vice President and Chief Financial Officer of ISI
since July 1985. He became a Director of ISI in October 1986. Mr. Murphy joined
Helm in May 1984 as Vice-President and Chief Financial Officer, and in 1992 he
became Executive Vice President--Finance.
Scott Altman ............................ ..................................... 34 --
Mr. Altman joined Helm in September 1987, and he was appointed Treasurer of the
Company in August 1988.
</TABLE>
ITEM l0: EXECUTIVE COMPENSATION
For the fiscal year ended December 3l, l996, no compensation was paid to the
Company's Chief Executive Officer or to any other executive officer. The
Company's outside directors received no cash fees during l996. Since the Company
has no operations, during 1996 only limited management services were rendered to
the Company including the analysis of possible merger or acquisition candidates
and accounting services.
[The rest of this page intentionally left blank.]
Page 7 of 20 pages. No exhibits filed herewith.
<PAGE> 8
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is certain information as of February 14, l997, concerning the
beneficial ownership of common stock (the Company's only class of voting
securities) held by each director, nominee for director, and by all officers and
directors of the Company as a group, and by each person and entity who, to the
best knowledge of the Company, may be deemed the beneficial owner of more than
5% of the outstanding shares of the Company's common stock.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent of
Name Ownership (l) Class
- ---- ----------------- ----------
<S> <C> <C>
Helm Resources, Inc.** 17,447,858(2) 59.9 %
Herbert M. Pearlman** 2,215,475(3) 10.0 %
David S. Lawi** 1,663,334(4) 7.6 %
Joseph J. Farley** 337,500(5) 1.5 %
William Lerner 48,000 *
Daniel T. Murphy 80,000(6) *
All executive officers and
directors as a group 4,344,309(3)-(6) 19.1 %
(6 persons)
</TABLE>
- ------------
* less than 1%
** address is 537 Steamboat Road, Greenwich, CT 06830
(l) Except as otherwise indicated, each named holder has, to the best of
the Company's knowledge, sole voting and investment power with respect
to the shares indicated.
(2) Includes 2,500,000 shares which may be acquired within 60 days upon the
exercise of common stock purchase warrants expiring on December 31,
1999, and 5,000,000 shares which are issuable upon conversion of
1,000,000 shares of convertible preferred stock. Helm Resources, Inc.
has waived all voting rights with respect to the preferred stock
through December 31, 1996.
(3) Includes 400,000 shares that may be acquired, at $.20 per share, upon
exercise of outstanding Common Stock Purchase Warrants expiring on July
31, 1998 and 105,000 shares that may be acquired, at $.20 per share,
upon exercise of outstanding Common Stock Purchase Warrants expiring on
December 31, 1999.
(4) Includes 200,000 shares that may be acquired, at $.20 per share, upon
exercise of outstanding Common Stock Purchase Warrants expiring on July
31, 1998 and 37,500 shares that may be acquired, at $.20 per share,
upon the exercise of Common Stock Purchase Warrants expiring on
December 31, 1999.
Page 8 of 20 pages. No exhibits filed herewith.
<PAGE> 9
(5) Includes 37,500 shares that may be acquired, at $.20 per share, upon
exercise of Common Stock Purchase Warrants expiring on December 31,
1999, and 300,000 shares that may be acquired, at $.20 per share, upon
exercise of outstanding Common Stock Purchase Warrants expiring on July
31, 1998.
(6) Includes 50,000 shares that may be acquired, at a price of $.20 per
share, upon exercise of outstanding Common Stock Purchase Warrants
expiring on July 31, 1998.
ITEM l2: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS: None.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(A) Exhibits
3.1 Certificate of Incorporation of the Registrant, filed January 5,
1983 [incorporated by reference to exhibit 3(a) to Registration Statement No.
2-84930 on Form S-1 (the "Form S-1")]
3.2 Certificate of Amendment of Certificate of Incorporation filed
April 25, 1983 [ incorporated by reference to exhibit 3(a) to the Form S-1]
3.3 Certificate of Amendment to Certificate of Incorporation filed
August 4, 1989 [incorporated by reference to exhibit 3.2A to Registration
Statement No.2 - 30374 on Form S-2 (the "Form S-2")]
3.4 Certificate of Amendment to Certificate of Incorporation filed
January 30, 1992 [incorporated by reference to exhibit 3.4 to the Registrant's
1991 Form 10-K]
3.5 Certificate of Designation relating to the 1991 Series A Preferred
Stock filed January 30, 1992 [incorporated by reference to exhibit 3.5 to the
Registrant's 1991 Form 10-K]
3.6 Amendment to Certificate of Designation relating to the 1991 Series
A Preferred Stock filed February 21, 1992 [incorporated by reference to exhibit
3.6 to the Registrant's 1991 Form 10-K]
3.7 By-laws of the Registrant [incorporated by reference to exhibit
3.34 to Form S-1]
3.8 Specimen of Certificate of Common Stock [incorporated by reference
to exhibit 3.4 to Form S-1]
4.1 Form of Common Stock Purchase Warrant issued to subscribers in 1991
Private Placement [incorporated by reference to Exhibit 4.4 to the Registrant's
1991 10-K]
4.2 Form of Common Stock Purchase Warrant issued to Helm Resources,
Inc. concurrently with the debt-preferred equity exchange [incorporated by
reference to Exhibit 4.5 to the Registrant's 1991 10-K]
Page 9 of 20 pages. No exhibits filed herewith.
<PAGE> 10
10.1 Resolutions of the Registrant's Board of Directors adopted on
August 11, 1988 and form of Warrant Agreement [incorporated by reference to
Exhibit 10.9 to Form S-2]
10.2 Agreement dated June 30, 1991 between the Registrant and Helm
Resources, Inc. relating to the exchange of indebtedness for 1991 Series A
Preferred Stock [incorporated by reference to Exhibit 10.14 to the Registrant's
1991 10-K]
- ------------
(B) Reports on Form 8-K: None.
Page 10 of 20 pages. No exhibits filed herewith.
<PAGE> 11
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 in the Town of Greenwich,
State of Connecticut, on the 28th day of February, 1997.
TELETRAK ADVANCED TECHNOLOGY SYSTEMS, INC.
BY:/s/ Joseph J. Farley
-------------------------------
JOSEPH J. FARLEY, President
BY:/s/ Scott Altman
-------------------------------
SCOTT ALTMAN, Treasurer,
Chief Accountant and
Principal Financial Officer
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 dates indicated.
<TABLE>
<S> <C> <C>
/s/Herbert M. Pearlman Chairman of the Board of Directors February 28, 1997
- ------------------------
Herbert M. Pearlman
/s/ Joseph J. Farley President, Director February 28, 1997
- ---------------------
Joseph J. Farley
/s/ David S. Lawi Secretary, Director February 28, 1997
- -------------------------
David S. Lawi
/s/ William Lerner Director February 28, 1997
- -------------------------
William Lerner
/s/ Daniel T. Murphy Director February 28, 1997
- -------------------------
Daniel T. Murphy
</TABLE>
Page 11 of 20 pages. No exhibits filed herewith.
<PAGE> 12
TELETRAK ADVANCED TECHNOLOGY SYSTEMS, INC.
STATEMENT IN LIEU OF ACCOUNTANT'S REPORT
The Company qualifies as an inactive registrant under the provisions of
Paragraph 210.3-11 of Securities and Exchange Commission Regulation S-X which
provides that the financial statements required for reports pursuant to the
Securities Exchange Act of 1934 may be unaudited.
F-1
PAGE 12 OF 20.
<PAGE> 13
TELETRAK ADVANCED TECHNOLOGY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<TABLE>
<S> <C>
ASSETS $ --
===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES-Accrued expenses
(Note 2) $ 230,526
DUE TO HELM RESOURCES, INC. (NOTE 3) 890,567
-----------
TOTAL LIABILITIES 1,121,093
-----------
STOCKHOLDERS' DEFICIENCY:
1991 Series A Preferred Stock
$.01 par value shares; 20,000,000
shares authorized; 1,000,000
shares issued and outstanding 10,000
Common stock, $.01 par value
80,000,000; shares authorized;
21,647,000 shares issued and
outstanding 216,470
Additional paid-in capital 6,005,480
Deficit (7,353,043)
------------
TOTAL STOCKHOLDERS' DEFICIENCY (1,121,093)
------------
$ --
============
</TABLE>
See accompanying notes to consolidated financial statements
F-2
PAGE 13 OF 20
<PAGE> 14
TELETRAK ADVANCED TECHNOLOGY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended
December 31,
--------------------------------
]996 1995
------------ ------------
<S> <C> <C>
REVENUES (Note 6) $ -- $ --
------------ ------------
EXPENSES:
General and administrative 16,600 21,600
Interest expenses (affiliates)
(Note 3) 11,000 11,000
------------ ------------
Total expenses 27,600 32,600
------------ ------------
NET LOSS $ (27,600) $ (32,600)
============ ============
LOSS PER SHARE $ -- $ --
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 21,715,000 21,933,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-3
PAGE 14 OF 20
<PAGE> 15
TELETRAK ADVANCED TECHNOLOGY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
additional
paid-in Notes
Preferred stock common stock capital Deficit receivable Total
---------------- ----------------- ------- ------- ---------- -----
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1995 1,000,000 $10,000 22,037,000 $220,370 $6,066,580 $(7,292,843) $(65,000) $(1,060,893)
Forfeiture of
common stock -- -- (300,000) (3000) (47,000) -- 50,000 --
Net loss -- -- -- -- -- (32,600) -- (32,600)
1,000,000 10,000 21,737,000 217,370 6,019,580 (7,325,443) (15,000) (1,093,493)
Forfeiture of
common stock -- -- (90,000) (900) (14,100) -- 15,000 --
Net Loss -- -- -- -- -- (27,600) -- (27,600)
December 31, 1996 1,000,000 $10,000 21,647,000 $216,470 $6,005,480 $(7,353,043 $ -- $(1,121,093)
</TABLE>
See accompanying notes to consolidated financial statements.
F4
PAGE 15 OF 20
<PAGE> 16
TELETRAK ADVANCED TECHNOLOGY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended
December 31,
------------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(27,600) $(32,600)
-------- --------
Adjustments to reconcile net loss
to net cash used in operating
activities:
Interest expense, noncash 11,000 11,000
Increase in:
Accounts payable and accrued expenses 7,600 9,937
Due to Helm 9,000 11,367
-------- --------
Total adjustments 27,600 32,304
-------- --------
Net cash used in operating
activities -- (296)
CASH, BEGINNING OF YEAR -- 296
-------- --------
CASH, END OF YEAR $ -- $ --
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
PAGE 16 OF 20
<PAGE> 17
TELETRAK ADVANCED TECHNOLOGY SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Teletrak Advanced Technology Systems, Inc. was incorporated in Delaware on
January 5, 1983. Its principal business activity was the sale of a proprietary
software system that utilized optical disk technology. This business was
discontinued in October 1993 upon the Company's licensing of the rights to this
software to an unrelated third party (see Note 6).
The consolidated financial statements include the accounts of Teletrak
Advanced Technology Systems, Inc. and its wholly-owned subsidiary (the
"Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
The Company is an affiliate of Helm Resources, Inc. ("Helm"), a
publicly-held company whose shares are listed on the American Stock Exchange.
Helm owns 39.6% of the Company's outstanding common stock and 100% of the
Company's 1991 Series A Preferred Stock ("Preferred Stock").
The consolidated financial statements have been prepared assuming the
Company will continue as a going concern. The Company has suffered recurring
losses from operations since inception and has deficiencies in working capital
and net assets. Furthermore, as discussed in Note 6, the Company has no ongoing
business. These factors raise substantial doubt about the Company's ability to
continue as a going concern. The Company is attempting to acquire or merge with
another entity through the issuance of debt or equity. Until such an acquisition
or merger takes place, the Company has significantly reduced its operating
expenses and is negotiating reductions or deferrals on the payment of its
liabilities. There can be no assurances that the Company will be successful in
these efforts. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
F-6
PAGE 17 OF 20
<PAGE> 18
TELETRAK ADVANCED TECHNOLOGY SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 2 - ACCRUED EXPENSES
Included in accrued expenses is $142,000 for an estimate of future rent
obligations relating to a lease that was terminated in 1991. The Company is
unable to determine the outcome of a settlement, if any, of this obligation or
the expected timing of such payment, if any. However, the Company does not
believe the ultimate resolution of this matter will materially or adversely
affect the Company's financial position.
The Company is negotiating reductions or deferrals of payment for the
remaining accruals. Future financial statements will reflect the reduction, if
any, on these liabilities.
NOTE 3 - RELATED PARTY TRANSACTIONS
Helm has deferred payment on its indebtedness until after December 31,
1997; accordingly, the amount has been classified as a long-term liability.
Helm provides the company with various managerial and administrative
services for which the Company is charged direct costs and expenses. In
addition, certain indirect administrative and managerial costs are allocated to
the Company based on certain formulas which management deems to be reasonable.
These costs and allocations are not material.
NOTE 4 - STOCKHOLDERS' DEFICIENCY
(a) Common Stock
In connection with a sale of units, consisting of common stock and common
stock purchase warrants, in 1991, the Company received $75,000 in notes from two
officers and affiliates, which were payable in five equal annual installments
beginning in November 1992. As installments on the notes are due, pursuant to
the terms of the notes, the officers surrender shares of common stock and
warrants in return for the Company's cancellation of unpaid principal payments
on such notes. In 1996, one of the officers forfeited 60,000 shares of common
stock and warrants to purchase 30,000 shares of common stock as consideration
for the cancellation of $10,000 principal amount of the notes and the other
forfeited 30,000 shares of common stock and warrants to purchase 15,000 shares
of common stock as consideration for cancellation of $5,000 principal amount of
notes.
F-7
PAGE 18 OF 20
<PAGE> 19
TELETRAK ADVANCED TECHNOLOGY SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(b) Preferred Stock
The Company has authorized 20,000,000 shares of Preferred Stock. The
Board of Directors has the power to issue the Preferred Stock in series and to
specify the relative rights and designation of each series. The Preferred Stock,
(held by Helm Resources, Inc.) pays an 8% cumulative annual dividend, in cash,
out of earnings, subject to anti-dilution provisions. The Preferred Stock is
convertible into the Company's common stock at a price of $.20 per common share,
subject to anti-dilution provisions, and entitles Helm to receive $1.00 per
share upon liquidation prior to the distribution of any proceeds to holders of
the Company's common stock. Additionally, Helm is entitled to vote with the
holders of the Company's common stock and not as a class on all matters on which
the holders of the Company's common stock are entitled to vote and would have
such number of votes as is equal to the number of shares of common stock into
which the preferred shares are then convertible. This series of Preferred Stock
is redeemable at the option of the Company in amounts up to 20% of pre-tax
income or 20% of the proceeds from the public sales of equity securities. The
Preferred Stock dividend arrearage was $360,000 at December 31, 1996.
(c) Stock Options
The Company had adopted a plan whereby options to purchase 1,250,000
shares of common stock may be granted. No options were granted or exercised in
1995 or 1996. There are no options outstanding as of December 31, 1995 or 1996.
(d) Warrants
At December 31, 1996, warrants to purchase common stock are
outstanding as follows.
<TABLE>
<CAPTION>
Price per
Issued Expire Shares Share
- ------ ------ ------ ---------
<S> <C> <C> <C>
August 1988 July 1998 1,000,000 $ .20
June 1991 December 1999 2,500,000 .20
September 1991 December 1999 180,000 .20
---------
3,680,000
=========
</TABLE>
F-8
PAGE 19 OF 20
<PAGE> 20
TELETRAK ADVANCED TECHNOLOGY SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 4 - STOCKHOLDERS' DEFICIENCY (CONTINUED)
(e) Reserved Shares
Shares reserved for future issuances as of December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
SHARES
<S> <C>
Conversion of Preferred Stock 5,000,000
Shares reserved for stock options 1,250,000
Warrants to purchase common stock 3,680,000
---------
9,930,000
=========
</TABLE>
NOTE 5 - INCOME TAXES
At December 31, 1996, the Company has approximately $7,200,000 of net loss
carryforwards for income tax purposes, which expire in years from 1998 through
2009. These losses may be subject to certain limitations. The deferred tax
benefits resulting from these carryforwards approximate $2,880,000 and a
valuation reserve of that amount has been established since the realization of
such benefit can not be predicted.
F-9
PAGE 20 OF 20
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 230,526
<BONDS> 0
0
10,000
<COMMON> 216,470
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,000
<INCOME-PRETAX> (27,600)
<INCOME-TAX> 0
<INCOME-CONTINUING> (27,600)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,600)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
