<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended...June 30, 1997.....................
OR
[ ] 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..0-12547...............................
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)
Registrant's telephone number, including area code (201) 460-0500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
(Title of class)
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 [XX] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
<PAGE>
The aggregate market value of the voting stock held by non-
affiliates of the registrant as of September 1, 1997 was
approximately $396,658 (by reference to the last reported
transaction in the stock).
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 REGISTRANTS)
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 September 1, 1997
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
STERITEK, INC.
INDEX
Pursuant to Regulation S-K showing
Location of Information Required by Items in Form 10-K
Page
Report Item and Heading Number
Part I
Item 1. Business........................................... X
Item 2. Properties......................................... X
Item 3. Legal Proceedings.................................. X
Item 4 . Submission of Matters to a Vote of Security
Holders............................................ X
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters.................... X
Item 6. Selected Financial Data............................ X
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation....... X
Item 8. Financial Statements and Supplementary Data........ X
Item 9. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure............. X
Part III
Item 10. Directors and Executive Officers
of the Registrant.................................. X
Item 11. Executive Compensation............................. X
Item 12. Security Ownership of Certain
Beneficial Owners and Management................... X
Item 13. Certain Relationships and Related
Transactions....................................... X
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K................................ X
<PAGE>
Part I
Item 1. Business.
Development of the Business of the Company
Steritek, Inc. (the "Company") is a New Jersey corporation with
its principal place of business at 121 Moonachie Avenue, Moonachie,
New Jersey 07074.
The principal business of the Company is Contract Packaging,
which involves contract packaging services and promotional
materials assembly for manufacturers of products in the pharmaceutical,
medical, personal health and beauty industries (collectively, "health
care"). The Company is also engaged in the communication, on behalf of
pharmaceutical companies and others, of medically-oriented information
to physicians through the Company's Physicians Fax Network. Until
October 6, 1995, the Company, through its BioMedical Services
business, was engaged in; (i) the distribution of its proprietary
intracranial pressure monitors, and (ii) manufacturing and supplying
products and accessories for electron microscope laboratories
(through its wholly owned subsidiary, Sterimed, Inc.). The Company
sold its BioMedical Services business on October 6, 1995. The Company's
strategy is to continue to enhance its core business of contract
packaging while developing its Physicians Fax Network.
Financial information about industry segments is contained in
Note 8 of the Notes to Consolidated Financial Statements. Note 8
sets forth, for the periods indicated, the amounts of revenue, operating
profit and identifiable assets attributable to the Company's business
segments.
Description of the Business
Contract Packaging
The Company's contract packaging services are its principal
business activity. The Company believes that the packaging of a
health care product is an integral part of its efficacy, safety and
consumer acceptance. Although many manufacturers of health care
products include packaging as part of the manufacturing process,
many of these same manufacturers utilize the services of independent
packaging companies in certain circumstances. For example, sample
distributions, special promotions and less established products are
typically characterized by lower production volumes and special
packaging needs. In addition, new product introductions and times
of peak demand may require special packaging needs and/or additional
packaging capacity. Also, certain manufacturers may not have the
necessary packaging equipment or expertise to package certain of
their products and may be unwilling to devote the capital resources
necessary to undertake packaging them. In these circumstances,
independent packagers often offer an efficient, flexible and
economical alternative to in-house packaging.
The Company provides a range of packaging services to its health
care customers. The Company packages health care products supplied
to it in bulk quantities by its customers in the form of finished
products such as feminine hygiene products, tablets, capsules,
powders, patches, ointments, lotions and liquids. The Company's
packaging services include pouch filling/sealing, blister and strip
packaging, form fill and seal, production of display units, shrink
wrapping, over wrapping, heat sealing, die cutting/laminating,
tamper evident packaging, ink jet labeling and bar coding. The
Company's major customers currently include Novartis Corporation
(formerly Ciba-Geigy Corporation), Johnson & Johnson, and
American Home Products, and it has regularly performed contract
packaging services for SmithKline Beecham, Carter Wallace and
Conair.
The Company performs its packaging services at the direction of,
and according to the specifications of, its customer. The type of
package used typically depends on the nature of the product, its
unit volume and dosage and the manufacturing and marketing requirements
of the customer. Blister packaging consists of a plastic blister
affixed to a rigid or semi-rigid backing material, through which an
individual dose is expelled. Strip packaging is often used for products
that require extra protection from moisture, light and tampering and
generally consists of higher density materials produced in a
perforated strip of packages. Tamper-evident and child-resistant
features may take the form of blister, shrink-wrap, over-wrap or
other packaging.
After a health care product has been packaged by the Company, its
services often include inserting the products into folding cartons,
set-up boxes or other display units either produced by the Company
or supplied by the customer. The products are then either delivered
to the customer or into the customer's distribution system depending
upon the customer's instructions.
In general, health care packaging services are provided by the
Company to its customers on an "as-needed" basis, with customers
obtaining bids from several companies or selecting the Company
without a prior bidding process. Once selected by a manufacturer, the
Company typically performs packaging services for the manufacturer on a
purchase order by purchase order basis, and not pursuant to a long-
term contract. Each purchase order usually specifies a specific
quantity of product to be packaged in a particular manner and at a
specified price and time. The packaged product is usually returned
to the manufacturer for distribution and sale. The Company has no
assurance that a customer will continue to use its services after
a particular purchase order is filled. Continued use of the
Company's services is often dependent on a variety of factors, many of
which are outside of the control of the Company. These factors may
include, for example, the demand for the customer's product, the
customer's inventory levels, and the customer's use of internal or
alternative packaging capabilities. Thus, the Company's operating
results can vary significantly from period to period.
Contract packaging services represented approximately 88%, 88%
and 95% of the Company's consolidated sales revenues from
continuing operations for the fiscal years ended June 30, 1997,
1996, and 1995, respectively. See Note 8 of the Notes to
Consolidated Financial Statements.
Physicians Fax Network
The Company, through its Physicians Fax Network, facilitates the
communication between certain health care companies, regulatory
agencies, and others, with physicians. Historically, this
communication has been accomplished by time consuming and costly
mailings. The Company, however, now offers such persons the
ability to send communications to physicians, at their offices during
off-peak hours, via electronic facsimile transmission ("fax"), instead
of the mail. This procedure provides immediate and cost effective
communication to physicians, and also provides the sender with
documentation that the communication was sent and received. The
Physicians Fax Network is able to broadcast documents to hundreds
of thousands of locations overnight. The Company believes that this
service is particularly useful for drug manufacturers to send new
drug, recall and other priority medical communications, as well as
to facilitate other agencies, such as the American Medical Association
("AMA"), communication with physicians.
The Company has access to the fax numbers, along with certain
other data, of over 420,000 physicians and 44,000 pharmacists.
The fax transmissions are executed by the Company through selected
service companies with whom the Company has an arrangement.
The Company's Physician's Fax Network business, which was
launched in the fiscal year ending June 30, 1995, represented
approximately 12%, 12% and 5%, of its consolidated sales revenues
from continuing operations for the fiscal years ended June 30,1997,
1996 and 1995, respectively.
Quality Assurance
Assuring the quality of health care products and the packaging in
which they are sold is extremely important to the Company and its
customers. The Company stresses quality assurance in every aspect
of its operations through a "Quality Assurance Program" ("QAP"), which
involves every employee of the Company. QAP includes training for
all employees following the date of hire and semi-annually thereafter
in all aspects of the operations of the Company. The Company believes
that its QAP program is an essential component in providing the
quality assurance and service desired by its customers.
The Company's packaging facilities are inspected by the federal
Food and Drug Administration ("FDA") on a periodic basis as part of
the Company's routine regulatory compliance, and from time to time
in connection with the FDA approval process for new and amended drug
applications. In addition, the Company's facilities are inspected
periodically by the Company's customers as part of their quality
assurance process, with the frequency of each customer's
inspections varying, depending on the particular customer and
packaging service.
Marketing
The Company markets its contract packaging services primarily
through the development of relationships with managers within the
purchasing, manufacturing, quality assurance, marketing and package
development departments of health care product manufacturers.
These relationships are fostered and maintained by the Company's
management and sales force, as well as by one or more representatives
from the Company's manufacturing and quality assurance operations. The
Company's existing customers, as well as potential new customers,
are contacted on a regular basis by the Company's management and by its
sales force. The Company relies on advertising and direct mail, as
well as attendance at local and national trade shows, as part of
its marketing activities for its contract packaging services.
Customers
The Company's major customers of its contract packaging services
currently include Novartis Corporation, Johnson & Johnson and
American Home Products, and it has regularly performed contract
packaging services for SmithKline Beecham, Carter Wallace, and
Conair. Consistent with industry practice, the Company's customers
purchase services on an as-needed basis, typically pursuant to
purchase orders, rather than through long-term contracts.
For the fiscal year ended June 30, 1997, Novartis Corporation,
Johnson & Johnson and American Home Products each accounted for
more than 10% of the Company's consolidated revenues. The loss
of any of such customers could have a material adverse effect on
the Company's business. For the fiscal years ended June 30, 1996
and 1995, Novartis Corporation accounted for an aggregate of 42%
and 49%, respectively, and Johnson & Johnson accounted for an
aggregate of 25% and 31%, respectively, of the Company's sales from
contract packaging services. The Company's business with specific
customers can vary significantly from year to year.
No single customer accounts for more than ten percent of the
Company's business from the sale of its other products or services.
Competition
Competition in the health care packaging industry is intense.
The Company believes that competition for packaging services is
based primarily on quality, the variety of packaging services
available, customer service, responsiveness and price. The Company
competes with several companies that provide a broader range of
integrated packaging services, and a large number of companies that
provide one or a few types of packaging services. In addition, many
manufacturers perform some or all of their packaging at their own
facilities and, as a result, may be considered to be competitors of
the Company. The Company currently competes with companies that are
larger and have much greater resources than the Company.
In order to compete successfully, the Company believes an
independent packager must have expertise in the packaging services
required, satisfy the high quality standards of health care
manufacturers and the FDA, and respond to the diverse and changing
needs of the health care industry, all at competitive prices.
Government Regulation
The Company's health care packaging operations are required to
be, and the Company believes that such operations are, conducted
pursuant to the Current Good Manufacturing Practices standards of
the FDA. The Company is registered with the FDA as a pharmaceutical
packager and medical device manufacturer. The Company's facilities
undergo general FDA inspections every two years, the most recent of
which occurred on May 14, 1997. In addition, the Company's facilities
are subject to limited inspections from time to time in connection
with the Company being named on a New Drug Application ("NDA") by
a pharmaceutical manufacturer as a potential independent packager.
These inspections review the Company's capacity to package the new
drug in question. Only those companies listed in an approved NDA
may provide packaging services with respect to the product. While
the Company does not conduct any independent analysis of the products
provided by its customers for packaging, rigorous controls are
maintained to account for product utilization.
If, for any reason, the Company were to fail to comply with
the requirements of the FDA, the Company could be subject to
administrative action ranging from written citations for minor
infractions to plant shutdowns in serious cases, which could have
a material adverse affect on the Company. The Company is also
subject to various rules and regulations administered by the Drug
Enforcement Administration Division of the United States Department
of Health and Human Services and other federal, state and local
agencies. The Company believes that it conducts its operations in
compliance in all material respects with all such rules and regulations.
The Company is subject to federal, state and local regulations
relating to the protection of the environment, but compliance with
these provisions has had no material effect upon the business or
financial position of the Company.
Inventory and Raw Materials
The Company's inventory for contract packaging services consists
primarily of plastic, aluminum foil, paperboard and corrugated
cardboard shipping cartons, as well as work in progress utilizing
this inventory. The Company does not maintain any significant finished
goods inventory. The Company purchases its raw materials, supplies
and equipment from many different suppliers and is not dependent
upon any single supplier for its requirements.
Employees
As of September 1, 1997, the Company had 250 employees, of whom
20 were engaged in executive, sales, technical and administrative
functions, and 230 were engaged in production. None of the
employees at the Company's facilities are represented by a union.
The number of persons employed by the Company fluctuates depending
upon the volume of business. The Company considers its employee
relations to be generally satisfactory, and has not experienced
any work stoppages or labor shortages.
Item 2. Properties
The Company leases 62,000 square feet of space for use as a
packaging facility, corporate headquarters and sales and
administrative offices located at 121 Moonachie Avenue, Moonachie,
New Jersey 07074. In addition, the Company leases on a month-
to-month basis a 28,000 square foot building located at 106 McLean
Boulevard, Paterson, New Jersey 07514, which houses packaging
operations.
The Company believes that its present facilities are well
maintained and in good operating condition, and that such
facilities are adequate for all of the Company's reasonably
foreseeable requirements.
Item 3. Legal Proceedings
The Company may, from time to time, become involved in various
legal proceedings incidental to its business, some of which may be
covered by insurance. The Company knows of no litigation, either
pending or threatened, which is likely to have a material adverse
effect on the Company's financial position. The Company has never
been subject to any product liability claims.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
<PAGE>
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The Company's Common Stock is traded in the "pink sheets" in the
over-the-counter market. The market for the Company's Common
Stock during the periods presented has been represented by low volume
and limited or sporadic trades. The pink sheets are not regularly
updated for the Company. Consequently, there are no relevant bid and
asked prices for the Company's stock. Accordingly, a table
presenting the high and low bid and asked prices for the Company's
Common Stock (published by the National Quotation Service, Inc.) has
not been included.
There were 138 holders of record of the Company's Common Stock
as of September 1, 1997, which total does not include individual
participants in security listings.
The Company has not previously declared or paid any cash
dividends on its Common Stock. The Company currently anticipates
retaining any earnings for use in the operation and expansion of
its business. Therefore, it is unlikely that dividends will be
declared in the foreseeable future.
Item 6. Selected Financial Data.
SELECTED FINANCIAL DATA
The following table presents summary historical financial
data as of the dates and for the periods indicated. The information
in the summary has been derived in part from, and should be read in
conjunction with, the consolidated financial statements, related
notes and other financial information included elsewhere in this report.
<PAGE>
<TABLE>
STERITEK, INC. & SUBSIDIARY
SELECTED FINANCIAL DATA
<CAPTION>
For the Years Ended June 30,
----------------------------------------------------------
1997 1996(1) 1995 1994 1993
---------- ---------- ---------- ---------- ----------
OPERATING DATA:
<S> <C> <C> <C> <C> <C>
Sales $4,907,504 $4,714,542 $5,095,103 $3,443,986 $5,618,649
Costs of Sales 2,891,755 2,731,128 2,654,980 2,161,694 2,936,406
S G & A 2,200,257 2,392,864 1,975,165 2,095,596 1,984,263
Operating Income
(loss) (184,478) (409,450) 464,958 (813,304) 697,980
Income (loss) from
contin. operations 140,192 (523,882) 212,112 (1,037,968) 312,573
Income (loss) from
discont. operations (67,427) 45,344 (66,738) (2,169) 115,955
Net Income(loss)(2) 72,765 (478,538) 145,374 (1,040,137) 428,528
Net Income (loss)
per share .02 (.13) .04 (.29) .12
BALANCE SHEET DATA:
Assets $2,955,033 $2,309,256 $2,977,254 $2,940,774 $3,960,287
Assets transferred
under contractual
agreement 0 68,660 75,700 110,565 144,942
Net assets of
discont. operations 0 0 241,178 287,057 410,723
Current
Liabilities 1,105,567 666,964 862,899 1,097,977 835,685
Long-term debt
and capital lease
obligations,
excl. current
maturities 567,067 432,658 426,183 300,000 571,667
Shareholders'
Equity 1,282,399 1,209,634 1,688,172 1,542,798 2,552,935
Working Capital 711,045 344,973 435,939 327,135 1,000,603
- -----------------------------
</TABLE>
(1) On October 6, 1995, the Company sold all of the assets
used directly and exclusively in its ICP business and all
of its assets, subject to all of its liabilities, in its
EMS business (i.e., the BioMedical Services business).
Operating results of the Biomedical Services business for
the period July 1, 1995 to October 6, 1995 are shown
separately in the income statement. The income statement
for the years ended June 30, 1995, 1994 and 1993 have
been restated and operating results of the discontinued
operations are also shown separately. See Note 1 of the
Notes to Consolidated Financial Statements.
(2) In July 1991, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income
Taxes." The effect of this change increased net income by
$862,000 ($.24 per share) for the fiscal year ended June 30,
1992. For the fiscal year ended June 30, 1994, the Company
adjusted the deferred tax asset, resulting in an increase in
net loss by $214,500 (($.06) per share). For the fiscal year
ended June 30, 1996, the Company adjusted the deferred tax
asset, resulting in an increase in net loss by $100,000
(($.03) per share). For the fiscal year ended June 30, 1997,
the Company adjusted the deferred tax asset, resulting in
a decrease in net loss by $361,400 ($.10 per share). See
Note 9 of the Notes to Consolidated Financial Statements.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The Management's Discussion and Analysis of Financial Condition
and Results of Operations set forth below is based upon the restated
income statement for the years ended June 30, 1995 and 1994 as a result
of the October 6, 1995 sale by the Company of its BioMedical Services
business. Operating results of the BioMedical Services business for
the period July 1, 1995 to October 6, 1995 are shown separately in the
income statement. See Note 1 to the Notes to Consolidated Financial
Statements.
Year Ended June 30, 1997 as Compared to the Year Ended June 30,
1996
Revenues from continuing operations for the year ended
June 30, 1997 increased to $4,907,504 from $4,714,542 for the same
period in 1996. Revenues for the year ended June 30, 1996 included
$4,145,242 from contract packaging and $569,300 from the Physicians
Fax Network. Revenues for the year ended June 30, 1997 included
$4,309,091 from contract packaging and $598,413 from the Physicians
Fax Network. The increase in contract packaging revenues is principally
due to a higher level of contract packaging activity. The Company
has continued to aggressively market its contract packaging business
and its Physicians Fax Network.
The Company's cost of sales represented 57.9% of sales
(or $2,731,128) for the year ended June 30, 1996, as compared to
58.9% of sales (or $2,891,755) for the year ended June 30, 1997. 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")
for the year ended June 30, 1996 was $2,392,864 (or 50.7% of sales), as
compared to $2,200,257 (or 44.8% of sales) for the year ended June
30, 1997. The decrease in SG&A is principally a result of the
Company's overall cost reduction efforts.
Operating loss for the year ended June 30, 1996 was $409,450
as compared to a loss of $184,478 for the year ended June 30, 1997.
The decrease in operating loss is principally attributable to the
decrease in SG&A.
In July 1991, the Company adopted Statement of Financial
Accounting Standards No. 109 ("FAS 109"), "Accounting for Income
Taxes." The adoption of FAS 109 changed the Company's method of
accounting for income taxes from the deferred method (Accounting
Principles Board Opinion 11) to an asset and liability approach.
In the fourth quarter of the fiscal year ended June 30, 1996, the
Company revised its estimate of the valuation allowance for income
taxes and recognized an adjustment amounting to $100,000 (($.03)
per share) to reduce the previously reported deferred tax asset.
For the fiscal year ended June 30, 1997, the Company adjusted
the deferred tax asset, resulting in a decrease in net loss
by $361,400 ($.10 per share). See Note 9 to the Notes to
Consolidated Financial Statements.
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.
Year Ended June 30, 1996 as Compared to the Year Ended June 30,
1995
Revenues for the year ended June 30, 1996 decreased to
$4,714,542 from $5,095,103 for the same period in 1995. Revenues
for the year ended June 30, 1996 include $4,145,242 from contract
packaging and $569,300 from the Physicians Fax Network. Revenues
for the year ended June 30, 1995 included $4,851,403 from contract
packaging and $243,700 from the Physicians Fax Network. The
decrease in contract packaging revenues is principally due to a
lower level of contract packaging activity. The Company has continued
to aggressively market its contract packaging business and its
Physicians Fax Network.
The Company's cost of sales represented 57.9% of sales
(or $2,731,128) for the year ended June 30, 1996, as compared to
52.1% of sales (or $2,654,980) for the year ended June 30, 1995. 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")
for the year ended June 30, 1996 was $2,392,864 (or 50.7% of sales), as
compared to $1,975,165 (or 38.8% of sales) for the year ended June
30, 1995. The increase in SG&A is principally a result of the addition
of staff and increased sales efforts to market and sell the Company's
contract packaging services and Physicians Fax Network.
Operating loss for the year ended June 30, 1996 was $409,450
as compared to income of $464,958 (9% of sales) for the year ended
June 30, 1995. The decrease in operating income is principally
attributable to the increase in SG&A and the lower gross profit
margins in the contract packaging business.
On or about October 6, 1995, Sterimed, Inc. ("Sterimed"), a
wholly-owned subsidiary of the Company, entered into an Asset
Sale/Purchase Agreement with RAJ Communications, Ltd. ("RAJ"), John
Arnott and Rita Arnott. Pursuant to that agreement, Sterimed sold
to RAJ all of its assets, subject to certain of its liabilities, which
comprised the EMS business. The purchase price was $300,000, paid
in cash at closing. The gain on the disposal of Sterimed's business
was $39,998. See Note 1 of the Notes to Consolidated Financial
Statements.
On or about October 6, 1995, the Company also entered
into a separate Asset Sale/Purchase Agreement with RAJ, John
Arnott and Rita Arnott. Pursuant to that agreement, the Company sold
to RAJ all of its assets used directly and exclusively in its ICP
business. The purchase price was $300,000, and is to be paid in
consecutive monthly installments (without interest) commencing
October 15, 1995, each in the amount of 10% of the gross receipts of
the RAJ ICP business until paid in full. The sole source of payment
of such purchase price is the gross receipts from the ICP business.
A note receivable has not been recorded due to the uncertainty
of its collectibility. The Company has received only $5,000 in
payments against such purchase price as of June 30, 1996. See Note 1
of the Notes to Consolidated Financial Statements.
In July 1991, the Company adopted Statement of Financial
Accounting Standards No. 109 ("FAS 109"), "Accounting for Income
Taxes." The adoption of FAS 109 changed the Company's method of
accounting for income taxes from the deferred method (Accounting
Principles Board Opinion 11) to an asset and liability approach.
In the fourth quarter of the fiscal year ended June 30, 1996, the
Company revised its estimate of the valuation allowance for income
taxes and recognized an adjustment amounting to $100,000 (($.03)
per share) to reduce the previously reported deferred tax asset.
See Note 9 to the Notes to Consolidated Financial Statements.
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.
Year Ended June 30, 1995 as Compared to the Year Ended June 30,
1994
Revenues for the year ended June 30, 1995 increased to
$5,095,103 from $3,443,986 for the same period in 1994. Revenues
for the year ended June 30, 1995 included $4,851,403 from contract
packaging and $243,700 from the Physicians Fax Network. The
Company had no revenues from the Physicians Fax Network for the
fiscal year ended June 30, 1994. The increase in contract packaging
revenues is principally due to a higher level of contract packaging
activity.
The Company's cost of sales represented 52.1% of sales
(or $2,654,980) for the year ended June 30, 1995, as compared to 62.8%
of sales (or $2,161,694) for the year ended June 30, 1994. The
decrease 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 year ended June 30, 1995 was $1,975,165 (or 38.8% of sales),
as compared to $2,095,596 (or 60.8% of sales) for the year ended June
30, 1994. The decrease in SG&A as a percentage of sales is principally
due to the increase in sales revenues for the year ended June 30,
1995.
Operating income for the year ended June 30, 1995 was
$464,958 (or 9% of sales) as compared to a loss of $813,304 for
the year ended June 30, 1994. The increase in operating income is
principally attributable to the increase in the contract packaging
business and relative decrease in other costs and expenditures.
In July 1991, the Company adopted Statement of Financial
Accounting Standards No. 109 ("FAS 109"), "Accounting for Income
Taxes." The adoption of FAS 109 changed the Company's method of
accounting for income taxes from the deferred method (Accounting
Principles Board Opinion 11) to an asset and liability approach.
In the fourth quarter of the fiscal year ended June 30, 1994, the
Company revised its estimate of the valuation allowance for income
taxes and recognized an adjustment amounting to $214,500 ($.06 per
share) to reduce the previously reported deferred tax asset. See
Note 9 to the Notes to Consolidated Financial Statements.
Liquidity and Capital Resources
The Company's working capital on June 30, 1997 was $711,045.
The Company's working capital on June 30, 1996, was approximately
$405,324. The principal changes in the components of working
capital are the increases in accounts receivable, inventories
and deferred tax asset.
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.
It is anticipated that the loans will be repaid when the
Company's cash position improves. 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.
Item 8. Financial Statements and Supplementary Data.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
JUNE 30, 1997
<PAGE>
STERITEK, INC. AND SUBSIDIARY
JUNE 30, 1997
CONTENTS
Report of Independent Certified Public Accountants
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
<PAGE>
I. WEISMANN ASSOCIATES
CERTIFIED PUBLIC ACCOUNTANTS
218 RIDGEDALE AVENUE
PO BOX 2207
MORRISTOWN, NJ 07962-2207
(201) 984-8900
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
STERITEK, INC. AND SUBSIDIARY
We have audited the Balance Sheets of Steritek, Inc. and
Subsidiary as of June 30, 1997, and the related Consolidated
Statements of Operations, Stockholders' Equity and Cash Flows for
the fiscal year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audit. The consolidated financial statements of Steritek, Inc.
and Subsidiary as of June 30, 1996 and 1995 were audited by other
auditors whose report dated August 22, 1996, expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the 1997 financial statements referred to above
present fairly, in all material respects, the financial position of
Steritek, Inc. and Subsidiary as of June 30, 1997, and the results of
its operations and cash flows for the year then ended in conformity
with generally accepted accounting principles.
/s/ I. Weismann Associates
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
August 25, 1997
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
June 30,
---------------------------
1997 1996(1)
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 212,127 296,429
Accounts receivable, (less allowance
for doubtful accounts of $4,895 in
1997 and 1996) 904,425 478,504
Inventories (Note 2) 190,314 107,108
Prepaid expenses and other assets 79,719 61,296
Deferred tax asset 430,000 68,600
---------- ----------
Total current assets 1,816,612 1,011,937
---------- ----------
Property, equipment and
Improvements - at cost (Note 4):
Machinery and equipment 2,220,885 2,088,102
Leasehold improvements 521,060 303,064
Equipment held under capital leases 283,150 283,150
Furniture and fixtures 88,861 87,701
---------- ----------
Total 3,113,956 2,762,017
Less: accumulated depreciation and
amortization 2,057,921 1,693,868
---------- ----------
Net depreciated cost 1,056,035 1,068,149
---------- ----------
Other assets:
Physicians Fax Network, net of accumulated
amortization - 100,159
Assets transferred under contractual
arrangement - 68,660
Security deposits 82,836 60,351
---------- ----------
Total other assets 82,836 229,170
---------- ----------
Total $2,955,033 2,309,256
========== ==========
</TABLE>
(1) Amounts have been reclassified to conform to current year presentation.
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
June 30,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 536,324 276,522
Accrued expenses 210,077 91,328
Current portion:
Long-term debt (Note 3) 140,000 200,000
Capital lease obligations (Note 4) 83,894 99,114
Loan payable - stockholder (Note 5) 100,000 -
Taxes payable 35,272 -
---------- ----------
Total current liabilities 1,105,567 666,964
Long-term debt liabilities:
Net of current portion:
Long-term debt (Note 3) 560,000 381,667
Capital lease obligations (Note 4) 7,067 50,991
---------- ----------
Total liabilities 1,672,634 1,099,622
---------- ----------
Commitments (Note 6)
Stockholders' 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 at June 30, 1997 and 1996 640,844 640,844
Retained earnings 641,555 568,790
---------- ----------
Total stockholders' equity 1,282,399 1,209,634
---------- ----------
Total liabilities and
Stockholders equity $2,955,033 2,309,256
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Years Ended June 30,
-----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Sales - net $4,907,504 4,714,542 5,095,103
Cost of sales 2,891,755 2,731,128 2,654,980
---------- ---------- ----------
Gross profit 2,015,749 1,983,414 2,440,123
Selling, general and administrative
expenses 2,200,257 2,392,864 1,975,165
---------- ---------- ----------
Operating income (loss) (184,478) (409,450) 464,958
Other income 11,116 42,089 9,852
Interest expense (47,846) (56,521) (77,798)
--------- --------- --------
Income (loss) before taxes (221,208) (423,882) 397,012
--------- --------- --------
Provision for taxes (Note 9):
(Increase) decrease in valuation
of the deferred tax asset (361,400) 100,000 -
Deferred taxes:
Federal - - 146,200
State - - 38,700
--------- ---------- ---------
Total (361,400) 100,000 184,900
--------- ---------- ----------
Income (loss) from operations 140,192 (523,882) 212,112
--------- --------- ---------
Discontinued operations:
Income (loss) from operations of
Bio Medical Services Segment sold
on October 6, 1995 - 5,346 (66,738)
Gain on sale of Sterimed, Inc. (67,427) 39,998 -
--------- --------- ---------
Total (67,427) 45,344 (66,738)
-------- -------- --------
Net income (loss) $ 72,765 (478,538) 145,374
========== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Continued)
<CAPTION>
Years Ended June 30,
-----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Weighted-average number of
common and common equivalent
shares outstanding 3,586,285 3,586,285 3,976,285
========== ========== ==========
Earnings (loss) per share:
Income from continuing operations $ .04 (.14) $ .05
Discontinued operations (.02) .01 (.01)
----------- ---------- -----------
Net income (loss) per common and
common equivalent share $ .02 $(.13) $ .04
=========== ========== ==========
</TABLE>
As of June 30, 1997, 405,000 options to purchase common stock were
outstanding, priced at $.125 to $1.50, but were not included
in the computation of diluted earnings per share since the options'
exercise price equalled or exceeded management's estimate of the
average market price of common shares at June 30, 1997. (See Note
1).
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Common Stock
No Par Value Retained
--------------------
Shares Amount Earnings Total
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Balance, June 30, 1996 3,586,285 $640,844 $ 568,790 $1,209,634
Net income for the fiscal
year ended June 30, 1997 - - 72,765 72,765
---------- -------- --------- ----------
Balance, June 30, 1997 3,586,285 $640,844 641,555 1,282,399
========== ========= ========= ==========
Balance, June 30, 1995 3,586,285 $640,844 1,047,328 1,688,172
Net loss for the year ended
June 30, 1996 - - (478,538) (478,538)
---------- -------- --------- ---------
Balance, June 30, 1996 3,586,285 $640,844 568,790 1,209,634
========== ========= ========= =========
Balance, June 30, 1994 3,586,285 $640,844 901,954 1,542,798
Net income for the fiscal
year ended June 30, 1995 - - 145,374 145,374
---------- -------- --------- ----------
Balance, June 30, 1995 3,586,285 $640,844 1,047,328 1,688,172
========== ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years Ended June 30,
--------------------------------------
1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 72,765 $ (478,538) $ 145,374
Adjustments to reconcile net
income(loss) to net cash
provided (used) by
operating activities:
Depreciation and amortization 364,052 326,715 268,343
Amortization of patents and
excess of cost over net assets
of business acquired - 1,029 4,116
(Gain) loss on sale of Sterimed,
Inc. 67,427 (39,998) -
(Increase) decrease in valuation
of the deferred tax asset (361,400) 100,000 -
Deferred taxes - - 184,900
Amortization of Physicians Fax
Network 100,159 100,158 100,159
Uncollectible accounts - 19,511 -
Changes in assets and liabilities:
Accounts receivable (425,921) 116,829 (210,243)
Inventories (83,233) 27,269 31,734
Prepaid expenses and other assets (18,423) (4,292) (18,797)
Assets transferred under
contractual arrangement 1,233 7,100 34,865
Net assets of discontinued segment - (25,795) 32,263
Accounts payable and accrued
expenses 378,551 48,152 93,390
Taxes payable 35,272 - -
---------- --------- ---------
Net cash provided by operating
activities 130,482 198,140 666,104
---------- --------- ---------
Cash flows from investing activities:
Increase security deposits (22,035) - -
Payments received on loan
receivable - 3,784 -
Expenditures for purchase of
machinery and equipment (351,938) (231,545) (602,501)
Proceeds from officer's loan 100,000
Proceeds from sale of discounted
business - 300,000 -
---------- --------- ---------
Net cash provided (used) by
investing activities (273,973) 72,239 (602,501)
========== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<CAPTION>
Years Ended June 30,
--------------------------------------
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Cash flow from financing activities:
Principal payments:
Long-term debt $(581,667) (450,000) (140,000)
Capital lease obligations (59,144) (87,612) (45,433)
Note payable - bank - - (300,000)
Borrowings:
Long-term debt 700,000 300,000 -
Capital lease obligations - - 283,150
--------- --------- --------
Net cash provided (used) by
financing activities: 59,189 (237,612) (202,283)
--------- --------- --------
Net increase (decrease) in cash
and cash equivalents (84,302) 32,767 (138,680)
Cash and cash equivalents:
Beginning 296,429 263,662 402,342
--------- --------- --------
Ending $ 212,127 296,429 263,662
========= ========= ========
Supplemental disclosure of cash
flow information:
Interest paid $ 47,846 56,521 79,578
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996, AND 1995
NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
BUSINESS DESCRIPTION:
- --------------------
The Company's principal business is providing contract packaging services and
promotional materials assembly for distribution by the pharmaceutical,
medical, personal health and beauty industries. The Company is also engaged
in the communication, on behalf of pharmaceutical companies and others, of
medically oriented information to physicians through its Physicians Fax
Network (PFN). Sterimed, Inc., a wholly owned subsidiary, was a manufacturer
and supplier of products and accessories for electron microscope
laboratories, whose assets were sold in October 1995 and are presently
inactive. The Company's distribution business involving the distribution of
its Intracranial Pressure Monitors (ICP) through its Bio Medical Services
segment was discontinued in October 1995.
DISCONTINUED OPERATION:
- ----------------------
On October 6, 1995, the Company sold all assets used in the ICP business,
and all assets subject to all liabilities of Sterimed, Inc., collectively
the Bio Medical Services Segment, to a former director/employee.
The aggregate purchase price of $600,000 includes $300,000 for Sterimed,
Inc.'s electron microscope business, paid in cash, and $300,000 for the ICP
business paid by a non-interest bearing note due in monthly installments,
equal to 10% of future gross receipts of ICP. The note receivable balance of
$67,427 was written off during the current year due to the uncertainty of its
collectibility, and accordingly, the prior year transaction has not been
considered a sale for accounting purposes and the gain on disposal of the ICP
business not recognized. The assets involved in the transaction have been
segregated in the balance sheets for the prior year under the caption "assets
transferred under contractual arrangement".
Gain of the sale of Sterimed, Inc.'s electron microscope business was
$39,998.
Operating results of the Bio Medical Services Segment for the period July 1,
1995 to October 6, 1995 are shown separately in the accompanying consolidated
statements of operations. The consolidated statements of operations for
the year ended June 30, 1995 have been restated with operating results of
the discontinued operations shown separately.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
PRINCIPLES OF CONSOLIDATION
- ---------------------------
The consolidated financial statements include the accounts of Steritek, Inc.
and Sterimed, Inc., a wholly owned subsidiary (inactive). All material
intercompany balances and transactions for these years have been eliminated.
USE OF ESTIMATES
- ----------------
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts or assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the amounts of sales and
expenses during the reporting period. Actual results could differ from those
estimates.
CONCENTRATION OF CREDIT RISK;
- ----------------------------
The Company maintains a bank account balance as of June 30, 1997, which
exceeds the FDIC insured limit by $135,950.
Credit sales are made to customers in the normal course of business and are
unsecured. For the year ended June 30, 1997, the three largest customers
accounted for approximately 67% of net sales; five customers accounted for
approximately 85% of accounts receivable at June 30, 1997.
CASH AND CASH EQUIVALENTS:
- -------------------------
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments with a ninety day or less maturity
to be cash equivalents.
INVENTORIES:
- -----------
Valued at the lower of cost or market, determined by the first-in,
first-out (FIFO) method.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
PROPERTY, EQUIPMENT AND IMPROVEMENTS AND RELATED DEPRECIATION AND
- -----------------------------------------------------------------
AMORTIZATION:
- ------------
Property, equipment and improvements - Stated at cost. Costs of major
acquisitions, replacements and renewals that extend the useful lives of
the property and equipment are capitalized. Upon retirement or other
disposition, the costs and related accumulated depreciation and/or
amortization are removed from the accounts with gain or loss recognized in
income. Cost of maintenance and repairs are charged to expense as incurred.
Depreciation and amortization - Calculated under the straight-line method for
financial reporting purposes at rates based on the following estimated useful
lives:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Property held under capital lease 5 - 10
Machinery and equipment 5 - 10
Furniture, fixtures and office equipment 5 - 7
Leasehold improvements 5 - 39
</TABLE>
The accelerated cost recovery and modified accelerated cost recovery systems
are utilized for federal income tax purposes and for assets acquired
subsequent to December 31, 1980. The tax effect of the greater expense
allowable under this method has been provided for in the financial statements
as deferred taxes.
Depreciation and amortization was $364,052, $326,715 and $268,343 for the
years ended June 30, 1997, 1996 and 1995, respectively.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
PHYSICIANS FAX NETWORK:
- ----------------------
Marketing communication system utilizing electronic facsimile transmission
acquired June 30, 1993 for $527,000. During the year ended June 30, 1994,
the asset was reduced by $226,525 due to poor performance in the delivery of
the originally agreed upon network. Amortization was not recorded for the
year ended June 30, 1994, as the network was not operational, and
accordingly, not placed in service until the year ended June 30, 1995.
During the years ended June 30, 1997, 1996 and 1995, amortization of
$100,159, $100,157 and $100,159 was charged to operations, based on a three-
year life.
COMPENSATED ABSENCES:
- --------------------
Employees are entitled to paid vacations, sick days and personal days off,
depending on job classification, length of service, and other factors. It is
impracticable to estimate the amount of compensation for future absences,
and, accordingly, no liability has been recorded in the accompanying balance
sheets. The Company's policy is to recognize these costs when paid.
INCOME TAXES:
- ------------
Accounted for in accordance with the Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," wherein the asset and
liability method is used. Deferred taxes are recognized for temporary
differences between the basis of assets and liabilities for financial
statement and income tax purposes. The temporary differences relate
primarily to different accounting methods used for depreciation and
amortization of property and equipment, goodwill, allowance for doubtful
accounts and net operating loss carryforwards.
A valuation allowance is recorded for deferred tax assets when it is more
likely than not that some or all of the deferred tax assets will not be
realized through future operations. Accordingly, the Company has provided
a valuation allowance (based on estimated future taxable income) for the
portion of the total deferred income tax asset that will not be realized
as related to the operating loss carryforward. It is management's belief
that a substantial portion of the loss carryforward will be used in the
subsequent fiscal year and therefore the valuation allowance recorded in
the prior year has been decreased accordingly.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
NET INCOME (LOSS) PER SHARE:
- ---------------------------
Net income per common and common equivalent share was computed by dividing
net income by the weighted-average number of common shares and equivalents
(stock options) outstanding during the year ended June 30, 1997 and 1995.
Net loss per common and common equivalent share was computed by dividing net
loss by the weighted average number of common shares outstanding during the
year ended June 30, 1996.
STOCK BASED COMPENSATION:
- ------------------------
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation", which requires adoption of the disclosure provisions no later
than fiscal years beginning after December 15, 1995 and adoption of the
measurement and recognition provisions for non-employee transactions no later
than after December 15, 1995. The new standard defines a fair value method
of accounting for the issuance of stock options and other equity instruments.
Under the fair value method, compensation cost is measured at the grant date
based on the fair value of the award and is recognized over the service
period, which is usually the vesting period. Pursuant to SFAS No. 123, the
Company is not required to adopt the fair value method of accounting for
employee stock-based transactions. The Company is permitted to continue to
account for such transactions under Accounting Principles Board Opinion (APB)
No. 25, "Accounting for Stock Issued to Employees", but commencing during the
first quarter of fiscal 1997 was required to disclose in a note to the
consolidated financial statements proforma net income, and per share amounts
as if the Company had applied the method of accounting. The adoption of this
new requirement did not effect the Company's consolidated financial
statements, nor was there any effect on proforma net income.
NOTE 2 -INVENTORIES:
<TABLE>
<CAPTION>
June 30,
-------------------
1997 1996
-------- --------
<S> <C> <C>
Raw materials $190,341 103,054
Finished goods - 4,054
--------- --------
Total $190,341 107,108
========= ========
</TABLE>
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 3 - LONG-TERM DEBT:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Bank of New York:
Payable in monthly installments of
$11,667 plus interest at bank base rate
plus 1% through June 2002; secured by
substantially all assets and personally
guaranteed by the President. $700,000 -
Payable in monthly installments of
$11,667 plus interest at bank base rate
plus 1/2% through July 1998; secured by
substantially all assets and personally
guaranteed by the President. - 291,667
Payable in monthly installments of
$5,000 plus interest at bank base rate
plus 1/2% through April 2001; secured by
substantially all assets and personally
guaranteed by the President. - 290,000
-------- --------
Total 700,000 581,667
Less: Current portion 140,000 200,000
-------- --------
Long-term portion $560,000 381,667
======== ========
</TABLE>
<TABLE>
Maturities at June 30, 1997:
<CAPTION>
Years Ending June 30
- --------------------
<S> <C>
1998 $140,000
1999 140,000
2000 140,000
2001 140,000
2002 140,000
--------
Total $700,000
</TABLE>
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 4 - CAPITAL LEASE OBLIGATIONS:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
For machinery and equipment, payable
in monthly installments of $6,661,
maturing December 1997, non-interest
bearing (In arrears six months as of
June 30, 1997). $ 79,946 133,234
For machinery and equipment, payable
in monthly installments of $402,
including interest at 9.9%; maturing
January 2000. 11,015 14,871
For machinery and equipment payable
in monthly installments of $2,400,
including interest at 20%; matured
April 1996. - 2,000
-------- -------
Total 90,961 150,105
Less: Current portion 83,894 99,114
-------- -------
Long-term portion $ 7,067 50,991
======== =======
</TABLE>
<TABLE>
Maturities at June 30, 1997:
<CAPTION>
Years Ending June 30
--------------------
<S> <C>
1998 $83,894
1999 5,700
2000 1,367
-------
Total $90,961
=======
</TABLE>
NOTE 5 - LOAN PAYABLE - STOCKHOLDER:
Interest at 8.5%; payable on demand.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 6 - COMMITMENTS:
LEASES
- ------
The Company leases its operating and corporate facilities under operating
leases expiring in 1997 and 2004 with provision for additional payments for
annual rent increases in real estate taxes and insurance. The Company leases
a warehouse facility on a month to month basis since October 1992. Total
rent expense amounted to $353,421, $356,973 and $314,553 for the years ended
June 30, 1997, 1996 and 1995, respectively. The rent expense for
discontinued operations was immaterial. Rent for its corporate facilities
were in arrears in the amount of $16,637 (accrued in the current year).
Future minimum rental commitments under leases:
<TABLE>
<CAPTION>
Years Ending
June 30 Amount
------------ ------
<S> <C>
1998 $ 260,986
1999 267,224
2000 273,463
2001 279,702
2002 285,940
Thereafter 596,835
----------
Total $1,964,150
==========
</TABLE>
NOTE 7 - STOCK OPTIONS:
Plan adopted on June 24, 1992, authorizing the granting of either incentive
or nonqualified stock options to purchase up to 400,000 shares of common
stock to certain individuals performing services for the Company.
Nonqualified options to purchase 150,000 shares were issued on this date to
the directors/employees of the Company. The exercise price of $.50 per share
was the Company's estimate of the market value at that date. The options
became exercisable on December 24, 1992 and expire on June 24, 2002.
On December 16, 1992, nonqualified options to purchase 10,000 shares were
issued to a director/employee of the Company. The exercise price of $1.00
per share was the Company's estimate of the market value at that date. The
options became exercisable on June 16, 1993 and expire on December 16, 2002.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 7 - STOCK OPTIONS (Continued):
On August 19, 1993, nonqualified options to purchase 210,000 shares were
issued to the directors/employees of the Company. The exercise price of
$1.50 per share was the Company's estimate of the market value at that date.
The options became exercisable on February 19, 1994 and expire on August 19,
2003.
On August 29, 1993, nonqualified options to purchase 20,000 shares were
issued to an employee. The exercise price of $1.50 per share was the
Company's estimate of the market value at that date. The options became
exercisable on February 29, 1994 and expire on August 29, 2003.
On November 9, 1993, the authorized number of shares of common stock
permitted to be issued pursuant to the plans adopted June 24, 1992 was
increased to 550,000.
On October 26, 1995, nonqualified options to purchase 100,000 shares were
issued to the directors/employees of the Company. The exercise price of $.25
per share was the Company's estimate of the market value at that date. The
options became exercisable on April 26, 1995 and expire on October 26, 2005.
On February 5, 1997 the Board of Directors approved and ratified the
repricing of 5,000 options issued December 12, 1992, 55,000 options
issued August 1, 1993 and 20,000 options issued September 29, 1993 to
a new option price of $.125.
Pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation", the
Company is permitted and has opted to continue to account for such
transactions under Accounting Principals Board Opinion ("APB") No. 25 with the
requirement to disclose proforma income and per share amounts as if the
Company had applied the new method. The fair value per share at grant date
equaled the exercise price, therefore having no effect on proforma income
(See Note 1).
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 7 -STOCK OPTIONS (Continued):
<TABLE>
The following summarizes information relative to stock option plans:
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Options outstanding at beginning
of fiscal year 445,000 390,000 390,000
Options granted - 100,000 -
Options cancelled (40,000) (45,000) -
------- ------- -------
Options outstanding at end of
fiscal year 405,000 445,000 390,000
======= ======= =======
Options exercisable at end of
fiscal year 405,000 445,000 390,000
======= ======= =======
Option prices per share:
Granted - $.25 -
======= ======= =======
Cancelled $ .25-1.50 $1.00-1.50 -
========== ========== =======
Exercise price of options
outstanding at end of
fiscal year $.125-1.50 $ .25-1.50 $ .50-1.50
========== ========== ==========
</TABLE>
NOTE 8 - SEGMENT INFORMATION:
The Company's operations are divided into two business segments: Contract
Packaging and Physicians Fax Network (see Note 1).
<TABLE>
Operations by business segments:
<CAPTION>
Year Ended June 30, 1997
--------------------------------
Physicians
Fax Contract
Network Packaging Total
--------- --------- ---------
<S> <C> <C> <C>
Sales $598,413 4,309,091 4,907,504
Operating loss (62,070) (122,408) (184,478)
Depreciation and amortization 100,159 263,893 364,052
Aggregate carrying amount of
identifiable assets - 2,955,033 2,955,033
Additions to machinery and equipment - 351,939 351,939
</TABLE>
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 8 - SEGMENT INFORMATION (continued):
<TABLE>
<CAPTION>
Year Ended June 30, 1996
--------------------------------
Bio Medical Contract
Services Packaging Total
----------- --------- ---------
<S> <C> <C> <C>
Sales $193,797 4,714,542 4,908,330
Operating income (loss) 5,346 (409,450) (404,104)
Depreciation and amortization 1,029 326,715 327,744
Aggregate carrying amount of
identifiable assets 2,309,256 2,309,256
Additions to machinery and equipment 231,545 231,545
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30, 1995
---------------------------------
Bio Medical Contract
Services Packaging Total
----------- ---------- ---------
<S> <C> <C> <C>
Sales $849,281 5,095,103 5,944,384
Operating income (loss) (66,738) 464,958 398,220
Depreciation and amortization 13,615 258,844 272,459
Aggregate carrying amount of
identifiable assets 316,878 2,660,376 2,977,254
Additions to machinery and equipment - 602,501 602,501
</TABLE>
NOTE 9 - INCOME TAXES:
Deferred tax asset at June 30, 1997 represents recognition of net
operating loss carryforwards and is comprised of the following components.
<TABLE>
<CAPTION>
Deferred Tax
Temporary Asset
Difference Tax Rate (Liability)
----------- -------- ------------
<S> <C> <C> <C>
Allowance for doubtful accounts $ 5,000 43% 2,150
Accumulated depreciation 171,860 43% 73,900
Net operating loss carryforward 2,900,000 43% 1,247,000
Less: valuation allowance (2,076,860) 43% (893,050)
----------- ---------
Totals $ 1,000,000 430,000
=========== =========
</TABLE>
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 9 - INCOME TAXES (continued):
At June 30, 1997 net operating loss (NOL) carryforwards of approximately
$2,900,000 were available, expiring on various dates from 1998 through 2011.
The valuation allowance as of June 30, 1997 was decreased by $361,400
($.10 per share) due substantially to a change in judgement concerning the
realization of the related deferred tax asset in the subsequent year.
The deferred tax asset of $68,600 at June 30, 1996, was comprised of the
following components:
<TABLE>
<CAPTION>
Deferred Tax
Temporary Asset
Difference Tax Rate (Liability)
----------- -------- ------------
<S> <C> <C> <C>
Allowance for doubtful accounts $ 5,000 43% 2,150
Accumulated depreciation (201,000) 43% (86,430)
Benefit of remaining operating loss
carryforward 2,515,000 43% 1,081,450
Less: valuation allowance (2,159,000) 43% (928,570)
----------- ---------
Totals $ 160,000 68,600
=========== =========
</TABLE>
During the year ended June 30, 1996, the beginning-of-the-year balance of the
valuation allowance was increased by $100,000 due substantially to a change
in circumstances causing a change in judgment about the realization of the
related deferred tax asset in future years.
At June 30, 1996, net operating loss (NOL) carryforwards of approximately
$2,515,000 were available, expiring on various dates from 1997 through 2006.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 9 - INCOME TAXES (continued):
The deferred tax asset of $168,600 at June 30, 1995 was comprised of the
following components:
<TABLE>
<CAPTION>
Deferred Tax
Temporary Asset
Difference Tax Rate (Liability)
---------- -------- ------------
<S> <C> <C> <C>
Inventory $ (95,000) 43% (40,850)
Allowance for doubtful accounts 5,000 43% 2,150
Accumulated depreciation (106,000) 43% (45,580)
Benefit of remaining operating loss
carryforward 2,235,070 43% 961,080
Less: valuation allowance (1,646,070) 43% (708,200)
--------- -------
Totals $ 393,000 168,600
========= =======
</TABLE>
The deferred tax asset was reduced by $184,900 and corresponding Federal and
State tax provisions have been recorded for the year ended June 30, 1995.
At June 30, 1997, investment tax credit carryforwards of approximately
$35,700 and research and development & D) credits of approximately $85,500
were available, expiring on various dates from 1998 through 2002. The Tax
Reform Act of 1986 (the Act) reduced the amount of Investment Tax Credit
carryfowards allowed to 65%. R & D credit carryforwards were unaffected by
the Act.
NOTE 10 FAIR VALUE OF FINANCIAL INSTRUMENTS:
The amounts included in the balance sheet at June 30, 1997 for cash and cash
equivalents, accounts receivable, accounts payable, prepaid expenses, and
accrued expenses approximated fair value due to the short term nature of
these instruments. The carrying amount of long-term debt, capital lease
obligations and loan payable-officer approximate fair value based on
borrowing rates currently available to the Company.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 11 FOURTH QUARTER 1996 ADJUSTMENTS (UNAUDITED):
The Company revised its accounting for the disposition of its Intracranial
Pressure Monitor (ICP) business and accordingly, an adjustment in the amount
of $236,099 ($.07 per share) was recognized to reduce the previously reported
gain on disposal.
The Company also revised its estimate of the valuation allowance for income
taxes and recognized an adjustment amounting to $100,000 ($.03 per share) to
reduce the previously reported deferred tax asset.
<PAGE>
Part III
Item 10. Directors and Executive Officers
<TABLE>
The following table sets forth certain information relating
to the directors, executive officers and certain significant
employees of the Company:
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Albert J. Wozniak................... 58 Chairman, Chief
Executive Officer,
President
Charles A. Pergola.................. 63 Director
James K. Wozniak.................... 34 Director, Vice
President and
Secretary
</TABLE>
Each Director holds office until the earlier of the election
of his successor at the next annual meeting of shareholders or
his resignation or removal. Officers are elected by, and serve
at the discretion of, the Board of Directors. There are
currently four vacancies on the Board of Directors.
Mr. Albert J. Wozniak has been Chairman of the Board, Chief
Executive Officer and President of the Company since December 26,
1986. Prior to December 26, 1986, Mr. Wozniak was the founder,
President and director of Master-Pak Laboratories, Inc. (since
1972) and Steritek, Inc. (since 1974). On or about December 26,
1986, Steritek, Inc. was merged into the Company and Master-Pak
Laboratories, Inc. became a subsidiary of the Company (on July 1,
1993, Master-Pak became a division of the Company). Both Master-
Pak Laboratories, Inc., and Steritek, Inc. were engaged in the
contract packaging business from inception. Albert J. Wozniak is
the father of James K. Wozniak.
Mr. Charles A. Pergola, a director of the Company since
December 1992, served as President of the Beauty Care Group of
Revlon from July 1990 to December 1991, President of SmithKline
Beecham Consumer Brands from September 1989 to June 1990,
President of Beecham Products USA from September 1988 to
September 1989, and President of Norcliff Thayer, Beecham Group
from 1986 to 1988. Prior to 1986, Mr. Pergola held various
executive positions at Revlon and Norcliff Laboratories. Mr.
Pergola is also a director of W.F. Young Co. and AFPE Foundation.
Mr. James K. Wozniak, a director of the Company since 1991,
has been a Vice President of the Company since December 1991, and
Secretary since July 1992. From December 1987 to December 1991,
Mr. James Wozniak was Plant Manager and from December 1989, also
acted as Controller of the Company. James Wozniak is the son of
Albert J. Wozniak.
Item 11. Executive Compensation
Set forth below is disclosure of all plan and non-plan
compensation awarded to, earned by, or paid to the named
executive officer by any person for all services rendered in all
capacities to the Company and its subsidiaries, unless otherwise
specified.
<TABLE>
Summary Compensation Table
The table below sets forth information concerning
compensation paid to the named executive officer during the last
fiscal year.
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------------ --------
Other
Name and Annual Restrct All
Principal Fiscal Salary Bonus Comp. Stock Options LTIP Other
Position Year ($) ($) ($) Awrds (#) Payout Comp.
- --------- ------ ------ ----- ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Albert J. 1997 250,000 - - - - - -
Wozniak 1996 200,000 - - - 20,000 - -
Chairman, 1995 238,000 - - - - - -
CEO and
President
</TABLE>
<TABLE>
Aggregate Options Exercised in Last Fiscal Year
and Fiscal Year-End Option Values
The table below sets forth information concerning exercises
of stock options by the named executive officers during the last
fiscal year and the fiscal year-end value of the named executive
officer's unexercised options.
<CAPTION>
Number of Value of
Unexercised Unexercised
Options at In-the-Money
FY-End Options at
Shares Value (#) FY-End ($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
---- ------------ --------- ------------- -------------
<S> <C> <C> <C> <C>
Albert J. - - 215,000/-0- $0/0
Wozniak
</TABLE>
Compensation of Directors
Directors are awarded options to purchase Common Stock of the
Company pursuant to the Stock Option Plan for their services as a
director. For the fiscal year ended June 30, 1994, each director
was awarded options to purchase 10,000 shares of Common Stock at
the fair market value on the date of grant for services as a
director. For the fiscal year ended June 30, 1996, each director
was awarded options to purchase 20,000 shares of Common Stock at
the fair market value on the date of grant for services as a
director. No options have been awarded since then. Under the
terms of the Stock Option Plan, the maximum amount of options
awarded to a director in a year, for his or her services as such,
cannot exceed options to purchase 35,000 shares of Common Stock.
Employment Contracts
No executive officer of the Company is a party to an
employment agreement, termination of employment or change in
control arrangement, or any other compensatory plan or
arrangement.
Stock Option Plan
The Steritek, Inc. Stock Option Plan (the "Plan"), authorizes
the granting of either Incentive Stock Options or Nonqualified
Stock Options to acquire in the aggregate up to 550,000 shares of
the Company's Common Stock. The shares available for issuance
will be increased or decreased according to any reclassification,
recapitalization, stock split, stock dividend or other such
subdivision or combination of the Company's Common Stock. The
following description of certain provisions of the Plan is
qualified in its entirety by reference to the Plan which is
available from the Company upon request.
Eligibility. Any person, including officers and directors,
employed by the Company or any parent or subsidiary of the
Company shall be eligible to receive Incentive Stock Options
under the Plan. Approximately 250 persons are eligible to
receive Incentive Stock Options as of September 1, 1997. Any
employee who owns ten percent or more of the total combined
voting power of all classes of the Company's voting stock shall
be eligible to receive Incentive Stock Options only under certain
limited circumstances. Additionally, the Plan permits
Nonqualified Stock Options to be granted to directors,
consultants, independent contractors and agents as well as
employees. An indeterminate number of persons, including one
nonemployee director, are eligible to receive Nonqualified Stock
Options as of September 1, 1997. Each director shall not,
however, be eligible to receive stock options to purchase more
than 35,000 shares of Common Stock per year, subject to such
further terms and conditions as are contained in the Plan. It is
the present intent of the Company to satisfy the regulations
promulgated under Rule 16(b) of the Securities Exchange Act of
1934, as amended, insofar as such rules relate to participation
in the Plan by directors who are disinterested administrators, as
such term is defined therein. In connection therewith, the
Company may request a No-Action Letter from the Division of
Corporate Finance of the Securities and Exchange Commission and,
consequently, may modify the terms under which directors
participate in the Plan. The Board of Directors of the Company
will determine who should be granted stock options under the
Plan.
Exercise Price of Options. Options granted pursuant to the
Plan must have an exercise price equal to the fair market value
of the Company's Common Stock at the time the option is granted,
except that in the case of an Incentive Stock Option the price
shall be at least 110 percent of the fair market value where the
option is granted to an employee who owns more than ten percent
of the total combined voting power of all classes of the
Company's voting stock. The average bid and asked prices of
the Company's Common Stock is not updated by the National
Quotation Service, Inc. The last reported transaction in the
Company's Common Stock, which occurred in July 1997, was at
$.25 per share. Under the terms of the Plan, the aggregate
fair market value of the stock with respect to which Incentive
Stock Options are exercisable for the first time by an individual
during any calendar year shall not exceed $100,000.
Terms. All options available to be granted under the Plan
must be granted by January 1, 2002. The Board of Directors will
determine the actual term of the options but no option will be
able to be exercised after the expiration of ten years from the
date of its grant. No Incentive Stock Option granted to an
employee who owns more than ten percent of the combined voting
power of all the outstanding classes of stock in the Company may
be exercised after five years from the date of grant.
The options granted pursuant to the Plan shall not be
transferable except by will or by the laws of descent and
distribution.
Exercise of Options. Incentive Stock Options granted to
employees under the Plan may be exercised only by the employee
during his employment with the Company or for a period not
exceeding three months after voluntary termination, or for a
period not exceeding one year if the employee ceased employment
because of permanent and total disability within the meaning of
Section 105(d)(4) of the Internal Revenue Code of 1986, as
amended, but such options may be exercised by the employee's
estate, or by any person who acquired the right to exercise such
option by bequest or inheritance from the employee for a period
of twelve months from the date of the employee's death. If such
option shall by its terms sooner expire, such options shall not
be extended as a result of the employee's death. All options
granted pursuant to the Plan must be exercised within ten years
from the date of the grant. Incentive Stock Options granted to
an employee who is the beneficial owner of ten percent or more of
the total combined voting power of all classes of the Company's
stock, or of any parent or subsidiary, must exercise such options
within five years from the date such option is granted. Options
granted under the Plan need not be exercised in the order in
which they are granted. If employment is terminated for cause or
without consent of the employee, the options granted pursuant to
the Plan shall immediately terminate.
Tax Consequences Of Stock Options
Incentive Stock Options
Certain options granted under the Plan are intended to
qualify as incentive stock options ("Incentive Stock Option")
within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended ("Code"). Set forth below is a general summary
of certain of the principal Federal income tax consequences to
participants and the Company of Incentive Stock Options granted
under the Plan.
An employee to whom an Incentive Stock Option is granted
pursuant to the Plan will not recognize any compensation income
(for regular tax purposes), and the Company will not be entitled
to a compensation deduction, at the time an Incentive Stock
Option is granted or at the time an Incentive Stock Option is
exercised. However, in the year of exercise the amount by which
the fair market value of the Common Stock at the time of exercise
exceeds the option price will generally be included in the
optionee's computation of alternative minimum taxable income.
The amount included in income will be added to the optionee's
basis in the shares received for minimum tax computation
purposes. If the employee incurs the alternative minimum tax,
however, he or she should qualify for the credit for prior year
minimum tax liability in the first future year he or she has
regular tax liability.
In order to obtain Incentive Stock Option treatment for
Federal income tax purposes upon the subsequent sale (or other
disposition) by the optionee of the shares of Common Stock
received upon exercise of the option, the sale (or other
disposition) must not occur with two years from the date the
option was granted nor within one year after the transfer of
such shares upon exercise of the option (the "ISO holding period
requirement"). If the ISO holding period requirements are
satisfied, on the subsequent sale (or other disposition) by the
optionee of the shares of Common Stock received upon the exercise
of an option, the optionee generally will recognize income from
the sale of a capital asset equal to the difference, if any,
between the proceeds realized from the sale (or other
disposition) and the amount paid as the exercise price of the
option. On the other hand, if the ISO holding period
requirements are not satisfied, on the subsequent sale (or other
disposition) by the optionee of the shares of Common Stock
received upon the exercise of the option ("Disqualifying
Disposition"), the optionee generally will recognize income
taxable as compensation, and the Company will be entitled to a
compensation deduction (provided certain withholding requirements
are met), in an amount equal to the lesser of (a) the difference,
if any, between the fair market value of the shares on the date
of exercise and the amount paid as the exercise price of the
option, or (b) the difference, if any, between the proceeds
realized from the sale or other disposition and the amount paid
as the exercise price of the option. Any additional gain
realized on a Disqualifying Disposition (in addition to the
compensation income referred to above) would generally give rise
to income from the sale of a capital asset and taxed accordingly.
The tax basis of the shares of Common Stock received by the
optionee will be equal to the amount paid as the exercise price
plus the amount, if any, includable in his or her gross income as
compensation in the event of a Disqualifying Disposition. The
holding period for the shares will commence on the date of
exercise of the Incentive Stock Option.
Nonqualified Stock Options
Certain options to purchase Common Stock issued under the
Plan may not be intended to qualify as Incentive Stock Options
within the meaning of Section 422 of the Code. As such, the
options are generally referred to as Nonqualified Stock Options.
Set forth below is a general summary of certain of the principal
Federal income tax consequences to participants and the Company
of Nonqualified Stock Options.
An individual to whom a Nonqualified Stock Option is granted
will generally not recognize any compensation income, and the
Company will not be entitled to a compensation deduction, at the
time the Nonqualified Stock Option is granted (even if the option
price is less than the fair market value of the Common Stock at
the time of the grant). In the year of exercise or, if later,
the year in which the six month period prescribed by Section
16(b) of the Securities Exchange Act of 1934 ("Section 16(b)"),
if applicable, expires, the optionee generally will recognize
income taxable as compensation and, provided the Company meets
the applicable withholding requirements, the Company will be
entitled to a compensation deduction, in an amount equal to the
difference (if any) between the fair market value of the shares
on the date of exercise (or, if applicable, the date any Section
16(b) restrictions expire) and the amount paid as the exercise
price of the option.
An optionee who is a director or officer of the Company
within the meaning of Section 16(b), or who is otherwise subject
to Section 16(b), will be required to defer the recognition of
income on the purchase of shares pursuant to Nonqualified Stock
Options until the Section 16(b) restrictions expire. He or she
may consider electing to disregard the Section 16(b) restrictions
for tax purposes pursuant to Section 83(b) of the Code. Under
this election, the amount will be included in income in the year
of exercise (which may not be the year the Section 16(b)
restrictions lapse) and will be measured by the difference
between the option price and fair market value when the Section
16(b) restrictions lapse.
The tax basis of the shares of Common Stock received by the
optionee upon exercise will be equal to the amount paid as the
exercise price plus the amount, if any, includable in his or her
gross income as compensation. The holding period for the shares
will commence just after the exercise of the Nonqualified Stock
Option or, if applicable, just after the date the Section 16(b)
restrictions expire.
On the subsequent sale (or other disposition) by the optionee
of the shares of Common Stock received upon the exercise of the
option, any gain or loss realized on such sale or disposition
will generally give rise to gain or loss from the sale of a
capital asset and taxed accordingly.
<TABLE>
Stock Options Issued by the Company
The following table sets forth, as to certain executive
officers of the Company and as to all executive officers of the
Company as a group, the total number of options granted between
June 20, 1992, the date of adoption of the plan, and June 30,
1997 and the average exercise price of such options. No options
granted by the Company have been exercised as of September 1,
1997. Options to purchase 45,000 shares have been canceled. On
February 5, 1997, the Board of Directors approved the repricing
of options to purchase 80,000 shares, at exercise prices of $1.00
to $1.50, to a new exercise price of $0.125.
<CAPTION>
Options granted during period
----------------------------------
Name of individual Per share
or number in group Number of shares Exercise Price
- ------------------ ---------------- --------------
<S> <C> <C>
Albert J. Wozniak (1).......... 35,000 $ .50
Chairman, CEO and President 145,000 $1.50
20,000 $ .25
15,000 $ .125
James K. Wozniak (2)........... 35,000 $ .50
Director, VP and Secretary 20,000 $ .25
10,000 $ .125
Non-Executive Director Group... 5,000 $1.00
20,000 $ .25
15,000 $ .125
Employee Group................. 70,000 $ .125
</TABLE>
- -----------------------
(1) Albert J. Wozniak is the only Executive Officer.
(2) James K. Wozniak is the only Non-Executive Officer.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
<TABLE>
The following table sets forth, as of September 1, 1997,
certain information with respect to the beneficial ownership of
the Common Stock of the Company as to each director and nominee
of the Company, each person known by the Company to own
beneficially more than 5% of its Common Stock, each executive
officer, and all directors and executive officers of the Company
as a group.
<PAGE>
<CAPTION>
Shares
Beneficially Percent
Name and Address Owned(1) Owned
- ---------------- ------------- ------
<S> <C> <C>
Albert J. Wozniak................... 2,230,650(2) 58.46%
Steritek, Inc.
121 Moonachie Ave.
Moonachie, NJ 07074
Gerlach & Co....................... 356,639 9.94%
c/o Citibank N.A.
111 Wall Street
New York, NY 10043
Charles A. Pergola.................. 40,000(3) *
James K. Wozniak.................... 67,000(3) 1.29%
All directors and officers
as a group (3 persons)............ 2,337,650(4) 59.84%
</TABLE>
- ---------------------------
* - Represents less than 1%.
(1) Unless otherwise indicated, each named holder has, to the best
knowledge of the Company, sole voting and investment power with
respect to the shares.
(2) Includes 215,000 shares of Common Stock of the Company that
may be acquired within 60 days upon the exercise of options.
(3) Includes 65,000 shares as to James K. Wozniak, and 40,000 shares
as to Mr. Pergola, that may be acquired within 60 days upon the
exercise of options.
(4) Includes 320,000 shares of Common Stock of the Company that
may be acquired by directors and officers within 60 days upon the
exercise of options.
Item 13. Certain Relationships and Related Transactions
On or about October 6, 1995, Sterimed, Inc. ("Sterimed"), a
wholly-owned subsidiary of Steritek, Inc. (the "Corporation"),
entered into an Asset Sale/Purchase Agreement with RAJ
Communications, Ltd. ("RAJ"), John Arnott and Rita Arnott.
Pursuant to that agreement, Sterimed sold to RAJ all of its
assets, subject to certain of its liabilities, which comprised
Sterimed's electron microscope supply business. More
specifically, the assets consisted of cash, accounts
receivable, machinery and equipment, motor vehicles, work in
process and raw materials, inventory, leasehold improvements,
patents and trademarks, goodwill, books and records, and the
name "Ladd Research" and any derivative thereof. The
purchase price was $300,000, paid at closing. The purchase
price, which was negotiated between the parties, approximated
Sterimed's book value for the assets.
On or about October 6, 1995, the Corporation entered into a
separate Asset Sale/Purchase Agreement with RAJ, John Arnott and
Rita Arnott. Pursuant to that agreement, the Corporation sold to RAJ
all of its assets used directly and exclusively in its Intracranial
Pressure Monitor ("ICP") business. More specifically, the assets
consisted of machinery and equipment, work in process and raw
materials, inventory, patents and trademarks, goodwill, books and
records, and the name "J7000 Intracranial Pressure Monitor". The
purchase price was $300,000, to be paid in consecutive monthly
installments, each in the amount of 10% of gross receipts of the
RAJ ICP business, until paid in full. The sole source of payment of
such purchase price is the gross receipts from the ICP business. The
purchase price was arrived at by negotiation between the parties.
John Arnott is the sole shareholder of RAJ. Rita Arnott is
John Arnott's wife. John Arnott was a director and employee of the
Corporation from 1990 through October 6, 1995. John Arnott is the
brother-in-law of, and Rita Arnott is the sister of, Albert J.
Wozniak. Albert J. Wozniak is a director and principal shareholder
of the Corporation.
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.
It is anticipated that the loans will be repaid when the
Company's cash position improves. The proceeds of the loans were
used by the Company for working capital purposes.
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) Financial Statements and Financial Statement Schedules
File As Part of the Report.
The response to part (a)(1) and (2) of Item 14 is submitted
as a separate section of this report under Item 8. All schedules
have been omitted since the required information is not present
or is not present in amounts sufficient to require submission
of the schedule, or because the information required is included
in the Consolidated Financial Statements or the notes thereto.
(a)(3) Exhibits.
2.1 Plan and Agreement of Merger By and Between Steritek, Inc.
and CardioSearch Inc.(1)
3.1 Restated Certificate of Incorporation of Registrant(1)
3.2 Amended and Restated By-Laws of Registrant(1)
4.1 First Mortgage Note and Common Stock Purchase Agreement(1)
10.1 Steritek, Inc. Stock Option Plan(1)
10.2 Lease of Premises at McLean Blvd at 9th Avenue, Paterson,
NJ(1)
10.3 Lease of Premises at Moonachie, New Jersey(1)
10.4 Agreement to Purchase Certain Assets of Ladd Research
Industries, Inc.(1)
10.5 Agreement with Wim Management Corporation and William L.
Wimberly(1)
10.6 Agreement with Kapular Marketing Research, Inc.(2)
10.7 Realty Lease Amendment No. 1
10.8 Amendment to Lease, Dated September 12, 1984
10.9 Purchase Order, dated January 13, 1995(3)
10.10 Rental/Purchase Agreement, dated April 20, 1995(3)
10.11 Lease Agreement, commencing March 28, 1995(3)
10.12 Commercial Note, dated June 30, 1993(3)
10.13 Commercial Note, dated June 30, 1993(3)
10.14 Security Agreement, including Guaranties and Waiver, dated
June 30, 1993(3)
10.15 Credit Agreement, dated June 30, 1993(3)
10.16 Waiver Ltr from Bank of New York, dtd September 27, 1995(3)
10.17 Asset Sale/Purchase Agreement with RAJ Communications, Ltd.,
dated October 6, 1995(4)
10.18 Asset Sale/Purchase Agreement with RAJ Communications, Ltd.,
dated October 6, 1995(4)
10.19 Commercial Note, entered into on or about March 29, 1996 and
Guaranty(5)
10.20 Promissory Note, entered into on or about June 17, 1997
10.21 Promissory Note, entered into on or about April 30, 1997
10.22 Promissory Note, entered into on or about May 31, 1997
16.1 Certifying Accountant letter(6)
22 List of Subsidiaries of the Company*
25 Power of Attorney*
27 Financial Data Schedule
(1) - Incorporated by reference to the Registrant's Form 10 filed
November 4, 1992.
(2) - Incorporated by reference to the Registrant's Form 10-K filed
September 28, 1993.
(3) - Incorporated by reference to the Registrant's Form 10-K filed
September 28, 1995.
(4) - Incorporated by reference to the Registrant's Form 8-K filed
October 25, 1995.
(5) - Incorporated by reference to the Registrant's Form 10-Q filed
May 14, 1996.
(6) - Incorporated by reference to the Registrant's Form 8-K/A filed
August 14, 1997.
(b) Reports on Form 8-K
The Company filed one report on Form 8-K on August 6, 1997 to
report a change in its certifying accountant. A Form 8-K/A was filed
on August 14, 1997 to include a letter from the former certifying
accountant.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Steritek, Inc. has duly caused
this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Steritek, Inc.
By/s/ Albert J. Wozniak
----------------------------
Albert J. Wozniak, President
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on
behalf of Steritek, Inc. and in the capacities and on the date(s)
indicated.
Signatures Title Date
---------- ----- ----
/s/ Albert J. Wozniak Chairman of the Board, September 26, 1997
- -----------------------
Albert J. Wozniak President, CEO
Director September , 1997
- ------------------------
Charles A. Pergola
/s/ James K. Wozniak Vice President, Chief September 26, 1997
- ------------------------
James K. Wozniak Financial Officer and
Secretary (principal
financial and account-
ing officer), Director
<PAGE>
STERITEK, INC.
EXHIBITS TO FORM 10-K
2.1 Plan and Agreement of Merger By and Between Steritek, Inc.
and CardioSearch Inc.(1)
3.1 Restated Certificate of Incorporation of Registrant(1)
3.2 Amended and Restated By-Laws of Registrant(1)
4.1 First Mortgage Note and Common Stock Purchase Agreement(1)
10.1 Steritek, Inc. Stock Option Plan(1)
10.2 Lease of Premises at McLean Blvd at 9th Avenue, Paterson,
NJ(1)
10.3 Lease of Premises at Moonachie, New Jersey(1)
10.4 Agreement to Purchase Certain Assets of Ladd Research
Industries, Inc.(1)
10.5 Agreement with Wim Management Corporation and William L.
Wimberly(1)
10.6 Agreement with Kapular Marketing Research, Inc.(2)
10.7 Realty Lease Amendment No. 1
10.8 Amendment to Lease, Dated September 12, 1984
10.9 Purchase Order, dated January 13, 1995(3)
10.10 Rental/Purchase Agreement, dated April 20, 1995(3)
10.11 Lease Agreement, commencing March 28, 1995(3)
10.12 Commercial Note, dated June 30, 1993(3)
10.13 Commercial Note, dated June 30, 1993(3)
10.14 Security Agreement, including Guaranties and Waiver, dated
June 30, 1993(3)
10.15 Credit Agreement, dated June 30, 1993(3)
10.16 Waiver Ltr from Bank of New York, dtd September 27, 1995(3)
10.17 Asset Sale/Purchase Agreement with RAJ Communications, Ltd.,
dated October 6, 1995(4)
10.18 Asset Sale/Purchase Agreement with RAJ Communications, Ltd.,
dated October 6, 1995(4)
10.19 Commercial Note, entered into on or about March 29, 1996 and
Guaranty(5)
10.20 Promissory Note, entered into on or about June 17, 1997
10.21 Promissory Note, entered into on or about April 30, 1997
10.22 Promissory Note, entered into on or about May 31, 1997
16.1 Certifying Accountant letter(6)
22 List of Subsidiaries of the Company*
25 Power of Attorney*
27 Financial Data Schedule
(1) - Incorporated by reference to the Registrant's Form 10 filed
November 4, 1992.
(2) - Incorporated by reference to the Registrant's Form 10-K filed
September 28, 1993.
(3) - Incorporated by reference to the Registrant's Form 10-K filed
September 28, 1995.
(4) - Incorporated by reference to the Registrant's Form 8-K filed
October 25, 1995.
(5) - Incorporated by reference to the Registrant's Form 10-Q filed
May 14, 1996.
(6) - Incorporated by reference to the Registrant's Form 8-K/A filed
August 14, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
STERITEK, INC. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS
INCLUDED IN ITS FORM 10-K FOR THE YEAR ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000720831
<NAME> STERITEK, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 212,127
<SECURITIES> 0
<RECEIVABLES> 904,425
<ALLOWANCES> 4,895
<INVENTORY> 190,341
<CURRENT-ASSETS> 1,816,612
<PP&E> 3,113,956
<DEPRECIATION> 2,057,921
<TOTAL-ASSETS> 2,955,033
<CURRENT-LIABILITIES> 1,105,567
<BONDS> 567,067
0
0
<COMMON> 640,844
<OTHER-SE> 641,555
<TOTAL-LIABILITY-AND-EQUITY> 2,955,033
<SALES> 4,907,504
<TOTAL-REVENUES> 4,907,504
<CGS> 2,891,755
<TOTAL-COSTS> 2,891,755
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,846
<INCOME-PRETAX> (221,208)
<INCOME-TAX> 0
<INCOME-CONTINUING> 140,192
<DISCONTINUED> (67,427)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,765
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
PROMISSORY NOTE
TIME/INSTALLMENT
(PRIME RATE)
$700,000.00 June 17, 1997
FOR VALUE RECEIVED, the undersigned (the "Borrower"), jointly
and severally, if more than one, hereby promises to pay to the order
of THE BANK OF NEW YORK (the "Bank") at its 385 Rifle Camp Road, West
Paterson, New Jersey office, SEVEN HUNDRED THOUSAND DOLLARS ($700,000)
in 60 equal consecutive installments of principal in the amount of
$11,666.67 each, beginning on July 17, 1997 and continuing thereafter
on the 17th day of each successive month until June 17, 2002 when the
entire unpaid principal balance hereof shall be due and payable.
The Borrower agrees to pay interest from the date hereof on the
unpaid principal balance of the loan evidenced by this note, computed
on the basis of a 360 day year for the actual number of days elapsed,
at a rate per annum equal to the Prime Rate plus 1.00%, but not to
exceed the maximum rate permitted by law. Interest shall be payable
on the 17th day of each month and at the maturity of the loan evidenced
by this note (whether by acceleration or otherwise).
If any Event of Default (as hereinafter defined) shall occur and
be continuing, the Borrower agrees to pay interest on the unpaid
balance of the loan evidenced by this note, payable on demand, at a
rate per annum equal to the rate set forth above plus 2%, but not to
exceed the maximum rate permitted by law. "Prime Rate" shall mean the
prime commercial lending rate of the Bank as publicly announced to be
in effect from time to time, such rate to be adjusted automatically,
without notice, on the effective date of any change in such rate. The
Borrower acknowledges that the Prime Rate is not the lowest rate at
which the Bank may make loans or other extensions of credit.
If any payment of principal of or interest on the loan evidenced
by this note becomes payable on a Saturday, Sunday or a day on which
the Bank is permitted or required by law to be closed, then such payment
shall be extended to the next succeeding business day, and interest
shall be payable at the rate set forth above during such extension.
The loan evidenced by this note may be prepaid at any time
without penalty, but with interest on the amount being prepaid through
the date of prepayment. If the loan evidenced by this note is payable
in installments, such prepayment shall be applied to the installments
thereof in the inverse order of maturity.
The Bank is authorized to charge any deposit account hereof on
the date made, of the Borrower maintained at the Bank for each
principal prepayment and for each principal payment and each interest
payment and any other amount due hereunder on the due date thereof.
If any of the following events (each an "Event of Default")
shall occur with respect to any Obligor (which term shall include the
Borrower, any guarantor hereof or any hypothecator of any collateral
securing this note): (1) failure of any Obligor in the performance of
any such obligor's covenants herein or in any instrument, document or
agreement delivered in connection herewith; (2) default by any Obligor
in the payment or performance of any Obligation (which term shall
include any and all present or future obligations or liabilities of
such Obligor to the Bank, whether incurred by such Obligor as maker,
indorser, drawer, acceptor, guarantor, accommodation party,
counterparty, purchaser, seller or otherwise, and whether due or to
become due, secured or unsecured, absolute or contingent, joint and/or
several, and howsoever and whensoever acquired by the Bank); (3)
failure to pay when due any other indebtedness for borrowed money,
acceleration of the maturity of such indebtedness or the occurrence
of any event which with notice or lapse of time, or both, would permit
acceleration of such indebtedness; (4) if the Obligor is an individual,
the death or incompetence of such Obligor; (5) if the Obligor is not an
individual, the dissolution, merger or consolidation of, or the sale
or disposal of all or substantially all of the assets of the Obligor
without the prior written consent of the Bank; (6) the financial
condition or credit standing of any Obligor shall be or become
materially impaired in the sole opinion of the Bank or any of its
officers; (7) commencement of any proceeding, procedure or other remedy
supplemental to the enforcement of a judgement against any Obligor; (8)
any representation or warranty made by an Obligor or any financial or
other statement of any Obligor proves to be untrue, incorrect or
incomplete when made or delivered; (9) the death of the insured under
any life insurance policy held as collateral by the Bank for the
Obligations of any Obligor with respect to this note, or the nonpayment
of any premiums on any such life insurance policy; (10) the validity
of enforceability of this note, any guarantee hereof or any other
document delivered in connection herewith shall be contested or
declared null and void or any Obligor shall deny it has any liability
or obligation under or with respect to this note, any guarantee hereof
or any other document delivered by it in connection herewith; or (11)
any Obligor shall make payment on account of any indebtedness
subordinated to the indebtedness evidence by this note in contravention
of the terms of such subordination; then the loan evidenced by this
note and all accrued interest thereon shall become due and payable
forthwith, upon declaration to that effect by the Bank, without notice
to the Borrower or any Obligor, anything contained herein or in any
other document, instrument or agreement to the contrary withstanding.
The loan evidenced by this note and accrued interest thereon shall
become immediately and automatically due and payable, without
presentment, demand, protest or notice of any kind, upon the
commencement by or against any Obligor of a case or proceeding under
any bankruptcy, insolvency or other law relating to the relief of
debtors, the readjustment, composition or extension of indebtedness
or reorganization or liquidation (such additional event is also referred
to herein as an "Event of Default").
All obligations of the Borrower to the Bank under this note are
secured pursuant to the terms of a security agreement executed by the
Borrower in favor of the Bank dated the date hereof as such agreement
may be amended or modified from time to time and any other security
agreement and mortgage that the Borrower shall have executed or shall
at any time execute in favor of the Bank, and the Bank is entitled to
all of the benefits thereof.
The Bank shall have a lien on the balances of the Borrower now or
hereafter on deposit with or held as custodian by the Bank and the Bank
shall have authority to set off such balances against the indebtedness
evidenced by this note or any other Obligation of the Borrower, and may
at any time, without notice to the extent permitted by law, apply the
same to the indebtedness evidenced by this note or such other
Obligations, whether due or not.
The Borrower agrees to pay all costs and expenses incurred by the
Bank incidental to or in any way relating to the Bank's enforcement of
the Obligations of the Borrower hereunder or the protection of the
Bank's rights in connection herewith, including, but not limited to,
reasonable attorney's fees and expenses, whether or not litigation
is commenced.
Promptly upon the Bank's request, the Borrower agrees to furnish
such information (including, without limitation, financial statements
and tax returns of the Borrower) to the Bank and to permit the Bank
to inspect and make copies of its books and records, as the Bank shall
reasonably request from time to time.
The Borrower waives any right to claim or interpose any
counterclaim or set-off of any kind in any litigation relating to this
note or the transactions contemplated hereby.
This note may not be amended, and compliance with its terms may
not be waived, orally or by course of dealing, but only by a writing
signed by an authorized officer of the Bank.
This note may be assigned by the Bank and its benefits shall
inure to the successors, indorsees and assigns of the Bank.
The Borrower authorizes the Bank to date this note as of the date
of the making of the loan evidenced hereby and to complete any blank
space herein according to the terms upon which such loan was granted.
No failure on the part of the Bank to exercise, and no delay in
exercising, any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Bank of
any right, remedy or power hereunder preclude any other or future
exercise thereof or the exercise of any other right, remedy or power.
Each and every right, remedy and power hereby granted to the Bank
or allowed it by law or other agreement shall be cumulative and not
exclusive of any other right, remedy or power and may be exercised by
the Bank at any time and from time to time.
Every provision of this note is intended to be severable; if any
term or provision of this note shall be invalid, illegal or
unenforceable for any reason, the validity, legality and enforceability
of the remaining provisions hereof shall not in any way be affected or
impaired thereby.
The Borrower hereby waives presentment, demand, protest and notice
of protest, non-payment or dishonor hereof.
The Borrower represents and warrants that the Borrower is a
corporation duly organized, validly existing and in good standing under
the laws of the State of New Jersey; that the execution, delivery and
performance of this note are within the Borrower's corporate powers and
have been duly authorized by all necessary action of its board of
directors and shareholders; and that each person executing this note has
the authority to execute and deliver this note on behalf of the Borrower.
THE PROVISIONS OF THIS NOTE SHALL BE CONSTRUED AND INTERPRETED,
AND ALL RIGHTS AND OBLIGATIONS HEREUNDER DETERMINED, IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW JERSEY WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICT OF LAWS. THE BORROWER SUBMITS TO THE JURISDICTION OF STATE AND
FEDERAL COURTS LOCATED IN THE STATE OF NEW JERSEY AND THE CITY OF NEWARK
IN PERSONAM AND AGREES THAT ALL ACTIONS AND PROCEEDING RELATING DIRECTLY
OR INDIRECTLY TO THIS NOTE SHALL BE LITIGATED ONLY IN SAID COURTS OR
COURTS LOCATED ELSEWHERE AS SELECTED BY THE BANK AND THAT SUCH COURTS
ARE CONVENIENT FORUMS. THE BORROWER WAIVES PERSONAL SERVICE UPON IT
AND CONSENTS TO SERVICE OF PROCESS BY MAILING A COPY THEREOF TO IT BY
REGISTERED OR CERTIFIED MAIL.
THE BORROWER AND THE BANK WAIVE THE RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF OR IN ANY WAY CONNECTED
TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY.
STERITEK, INC.
121 Moonachie Avenue
Moonachie, NJ 07074
By: /s/ Albert J. Wozniak
----------------------
Albert J. Wozniak, President/CEO
<PAGE>
PROMISSORY NOTE
$50,000.00 Moonachie, New Jersey
FOR VALUE RECEIVED, the Undersigned promises to pay to the order
of Albert J. Wozniak, having a mailing address at 121 Moonachie
Avenue, Moonachie, New Jersey 07074 (hereinafter referred to as
the "Promisee"), the principal sum of FIFTY THOUSAND DOLLARS
($50,000.00) in lawful money of the United States. This Note shall
bear interest on the unpaid principal sum, from April 30, 1997, at the
rate of EIGHT AND ONE HALF percent (8.5%) per annum. Said principal
and interest shall be payable on demand by Promisee. All computations
of interest shall be calculated on the basis of a 365 day year.
1. The Undersigned and each and every party to this Note,
whether as maker or otherwise, waives presentment, demand, protest
and notice of dishonor and of protest, and agrees to the terms hereof
and any extension or postponement of the time for payment.
2. The obligations evidenced by this Note shall bind the
Undersigned, their heirs and assigns, and the benefits hereto shall
inure to the holder hereof, their heirs and assigns.
3. The Promisee shall not by any act be deemed to have waived
any of its rights or remedies hereunder unless such waiver is in
writing and signed by the Promisee, and then only to the extent set
forth therein. A waiver as to any one event shall in no way be
construed as continuing or as preventing waiver of such rights or
remedy on a subsequent event.
4. This Note may be prepaid in whole or in part, at any time,
without prepayment penalty or additional premium.
Dated: April 30, 1997
STERITEK, INC.
By: /s/ James K. Wozniak
------------------------
James K. Wozniak,
Vice President and CFO
142900
<PAGE>
PROMISSORY NOTE
$50,000.00 Moonachie, New Jersey
FOR VALUE RECEIVED, the Undersigned promises to pay to the order
of Albert J. Wozniak, having a mailing address at 121 Moonachie
Avenue, Moonachie, New Jersey 07074 (hereinafter referred to as
the "Promisee"), the principal sum of FIFTY THOUSAND DOLLARS
($50,000.00) in lawful money of the United States. This Note shall
bear interest on the unpaid principal sum, from May 31, 1997, at the
rate of EIGHT AND ONE HALF percent (8.5%) per annum. Said principal
and interest shall be payable on demand by Promisee. All computations
of interest shall be calculated on the basis of a 365 day year.
l. The Undersigned and each and every party to this Note,
whether as maker or otherwise, waives presentment, demand, protest
and notice of dishonor and of protest, and agrees to the terms hereof
and any extension or postponement of the time for payment.
2. The obligations evidenced by this Note shall bind the
Undersigned, their heirs and assigns, and the benefits hereto shall
inure to the holder hereof, their heirs and assigns.
3. The Promisee shall not by any act be deemed to have waived
any of its rights or remedies hereunder unless such waiver is in
writing and signed by the Promisee, and then only to the extent set
forth therein. A waiver as to any one event shall in no way be
construed as continuing or as preventing waiver of such rights or
remedy on a subsequent event.
4. This Note may be prepaid in whole or in part, at any time,
without prepayment penalty or additional premium.
Dated: May 31, 1997
STERITEK, INC.
By: /s/ James K. Wozniak
------------------------
James K. Wozniak,
Vice President and CFO
