<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, 1997
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, 1997
<PAGE>
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,
1997 1997
----------- -------------
(Unaudited) (Derived from
Audited
Financial
Statements)
<S> <C> <C>
ASSETS
Current Assets:
Cash $106,666 $212,127
Trade accounts receivable, less allowance for
doubtful accounts of $4,895 1,271,583 904,425
Inventories 169,260 190,341
Prepaid expenses and other assets 37,660 79,719
Deferred tax asset 366,436 430,000
---------- ----------
Total current assets 1,951,605 1,816,612
Machinery and equipment 3,466,935 3,113,956
Less: accumulated depreciation and
amortization 2,142,663 2,057,921
---------- ----------
1,324,272 1,056,035
---------- ----------
Other assets
Security deposits 62,386 82,386
---------- ----------
62,386 82,386
---------- ----------
$3,338,263 $2,955,033
========== ==========
</TABLE>
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<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable trade $754,841 $536,324
Accrued expenses 202,442 210,077
Current maturities of long-term debt 105,000 140,000
Current maturities of capital lease obligations 86,851 83,894
Loan payable - stockholder 150,000 100,000
Taxes payable 63,780 35,272
---------- ---------
Total current liabilities 1,362,914 1,105,567
---------- ----------
Long-term debt, excluding current maturities 560,000 560,000
Capital lease obligations, less current maturities 21,406 7,067
---------- ----------
Total liabilities 1,944,320 1,672,634
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 753,099 641,555
---------- ----------
Total shareholders' equity 1,393,943 1,282,399
---------- ----------
$3,338,263 $2,955,033
========== ==========
</TABLE>
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<TABLE>
STERITEK, INC. AND SUBSIDIARY
(UNAUDITED)
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
September 30,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Sales $2,010,682 $1,016,706
Cost of sales 1,197,935 522,437
---------- ----------
Gross profit 812,747 494,269
Selling, general and administrative expenses 621,618 606,446
---------- -----------
Operating income 191,129 (112,177)
Interest expense (16,021) (13,568)
---------- ----------
Income before provision for income taxes 175,108 (125,745)
---------- ----------
Provision for income taxes:
Provision for federal income taxes - deferred 47,804
Provision for state income taxes - deferred 15,760
--------- ----------
63,564
--------- ----------
Net income $111,544 ($125,745)
========== ==========
Weighted-average number of common shares
outstanding 4,001,285 3,586,285
========== ==========
Net income per common share $0.03 ($0.04)
========== ==========
</TABLE>
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
(UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
September 30,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $111,544 ($125,745)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization of machinery
and equipment 84,742 81,724
Amortization of physicians' fax database 25,039
Changes in operating assets and liabilities:
(Increase) decrease in trade accounts
receivable (367,158) 68,019
Decrease (increase) in inventories 21,081 (3,000)
Decrease (increase) in prepaid expenses
and other assets 62,059 20,797
Decrease in deferred tax asset 63,564
Increase (decrease) in accounts payable
and accrued expenses 239,390 (92,396)
---------- ----------
Net cash provided by (used in) operating
activities 215,222 (25,562)
---------- ----------
Cash flows from investing activities:
Collections on note receivable - 761
Expenditures for purchase of machinery
and equipment (352,979) (49,006)
---------- ----------
Net cash used in investing activities (352,979) ( 48,244)
---------- ----------
Cash flows from financing activities:
Principal payments on long-term debt (35,000) ( 50,000)
Principal payments on capital lease obligations (1,501) ( 9,523)
Borrowings on capital lease obligations 18,797
Proceeds from officer's loan 50,000
---------- ----------
Net cash provided by (used in) financing
activities 32,296 ( 59,523)
---------- ----------
Net (decrease) increase in cash (105,461) (133,329)
Cash at beginning of period 212,127 296,429
---------- ----------
Cash at end of period $106,666 $163,100
========= ==========
Supplemental disclosures of cash flow
information:
Interest paid $16,021 $13,568
========== ==========
</TABLE>
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1997
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, 1997 are not necessarily
indicative of the results that may be expected for the year
ending June 30, 1998. 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, 1997.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three Months Ended September 30, 1997 as Compared to the Three Months
Ended September 30, 1996
Revenues for the three months ended September 30, 1997 increased to
$2,010,682 from $1,016,706 for the same period in 1996. Revenues for
the three months ended September 30, 1997 included approximately:
(i) $1,862,127 from contract packaging, as compared to $919,053 for the
same period in 1996; and (ii) $148,555 from the Physicians Fax Network, as
compared to $97,653 for the same period in 1996. The increase in
contract packaging revenues is partially attributable to the Company's
expanded relationship with a major customer. The Company has
continued to aggressively market its contract packaging business
and its Physicians Fax Network.
The Company's cost of sales represented 59.6% of sales (or $1,197,935)
for the quarter ended September 30, 1997, as compared to 51.4% of sales (or
$522,437) for the quarter ended September 31, 1996. The 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") was 30.9% of
sales (or $621,618) for the quarter ended September 30, 1997, as
compared to 59.6% of sales (or $606,446) for the quarter ended
September 30, 1996. SG&A expenditures remained relatively constant
during the two periods.
The Company earned a profit of $111,544 (or 5.5% of sales) for the
quarter ended September 30, 1997, as compared to an operating loss of
($125,745) for the quarter ended September 30, 1996. The profit is
attributable to the Company's increased sales and continued efforts to
control costs.
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 September 30, 1997 was $588,691,
as compared to $711,045 on June 30, 1997. The principal changes
in the components of working capital are the increases in the Company's
accounts receivable as a result of higher sales volume, and a related
increase in trade accounts payable.
On June 17, 1997, the Company borrowed $700,000 from the Bank
of New York, payable monthly until June 17, 2002, at prime plus 1%.
The monthly payments are $11,666.67 of principal plus interest.
The proceeds of this borrowing were used to retire prior indebtedness
of the Company, and to provide working capital for operations.
On April 30, 1997, the Company borrowed $50,000 from Albert J.
Wozniak, the Chairman and Chief Executive Officer of the Company.
The loan bears interest at 8.5% per annum, and is payable by the
Company on demand. On May 31, 1997, the Company borrowed an
additional $50,000 from Mr. Wozniak. The May 31, 1997 loan bears
interest at 8.5% per annum, and is payable by the Company on demand.
On September 30, 1997, the Company borrowed an additional $50,000 from
Mr. Wozniak. The September 30, 1997 loan bears interest at 8.5% per
annum, and is payable by the Company on demand. It is anticipated that
the loans will be repaid when the Company's cash position improves.
All loans bear the same terms and conditions. The proceeds of the
loans were used by the Company for working capital purposes.
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.
The Company is a defendant in a personal injury action styled "Jeffrey
Lloyd v. S.R.J. Corporation, et al.," BER-L-93-97, in New Jersey Superior
Court, Law Division, Bergen County. In this action, the plaintiff
seeks to recover damages for personal injuries resulting from a slip and
fall. The full nature and extent of plaintiff's injuries and the
amount of damages being sought is presently unknown. The Company
has a Commercial General Liability insurance policy, with policy
limits of $1,000,000 per occurrence, which provides liability coverage for
this claim. The insurer has assigned counsel to defend the Company
with a reservation of rights, stating that certain claims contained
in the complaint, alleging intentional acts and seeking punitive damages,
are not covered by the insurance policy. The Company has retained counsel
to monitor this lawsuit due to the insurer's reservation of rights. The
Company has denied liability and intends to contest this claim vigorously.
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.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
<PAGE>
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 and
Treasurer (principal
financial and accounting officer)
Date: November 19, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STERITEK,
INC. AND SUBSIDIARY (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS
INCLUDED IN ITS FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997 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-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 106,666
<SECURITIES> 0
<RECEIVABLES> 1,271,583
<ALLOWANCES> 4,895
<INVENTORY> 169,260
<CURRENT-ASSETS> 1,951,605
<PP&E> 3,466,935
<DEPRECIATION> 2,142,663
<TOTAL-ASSETS> 3,338,263
<CURRENT-LIABILITIES> 1,362,914
<BONDS> 560,000
0
0
<COMMON> 640,844
<OTHER-SE> 753,099
<TOTAL-LIABILITY-AND-EQUITY> 3,338,263
<SALES> 2,010,682
<TOTAL-REVENUES> 2,010,682
<CGS> 1,197,935
<TOTAL-COSTS> 1,197,935
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,021
<INCOME-PRETAX> 175,108
<INCOME-TAX> 63,564
<INCOME-CONTINUING> 111,544
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111,544
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
