<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
Commission file number 0-12547
Steritek, Inc.
(Exact name of registrant as specified in its charter)
New Jersey 22-2243703
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
121 Moonachie Avenue
Moonachie, NJ 07074
(Address of principal executive offices)
(Zip Code)
(201) 460-0500
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13, or
15(d) of the Securities Exchange act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date: 3,586,285 shares of Common Stock on February 1, 1998
<PAGE>
INDEX
Page
Part I - Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets..................... 3
Consolidated Statements of Operations........... 4
Consolidated Statements of Cash Flows........... 6
Notes to Consolidated Financial Statements...... 7
Item 2. Management's Discussion and Analysis............. 8
Part II - Other Information....................................12
Signatures.....................................................13
<PAGE>
<TABLE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<CAPTION>
December 31, June 30,
1997 1997
----------- -------------
(Unaudited) (Derived from
Audited
Financial
Statements)
<S> <C> <C>
ASSETS
Current Assets:
Cash $384,285 $212,127
Trade accounts receivable, less allowance for
doubtful accounts of $4,895 877,838 904,425
Inventories 305,349 190,341
Prepaid expenses and other assets 57,960 79,719
Deferred tax asset 248,975 430,000
---------- ----------
Total current assets 1,874,407 1,816,612
Machinery and equipment 3,600,981 3,113,956
Less: accumulated depreciation and
amortization 2,233,178 2,057,921
---------- ----------
1,367,803 1,056,035
---------- ----------
Other assets
Security deposits 64,779 82,386
---------- ----------
64,779 82,386
---------- ----------
$3,306,989 $2,955,033
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable trade $694,572 $536,324
Accrued expenses 205,160 210,077
Current maturities of long-term debt 70,000 140,000
Current maturities of capital lease obligations 4,775 83,894
Loan payable - stockholder 150,000 100,000
Taxes payable 43,397 35,272
---------- ---------
Total current liabilities 1,167,904 1,105,567
---------- ----------
Long-term debt, excluding current maturities 560,000 560,000
Capital lease obligations, less current maturities 21,406 7,067
---------- ----------
Total liabilities 1,749,310 1,672,634
Shareholders' equity:
Preferred stock, no par value, authorized
2,000,000 shares; none issued
Common stock, no par value, authorized
5,000,000 shares; issued and outstanding
3,586,285 shares 640,844 640,844
Retained earnings 916,835 641,555
---------- ----------
Total shareholders' equity 1,557,679 1,282,399
---------- ----------
$3,306,989 $2,955,033
========== ==========
</TABLE>
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
(UNAUDITED)
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Six Months Ended
December 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Sales $4,318,553 $2,386,940
Cost of sales 2,584,422 1,191,518
---------- ----------
Gross profit 1,734,131 1,195,422
Selling, general and administrative expenses 1,245,877 1,242,659
---------- -----------
Operating income 488,254 (47,237)
Interest expense (31,948) (25,391)
---------- ----------
Income before provision for income taxes 456,306 (72,628)
---------- ----------
Provision for income taxes:
Provision for federal income taxes - deferred 139,957 0
Provision for state income taxes - deferred 41,068 0
--------- ----------
181,025 0
--------- ----------
Net income $275,281 ($72,628)
========== ==========
Weighted-average number of common shares
outstanding 4,001,285 3,586,285
========== ==========
Net income per common share $0.07 ($0.02)
========== ==========
</TABLE>
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
(UNAUDITED)
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
December 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Sales $2,307,871 $1,370,234
Cost of sales 1,386,487 669,081
---------- ----------
Gross profit 921,384 701,153
Selling, general and administrative expenses 624,259 636,213
---------- ----------
Operating income 297,125 64,940
Interest expense (15,927) (11,823)
---------- ----------
Income before provision for income taxes 281,198 53,117
---------- ----------
Provision for income taxes:
Provision for federal income taxes - deferred 92,153 7,370
Provision for state income taxes - deferred 25,308 3,984
---------- ----------
117,461 11,354
---------- ----------
Net income $163,737 $ 41,763
========== ==========
Weighted-average number of common shares
outstanding 4,001,285 3,586,285
=========== ==========
Net income per common share $0.04 $0.01
=========== ==========
</TABLE>
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
(UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Six Months Ended
December 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $275,281 ($72,628)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization of machinery
and equipment 175,257 170,313
Amortization of physicians fax database 0 50,080
Changes in operating assets and liabilities:
Decrease (increase) in trade accounts
receivable 26,587 55,479
(Increase) decrease in inventories (115,008) 4,500
Decrease (increase) in prepaid expenses
and other assets 39,366 6,556
Decrease in deferred tax asset 181,025 0
Increase (decrease) in state income
taxes payable 8,124 6,229
Increase (decrease) in accounts payable
and accrued expenses 153,331 (24,254)
---------- ----------
Net cash provided by operating
activities 743,963 196,275
---------- ----------
Cash flows from investing activities:
Collections on note receivable 0 1,233
Expenditures for purchase of machinery
and equipment (487,025) (101,918)
---------- ----------
Net cash used in investing activities (487,025) (100,685)
---------- ----------
Cash flows from financing activities:
Principal payments on long-term debt (70,000) (100,000)
Principal payments on capital lease obligations (64,780) (30,394)
Proceeds from officer's loan 50,000 0
---------- ----------
Net cash provided by (used in) financing
activities (84,780) (130,394)
---------- ----------
Net increase (decrease) in cash 172,158 (34,804)
Cash at beginning of period 212,127 296,429
---------- ----------
Cash at end of period $384,285 $261,625
========= ==========
Supplemental disclosures of cash flow
information:
Interest paid $31,948 $25,391
========== ==========
</TABLE>
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 1997
1. Basis of Presentation
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting only of
normally recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the
six month period ended December 31, 1997 are not necessarily
indicative of the results that may be expected for the year
ending June 30, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto
included in the Company's Form 10-K for the year ended June
30, 1997.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Six Months Ended December 31, 1997 as Compared to the Six Months
Ended December 31, 1996
Revenues for the six months ended December 31, 1997 increased to
$4,318,553 from $2,386,940 for the same period in 1996. Revenues for
the six months ended December 31, 1997 reflect an increased level of
activity in the Company's contract packaging and Physicians Fax Network
business. December 31, 1997 revenues included approximately:
(i) $3,933,740 from contract packaging, as compared to $2,147,658
for the same period in 1996; and (ii) $384,813 from the Physicians Fax
Network, as compared to $239,282 for the same period in 1996. The Company
has continued to aggressively market its contract packaging business
and its Physicians Fax Network.
The Company's cost of sales represented 59.8% of sales (or
$2,584,422) for the six months ended December 31, 1997, as compared
to 49.9% of sales (or $1,191,518) for the six months ended December
31, 1996. The increase in cost of sales, as a percent of sales, is a
result of the change in the mix of the products packaged by the
Company during the respective periods.
Selling, general and administrative expenses ("SG&A") for the
six months ended December 31, 1997 was 28.8% of sales (or $1,245,877),
as compared to 52.0% of sales (or $1,242,659) for the six months ended
December 31, 1996. SG&A, in dollar terms, remained relatively constant
during the two periods being compared.
The Company earned an operating profit for the six months ended
December 31, 1997 in the amount of $488,254 (or 11.3% of sales), as
compared to an operating loss of ($47,237) for the six months ended
December 31, 1996. The profit is principally attributable to the higher
level of sales.
There were no other material changes in the results of
operations in the Company's business.
Health care packaging services are typically provided by the
Company to its customers on an "as-needed" (purchase order-by-
purchase order) basis, and not pursuant to a long-term contract.
Because of the nature of the contract packaging business, the
Company's operating results can vary significantly from period to
period.
Three Months Ended December 31, 1997 as Compared to the Three Months
Ended December 31, 1996
Revenues for the three months ended December 31, 1997 were
$2,307,871 as compared to $1,370,234 for the same period in 1996.
Revenues for the three months ended December 31, 1997 included
approximately $2,071,613 from contract packaging and $236,258 from
the Physicians Fax Network. For the three months ended December
31, 1996, the Company derived approximately $1,281,453 in revenues
from contract packaging and $88,781 from the Physicians Fax
Network.
The Company's cost of sales were $1,386,487 (or 60.0% of sales)
for the three months ended December 31, 1997 as compared to $669,081
(or 48.8% of sales) for the three months ended December 31, 1996. The
increase in cost of sales, as a percent of sales, is a result of
the change in the mix of the products packaged by the Company
during the respective periods.
Selling, general and administrative expenses ("SG&A") for the
three months ended December 31, 1997 was $624,259 (or 27.0% of sales)
as compared to $636,213 (or 46.0% of sales) for the three months
ended December 31, 1996. SG&A, in dollar terms, remained relatively
constant between the two periods.
Operating income for the three months ended December 31, 1997
was $297,125 (or 12.9% of sales), as compared to income of $64,940
(or 4.7% of sales) for the three months ended December 31, 1996.
The increase in operating income is principally attributable to
the higher revenues for the period ended December 31, 1997.
There were no other material changes in the results of
operations in the Company's business.
Liquidity and Capital Resources
The Company's working capital on December 31, 1997 was $706,503,
as compared to $711,045 on June 30, 1997. The principal changes
in the components of working capital are the increases in the Company's
accounts receivable as a result of higher sales volume, and a related
increase in trade accounts payable.
On June 17, 1997, the Company borrowed $700,000 from the Bank
of New York, payable monthly until June 17, 2002, at prime plus 1%.
The monthly payments are $11,666.67 of principal plus interest.
The proceeds of this borrowing were used to retire prior indebtedness
of the Company, and to provide working capital for operations.
On April 30, 1997, the Company borrowed $50,000 from Albert J.
Wozniak, the Chairman and Chief Executive Officer of the Company.
The loan bears interest at 8.5% per annum, and is payable by the
Company on demand. On May 31, 1997, the Company borrowed an
additional $50,000 from Mr. Wozniak. The May 31, 1997 loan bears
interest at 8.5% per annum, and is payable by the Company on demand.
On September 30, 1997, the Company borrowed an additional $50,000 from
Mr. Wozniak. The September 30, 1997 loan bears interest at 8.5% per
annum, and is payable by the Company on demand. It is anticipated that
the loans will be repaid when the Company's cash position improves.
All loans bear the same terms and conditions. The proceeds of the
loans were used by the Company for working capital purposes.
The Company believes that funding for anticipated operations
and capital needs will come from existing working capital and
anticipated future operations.
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
<PAGE>
STERITEK, INC. AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Steritek, Inc.
By/s/ James K. Wozniak
James K. Wozniak, Vice President,
Chief Financial Officer and
Secretary (principal financial
and accounting officer)
Date: February 17, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STERITEK,
INC. AND SUBSIDIARY (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS
INCLUDED IN ITS FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 384,285
<SECURITIES> 0
<RECEIVABLES> 877,838
<ALLOWANCES> 4,895
<INVENTORY> 305,349
<CURRENT-ASSETS> 1,874,407
<PP&E> 3,600,981
<DEPRECIATION> 2,233,178
<TOTAL-ASSETS> 3,306,989
<CURRENT-LIABILITIES> 1,167,904
<BONDS> 581,406
0
0
<COMMON> 640,844
<OTHER-SE> 916,835
<TOTAL-LIABILITY-AND-EQUITY> 3,306,989
<SALES> 2,307,871
<TOTAL-REVENUES> 2,307,871
<CGS> 1,386,487
<TOTAL-COSTS> 1,386,487
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,927
<INCOME-PRETAX> 281,198
<INCOME-TAX> 117,461
<INCOME-CONTINUING> 163,737
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 163,737
<EPS-PRIMARY> .05
<EPS-DILUTED> .04
</TABLE>
