UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996
Commission file number 0-12547
Steritek, Inc.
(Exact name of registrant as specified in its charter)
New Jersey 22-2243703
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
121 Moonachie Avenue
Moonachie, NJ 07074
(Address of principal executive offices)
(Zip Code)
(201) 460-0500
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13, or
15(d) of the Securities Exchange act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date: 3,586,285 shares of Common Stock on February 1, 1996
<PAGE>
INDEX
Page
Part I - Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets..................... 3
Consolidated Statements of Operations........... 4
Consolidated Statements of Cash Flows........... 6
Notes to Consolidated Financial Statements...... 7
Item 2. Management's Discussion and Analysis............. 8
Part II - Other Information....................................12
Signatures.....................................................13
<PAGE>
<TABLE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
STERITEK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<CAPTION>
December 31, June 30,
1996 1996
----------- -------------
(Unaudited) (Derived from
Audited
Financial
Statements)
<S> <C> <C>
ASSETS
Current Assets:
Cash $261,625 $296,429
Trade accounts receivable, less allowance for
doubtful accounts of $4,895 423,025 478,504
Inventories 102,608 107,108
Prepaid expenses and other assets 115,091 121,647
Deferred tax asset 68,600 68,600
---------- ----------
Total current assets 970,949 1,072,288
Machinery and equipment 2,863,935 2,762,017
Less: accumulated depreciation and
amortization 1,864,181 1,693,868
---------- ----------
999,754 1,068,149
---------- ----------
Other assets
Physicians' fax database 50,079 100,159
---------- ----------
Assets transferred under contractual arrangement 67,427 68,660
---------- ----------
$2,088,209 $2,309,256
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable trade $312,544 $276,522
Accrued expenses 37,283 91,328
Current maturities of long-term debt 100,000 200,000
Current maturities of capital lease obligations 68,720 99,114
---------- ---------
Total current liabilities 518,547 666,964
---------- ----------
Long-term debt, excluding current maturities 381,667 381,667
---------- ----------
Capital lease obligations, less current maturities 50,991 50,991
---------- ----------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Shareholders' equity:
Preferred stock, no par value, authorized
2,000,000 shares; none issued
Common stock, no par value, authorized
5,000,000 shares; issued and outstanding
3,586,285 shares 640,844 640,844
Retained earnings 496,160 568,790
---------- ----------
Total shareholders' equity 1,137,004 1,209,634
---------- ----------
$2,088,209 $2,309,256
========== ==========
</TABLE>
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARIES
(UNAUDITED)
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Six Months Ended
December 31,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
Sales $2,386,940 $2,953,866
Cost of sales 1,191,518 1,442,506
---------- ----------
Gross profit 1,195,422 1,511,360
Selling, general and administrative expenses 1,242,659 1,285,273
---------- -----------
Operating income (47,237) 226,087
Gain on Sale of Assets 0 276,098
Interest expense (25,391) (31,842)
---------- ----------
Income before provision for income taxes (72,628) 470,343
---------- ----------
Provision for income taxes:
Provision for federal income taxes - deferred 0 119,947
Provision for state income taxes - deferred 0 42,543
--------- ----------
0 162,490
--------- ----------
Net income ($72,628) $307,853
========== ==========
Weighted-average number of common shares
outstanding 3,586,285 3,940,452
========== ==========
Net income per common share ($0.02) $0.08
========== ==========
</TABLE>
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARIES
(UNAUDITED)
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
December 31,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
Sales $1,370,234 $1,366,868
Cost of sales 669,081 643,574
---------- ----------
Gross profit 701,153 723,294
Selling, general and administrative expenses 636,213 610,269
---------- ----------
Operating income 64,940 113,025
Gain on sale of assets 276,098
Interest expense (11,823) (15,644)
---------- ----------
Income before provision for income taxes 53,117 373,479
---------- ----------
Provision for income taxes:
Provision for federal income taxes - deferred 7,370 101,731
Provision for state income taxes - deferred 3,984 33,825
---------- ----------
11,354 135,556
---------- ----------
Net income $41,763 $237,923
========== ==========
Weighted-average number of common shares
outstanding 3,586,285 3,940,452
=========== ==========
Net income per common share $0.01 $0.06
=========== ==========
</TABLE>
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARIES
(UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Six Months Ended
December 31,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($72,628) $307,853
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization of machinery
and equipment 170,313 39,183
Amortization of physicians fax database 50,080 50,079
Amortization of patents and excess of cost
over net assets of business acquired 671
Gain on sale of subsidiary (39,998)
Gain on sale of asset (236,099)
Changes in operating assets and liabilities
(net of sale of subsidiary):
Decrease (increase) in trade accounts
receivable 55,479 (148,057)
Decrease (increase) in inventories 4,500 56,450
Decrease (increase) in prepaid expenses
and other assets 6,556 (6,330)
Decrease in deferred tax asset 162,490
(Decrease) increase in accounts payable
and accrued expenses (24,254) (33,003)
Increase (decrease) in state income
taxes payable 6,229 27,250
---------- ----------
Net cash provided by (used in) operating
activities 196,275 180,489
---------- ----------
Cash flows from investing activities:
Proceeds from sale of subsidiary 300,000
Collections on note receivable 1,233 2,345
Expenditures for purchase of machinery
and equipment (101,918) (65,275)
---------- ----------
Net cash (used in) provided by investing activities (100,685) 237,070
---------- ----------
Cash flows from financing activities:
Principal payments on long-term debt (100,000) (70,000)
Principal payments on capital lease obligations (30,394) (49,580)
---------- ----------
Net cash (used in) provided by financing
activities (130,394) (119,580)
---------- ----------
Net (decrease) increase in cash (34,804) 297,979
Cash at beginning of period 296,429 263,662
---------- ----------
Cash at end of period $261,625 $561,641
========= ==========
Supplemental disclosures of cash flow
information:
Interest paid $25,391 $31,842
========== ==========
Supplemental schedule of non-cash activities:
Sale of assets in exchange for note receivable $300,000
Net assets exchanged (63,901)
__________
Gain on sale of assets $236,099
==========
</TABLE>
<PAGE>
STERITEK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 1996
1. Basis of Presentation
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting only of
normally recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the
six month period ended December 31, 1996 are not necessarily
indicative of the results that may be expected for the year
ending June 30, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto
included in the Company's Form 10-K for the year ended June
30, 1996.
<PAGE>
STERITEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Six Months Ended December 31, 1996 as Compared to the Six Months
Ended December 31, 1995
Revenues for the six months ended December 31, 1996 decreased to
$2,386,940 from $2,953,866 for the same period in 1995. Revenues for
the six months ended December 31, 1996 reflect a reduced level of
activity in the Company's contract packaging and Physicians Fax Network
business. December 31, 1996 revenues included approximately:
(i) $2,147,658 from contract packaging, as compared to $2,434,483
for the same period in 1995; (ii) $239,282 from the Physicians Fax
Network, as compared to $316,383 for the same period in 1995; and
(iii) $0 from its BioMedical Services business (intracranial pressure
monitor business ("ICP") and the electron microscope supply ("EMS")
business), as compared to $203,000 for the same period in 1995. The
Company sold its ICP and EMS businesses on October 6, 1995. The
Company did not report any revenues from these businesses since
September 30, 1995. The Company has continued to aggressively market
its contract packaging business and its Physicians Fax Network.
The Company's cost of sales represented 49.9% of sales (or
$1,191,518) for the six months ended December 31, 1996, as compared
to 48.2% of sales (or $1,442,506) for the six months ended December
31, 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
six months ended December 31, 1996 was 52.0% of sales (or $1,242,659),
as compared to 43.5% of sales (or $1,285,273) for the six months ended
December 31, 1995. The increase in SG&A is principally a result of
the addition of staff to market and sell the Company's contract
packaging services.
The Company incurred an operating loss for the six months ended
December, 1996 in the amount of ($47,237) as compared to income of
$226,087 (or 7.6% of sales) for the six months ended December 31, 1995.
The operating loss is principally attributable to the lower level of
sales without a corresponding reduction in SG&A expense.
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,
<PAGE>
subject to certain of its liabilities, which comprised the EMS
business. The purchase price was $300,000, paid at closing. The
Company's revenues from the EMS business were $696,333 for the
fiscal year ended June 30, 1995, and $607,500 for the fiscal year
ended June 30, 1994. 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. The Company has received only $6,105 in payments
against such purchase price as of December 31, 1996. It is unclear
when the entire balance will be paid. The Company's
revenues from the ICP business were $152,948 for the fiscal year
ended June 30, 1995, and $181,700 for the fiscal year ended June
30, 1994.
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.
Three Months Ended December 31, 1996 as Compared to the Three Months
Ended December 31, 1995
Revenues for the three months ended December 31, 1996 were
$1,370,234 as compared to $1,366,868 for the same period in 1995.
Revenues for the three months ended December 31, 1996 included
approximately $1,281,453 from contract packaging and $88,781 from
the Physicians Fax Network. For the three months ended December
31, 1995, the Company derived approximately $1,190,292 in revenues
from contract packaging and $176,576 from the Physicians Fax
Network.
The Company's cost of sales were $669,081 (or 48.8% of sales)
for the three months ended December 31, 1996 as compared to $643,574
(or 47.0% of sales) for the three months ended December 31, 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.
<PAGE>
Selling, general and administrative expenses ("SG&A") for the
three months ended December 31, 1996 was $636,213 (or 46.0% of sales)
as compared to $610,269 (or 44.0% of sales) for the three months
ended December 31, 1995. SG&A remained relatively constant between
the two periods.
Operating income for the three months ended December 31, 1996
was $64,940 (or 4.7% of sales), as compared to income of $113,025
(or 8.2% of sales) for the three months ended December 31, 1995.
The decrease in operating income is principally attributable to
the higher cost of sales for the period ended December 31,
1996.
There were no other material changes in the results of
operations in the Company's business.
Liquidity and Capital Resources
The Company's working capital on December 31, 1996 was $481,207.
The Company's working capital on June 30, 1996, was approximately
$405,324. The principal changes in the components of
working capital are the reduction in the Company's accounts
receivable as a result of lower sales volume and the reduction of
accrued expenses and the current portion of long term debt as
of June 30, 1996.
As of March 31, 1994, the Company executed its 7%
Subordinated Promissory Note, due March 31, 1996, in the amount of
$300,000. The Company paid this note in full on March 31, 1996,
with the proceeds of a loan from The Bank of New York (NJ). The Bank
of New York note bears interest at the bank's prime rate plus .5%
per year, and is payable in monthly increments of $5,000. Any unpaid
balance due is payable April 1, 2001.
On June 30, 1993, the Company borrowed $700,000 from a bank,
payable monthly until July 1, 1998, at prime plus 1/2%. This Note
is collateralized by substantially all of the assets of the Company
and is personally guaranteed by the president of the Company. At
June 30, 1994, the Company was not in compliance with certain covenants
pertaining to minimum working capital, net worth, quick ratio,
current ratio and debt service. These covenants were waived by the
bank as of June 30, 1995, for the remaining term of the loan. The
Company has continued to make its monthly payments to the bank in a
timely fashion.
The Company believes that funding for anticipated operations
and capital needs will come from existing working capital and
anticipated future operations.
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
<PAGE>
STERITEK, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Steritek, Inc.
By/s/ James K. Wozniak
James K. Wozniak, Vice President,
Chief Financial Officer and
Secretary (principal financial
and accounting officer)
Date: February 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STERITEK,
INC. AND SUBSIDIARIES (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS
INCLUDED IN ITS FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 261,625
<SECURITIES> 0
<RECEIVABLES> 423,025
<ALLOWANCES> 4,895
<INVENTORY> 102,608
<CURRENT-ASSETS> 970,949
<PP&E> 2,863,935
<DEPRECIATION> 1,864,181
<TOTAL-ASSETS> 2,088,209
<CURRENT-LIABILITIES> 518,547
<BONDS> 381,667
0
0
<COMMON> 640,844
<OTHER-SE> 496,160
<TOTAL-LIABILITY-AND-EQUITY> 2,088,209
<SALES> 1,370,234
<TOTAL-REVENUES> 1,370,234
<CGS> 669,081
<TOTAL-COSTS> 669,081
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,823
<INCOME-PRETAX> 53,117
<INCOME-TAX> 11,354
<INCOME-CONTINUING> 41,763
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,763
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
