<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, 1998.....................
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. [ ]
The aggregate market value of the voting stock held by non-
affiliates of the registrant as of September 1, 1998 was
approximately $374,311 (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:
3,636,285 shares of Common Stock on September 1, 1998
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 7A. Quantitative and Qualitative Disclosures about
Market Risk........................................ 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 90%,
88% and 96% of the Company's consolidated sales revenues from
continuing operations for the fiscal years ended June 30, 1998,
1997, and 1996, 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, 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 represented
approximately 10%, 12% and 4%, of its consolidated sales revenues
from continuing operations for the fiscal years ended June 30,1998,
1997 and 1996, 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, 1998, 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, 1997
and 1996, 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, 1998, the Company had approximately 200 employees,
of whom 20 were engaged in executive, sales, technical and administrative
functions, and 180 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. Until November 1997, the Company leased 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.
(a) On April 9, 1998, the Company held its annual meeting of
shareholders.
(b) The meeting involved the election of directors. The two
directors nominated, Albert J. Wozniak and James K. Wozniak, were
reelected as directors of the Company. The Company has no other
members of the Board of Directors.
(c) The only matter voted upon was the election of directors.
The number of shares cast for the election of each of Albert J.
Wozniak and James K. Wozniak was 2,964,908. No shares were voted
against the election of such persons. 100,400 shares were not
voted.
<PAGE>
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The Company's Common Stock is traded 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. 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, 1998, 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,
----------------------------------------------------------
1998 1997 1996(1) 1995 1994
---------- ---------- ---------- ---------- ----------
OPERATING DATA:
<S> <C> <C> <C> <C> <C>
Sales $8,674,561 $4,907,504 $4,714,542 $5,095,103 $3,443,986
Costs of Sales 5,764,318 2,891,755 2,731,128 2,654,980 2,161,694
S G & A 2,003,603 2,200,257 2,392,864 1,975,165 2,095,596
Operating Income
(loss) 906,640 ( 184,508) (409,450) 464,958 (813,304)
Income (loss) from
contin. operations 925,376 140,192 (523,882) 212,112 (1,037,968)
Income (loss) from
discont. operations - (67,427) 45,344 (66,738) (2,169)
Net Income(loss)(2) 925,376 72,765 (478,538) 145,374 (1,040,137)
Net Income (loss)
per share .26 .02 (.13) .04 (.29)
BALANCE SHEET DATA:
Assets $3,929,825 $2,955,033 $2,309,256 $2,977,254 $2,940,774
Assets transferred
under contractual
agreement 0 0 68,660 75,700 110,565
Net assets of
discont. operations 0 0 0 241,178 287,057
Current
Liabilities 1,046,698 1,105,567 666,964 862,899 1,097,977
Long-term debt
and capital lease
obligations,
excl. current
maturities 669,102 567,067 432,658 426,183 300,000
Shareholders'
Equity 2,214,025 1,282,399 1,209,634 1,688,172 1,542,798
Working Capital 1,242,944 711,045 344,973 435,939 327,135
- -----------------------------
</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).
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." 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).
For the fiscal year ended June 30, 1998, the Company adjusted
the deferred tax asset, resulting in an increase in net
income by $555,300 ($.15 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 year ended June 30, 1995 as a result
of the October 6, 1995 sale by the Company of its BioMedical Services
business. See Note 1 to the Notes to Consolidated Financial
Statements.
Year Ended June 30, 1998 as Compared to the Year Ended June 30,
1997
Revenues from continuing operations for the year ended
June 30, 1998 increased to $8,674,561 from $4,907,504 for the same
period in 1997. Revenues for the year ended June 30, 1997 included
$4,309,091 from contract packaging and $598,413 from the Physicians
Fax Network. Revenues for the year ended June 30, 1998 included
$7,841,233 from contract packaging and $833,328 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 58.9% of sales
(or $2,891,755) for the year ended June 30, 1997, as compared to
66.4% of sales (or $5,764,318) for the year ended June 30, 1998. 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, 1997 was $2,200,257 (or 44.8% of sales), as
compared to $2,003,603 (or 23.1% of sales) for the year ended June
30, 1998. 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, 1997 was $184,508
as compared to income of $906,640 for the year ended June 30, 1998.
The increase in operating income is principally attributable to the
increase in contract packaging activity.
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.
For the fiscal year ended June 30, 1998, the Company adjusted
the deferred tax asset, resulting in an increase in net income
by $555,300 ($.15 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, 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.
Liquidity and Capital Resources
The Company's working capital on June 30, 1998 was $1,242,944.
The Company's working capital on June 30, 1997, was approximately
$711,045. The principal changes in the components of working
capital are the increases in cash and inventories as a result of
the increased contract packaging activity.
On March 12, 1998, the Company executed a Note with the Bank of
New York in the amount of $785,000, payable over four years at a
fixed interest rate of 8.09%. The Note was issued to provide working
capital and to refinance a loan on June 17, 1997, in the amount of
$700,000 from the Bank of New York, payable monthly until June 17,
2002, at prime plus 1%. The proceeds of the June 17, 1997 borrowing
were used to retire prior indebtedness of the Company and to provide
working capital for operations. On April 13, 1998, the Company
executed an additional Note with the Bank of New York in the
amount of $146,000, payable over three years at a fixed interest
rate of 8.09%. The Note was issued to provide working capital
to the Company.
On March 12, 1998, the Company obtained a line of credit from
the Bank of New York in the amount of $250,000, at prime plus 1/2%.
The Company has not drawn any funds on this line of credit as of the
date hereof.
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.
The loans were repaid during the fourth quarter of fiscal year ending
June 30, 1998. 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 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company has no market risk sensitive instruments. The
amounts included in the balance sheet at June 30, 1998 for cash
and cash equivalents, accounts receivable, prepaid expenses and other
assets, and accounts payable 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-stockholder approximate fair value based on borrowing rates
currently available to the Company.
Item 8. Financial Statements and Supplementary Data.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
JUNE 30, 1998
<PAGE>
STERITEK, INC. AND SUBSIDIARY
JUNE 30, 1998
CONTENTS
Independent Auditor's Report
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
<PAGE>
I. WEISMANN ASSOCIATES
CERTIFIED PUBLIC ACCOUNTANTS
PO BOX 2207
MORRISTOWN, NJ 07962-2207
(973) 984-8900
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
STERITEK, INC. AND SUBSIDIARY
We have audited the Consolidated Balance Sheets of Steritek, Inc.
and Subsidiary as of June 30, 1998 and 1997, and the related Consolidated
Statements of Income, Stockholders' Equity and Cash Flows for
the fiscal years 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 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 1998 and 1997 financial statements referred
to above present fairly, in all material respects, the financial
position of Steritek, Inc. and Subsidiary as of June 30, 1998 and
1997, and the results of its operations and cash flows for the
years then ended in conformity with generally accepted accounting
principles.
/s/ I. Weismann Associates
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
August 7, 1998
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
June 30,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 557,565 212,127
Accounts receivable, (less allowances
for doubtful accounts of $7,098 and
$4,895 in 1998 and 1997, respectively) 863,843 904,425
Inventories (Note 2) 352,715 190,341
Prepaid expenses and other assets 93,219 79,719
Deferred tax asset (Note 9) 422,300 430,000
---------- ----------
Total current assets 2,289,642 1,816,612
---------- ----------
Property, equipment and
Improvements - at cost (Note 4):
Machinery and equipment 2,699,214 2,220,885
Leasehold improvements 707,204 521,060
Capital leases 300,173 283,150
Office furniture and equipment 162,234 88,861
---------- ----------
Total 3,868,825 3,113,956
Less: accumulated depreciation and
amortization 2,294,054 2,057,921
---------- ----------
Net property, equipment
and improvements 1,574,771 1,056,035
---------- ----------
Other assets - Security deposits 65,412 82,836
---------- ----------
Total $3,929,825 $2,955,033
========== ==========
</TABLE>
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,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 525,613 $ 536,324
Accrued expenses 256,901 210,077
Current portion:
Long-term debt (Note 3) 222,154 140,000
Capital lease obligations (Note 4) 9,939 83,894
Loan payable - stockholder (Note 5) - 100,000
Income taxes 32,091 35,272
---------- ----------
Total current liabilities 1,046,698 1,105,567
Long-term debt liabilities:
Long-term debt (Note 3) 659,663 560,000
Capital lease obligations (Note 4) 9,439 7,067
---------- ----------
Total liabilities 1,715,800 1,672,634
---------- ----------
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
3,636,285 shares (Note 7) 647,094 640,844
Retained earnings 1,566,931 641,555
---------- ----------
Total stockholders' equity 2,214,025 1,282,399
---------- ----------
Total liabilities and
stockholders' equity $3,929,825 $2,955,033
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Years Ended June 30,
-----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Sales - net $8,674,561 4,907,504 4,714,542
Cost of sales 5,764,318 2,891,755 2,731,128
---------- ---------- ----------
Gross profit 2,910,243 2,015,749 1,983,414
Selling, general and administrative
expenses 2,003,603 2,200,257 2,392,864
---------- ---------- ----------
Operating income (loss) 906,640 (184,508) (409,450)
Other income 112,644 11,146 42,089
Interest expense (67,295) (47,846) (56,521)
--------- --------- --------
Income (loss) before taxes 951,989 (221,208) (423,882)
--------- --------- --------
Income taxes (Note 9):
Increase (decrease) in valuation
of the deferred tax asset 555,300 361,400 (100,000)
Current:
Federal ( 15,755) - -
State ( 3,158) - -
Deferred:
Federal (458,000) - -
State (105,000) - -
--------- ---------- ---------
Total (26,613) 361,400 (100,000)
--------- ---------- ----------
Income (loss) from operations 925,376 140,192 (523,882)
--------- --------- ---------
Discontinued operations:
Income (loss) from discontinued
operations of Bio Medical
Services (Note 1) - (67,427) 5,346
Gain on sale of Sterimed, Inc. - - 39,998
--------- --------- ---------
Total - (67,427) 45,344
-------- -------- --------
Net income (loss) $ 925,376 $ 72,765 (478,538)
========== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (Continued)
<TABLE>
<CAPTION>
Years Ended June 30,
-----------------------------------
1998 1997 1996
---------- --------- ----------
<S> <C> <C> <C>
Earnings per common share:
Weighted-average number of
common and common equivalent
shares outstanding 3,596,700 3,586,285 3,586,285
========== ========= ==========
Earnings (loss) per share:
Income from continuing operations $ 0.26 $ 0.04 (0.14)
Discontinued operations N/A (0.02) 0.01
---------- ---------- ----------
Net income (loss) per common and
common equivalent share $ 0.26 $0.02 $(0.13)
========== ========= ==========
</TABLE>
As of June 30, 1998, 400,000 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, 1998. (See Note
1).
The accompanying notes are an integral part of these statements.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
No Par Value Retained
--------------------
Shares Amount Earnings Total
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Balance, June 30, 1995 3,586,285 $640,844 1,047,328 1,688,172
Net loss year ended
June 30, 1996 - - (478,538) (478,538)
---------- -------- --------- ---------
Balance, June 30, 1996 3,586,285 $640,844 568,790 1,209,634
Net income year ended
June 30, 1997 - - 72,765 72,765
---------- -------- --------- ----------
Balance, June 30, 1997 3,586,285 $640,844 641,555 1,282,399
Common stock issuance 50,000 6,250 6,250
Net income year ended
June 30, 1998 - - 925,376 925,376
--------- -------- --------- ---------
Balance, June 30, 1998 3,636,285 $647,094 1,566,931 2,214,025
========== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------------------
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 925,376 $ 72,765 $ (478,538)
Adjustments to reconcile net
income(loss) to net cash
provided by operating activities:
Depreciation and amortization 360,019 364,052 326,715
Amortization of patents and
excess of cost over net assets
of business acquired - - 1,029
(Gain) loss on sale of Sterimed, Inc. - 67,427 (39,998)
(Increase) decrease in valuation
of the deferred tax asset (555,300) (361,400) 100,000
Deferred taxes 563,000 - -
Amortization of Physicians Fax
Network - 100,159 100,158
Uncollectible accounts - - 19,511
Changes in assets and liabilities:
Accounts receivable 40,582 (425,921) 116,829
Inventories (162,374) (83,233) 27,269
Prepaid expenses and other assets (13,502) (18,423) (508)
Assets transferred under
contractual arrangement - 1,233 7,100
Net assets of discontinued segment - - (25,795)
Accounts payable and accrued
expenses 36,113 378,551 48,152
Income taxes (3,181) 35,272 -
---------- --------- ---------
Net cash provided by operating
activities 1,190,733 130,482 201,924
---------- --------- ---------
Cash flows from investing activities:
Increase (decrease) security
deposits 16,974 (22,035) -
Expenditures for purchase of
machinery and equipment (878,753) (351,938) (231,545)
Officer's loan:
Proceeds 50,000 100,000 -
Payments 150,000 - -
Proceeds from sale of
discontinued operation - - 300,000
---------- --------- ---------
Net cash provided (used) by
investing activities (961,779) (273,973) 68,455
========== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------------------
1998 1997 1996
--------- --------- --------
<S> <C> <C> <C>
Cash flow from financing activities:
Principal payments:
Long-term debt $ (749,183) (581,667) (450,000)
Capital lease obligations (88,606) (59,144) (87,612)
Borrowings:
Long-term debt 931,000 700,000 300,000
Capital lease obligations 17,023 - -
Common stock issuance 6,250 - -
--------- -------- --------
Net cash provided (used) by
financing activities: 116,484 59,189 (237,612)
--------- -------- --------
Net increase (decrease) in cash
and cash equivalents 345,438 (84,302) 32,767
Cash and cash equivalents:
Beginning 212,127 296,429 263,662
-------- -------- --------
Ending $557,565 212,127 296,429
======== ======== ========
Supplemental disclosure of cash
flow information:
Interest paid $ 67,295 47,846 56,521
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998, 1997, AND 1996
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 and the 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 microscopes used in laboratories, whose assets were sold
in October 1995. On April 9, 1998 the corporate charter of Sterimed,
Inc. was dissolved pursuant to the laws of the State of Delaware.
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 their
electron microscope business subject to all the liabilities
of Sterimed, Inc., collectively with the Bio Medical Services
Segment, to a former director/employee. The aggregate purchase
price was $600,000 for Sterimed, Inc.'s electron microscope business and
Bio Medical Services ICP business; paid $300,000 in cash, and
$300,000 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 fiscal year ended
June 30, 1997 due to the uncertainty of its collectability. The sale
of Bio Medical Services has not been considered a sale for
accounting purposes and the gain on disposal of the ICP
business not recognized.
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 income for the year ended
June 30, 1996.
<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 during their active years have
been eliminated. On April 9, 1998 the corporate charter of Sterimed,
Inc. was dissolved pursuant to the laws of the State of Delaware.
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 of 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, 1998, which
exceeds the FDIC insured limit by $431,455.
Credit sales are made to customers in the normal course of business and are
unsecured.
For the year ended June 30, 1998, the four largest customers
accounted for approximately 78% of net sales; five customers
accounted for approximately 55% of accounts receivable at
June 30, 1998.
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 financial statements, the Company
considers all highly liquid investments with a ninety day or less
maturity to be cash equivalents.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998, 1997 and 1996
NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
INVENTORIES:
- -----------
Valued at the lower of cost or market, determined by the first-in,
first-out (FIFO) method.
PROPERTY, EQUIPMENT AND IMPROVEMENTS AND RELATED DEPRECIATION AND
- -----------------------------------------------------------------
AMORTIZATION:
- ------------
Property, equipment and improvements - Stated at cost. Expenditures
for major repairs and replacements 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>
Equipment 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 and state 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 $360,019, $364,052 and $326,715 for the
years ended June 30, 1998, 1997 and 1996, respectively.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998, 1997 and 1996
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, because 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 and 1996, amortization of
$100,159 and $100,158 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 and improvements, 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 years has been decreased accordingly.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998, 1997 and 1996
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, 1998 and 1997.
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 as required in
SFAS No. 123. The adoption of this new requirement did not effect
the Company's consolidated financial statements, nor was there any
effect on proforma net income.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
- -----------------------------------
The amounts included in the balance sheet at June 30, 1998 for cash
and cash equivalents, accounts receivable, prepaid expenses and other
assets, and accounts payable 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-stockholder approximate fair value based on borrowing rates
currently available to the Company.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998, 1997 and 1996
NOTE 2 - INVENTORIES:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Raw materials $352,715 190,341
======== =======
</TABLE>
NOTE 3 - LONG-TERM DEBT:
<TABLE>
<CAPTION>
<S> <C> <C>
Bank of New York:
Payable in monthly installments of
$19,197 including interest at 8.09%
through March 2002; secured by
substantially all assets. $743,022 -
Payable in monthly installments of
$4,581, including interest at 8.09%
through April 2000; secured by
substantially all assets. 138,795 -
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. Refinanced
March 12, 1998. - 700,000
-------- --------
Total 881,817 700,000
Less: Current portion 222,154 140,000
-------- --------
Long-term portion $659,663 560,000
======== ========
</TABLE>
<TABLE>
Maturities at June 30, 1998:
<CAPTION>
Years Ending June 30
--------------------
<S> <C>
1999 $222,154
2000 240,773
2001 251,797
2002 167,093
--------
Total $881,817
</TABLE>
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998, 1997 and 1996
NOTE 4 - CAPITAL LEASE OBLIGATIONS:
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Machinery and equipment:
payable in monthly installments of $402,
including interest at 9.9%; maturing
January 2000 $ 7,068 11,015
payable in monthly installments of $292,
including interest at 15.17%; maturing
August 2000 6,444 -
payable in monthly installments of $288,
including interest at 12.6%; maturing
July 2000 5,866 -
payable in monthly installments of $6,661,
non-interest bearing; matured December 1997 - 79,946
-------- -------
Total 19,378 90,961
Less: Current portion 9,939 83,894
-------- -------
Long-term portion $ 9,439 7,067
======== =======
</TABLE>
<TABLE>
Maturities at June 30, 1998:
<CAPTION>
Years Ending June 30
--------------------
<S> <C>
1999 $ 9,939
2000 8,864
2001 575
-------
Total $19,378
=======
</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, 1998, 1997 and 1996
NOTE 6 - COMMITMENTS:
LEASES
- ------
The Company leases its operating and corporate facilities under an
operating lease expiring in 2004 with provision for additional payments
for annual rent increases in real estate taxes and insurance. A
warehouse facility was leased on a month to month basis from October
1992, to November 1997. Total rent expense amounted to $308,299,
$353,421 and $356,973 for the years ended June 30, 1998, 1997
and 1996, respectively. The rent expense for discontinued
operations was immaterial. Rent for its corporate facilities were
in arrears in the amount of $18,716 (accrued in the current year).
Future minimum lease commitments:
<TABLE>
<CAPTION>
Years Ending
June 30 Amount
------------ ------
<S> <C>
1999 $ 267,224
2000 273,463
2001 279,702
2002 285,940
2003 273,893
Thereafter 322,852
----------
Total $1,703,074
==========
</TABLE>
LOAN PAYABLE - BANK
- -------------------
Established line of credit of $250,000 with The Bank of New York with
interest payable at prime plus one half percent. There was no
outstanding balance at June 30, 1998 and 1997.
EMPLOYMENT CONTRACT
- -------------------
Agreement for period of ten years commencing March 1, 1998 and ending
February 28, 2008, covering an officer of the Company and providing
incentive compensation in addition to annual salary of $125,000 plus
annual increases of no less than five percent.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998, 1997 and 1996
NOTE 7 - STOCK OPTIONS:
Plan adopted on June 24, 1992, authorizing the granting to
certain individuals performing services for the Company of either
incentive or nonqualified stock options to purchase up to 400,000 shares
of common stock. 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.
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 29, 1994 and
expire on August 19, 2003.
On September 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 19, 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.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998, 1997 and 1996
NOTE 7 -STOCK OPTIONS (Continued):
On February 5, 1997 the Board of Directors approved and ratified the
repricing of 10,000 options issued December 16, 1992, 55,000 options
issued August 19, 1993 and 20,000 options issued September 29, 1993 to
a new option price of $.125.
On March 26, 1998 options to purchase 50,000 shares of the Company's
common stock were exercised at $.125 per share by a former employee.
On June 24, 1998 nonqualified options to purchase 35,000 shares of the
Company's stock were issued to a director of the Company. The exercise
price of $.25 per share was the Company's estimate of the market value
at that date.
On June 24, 1998 the board of directors approved and ratified the
repricing of 35,000 options issued to a director on August 19, 1993
to a new option price of $.25.
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).
<TABLE>
The following summarizes information relative to stock option plans:
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Options outstanding at beginning
of fiscal year 455,000 445,000 390,000
Options granted 35,000 50,000 100,000
Options cancelled (40,000) (40,000) (45,000)
Options exercised (50,000) - -
--------- --------- ---------
Options outstanding at end of
fiscal year 400,000 455,000 445,000
========= ========= =========
Option prices per share:
Granted .25 - .25
========= ========= =========
Exercised .125 - -
========= ========= =========
Cancelled .125-1.50 .50-1.25 1.00-1.50
========= ========= =========
Exercise price of options
outstanding at end of fiscal year .125-1.50 .125-1.50 .25-1.50
========== ========== ==========
</TABLE>
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998, 1997 and 1996
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, 1998
--------------------------------
Physicians
Fax Contract
Network Packaging Total
--------- --------- ---------
<S> <C> <C> <C>
Sales $833,328 7,841,233 8,674,561
Operating income 109,769 796,871 906,640
Depreciation and amortization - 360,019 360,019
Aggregate carrying amount of
identifiable assets - 3,929,825 3,929,825
Additions to machinery and equipment - 637,170 637,170
</TABLE>
<TABLE>
<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) (122,438) (184,508)
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 - 351,938 351,938
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30, 1996
--------------------------------
Bio Medical Contract
Services Packaging Total
----------- --------- ---------
<S> <C> <C> <C>
Sales $193,797 4,520,745 4,714,542
Operating income (loss) 5,346 (414,796) (409,450)
Depreciation and amortization 1,029 325,686 326,715
Aggregate carrying amount of
identifiable assets - 2,309,256 2,309,256
Additions to machinery and equipment - 231,545 231,545
</TABLE>
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998, 1997 and 1996
NOTE 9 - INCOME TAXES:
Deferred tax asset of $422,300 at June 30, 1998 consisted of the
following components.
<TABLE>
<CAPTION>
Deferred Tax
Temporary Asset
Difference Tax Rate (Liability)
----------- -------- ------------
<S> <C> <C> <C>
Allowance for doubtful accounts $ 7,100 43% 3,050
Accumulated depreciation (92,200) 43% (39,650)
Benefit of remaining operating
loss carryforward 1,799,700 34% 611,900
Less: valuation allowance (450,000) 34% (153,000)
----------- ---------
Totals $ 1,264,600 422,300
=========== =========
</TABLE>
At June 30, 1998 net operating loss (NOL) carryforwards of approximately
$1,799,700 were available, expiring on various dates from 1999 through 2011.
The valuation allowance as of June 30, 1998 was increased by $555,300
because management believes that the current profit level will continue
and they will utilize most of the NOL carryforwards.
The deferred tax asset of $430,000 at June 30, 1997, consisted 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
Benefit of remaining 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>
At June 30, 1997 net operating loss (NOL) carryforwards of approximately
$3,163,000 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.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998, 1997 and 1996
NOTE 9 - INCOME TAXES (continued):
The deferred tax asset of $68,600 at June 30, 1996 consisted 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>
At June 30, 1996, net operating loss (NOL) carryforwards of approximately
$2,515,000 were available, expiring on various dates from 1997 through 2006.
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.
The reconciliation of taxes at statutory rates to provision for taxes
follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income (loss) before tax $ 951,989 (221,208) (423,882)
========= ======= =======
Expected tax at statutory rates 410,250 - -
Decrease (increase) resulting from
tax effect of:
Valuation of deferred tax asset 7,700 (361,400) 100,000
Utilization of loss carryforwards (517,704) - -
Effect of nondeductible expenses-net 126,367 - -
-------- ------- -------
Income taxes $ 26,613 (361,400) 100,000
======== ======== =======
</TABLE>
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998, 1997 and 1996
NOTE 9 - INCOME TAXES (continued):
The Company is currently being examined by the State of New Jersey for
the years ended June 30, 1993 through 1997. Management believes that
any adjustment will be immaterial. Additionally, Federal income tax
returns for the years ended June 30, 1995 through 1998 are subject to
review by the Internal Revenue Service.
NOTE 10 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.
NOTE 11 - SUBSEQUENT EVENTS:
On July 1, 1998 nonqualified options to purchase 35,000 shares
of the Company's stock were issued to a director of the Company.
The exercise price of $.25 per share was the Company's estimate of
the market value at that date.
On July 1, 1998 the board of directors approved and ratified the
repricing of 35,000 options issued to a director on August 19, 1993
to a new option price of $.25.
<PAGE>
Part III
Item 10. Directors and Executive Officers
<TABLE>
The following table sets forth certain information relating
to the directors, executive officers and certain significant
employees of the Company:
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Albert J. Wozniak................... 60 Chairman, Chief
Executive Officer,
President
James K. Wozniak.................... 36 Director, Vice
President and
Secretary
</TABLE>
Each Director holds office until the earlier of the election
of his successor at the next annual meeting of shareholders or
his resignation or removal. Officers are elected by, and serve
at the discretion of, the Board of Directors. There are
currently four vacancies on the Board of Directors.
Mr. Albert J. Wozniak has been Chairman of the Board, Chief
Executive Officer and President of the Company since 1986.
Albert J. Wozniak is the father of James K. Wozniak.
Mr. James K. Wozniak, a director of the Company since 1991,
has been a Vice President of the Company since 1991, and
Secretary since 1992. James Wozniak is the son of Albert J.
Wozniak.
Item 11. Executive Compensation
Set forth below is disclosure of all plan and non-plan
compensation awarded to, earned by, or paid to the named
executive officer by any person for all services rendered in all
capacities to the Company and its subsidiaries, unless otherwise
specified.
<TABLE>
Summary Compensation Table
The table below sets forth information concerning
compensation paid to the named officers during the last
fiscal year.
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------------ --------
Other Securities
Name and Annual Restrct Underlying All
Principal Fiscal Salary Bonus Comp. Stock Options/ LTIP Other
Position Year ($) ($) ($) Awrds SARs(#) Payout Comp.
- --------- ------ ------ ----- ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Albert J. 1998 245,200 30,000 - - 35,000 - -
Wozniak 1997 250,000 - - - 15,000 - -
Chairman, 1996 200,000 - - - 20,000 - -
CEO and
President
James K. 1998 115,351 - - - 35,000 - -
Wozniak 1997 * - - - 10,000 - -
Vice Pres., 1996 * - - - 20,000 - -
and Secretary
* - Less than $100,000.
</TABLE>
<TABLE>
Option/SAR Grants Table
The table below sets forth information concerning the grant
of stock options to the named officers during the last
fiscal year.
<CAPTION>
Option/SAR Grants in Last Fiscal Year
- ---------------------------------------------------------------------------
Potential
Realizable Value
at Assumed Annual Alternative
Rates of Stock to (f) and
Price Appreciation (g): Grant
Individual Grants for Option Term Date Value
- -------------------------------------------- ---------------- ----------
(a) (b) (c) (d) (e) (f) (g) (h)
% of
Number of Total
Securities Options
Underlying Granted to Grant
Options Employees Exercise Expira- Date
Granted In Fiscal Price tion Present
Name (#) Year ($/Sh) Date 5%($) 10%($) Value $
- -------- ---------- --------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Albert J.
Wozniak 35,000 50% $.25 6/24/08 $5,503 $13,945
James K.
Wozniak 35,000 50% $.25 6/24/08 $5,503 $13,945
</TABLE>
<TABLE>
Aggregate Options Exercised in Last Fiscal Year
and Fiscal Year-End Option Values
The table below sets forth information concerning exercises
of stock options by the named officers during the last
fiscal year and the fiscal year-end value of the named
officer's unexercised options.
<CAPTION>
Number of Value of
Unexercised Unexercised
Options at In-the-Money
FY-End Options at
Shares Value (#) FY-End ($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
---- ------------ --------- ------------- -------------
<S> <C> <C> <C> <C>
Albert J. - - 180,000/35,000 $4,062/$2,188
Wozniak
James K. - - 65,000/35,000 $3,125/$2,188
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, 1998, options to purchase
35,000 shares of common stock previously granted to Mr. Albert J.
Wozniak were repriced from an exercise price of $1.50 per share to
$.25 per share, and options to purchase 35,000 shares of common stock
at $.25 per share were awarded to Mr. James K. Wozniak. $.25 per share
was determined by the Company to be the fair market value of a share of
common stock on the date of grant (June 24, 1998). For the fiscal
year ending June 30, 1999, options to purchase 35,000 shares of common
stock previously granted to Mr. Albert J. Wozniak were repriced
from an exercise price of $1.50 per share to $.25 per share, and
Mr. James K. Wozniak was awarded options to purchase 35,000 shares of
common stock at $.25 per share. $.25 per share was determined by the
Company to be the fair market value of a share of common stock on the
date of grant (July 1, 1998). 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. The Company has entered into an employment contract
with James K. Wozniak, an officer of the Company. The contract
is for a period of ten years commencing March 1, 1998 and ending
February 28, 2008, and provides incentive compensation in addition
to annual salary of $125,000 plus annual increases of no less than
five percent.
<TABLE>
Report on Repricing of Options
The table below sets forth information concerning the repricing
of stock options held by the named directors/officers during the last
ten completed fiscal years.
<CAPTION>
Ten Year Option Repricings
Length of
Number of Market Price Exercise Original
Securities of Stock at Price at Option Term
Underlying Time of Time of Remaining at
Options Repricing or Repricing or New Date of
Repriced or Amendment Amendment Exercise Repricing or
Name Date Amended(#) ($) ($) Price($) Amendment
- -------- ------- ---------- ------------ ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Albert J. 2/5/97 15,000 $ .125 $1.50 $ .125 6.5 yrs.
Wozniak 6/24/98 35,000 $ .25 $1.50 $ .25 5.25 yrs.
James K. 2/5/97 10,000 $ .125 $1.50 $ .125 6.5 yrs.
Wozniak
</TABLE>
The Board repriced options previously issued to the named directors,
in lieu of issuing new options, for their services as directors. In
each case, the option was repriced to the Company's estimate of the
fair market value of a share of its stock on the repricing date.
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 500,000 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 220 persons are eligible to
receive Incentive Stock Options as of September 1, 1998. 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 are eligible
to receive Nonqualified Stock Options as of September 1, 1998.
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 known transaction in the Company's
Common Stock, which occurred in or about August 1998, was at
$.3125 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,
1998 and the average exercise price of such options. Options to
purchase 50,000 shares of common stock of the Company have been
exercised as of September 1, 1998. Options to purchase 140,000
shares have been canceled.
<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 75,000 $1.50
20,000 $ .25
15,000 $ .125
70,000 $ .25
James K. Wozniak (2)........... 35,000 $ .50
Director, VP and Secretary 20,000 $ .25
10,000 $ .125
70,000 $ .25
Employee Group................. 20,000 $ .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, 1998,
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................... 2,581,490(2) 68.27%
Steritek, Inc.
121 Moonachie Ave.
Moonachie, NJ 07074
James K. Wozniak.................... 67,000(3) 1.81%
All directors and officers
as a group (2 persons)............ 2,648,490(4) 68.86%
</TABLE>
- ---------------------------
(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 145,000 shares of Common Stock of the Company that
may be acquired within 60 days upon the exercise of options.
(3) Includes 65,000 shares of Common Stock of the Company that
may be acquired within 60 days upon the exercise of options.
(4) Includes 210,000 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 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.
The loans were be repaid during the last quarter of the fiscal year
ending June 30, 1998. 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
10.23 PROMISSORY NOTE TIME/INSTALLMENT (FIXED RATE), dated
March 12, 1998 (7)
10.24 PROMISSORY NOTE TIME/INSTALLMENT (FIXED RATE - LOANS NOT IN
EXCESS OF $250,000), dated April 13, 1998 (7)
10.25 MASTER PROMISSORY NOTE (PRIME RATE), dated March 12, 1998(7)
10.26 Employment Contract with James K. Wozniak
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.
(7) - Incorporated by reference to the Registrant's Form 10-Q filed
May 19, 1998.
(b) Reports on Form 8-K
None.
<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, October 1, 1998
- ----------------------- President, CEO
Albert J. Wozniak
/s/ James K. Wozniak Vice President, Chief October 1, 1998
- ------------------------ Financial Officer and
James K. Wozniak 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
10.23 PROMISSORY NOTE TIME/INSTALLMENT (FIXED RATE), dated
March 12, 1998 (7)
10.24 PROMISSORY NOTE TIME/INSTALLMENT (FIXED RATE - LOANS NOT IN
EXCESS OF $250,000), dated April 13, 1998 (7)
10.25 MASTER PROMISSORY NOTE (PRIME RATE), dated March 12, 1998(7)
10.26 Employment Contract with James K. Wozniak
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.
(7) - Incorporated by reference to the Registrant's Form 10-Q filed
May 19, 1998.
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is effective as of the 1st day of March 1998,
between STERITEK, INC., a New Jersey corporation, having its principal
place of business at 121 Moonachie Avenue, Moonachie, NJ 07074
(the "Corporation") and James K. Wozniak, residing at 301 Rea
Avenue Extension, Hawthorne, New Jersey 07506 (the "Employee")
WITNESSETH:
WHEREAS, the Corporation is engaged in the business of
contract packaging for the pharmaceutical and cosmetic industries
and providing a physicians' facsimile database and transmission system;
and
WHEREAS, Employee has experience and knowledge in the business in
which the Corporation is involved and wishes to remain a full-time
employee of the Corporation; and
WHEREAS, the Corporation wishes to employ Employee as Vice
President and Chief Financial Officer, and to be employed in such
capacity (the "Position") upon the terms and conditions hereinafter
set forth.
NOW THEREFORE, in consideration of the foregoing and mutual
covenants herein contained, the parties agree as follows:
1. Employment
(a) The Corporation hereby employs Employee to serve in the
Position and Employee hereby accepts such employment. Employee will
devote his full-time and attention, during normal business hours,
to performing all duties assigned or delegated to him by the President
of the Corporation.
(b) Employee will be required to discharge his duties in the
Position in accordance with the rules and regulations of the
Corporation.
(c) On a periodic basis during the term of this Agreement,
Employee will be required to provide the President of the Corporation
with periodic reports on his employment activities on behalf
of the Corporation.
2. Compensation
(a) For his services hereunder, Employee shall receive a base
salary of $125,000 per year, payable on the Corporation's regular
paydays. In addition, the Employee shall be entitled to receive a bonus,
in the amounts and at the times as shall be determined by the Board
of Directors of the Corporation.
(b) The Employee's base salary shall be reviewed by the Board
of Directors on an annual basis and upon such review, shall be increased
in such amount as the Board of Directors, in its discretion, determines,
but in no event shall such increase be less than five percent (5%)
of the Employee's base salary for the previous year.
(c) In addition to the base salary to which Employee is entitled
under Section 2 (a), Employee shall be entitled to participate in
fringe benefit plans which the Corporation may offer or establish from
time to time for employees of equal or lesser rank; provided, however,
that this provision shall not require that the Corporation establish
or continue any specific fringe benefit plan. The Employee shall be
provided a new company car at least every three years, of a
model commensurate with his position and as approved by the President.
(d) All compensation paid to Employee shall be subject to the
customary withholding of taxes as required by law.
3. Business Expenses
(a) The parties acknowledge that Employee may incur, from time to
time, for the benefit of the Corporation, and in furtherance of
the Corporation's business, various expenses such as travel,
entertainment and promotional expenses. The Corporation agrees that it
shall either pay such expenses directly, advance sums to Employee to be
used for payment of such expenses, or reimburse Employee for such
expenses incurred by him, subject to the approval of such expenses
by the Board of Directors of the Corporation.
(b) Employee agrees to submit to the Corporation such documentation
as may be reasonably necessary to substantiate the expenses
paid or reimbursed pursuant to this Article 3.
4. Performance of Employment. Employee will observe and comply
with such reasonable rules, regulations and policies as may from time to
time be established, in writing, by the Board of Directors of the
Corporation or his designee.
5. Vacation. Each year during this Agreement, Employee shall
be entitled to not less than five (5) weeks vacation per year and
additional leave to attend business related conventions, meetings,
and programs, all without reduction in salary hereunder in accordance
with the Corporation's standard vacation policy. Vacation and other
leave shall be taken on reasonable prior notice to the Board of Directors
of the Corporation or his designee and at a time and manner which shall
not interfere with the proper operation of the business of the
Corporation.
6. Employment Conduct and Confidential Information
(a) Employee shall at all times during the term of this
Agreement observe and conform to all the laws regulating the business
of the Corporation.
(b) Employee recognizes that during the term of this Agreement, he
will necessarily become privy to certain confidential and
proprietary information of the Corporation (hereinafter referred
to as "Confidential Data"). Confidential Data shall be considered to
be all information, not otherwise public knowledge, concerning the
identity of the Corporation's customers and suppliers, technical and
business activities, plans, operations, pricing and procedures,
which Confidential Data is designated in writing to be confidential
or proprietary. Employee agrees that he will hold all Confidential
Data in the strictest confidence and that he will not disclose to any
person entity for any reason nor use any Confidential Data in any way
other than on behalf of the Corporation or as the Corporation may
otherwise direct.
(c) Employee agrees that all business records and files, including
but not limited to memoranda, notes and proposals pertaining to the
business, products or processes of the Corporation, shall be the
sole property of the Corporation and he shall not retain, remove or copy
such materials during the term of this Agreement or upon its termination
or expiration, without the prior express written consent of the Board
of Directors of the Corporation. Upon the termination of this Agreement
or at any other time upon the request of the Board of Directors,
Employee shall deliver all such materials to the Corporation.
7. Term of Employment. The term of this Agreement shall be for
ten (10) years commencing on March 1, 1998 and ending on February 29,
2008. Thereafter, this Agreement shall automatically renew for
successive one (1) year terms, unless either party gives sixty
(60) days written notice of his or its intent not to renew prior to
the end of the then current term.
8. Termination of Employee.
(a) Disability. If, during the term of this Agreement,
Employee becomes physically or mentally disabled so as to become
unable for a period of more than six (6) consecutive months to perform
his duties hereunder on substantially a full-time basis as determined
by the Corporation (in its sole reasonable discretion), Employee's
total compensation shall be reduced to 50% of his base salary. If
Employee's disability continues for six (6) additional consecutive
months, the Corporation may, at its option, terminate Employee's
employment hereunder without further financial obligation, effective
as of the end of the twelfth (12th) consecutive month of disability
except as stated hereafter. For purposes of this provision, separate
periods of disability shall be counted as continuous if separated by
less than thirty (30) days, but the periods of separation shall
not be counted for purposes of calculating the total period of
disability.
(b) Cause. The Corporation may terminate Employee's employment
under this Agreement for "cause", at any time during the initial
or any renewal term, without further financial obligations hereunder.
1. For Purposes of this Agreement, the term "cause" for
immediate termination shall mean: (i) Employee being convicted of a
crime of the first or second degree, as evidenced by a final judgement,
order or decree of a court of competent jurisdiction; or (ii) any
act of gross negligence or gross misconduct on the part of Employee
with respect to his duties under this Agreement. For purposes of
this provision, gross negligence or gross misconduct shall
include embezzlement, theft or similar criminal conduct or fraud.
2. Cause for termination on thirty (30) days written notice
shall mean Employee's material breach of this Agreement. For purposes
of this provision, a material breach of this Agreement shall include
conduct or damage to property by the Employee which is materially
injurious to the Corporation or its business, gross incompetence,
gross insubordination, or any material violation by the Employee
of any reasonably express direction of his corporate superiors. If
the alleged breach of this Agreement is failure to comply with an oral
rule, regulation or policy, Employee must have been provided with
written notice of the rule, regulation or policy and of his alleged
non-compliance therewith before his conduct may be deemed breach of
this Agreement triggering a right to terminate upon thirty (30) days
written notice.
In the event that Employee cures the alleged cause for termination
(a "default") as set forth in this Section 8(b)(2) during the thirty (30)
day period, or if such default cannot be completely cured within such
thirty (30) day period, he uses his best efforts to cure such default
and continues same diligently, this Agreement shall not terminate;
provided, however, that this Agreement shall thereupon
automatically terminate if such default is not cured for any reason
within ninety (90) days after delivery of such notice to Employee.
9. Inventions, Creations and Discoveries. Employee acknowledges
that during the course of his employment he may, either alone or
in conjunction with others, be responsible for the creation or development
of inventions, processes, materials or property (hereinafter referred
to as "Materials"). Employee agrees that he will disclose all such
Materials to the Board of Directors of the Corporation.
Employee acknowledges that all such Materials developed during the
term of this Agreement shall be the property of the Corporation
whether or not patent or copyright applications are filed with
respect thereto from the date of their conception. If an
assignment is necessary to transfer ownership thereof to the
Corporation, Employee agrees that this Agreement, without more,
shall constitute such an assignment. At the Corporation's request,
Employee shall be required to make or assist in the filing of
letters of patent, copyright applications or the like with respect
to such materials. All such filings shall be made, if possible, in
the name of the Corporation, at its expense. If such filings are
required after the termination of Employee's employment by the
Corporation, he shall receive reasonable compensation for his assistance.
If made during the term of his employment, Employee shall receive
no additional compensation therefor.
10. Assignment Prohibited. This Agreement is personal to each
of the parties hereto and neither party may assign or delegate any of
its rights or obligations hereunder without first obtaining the
written consent of the other.
11. Continuity of Contract. Corporation is prohibited from
merging or consolidating with any other corporation or business
or from selling its Businesses outright unless the succeeding or
surviving corporation or business expressly assumes the rights
and obligations of the Corporation herein set forth with amendment.
12. Amendments. No amendments or additions to this Agreement
shall be binding unless in writing and signed by both parties.
13. Governing Law. This Agreement shall be governed in all
respects by the laws of the State of New Jersey.
14. Paragraph Heading. The paragraph headings used in this
Agreement are included solely for convenience and shall not affect or
be used in connection with the interpretation of this Agreement.
15. Waiver, Modification, Cancellation. Any waiver,
alteration or modification of any of the provisions of this Agreement
or cancellation or replacement of this Agreement shall not be valid unless
in writing and signed by all of the parties hereto.
16. eirs and Successors. This Agreement shall be binding upon
the Corporation, Employee and their successors, heirs, assigns,
personal representatives and transferees.
17. Entire Agreement. This Agreement contains the entire
agreement of the parties regarding the subject matter hereof and
supersedes all prior agreements, understandings and negotiations
regarding the same.
18. Waiver. The waiver by either party of a breach of any
provisions contained herein must be in writing and shall in no
way be construed as a waiver of any succeeding breach of such
provision or the waiver of the provision itself.
19. Notice. Whenever under the provisions of this Agreement
notice is required to be given, it shall be in writing and shall be
deemed given when (i) hand delivered; (ii) delivered by overnight
courier; (iii) transmitted by facsimile transmission and first class
mail; or (iv) mailed, postage prepaid by registered or certified mail,
return receipt requested, addressed to the Corporation or Employee at
their addresses as set forth on the first page of this Agreement.
Either party hereto may change his or its address for purposes
of this Agreement by notification to the other party in accordance with
this Paragraph.
20. Arbitration. If either party feels that the other party
is in breach of this Agreement or any other dispute in connection with
this Agreement arises between the parties, such claim or dispute
shall be submitted to binding arbitration. Either party may
initiate arbitration by giving written notice to that effect to the
other party. Within ten (10) days after service of such written notice,
each party shall designate one arbitrator. The two arbitrators so
named shall designate a third arbitrator, who shall be an attorney
licensed to practice law in the State of New Jersey, to act as the
head arbitrator; provided, however, that should the partisan
arbitrators be unable to agree upon a third arbitrator, then the
third arbitrator shall be named by a Judge of the Superior Court
of New Jersey sitting in Bergen County or the American
Arbitration Association upon the application of either party.
The Arbitration shall be conducted in accordance with the
then prevailing rules of the American Arbitration Association. In
connection with the arbitration, the arbitrators shall, at the
request of either party, direct that discovery be provided.
If the arbitration concerns whether a termination of Employee's
Employment was for cause, the Corporation shall have the burden
of establishing that cause existed by a preponderance of the evidence.
In rendering their decision and award, the arbitrators shall not
add to, subtract form or otherwise modify the provisions of this
Agreement, but rather shall be bound thereby. Unless the
arbitrators expressly provide in their award for a different
allocation of costs and expenses, each party shall bear its own
costs and expenses in connection with the arbitration and the
costs and expenses of the arbitrators shall be borne equally.
Judgement upon the award rendered by the arbitrators may be
entered by any court having jurisdiction thereof. It is
expressly recognized, however, that no claim with respect to this
Agreement may be raised b either party unless such claim is raised
within two (2) years from the date on which the claim or cause
of action accrued.
21. Counterparts. The Agreement may be executed by the parties
hereto on any number of separate counterparts and all such counterparts
taken together shall constitute one and the same instrument. A
facsimile mail transmission of this document executed by a party
to this Agreement shall be treated as an original.
22. Attorney Review. Employee acknowledges that he has been
advised to have this Agreement reviewed by an Attorney at Law.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed effective as of the date first above written.
ATTEST: STERITEK, INC.
/s/ Albert J. Wozniak
- -------------- ----------------------
Albert J. Wozniak,
President and Chief
Executive Officer
WITNESS: EMPLOYEE
/s/ James K. Wozniak
- -------------- ----------------------
James K. Wozniak
<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, 1998 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-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 557,565
<SECURITIES> 0
<RECEIVABLES> 863,843
<ALLOWANCES> 7,098
<INVENTORY> 352,715
<CURRENT-ASSETS> 2,289,642
<PP&E> 3,868,825
<DEPRECIATION> 2,294,054
<TOTAL-ASSETS> 3,929,825
<CURRENT-LIABILITIES> 1,046,698
<BONDS> 669,102
0
0
<COMMON> 647,094
<OTHER-SE> 1,566,931
<TOTAL-LIABILITY-AND-EQUITY> 3,929,825
<SALES> 8,674,561
<TOTAL-REVENUES> 8,674,561
<CGS> 5,764,318
<TOTAL-COSTS> 5,764,318
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,295
<INCOME-PRETAX> 951,989
<INCOME-TAX> 26,613
<INCOME-CONTINUING> 925,376
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 925,376
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
