<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
Commission file number 0-12547
Steritek, Inc.
(Exact name of registrant as specified in its charter)
New Jersey 22-2243703
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
121 Moonachie Avenue
Moonachie, NJ 07074
(Address of principal executive offices)
(Zip Code)
(201) 460-0500
(Registrant's telephone number, including area code)
(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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13, or
15(d) of the Securities Exchange act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date: 3,586,285 shares of Common Stock on November 1, 1996
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INDEX
Page
Part I - Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets..................... 3
Consolidated Statements of Operations........... 5
Consolidated Statements of Cash Flows........... 6
Notes to Consolidated Financial Statements...... 7
Item 2. Management's Discussion and Analysis............. 8
Part II - Other Information....................................12
Signatures.....................................................13
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<TABLE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<CAPTION>
September 30, June 30,
1996 1996
----------- -------------
(Unaudited) (Derived from
Audited
Financial
Statements)
<S> <C> <C>
ASSETS
Current Assets:
Cash $163,100 $296,429
Trade accounts receivable, less allowance for
doubtful accounts of $4,895 410,485 478,504
Inventories 110,108 107,108
Prepaid expenses and other assets 100,850 121,647
Deferred tax asset 68,600 68,600
---------- ----------
Total current assets 853,143 1,072,288
Machinery and equipment 2,811,022 2,762,017
Less: accumulated depreciation and
amortization 1,775,592 1,693,868
---------- ----------
1,035,430 1,068,149
---------- ----------
Other assets
Physicians' fax database 75,119 100,159
Assets transferred under contract arrangement 67,900 68,660
---------- ----------
143,019 168,819
---------- ----------
$2,031,592 $2,309,256
========== ==========
</TABLE>
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<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable trade $230,299 $276,522
Accrued expenses 45,155 91,328
Current maturities of long-term debt 150,000 200,000
Current maturities of capital lease obligations 89,591 99,114
---------- ---------
Total current liabilities 515,045 666,964
---------- ----------
Long-term debt, excluding current maturities 381,667 381,667
---------- ----------
Capital lease obligations, less current maturities 50,991 50,991
---------- ----------
Shareholders' equity:
Preferred stock, no par value, authorized
2,000,000 shares; none issued
Common stock, no par value, authorized
5,000,000 shares; issued and outstanding
3,586,285 shares 640,844 640,844
Retained earnings 443,045 568,790
---------- ----------
Total shareholders' equity 1,083,889 1,209,634
---------- ----------
$2,031,592 $2,309,256
========== ==========
</TABLE>
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<TABLE>
STERITEK, INC. AND SUBSIDIARY
(UNAUDITED)
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
September 30,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
Sales $1,016,706 $1,586,998
Cost of sales 522,437 798,934
---------- ----------
Gross profit 494,269 788,064
Selling, general and administrative expenses 606,446 675,004
---------- -----------
Operating income (112,177) 113,060
Interest expense (13,568) (16,198)
---------- ----------
Income before provision for income taxes (125,745) 96,862
---------- ----------
Provision for income taxes:
Provision for federal income taxes - deferred 18,219
Provision for state income taxes - deferred 8,718
--------- ----------
26,937
--------- ----------
Net income ($125,745) $ 69,925
========== ==========
Weighted-average number of common shares
outstanding 3,586,285 3,976,285
========== ==========
Net income per common share ($0.04) $0.02
========== ==========
</TABLE>
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<TABLE>
STERITEK, INC. AND SUBSIDIARY
(UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
September 30,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss (income) ($125,745) $ 69,925
Adjustments to reconcile net (loss) income
to net cash (used in) provided by operating
activities:
Depreciation and amortization of machinery
and equipment 81,724 78,294
Amortization of physicians' fax database 25,039 25,039
Amortization of patents and excess of cost
over net assets of business acquired 1,029
Changes in operating assets and liabilities:
Decrease (increase) in trade accounts
receivable 68,019 62,481
(Increase) decrease in inventories (3,000) 9,750
Decrease (increase) in prepaid expenses
and other assets 20,797 (3,375)
Decrease in deferred tax asset 26,937
(Decrease) increase in accounts payable
and accrued expenses (92,396) 1,697
---------- ----------
Net cash (used in) provided by operating
activities (25,562) 271,777
---------- ----------
Cash flows from investing activities:
Collections on note receivable 761
Expenditures for purchase of machinery
and equipment (49,006) (25,358)
---------- ----------
Net cash used in investing activities (48,244) ( 25,358)
---------- ----------
Cash flows from financing activities:
Principal payments on long-term debt (50,000) ( 35,000)
Principal payments on capital lease obligations (9,523) ( 22,772)
---------- ----------
Net cash (used in) provided by financing
activities (59,523) ( 57,772)
---------- ----------
Net (decrease) increase in cash (133,329) 188,647
Cash at beginning of period 296,429 263,662
---------- ----------
Cash at end of period $163,100 $452,309
========= ==========
Supplemental disclosures of cash flow
information:
Interest paid $13,568 $16,198
========== ==========
</TABLE>
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1996
1. Basis of Presentation
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting only of
normally recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the
three month period ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year
ending June 30, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto
included in the Company's Form 10-K for the year ended June
30, 1996.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three Months Ended September 30, 1996 as Compared to the Three Months
Ended September 30, 1995
Revenues for the three months ended September 30, 1996 decreased to
$1,016,706 from $1,586,998 for the same period in 1995. Revenues for
the three months ended September 30, 1996 included approximately:
(i) $919,053 from contract packaging, as compared to $1,244,191 for the
same period in 1995; (ii) $97,653 from the Physicians Fax Network, as
compared to $139,807 for the same period in 1995; and (iii) $0 from its
BioMedical Services business (intracranial pressure monitor business
("ICP") and the electron microscope supply ("EMS") business), as compared
to $203,000 for the same period in 1995. The Company sold its ICP and
EMS businesses on October 6, 1995. The Company did not report any
revenues from these businesses since September 30, 1995. The Company
has continued to aggressively market its contract packaging business
and its Physicians Fax Network.
The Company's cost of sales represented 51.4% of sales (or
$522,437) for the three months ended September 31, 1996, which was
comparable to 50.3% of sales (or $798,934) for the three months ended
September 30, 1995. The slight increase in cost of sales, as a percent
of sales, is a result of the change in the mix of the products packaged
by the Company during the respective periods.
Selling, general and administrative expenses ("SG&A") for the
three months ended September 30, 1996 was 59.6% of sales (or
$606,446), as compared to 42.5% of sales (or $675,004) for the three
months ended September 30, 1995. The decrease in SG&A is principally
a result of the Company's efforts to reduce administrative costs.
The Company incurred an operating loss for the three months ended
September 30, 1996 in the amount of ($125,745) as compared to income of
$69,925 (or 4.4% of sales) for the three months ended September 30, 1995.
The operating loss is principally attributable to the decrease in sales
without a corresponding decrease in SG&A.
There were no other material changes in the results of
operations in the Company's business.
Health care packaging services are typically provided by the
Company to its customers on an "as-needed" (purchase order-by-
purchase order) basis, and not pursuant to a long-term contract.
Because of the nature of the contract packaging business, the
Company's operating results can vary significantly from period to
period.
<PAGE>
Liquidity and Capital Resources
The Company's working capital on June 30, 1996 was
$405,324. The Company's working capital on September 30, 1996,
was $338,098. The principal changes in the components of
working capital are the reduction in the Company's cash and
accounts receivable as a result of lower sales volume, a
reduction in trade accounts payable and accrued expenses and
the principal repayment on debt.
On March 31, 1996, the Company borrowed $300,000 from
The Bank of New York (NJ). The Bank of New York note bears interest
at the bank's prime rate plus 1/2% per year, and is payable in
monthly increments of $5,000. Any unpaid balance due is payable
April 1, 2001. The proceeds of this loan were used to repay the
Company's 7% subordinated Promissory Note, dated March 31, 1994
and due March 31, 1996, in the amount of $300,000.
On June 30, 1993, the Company borrowed $700,000 from a bank,
payable monthly until July 1, 1998, at prime plus 1/2%. This Note
is collateralized by substantially all of the assets of the Company
and is personally guaranteed by the president of the Company. At
June 30, 1994, the Company was not in compliance with certain covenants
pertaining to minimum working capital, net worth, quick ratio,
current ratio and debt service. These covenants were waived by the
bank as of June 30, 1995, for the remaining term of the loan. The
Company has continued to make its monthly payments to the bank in a
timely fashion.
The Company believes that funding for anticipated operations
and capital needs will come from existing working capital and
anticipated future operations.
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
The Company's former transfer agent, Corporate Trust Department,
Midlantic National Bank, has become:
First City Transfer Company
111 Wood Avenue South, Ste 206
Iselin, NJ 08830
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
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STERITEK, INC. AND SUBSIDIARY
SIGNATURES
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.
Steritek, Inc.
By/s/ James K. Wozniak
James K. Wozniak, Vice President,
Chief Financial Officer and
Secretary (principal financial
and accounting officer)
Date: November 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STERITEK,
INC. AND SUBSIDIARIES (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS
INCLUDED IN ITS FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 163,100
<SECURITIES> 0
<RECEIVABLES> 410,485
<ALLOWANCES> 4,895
<INVENTORY> 110,108
<CURRENT-ASSETS> 853,143
<PP&E> 2,811,022
<DEPRECIATION> 1,775,592
<TOTAL-ASSETS> 2,031,592
<CURRENT-LIABILITIES> 515,045
<BONDS> 381,667
0
0
<COMMON> 640,844
<OTHER-SE> 443,045
<TOTAL-LIABILITY-AND-EQUITY> 2,031,592
<SALES> 1,016,706
<TOTAL-REVENUES> 1,016,706
<CGS> 522,437
<TOTAL-COSTS> 522,437
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,568
<INCOME-PRETAX> (125,745)
<INCOME-TAX> 0
<INCOME-CONTINUING> (125,745)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (125,745)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
