SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by Registrant [X]
Filed by a Party other than a Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14-12
Steritek, Inc.
(Name of Registrant as Specified In Its Charter)
Board of Directors of Steritek, Inc.
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
STERITEK, INC.
121 Moonachie Avenue
Moonachie, New Jersey 07074
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
on
April 9, 1998
Notice is hereby given that the Annual Meeting of Shareholders of
Steritek, Inc., a New Jersey corporation (the "Company"), will be held at
the offices of Steritek, Inc., 121 Moonachie Avenue, Moonachie, New Jersey
07074 on Thursday, April 9, 1998 at 10:00 a.m., local time, for the
following purposes:
1. To elect two directors to serve until the next annual meeting of
shareholders; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on March 11,
1998 are entitled to notice of, and to vote at, the meeting or any
adjournment thereof.
A copy of the Annual Report of Steritek, Inc. for the fiscal year ending
June 30, 1997 is enclosed with this Notice, the attached Proxy Statement and
accompanying proxy card.
All shareholders are urged to attend the meeting in person or by proxy.
By Order of the Board of Directors,
Albert J. Wozniak
President
March 17, 1998
Moonachie, New Jersey
KINDLY MARK, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE IF YOU CANNOT ATTEND IN PERSON.
<PAGE>
STERITEK, INC.
121 Moonachie Avenue
Moonachie, New Jersey 07074
____________________
PROXY STATEMENT
____________________
SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Steritek, Inc., a New Jersey
corporation (the "Company"), for use at the Annual Meeting of Shareholders
of the Company (the "Annual Meeting") which will be held at 10:00 A.M.,
local time, on Thursday, April 9, 1998, at the offices of Steritek,
Inc., 121 Moonachie Avenue, Moonachie, New Jersey 07074, and at any
adjournment of that meeting, for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders. This Proxy Statement, the
accompanying proxy card, and the Company's Annual Report to Shareholders are
being sent to shareholders on or about March 17, 1998. The Company's
principal executive offices are located at 121 Moonachie Avenue, Moonachie,
New Jersey 07074.
Shares of common stock represented by properly executed proxy cards
received by the Company at or prior to the meeting will be voted in
accordance with the instructions indicated on the proxy card. Unless
contrary instructions are given, the persons named on the proxy card intend
to vote the shares so represented FOR the election as a director of each
nominee named in this Proxy Statement. As to other business which may
properly come before the meeting, the persons named on the proxy card will
vote according to their best judgment.
A proxy may be revoked at any time before it is voted at the Annual
Meeting (1) by a duly executed proxy bearing a later date, (2) by a written
revocation addressed to the Secretary of the Company at the address above,
or (3) by voting by ballot at the Annual Meeting.
The cost of preparing, assembling and mailing this proxy soliciting
material and Notice of Annual Meeting of Shareholders will be borne by the
Company. Additional solicitation by mail, telephone, telecopier or by
personal solicitation may be done by directors, officers and regular
employees of the Company, for which they will receive no additional
compensation. Brokerage houses and other nominees, fiduciaries and
custodians nominally holding shares of the Company's common stock as of the
record date will be requested to forward proxy soliciting material to the
beneficial owners of such shares, and will be reimbursed by the Company for
their reasonable expenses.
VOTING SECURITIES
At the close of business on March 11, 1998, the record date for the
determination of shareholders entitled to notice of, and to vote at, the
meeting, the Company had outstanding 3,586,285 shares of common stock,
without par value ("Common Stock"). The Company has no other class of stock
outstanding.
Each share is entitled to one vote on all matters presented at the
Annual Meeting. The nominees for directors who receive a plurality of the
votes cast by the holders of the Common Stock entitled to vote at the
meeting will be elected. The adoption of other proposals, if any, will
require the affirmative vote of the holders of a majority of the Common
Stock voted on such proposal. The presence in person or by proxy of the
holders of a majority of the shares of Common Stock of the Company issued
and outstanding and entitled to vote at the Annual Meeting constitutes a
quorum. Abstentions will be treated as shares that are present and entitled
to vote for the purposes of determining the presence of a quorum but as
unvoted for purposes of determining the approval of any matter submitted to
the shareholders for a vote. Broker non-votes of shares will not be
considered as present and entitled to vote with respect to a matter.
ELECTION OF DIRECTORS
Two directors are to be elected at the Annual Meeting, each to serve
until the next annual meeting and until his successor shall have been
elected and qualified. Each of the nominees named below is presently a
member of the Board. There are, as of the date hereof, five vacancies on the
Board of Directors. The Company has not yet identified nominees to fill
these vacancies. Proxies cannot be voted for a greater number of persons
than the number of nominees named. The nominees for directors who receive
a plurality of the votes cast by the holders of the Common Stock entitled to
vote at the meeting will be elected.
Votes pursuant to the accompanying proxy will be cast, unless otherwise
indicated on the proxy card, for the re-election of each of Albert J.
Wozniak and James K. Wozniak. In case any of the nominees should
become unavailable for election for any reason not presently
known or contemplated, the persons named on the proxy card will
have discretionary authority to vote pursuant to the proxy for
a substitute.
Set forth below is the name, principal occupation and age of each
nominee for election as director, as well as certain information relating to
other positions held by them with the Company and other companies. Except
as otherwise indicated, the information set forth below as to principal
occupation is for at least the last five years. The family relationships
among the directors and officers of the Company are described below.
Nominee for Re-Election As A Director
Name Age Experience
Albert J. Wozniak 58 Chairman of the Board, Chief Executive
Officer and President of the Company.
Albert J. Wozniak is the father of
James K. Wozniak.
James K. Wozniak 34 Director, Vice President and
Secretary. James K. Wozniak is the
son of Albert J. Wozniak.
Albert J. Wozniak is also an executive officer of the Company.
Executive officers are elected by, and serve at the discretion of, the Board.
Recommendation of the Board
The Board of Directors recommends that shareholders vote in favor of the
re-election of each of Albert J. Wozniak and James K. Wozniak as a director.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 1, 1997,
certain information with respect to the beneficial ownership of
the Common Stock of the Company as to each director and nominee
of the Company, each person known by the Company to own
beneficially more than 5% of its Common Stock, each executive
officer, and all directors and executive officers of the Company
as a group.
<TABLE>
<CAPTION>
Shares
Beneficially Percent
Name and Address Owned(1) Owned
- ---------------- ------------- ------
<S> <C> <C>
Albert J. Wozniak................... 2,230,650(2) 58.68%
Steritek,Inc.
121 Moonachie Ave.
Moonachie, NJ 07074
Redemptorist Fathers of New York... 356,639 9.94%
c/o Citibank N.A.
111 Wall Street
New York, NY 10043
James K. Wozniak.................... 67,000(3) 1.83%
All directors and officers
as a group (2 persons)............ 2,297,650(4) 59.43%
</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 215,000 shares of Common Stock of the Company that
may be acquired within 60 days upon the exercise of options. This
amount does not include approximately 467,478 shares of Common Stock
which Mr. Wozniak may purchase from certain shareholders in negotiated
transactions.
(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 280,000 shares of Common Stock of the Company that
may be acquired by directors and officers within 60 days upon the
exercise of options.
<PAGE>
Compliance With Section 16(a) of the
Securities Exchange Act of 1934
The Federal securities laws require the Company's directors and
executive officers, and persons who own more than 10% of a registered class
of the Company's equity securities, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership
of any equity securities of the Company.
To the Company's knowledge, based solely on the review of the copies of
such reports furnished to the Company and written representations from
reporting persons with respect to fiscal year ending June 30, 1997, the
Company believes that during such fiscal year all persons subject to these
reporting requirements filed the required reports on a timely basis.
Board Meetings and Committees
The Board of Directors met two times during the fiscal year ended June
30, 1997. Each of the Company's current directors attended all of the
meetings of the Board. There were no meetings held by committees of the
Board during the fiscal year ended June 30, 1997.
The Board of Directors has organized two Committees: the Audit Committee
and the Compensation Committee. The principal functions of the
Audit Committee are to periodically meet with the Company's
independent public accountants to discuss certain accounting and
internal control and other matters deemed important by it, and such
other duties and powers as the Board may delegate. The
Compensation Committee is responsible for recommending to the Board the
compensation of the officers of the Company, determination of bonuses to
employees, and the award of stock options and the administration of the
stock option plan, and such other duties and powers as the Board may
delegate. Neither committee is active.
EXECUTIVE COMPENSATION
Set forth below is disclosure of all plan and non-plan
compensation awarded to, earned by, or paid to the named
executive officer by any person for all services rendered in all
capacities to the Company and its subsidiaries, unless otherwise
specified.
<TABLE>
Summary Compensation Table
The table below sets forth information concerning
compensation paid to the named executive officer during the last
fiscal year.
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------------ --------
Other
Name and Annual Restrct All
Principal Fiscal Salary Bonus Comp. Stock Options LTIP Other
Position Year ($) ($) ($) Awrds (#) Payout Comp.
- --------- ------ ------ ----- ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Albert J. 1997 250,000 - - - - - -
Wozniak 1996 200,000 - - - 20,000 - -
Chairman, 1995 238,000 - - - - - -
CEO and
President
</TABLE>
<TABLE>
Aggregate Options Exercised in Last Fiscal Year
and Fiscal Year-End Option Values
The table below sets forth information concerning exercises
of stock options by the named executive officers during the last
fiscal year and the fiscal year-end value of the named executive
officer's unexercised options.
<CAPTION>
Number of Value of
Unexercised Unexercised
Options at In-the-Money
FY-End Options at
Shares Value (#) FY-End ($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
---- ------------ --------- ------------- -------------
<S> <C> <C> <C> <C>
Albert J. - - 215,000/-0- $0/0
Wozniak
</TABLE>
Compensation of Directors
Directors are awarded options to purchase Common Stock of the Company
pursuant to the Stock Option Plan for their services as a director. For the
fiscal year ended June 30, 1994, each director was awarded options to
purchase 10,000 shares of Common Stock at the fair market value on the date
of grant for services as a director. During the fiscal year ended June 30,
1995, no director was awarded options to purchase shares of Common Stock.
For the fiscal year ending June 30, 1996, each of the five directors have
been awarded options to purchase 20,000 shares of Common Stock, at an
exercise price of $0.25 per share, which price the Board has determined to be
fair market value on the date of the grant. No options have been awarded
since then. Under the terms of the Stock Option Plan, the maximum amount of
options awarded to a director in a year, for his or her services as such,
cannot exceed options to purchase 35,000 shares of Common Stock.
Employment Contracts
No executive officer of the Company is a party to an
employment agreement, termination of employment or change in
control arrangement, or any other compensatory plan or
arrangement.
Stock Option Plan
The Steritek, Inc. Stock Option Plan (the "Plan"), authorizes
the granting of either Incentive Stock Options or Nonqualified
Stock Options to acquire in the aggregate up to 550,000 shares of
the Company's Common Stock. The shares available for issuance
will be increased or decreased according to any reclassification,
recapitalization, stock split, stock dividend or other such
subdivision or combination of the Company's Common Stock. The
following description of certain provisions of the Plan is
qualified in its entirety by reference to the Plan which is
available from the Company upon request.
Eligibility. Any person, including officers and directors,
employed by the Company or any parent or subsidiary of the
Company shall be eligible to receive Incentive Stock Options
under the Plan. Approximately 250 persons are eligible to
receive Incentive Stock Options as of September 1, 1997. Any
employee who owns ten percent or more of the total combined
voting power of all classes of the Company's voting stock shall
be eligible to receive Incentive Stock Options only under certain
limited circumstances. Additionally, the Plan permits
Nonqualified Stock Options to be granted to directors,
consultants, independent contractors and agents as well as
employees. An indeterminate number of persons are eligible
to receive Nonqualified Stock Options as of September 1, 1997. Each
director shall not, however, be eligible to receive stock options to
purchase more than 35,000 shares of Common Stock per year, subject to
such further terms and conditions as are contained in the Plan. It is
the present intent of the Company to satisfy the regulations
promulgated under Rule 16(b) of the Securities Exchange Act of
1934, as amended, insofar as such rules relate to participation
in the Plan by directors who are disinterested administrators, as
such term is defined therein. In connection therewith, the
Company may request a No-Action Letter from the Division of
Corporate Finance of the Securities and Exchange Commission and,
consequently, may modify the terms under which directors
participate in the Plan. The Board of Directors of the Company
will determine who should be granted stock options under the
Plan.
Exercise Price of Options. Options granted pursuant to the
Plan must have an exercise price equal to the fair market value
of the Company's Common Stock at the time the option is granted,
except that in the case of an Incentive Stock Option the price
shall be at least 110 percent of the fair market value where the
option is granted to an employee who owns more than ten percent
of the total combined voting power of all classes of the
Company's voting stock. The average bid and asked prices of the
Company's Common Stock is not updated by the National Quotation Service,
Inc. The last reported transaction in the Company's Common Stock,
which occurred in July 1997, was at $.25 per share. Under the terms
of the Plan, the aggregate fair market value of the stock with
respect to which Incentive Stock Options are exercisable for the first
time by an individual during any calendar year shall not exceed $100,000.
Terms. All options available to be granted under the Plan
must be granted by January 1, 2002. The Board of Directors will
determine the actual term of the options but no option will be
able to be exercised after the expiration of ten years from the
date of its grant. No Incentive Stock Option granted to an
employee who owns more than ten percent of the combined voting
power of all the outstanding classes of stock in the Company may
be exercised after five years from the date of grant.
The options granted pursuant to the Plan shall not be
transferable except by will or by the laws of descent and
distribution.
Exercise of Options. Incentive Stock Options granted to
employees under the Plan may be exercised only by the employee
during his employment with the Company or for a period not
exceeding three months after voluntary termination, or for a
period not exceeding one year if the employee ceased employment
because of permanent and total disability within the meaning of
Section 105(d)(4) of the Internal Revenue Code of 1986, as
amended, but such options may be exercised by the employee's
estate, or by any person who acquired the right to exercise such
option by bequest or inheritance from the employee for a period
of twelve months from the date of the employee's death. If such
option shall by its terms sooner expire, such options shall not
be extended as a result of the employee's death. All options
granted pursuant to the Plan must be exercised within ten years
from the date of the grant. Incentive Stock Options granted to
an employee who is the beneficial owner of ten percent or more of
the total combined voting power of all classes of the Company's
stock, or of any parent or subsidiary, must exercise such options
within five years from the date such option is granted. Options
granted under the Plan need not be exercised in the order in
which they are granted. If employment is terminated for cause or
without consent of the employee, the options granted pursuant to
the Plan shall immediately terminate.
Tax Consequences Of Stock Options
Incentive Stock Options
Certain options granted under the Plan are intended to
qualify as incentive stock options ("Incentive Stock Option")
within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended ("Code"). Set forth below is a general summary
of certain of the principal Federal income tax consequences to
participants and the Company of Incentive Stock Options granted
under the Plan.
An employee to whom an Incentive Stock Option is granted
pursuant to the Plan will not recognize any compensation income
(for regular tax purposes), and the Company will not be entitled
to a compensation deduction, at the time an Incentive Stock
Option is granted or at the time an Incentive Stock Option is
exercised. However, in the year of exercise the amount by which
the fair market value of the Common Stock at the time of exercise
exceeds the option price will generally be included in the
optionee's computation of alternative minimum taxable income.
The amount included in income will be added to the optionee's
basis in the shares received for minimum tax computation
purposes. If the employee incurs the alternative minimum tax,
however, he or she should qualify for the credit for prior year
minimum tax liability in the first future year he or she has
regular tax liability.
In order to obtain Incentive Stock Option treatment for
Federal income tax purposes upon the subsequent sale (or other
disposition) by the optionee of the shares of Common Stock
received upon exercise of the option, the sale (or other
disposition) must not occur with two years from the date the
option was granted nor within one year after the transfer of such
shares upon exercise of the option (the "ISO holding period
requirement"). If the ISO holding period requirements are
satisfied, on the subsequent sale (or other disposition) by the
optionee of the shares of Common Stock received upon the exercise
of an option, the optionee generally will recognize income from
the sale of a capital asset equal to the difference, if any,
between the proceeds realized from the sale (or other
disposition) and the amount paid as the exercise price of the
option. On the other hand, if the ISO holding period
requirements are not satisfied, on the subsequent sale (or other
disposition) by the optionee of the shares of Common Stock
received upon the exercise of the option ("Disqualifying
Disposition"), the optionee generally will recognize income
taxable as compensation, and the Company will be entitled to a
compensation deduction (provided certain withholding requirements
are met), in an amount equal to the lesser of (a) the difference,
if any, between the fair market value of the shares on the date
of exercise and the amount paid as the exercise price of the
option, or (b) the difference, if any, between the proceeds
realized from the sale or other disposition and the amount paid
as the exercise price of the option. Any additional gain
realized on a Disqualifying Disposition (in addition to the
compensation income referred to above) would generally give rise
to income from the sale of a capital asset and taxed accordingly.
The tax basis of the shares of Common Stock received by the
optionee will be equal to the amount paid as the exercise price
plus the amount, if any, includable in his or her gross income as
compensation in the event of a Disqualifying Disposition. The
holding period for the shares will commence on the date of
exercise of the Incentive Stock Option.
Nonqualified Stock Options
Certain options to purchase Common Stock issued under the
Plan may not be intended to qualify as Incentive Stock Options
within the meaning of Section 422 of the Code. As such, the
options are generally referred to as Nonqualified Stock Options.
Set forth below is a general summary of certain of the principal
Federal income tax consequences to participants and the Company
of Nonqualified Stock Options.
An individual to whom a Nonqualified Stock Option is granted
will generally not recognize any compensation income, and the
Company will not be entitled to a compensation deduction, at the
time the Nonqualified Stock Option is granted (even if the option
price is less than the fair market value of the Common Stock at
the time of the grant). In the year of exercise or, if later,
the year in which the six month period prescribed by Section
16(b) of the Securities Exchange Act of 1934 ("Section 16(b)"),
if applicable, expires, the optionee generally will recognize
income taxable as compensation and, provided the Company meets
the applicable withholding requirements, the Company will be
entitled to a compensation deduction, in an amount equal to the
difference (if any) between the fair market value of the shares
on the date of exercise (or, if applicable, the date any Section
16(b) restrictions expire) and the amount paid as the exercise
price of the option.
An optionee who is a director or officer of the Company
within the meaning of Section 16(b), or who is otherwise subject
to Section 16(b), will be required to defer the recognition of
income on the purchase of shares pursuant to Nonqualified Stock
Options until the Section 16(b) restrictions expire. He or she
may consider electing to disregard the Section 16(b) restrictions
for tax purposes pursuant to Section 83(b) of the Code. Under
this election, the amount will be included in income in the year
of exercise (which may not be the year the Section 16(b)
restrictions lapse) and will be measured by the difference
between the option price and fair market value when the Section
16(b) restrictions lapse.
The tax basis of the shares of Common Stock received by the
optionee upon exercise will be equal to the amount paid as the
exercise price plus the amount, if any, includable in his or her
gross income as compensation. The holding period for the shares
will commence just after the exercise of the Nonqualified Stock
Option or, if applicable, just after the date the Section 16(b)
restrictions expire.
On the subsequent sale (or other disposition) by the optionee
of the shares of Common Stock received upon the exercise of the
option, any gain or loss realized on such sale or disposition
will generally give rise to gain or loss from the sale of a
capital asset and taxed accordingly.
Stock Options Issued by the Company
The following table sets forth, as to certain executive
officers of the Company and as to all executive officers of the
Company as a group, the total number of options granted between
June 20, 1992, the date of adoption of the plan, and June 30,
1997 and the average exercise price of such options. No options
granted by the Company have been exercised as of September 1,
1997. Options to purchase 45,000 shares have been cancelled. On
February 5, 1997, the Board of Directors approved repricing of
options to purchase 80,000 shares, at exercise prices of $1.00
to $1.50 to a new exercise price of $0.125.
<TABLE>
<CAPTION>
Options granted during period
----------------------------------
Name of individual Per share
or number in group Number of shares Exercise Price
- ------------------ ---------------- --------------
<S> <C> <C>
Albert J. Wozniak (1).......... 35,000 $ .50
Chairman, CEO and President 145,000 $1.50
20,000 $ .25
15,000 $ .125
James K. Wozniak (2)........... 35,000 $ .50
Director, VP and Secretary 20,000 $ .25
10,000 $ .125
Non-Executive Director Group... 35,000 $ .50
20,000 $ .25
10,000 $ .125
Employee Group................. 70,000 $ .125
</TABLE>
- -----------------------
(1) Albert J. Wozniak is the only Executive Officer.
(2) James K. Wozniak is the only Non-Executive Officer.
INDEPENDENT AUDITORS
The Board of Directors has selected I. Weismann Associates to
serve as independent accountant for the Company's fiscal year ending
June 30, 1998. A representative of I. Weismann Associates is not
expected to be present at the Annual Meeting of Shareholders.
MISCELLANEOUS
The Company does not know of any business other than that described
above to be presented for actions to the stockholders at the meeting, but it
is intended that the proxies will be exercised upon any other matters and
proposals that may legally come before the meeting and any adjournments
thereof in accordance with the discretion of the persons named therein.
The Annual Report of the Company for the fiscal year ending June 30,
1997, including audited financial statements, has been furnished to all
persons who were shareholders of the Company on the record date for the
Annual Meeting of Shareholders.
PROPOSALS OF SECURITY HOLDERS
A proposal of a security holder intended to be presented at the next
annual meeting of shareholders and to be included in the proxy statement and
form of proxy relating to that meeting must be received at the Company's
principal executive offices at 121 Moonachie Avenue, Moonachie, New Jersey
07074, on or before September 30, 1998.
<PAGE>
STERITEK, INC.
PROXY
The undersigned hereby appoints Albert J. Wozniak and James K. Wozniak, and
each of them, with full power of substitution as proxies for the undersigned,
to attend the Annual Meeting of Shareholders of Steritek, Inc. ("Company") to
be held at the offices of the Company at 121 Moonachie Avenue, Moonachie, New
Jersey 07074 on Thursday, April 9, 1998 at 10:00 a.m. local time, and at
any adjournments thereof, and to vote the number of shares of Common Stock
of the Company that the undersigned would be entitled to vote, and with all
the power the undersigned would possess, if personally present, as follows:
1. The election of two nominees as directors to serve until the next annual
meeting of shareholders:
Vote Nominee
[ ] For [ ] Against [ ] Withhold Authority Albert J. Wozniak
[ ] For [ ] Against [ ] Withhold Authority James K. Wozniak
2. In their discretion, on such other business as may properly come before
the meeting or any adjournment thereof.
[ ] For [ ] Against [ ] Abstain
(Continued on the other side)
<PAGE>
(Continued from other side)
THE PROXIES WILL VOTE AS SPECIFIED ABOVE, OR IF A CHOICE IS NOT SPECIFIED,
THEY WILL VOTE FOR THE ELECTION OF ALL THE NOMINEES AS DIRECTORS AND FOR THE
PROPOSAL LISTED IN ITEM 2.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY.
Receipt of Notice of Annual Meeting
of Shareholders and Proxy Statement
dated March 17, 1998 is hereby
acknowledged:
Dated: , 1998
Signature(s)
(Please sign exactly as your name or names
appear hereon, indicating where proper,
official position or representative capacity.)
STERITEK, INC.
ANNUAL REPORT
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 providing 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, through its Physicians Fax
Network, also provides certain health care companies and others with a means
of communicating with physicians via electronic facsimile transmission.
The Company's strategy is to continue to enhance its core
business of contract packaging while developing its Physicians Fax
Network.
Description of the Business
The Contract Packaging Business
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 Physicians Fax Network
The Company, through its Physicians Fax Network, facilitates the
communication between certain health care companies, regulatory agencies, and
others, with physicians. Historically, this communication has been
accomplished by time consuming and costly mailings. The Company, however,
now offers such persons the ability to send communications to physicians, at
their offices during off-peak hours, via electronic facsimile transmission
("fax"), instead of the mail. This procedure provides immediate and cost
effective communication to physicians, and also provides the sender with
documentation that the communication was sent and received. The Physicians
Fax Network is able to broadcast documents to hundreds of thousands of
locations overnight. The Company believes that this service is particularly
useful for drug manufacturers to send new drug, recall and other priority
medical communications, as well as to facilitate other agencies, such as the
American Medical Association ("AMA"), communication with physicians.
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.
<TABLE>
============================================================================
STERITEK, INC. & SUBSIDIARY
SELECTED FINANCIAL DATA
===========================================================================
<CAPTION> For the Years Ended June 30,
_________________________________________________________
1997 1996(1) 1995 1994 1993
=============================================================================
OPERATING DATA:
<S> <C> <C> <C> <C> <C>
Sales $4,907,504 $4,714,542 $5,095,103 $3,443,986 $5,618,649
Costs of Sales 2,891,755 2,731,128 2,654,980 2,161,694 2,936,406
S G & A 2,200,257 2,392,864 1,975,165 2,095,596 1,984,263
Operating Income
(loss) (184,478) (409,450) 464,958 (813,304) 697,980
Income (loss) from
contin. operations 140,192 (523,882) 212,112 (1,037,968) 312,573
Income (loss) from
discont. operations (67,427) 45,344 (66,738) (2,169) 115,955
Net Income(loss)(2) 72,765 (478,538) 145,374 (1,040,137) 428,528
Net Income (loss)
per share .02 (.13) .04 (.29) .12
BALANCE SHEET DATA:
Assets $2,955,033 $2,309,256 $2,977,254 $2,940,774 $3,960,287
Assets transferred
under contractual
agreement 0 68,660 75,700 110,565 144,942
Net assets of
discont. operations 0 0 241,178 287,057 410,723
Current
Liabilities 1,105,567 666,964 862,899 1,097,977 835,685
Long-term debt
and capital lease
obligations,
excl. current
maturities 567,067 432,658 426,183 300,000 571,667
Shareholders'
Equity 1,282,399 1,209,634 1,688,172 1,542,798 2,552,935
Working Capital 711,045 344,973 435,939 327,135 1,000,603
- -----------------------------
</TABLE>
(1) On October 6, 1995, the Company sold all of the assets
used directly and exclusively in its ICP business and all
of its assets, subject to all of its liabilities, in its
EMS business (i.e., the BioMedical Services business).
Operating results of the Biomedical Services business for
the period July 1, 1995 to October 6, 1995 are shown
separately in the income statement. The income statement
for the years ended June 30, 1995, 1994 and 1993 have
been restated and operating results of the discontinued
operations are also shown separately. See Note 1 of the
Notes to Consolidated Financial Statements.
(2) In July 1991, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income
Taxes." The effect of this change increased net income by
$862,000 ($.24 per share) for the fiscal year ended June 30,
1992. For the fiscal year ended June 30, 1994, the Company
adjusted the deferred tax asset, resulting in an increase in
net loss by $214,500 (($.06) per share). For the fiscal year
ended June 30, 1996, the Company adjusted the deferred tax
asset, resulting in an increase in net loss by $100,000
(($.03) per share). For the fiscal year ended June 30, 1997,
the Company adjusted the deferred tax asset, resulting in
a decrease in net loss by $361,400 ($.10 per share). See
Note 9 of the Notes to Consolidated Financial Statements.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The Management's Discussion and Analysis of Financial Condition
and Results of Operations set forth below is based upon the restated
income statement for the years ended June 30, 1995 and 1994 as a result
of the October 6, 1995 sale by the Company of its BioMedical Services
business. Operating results of the BioMedical Services business for
the period July 1, 1995 to October 6, 1995 are shown separately in the
income statement. See Note 1 to the Notes to Consolidated Financial
Statements.
Year Ended June 30, 1997 as Compared to the Year Ended June 30,
1996
Revenues from continuing operations for the year ended
June 30, 1997 increased to $4,907,504 from $4,714,542 for the same
period in 1996. Revenues for the year ended June 30, 1996 included
$4,145,242 from contract packaging and $569,300 from the Physicians
Fax Network. Revenues for the year ended June 30, 1997 included
$4,309,091 from contract packaging and $598,413 from the Physicians
Fax Network. The increase in contract packaging revenues is principally
due to a higher level of contract packaging activity. The Company
has continued to aggressively market its contract packaging business
and its Physicians Fax Network.
The Company's cost of sales represented 57.9% of sales
(or $2,731,128) for the year ended June 30, 1996, as compared to
58.9% of sales (or $2,891,755) for the year ended June 30, 1997. The
increase in cost of sales, as a percent of sales, is a result of the
change in the mix of the products packaged by the Company during the
respective periods.
Selling, general and administrative expenses ("SG&A")
for the year ended June 30, 1996 was $2,392,864 (or 50.7% of sales), as
compared to $2,200,257 (or 44.8% of sales) for the year ended June
30, 1997. The decrease in SG&A is principally a result of the
Company's overall cost reduction efforts.
Operating loss for the year ended June 30, 1996 was $409,450
as compared to a loss of $184,478 for the year ended June 30, 1997.
The decrease in operating loss is principally attributable to the
decrease in SG&A.
In July 1991, the Company adopted Statement of Financial
Accounting Standards No. 109 ("FAS 109"), "Accounting for Income
Taxes." The adoption of FAS 109 changed the Company's method of
accounting for income taxes from the deferred method (Accounting
Principles Board Opinion 11) to an asset and liability approach.
In the fourth quarter of the fiscal year ended June 30, 1996, the
Company revised its estimate of the valuation allowance for income
taxes and recognized an adjustment amounting to $100,000 (($.03)
per share) to reduce the previously reported deferred tax asset.
For the fiscal year ended June 30, 1997, the Company adjusted
the deferred tax asset, resulting in a decrease in net loss
by $361,400 ($.10 per share). See Note 9 to the Notes to
Consolidated Financial Statements.
There were no other material changes in the results of
operations in the Company's business.
Health care packaging services are typically provided
by the Company to its customers on an "as-needed" (purchase
order-by-purchase order) basis, and not pursuant to a long-term
contract. Because of the nature of the contract packaging business,
the Company's operating results can vary significantly from period
to period.
Year Ended June 30, 1996 as Compared to the Year Ended June 30,
1995
Revenues for the year ended June 30, 1996 decreased to
$4,714,542 from $5,095,103 for the same period in 1995. Revenues
for the year ended June 30, 1996 include $4,145,242 from contract
packaging and $569,300 from the Physicians Fax Network. Revenues
for the year ended June 30, 1995 included $4,851,403 from contract
packaging and $243,700 from the Physicians Fax Network. The
decrease in contract packaging revenues is principally due to a
lower level of contract packaging activity. The Company has continued
to aggressively market its contract packaging business and its
Physicians Fax Network.
The Company's cost of sales represented 57.9% of sales
(or $2,731,128) for the year ended June 30, 1996, as compared to
52.1% of sales (or $2,654,980) for the year ended June 30, 1995. The
increase in cost of sales, as a percent of sales, is a result of the
change in the mix of the products packaged by the Company during the
respective periods.
Selling, general and administrative expenses ("SG&A")
for the year ended June 30, 1996 was $2,392,864 (or 50.7% of sales), as
compared to $1,975,165 (or 38.8% of sales) for the year ended June
30, 1995. The increase in SG&A is principally a result of the addition
of staff and increased sales efforts to market and sell the Company's
contract packaging services and Physicians Fax Network.
Operating loss for the year ended June 30, 1996 was $409,450
as compared to income of $464,958 (9% of sales) for the year ended
June 30, 1995. The decrease in operating income is principally
attributable to the increase in SG&A and the lower gross profit
margins in the contract packaging business.
On or about October 6, 1995, Sterimed, Inc. ("Sterimed"), a
wholly-owned subsidiary of the Company, entered into an Asset
Sale/Purchase Agreement with RAJ Communications, Ltd. ("RAJ"), John
Arnott and Rita Arnott. Pursuant to that agreement, Sterimed sold
to RAJ all of its assets, subject to certain of its liabilities, which
comprised the EMS business. The purchase price was $300,000, paid
in cash at closing. The gain on the disposal of Sterimed's business
was $39,998. See Note 1 of the Notes to Consolidated Financial
Statements.
On or about October 6, 1995, the Company also entered
into a separate Asset Sale/Purchase Agreement with RAJ, John
Arnott and Rita Arnott. Pursuant to that agreement, the Company sold
to RAJ all of its assets used directly and exclusively in its ICP
business. The purchase price was $300,000, and is to be paid in
consecutive monthly installments (without interest) commencing
October 15, 1995, each in the amount of 10% of the gross receipts of
the RAJ ICP business until paid in full. The sole source of payment
of such purchase price is the gross receipts from the ICP business.
A note receivable has not been recorded due to the uncertainty
of its collectibility. The Company has received only $5,000 in
payments against such purchase price as of June 30, 1996. See Note 1
of the Notes to Consolidated Financial Statements.
Year Ended June 30, 1995 as Compared to the Year Ended June 30,
1994
Revenues for the year ended June 30, 1995 increased to
$5,095,103 from $3,443,986 for the same period in 1994. Revenues
for the year ended June 30, 1995 included $4,851,403 from contract
packaging and $243,700 from the Physicians Fax Network. The
Company had no revenues from the Physicians Fax Network for the
fiscal year ended June 30, 1994. The increase in contract packaging
revenues is principally due to a higher level of contract packaging
activity.
The Company's cost of sales represented 52.1% of sales
(or $2,654,980) for the year ended June 30, 1995, as compared to 62.8%
of sales (or $2,161,694) for the year ended June 30, 1994. The
decrease in cost of sales, as a percent of sales, is a result of the change
in the mix of the products packaged by the Company during
the respective periods.
Selling, general and administrative expenses ("SG&A")
for the year ended June 30, 1995 was $1,975,165 (or 38.8% of sales),
as compared to $2,095,596 (or 60.8% of sales) for the year ended June
30, 1994. The decrease in SG&A as a percentage of sales is principally
due to the increase in sales revenues for the year ended June 30,
1995.
Operating income for the year ended June 30, 1995 was
$464,958 (or 9% of sales) as compared to a loss of $813,304 for
the year ended June 30, 1994. The increase in operating income is
principally attributable to the increase in the contract packaging
business and relative decrease in other costs and expenditures.
In July 1991, the Company adopted Statement of Financial
Accounting Standards No. 109 ("FAS 109"), "Accounting for Income
Taxes." The adoption of FAS 109 changed the Company's method of
accounting for income taxes from the deferred method (Accounting
Principles Board Opinion 11) to an asset and liability approach.
In the fourth quarter of the fiscal year ended June 30, 1994, the
Company revised its estimate of the valuation allowance for income
taxes and recognized an adjustment amounting to $214,500 ($.06 per
share) to reduce the previously reported deferred tax asset. See
Note 9 to the Notes to Consolidated Financial Statements.
Year Ended June 30, 1994 as Compared to the Year Ended June 30,
1993
Sales for the year ended June 30, 1994 decreased to
$3,443,986 from $5,618,649 for the same period in 1993. Revenues
for the year ended June 30, 1993 included approximately $3,400,000
from the packaging of Ciba-Geigy's smoking deterrent patch and
approximately $2,218,649 from other sources. For the year ended
June 30, 1994, the Company derived no revenues from packaging the
smoking deterrent patch, but increased its revenues from other sources
from $2,218,649 to $3,443,986.
The Company's cost of sales represented 62.8% of sales
(or $2,161,694) for the year ended June 30, 1994, as compared to 52.3%
of sales (or $2,936,406) for the year ended June 30, 1993. The
increase in cost of sales as a percentage of sales is due to a change
in the product mix, including a substantial reduction in the packaging
of the smoking deterrent patches.
Selling, general and administrative expenses ("SG&A")
for the year ended June 30, 1994 was 60.8% of sales (or $2,095,596), as
compared to 35.3% of sales (or $1,984,263) for the year ended June
30, 1993. The increase in SG&A in the amount of $111,333 is
principally attributable to the continued marketing and development
expenses associated with the Company's new marketing communication system
utilizing electronic facsimile transmission (the Physicians Fax
Network) and the continued marketing of the Healthy Care Pak.
Operating loss for the year ended June 30, 1994 was $813,304
as compared to operating income of $697,980 (12.4% of sales) for
the year ended June 30, 1993. The decrease in operating income is
principally attributable to the loss of Ciba-Geigy sales relating
to the smoking deterrent patch as well as the continued level of
expenditures in marketing and developing the Physician's Fax
Network and Healthy Care Pak without related sales revenues.
Liquidity and Capital Resources
The Company's working capital on June 30, 1997 was $711,045.
The Company's working capital on June 30, 1996, was approximately
$344,973. The principal changes in the components of working
capital are the increases in accounts receivable, inventories
and deferred tax asset.
On June 17, 1997, the Company borrowed $700,000 from the Bank
of New York, payable monthly until June 17, 2002, at prime plus 1%.
The monthly payments are $11,666.67 of principal plus interest.
The proceeds of this borrowing were used to retire prior indebtedness
of the Company, and to provide working capital for operations.
On April 30, 1997, the Company borrowed $50,000 from Albert J.
Wozniak, the Chairman and Chief Executive Officer of the Company.
The loan bears interest at 8.5% per annum, and is payable by the
Company on demand. On May 31, 1997, the Company borrowed an
additional $50,000 from Mr. Wozniak. The May 31, 1997 loan bears
interest at 8.5% per annum, and is payable by the Company on demand.
It is anticipated that the loans will be repaid when the
Company's cash position improves. The proceeds of the loans were
used by the Company for working capital purposes.
The Company believes that funding for anticipated operations
and capital needs will come from existing working capital and
anticipated future operations.
<PAGE>
<PAGE>
STERITEK, INC. AND SUBSIDIARY
JUNE 30, 1997
<PAGE>
STERITEK, INC. AND SUBSIDIARY
JUNE 30, 1997
CONTENTS
Report of Independent Certified Public Accountants
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
<PAGE>
I. WEISMANN ASSOCIATES
CERTIFIED PUBLIC ACCOUNTANTS
218 RIDGEDALE AVENUE
PO BOX 2207
MORRISTOWN, NJ 07962-2207
(201) 984-8900
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
STERITEK, INC. AND SUBSIDIARY
We have audited the Balance Sheets of Steritek, Inc. and
Subsidiary as of June 30, 1997, and the related Consolidated
Statements of Operations, Stockholders' Equity and Cash Flows for
the fiscal year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audit. The consolidated financial statements of Steritek, Inc.
and Subsidiary as of June 30, 1996 and 1995 were audited by other
auditors whose report dated August 22, 1996, expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the 1997 financial statements referred to above
present fairly, in all material respects, the financial position of
Steritek, Inc. and Subsidiary as of June 30, 1997, and the results of
its operations and cash flows for the year then ended in conformity
with generally accepted accounting principles.
/s/ I. Weismann Associates
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
August 25, 1997
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
June 30,
---------------------------
1997 1996(1)
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 212,127 296,429
Accounts receivable, (less allowance
for doubtful accounts of $4,895 in
1997 and 1996) 904,425 478,504
Inventories (Note 2) 190,314 107,108
Prepaid expenses and other assets 79,719 61,296
Deferred tax asset 430,000 68,600
---------- ----------
Total current assets 1,816,612 1,011,937
---------- ----------
Property, equipment and
Improvements - at cost (Note 4):
Machinery and equipment 2,220,885 2,088,102
Leasehold improvements 521,060 303,064
Equipment held under capital leases 283,150 283,150
Furniture and fixtures 88,861 87,701
---------- ----------
Total 3,113,956 2,762,017
Less: accumulated depreciation and
amortization 2,057,921 1,693,868
---------- ----------
Net depreciated cost 1,056,035 1,068,149
---------- ----------
Other assets:
Physicians Fax Network, net of accumulated
amortization - 100,159
Assets transferred under contractual
arrangement - 68,660
Security deposits 82,836 60,351
---------- ----------
Total other assets 82,836 229,170
---------- ----------
Total $2,955,033 2,309,256
========== ==========
</TABLE>
(1) Amounts have been reclassified to conform to current year presentation.
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
June 30,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 536,324 276,522
Accrued expenses 210,077 91,328
Current portion:
Long-term debt (Note 3) 140,000 200,000
Capital lease obligations (Note 4) 83,894 99,114
Loan payable - stockholder (Note 5) 100,000 -
Taxes payable 35,272 -
---------- ----------
Total current liabilities 1,105,567 666,964
Long-term debt liabilities:
Net of current portion:
Long-term debt (Note 3) 560,000 381,667
Capital lease obligations (Note 4) 7,067 50,991
---------- ----------
Total liabilities 1,672,634 1,099,622
---------- ----------
Commitments (Note 6)
Stockholders' equity:
Preferred stock, no par value, authorized
2,000,000 shares; none issued
Common stock, no par value, authorized
5,000,000 shares; issued and outstanding
3,586,285 shares at June 30, 1997 and 1996 640,844 640,844
Retained earnings 641,555 568,790
---------- ----------
Total stockholders' equity 1,282,399 1,209,634
---------- ----------
Total liabilities and
Stockholders equity $2,955,033 2,309,256
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Years Ended June 30,
-----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Sales - net $4,907,504 4,714,542 5,095,103
Cost of sales 2,891,755 2,731,128 2,654,980
---------- ---------- ----------
Gross profit 2,015,749 1,983,414 2,440,123
Selling, general and administrative
expenses 2,200,257 2,392,864 1,975,165
---------- ---------- ----------
Operating income (loss) (184,478) (409,450) 464,958
Other income 11,116 42,089 9,852
Interest expense (47,846) (56,521) (77,798)
--------- --------- --------
Income (loss) before taxes (221,208) (423,882) 397,012
--------- --------- --------
Provision for taxes (Note 9):
(Increase) decrease in valuation
of the deferred tax asset (361,400) 100,000 -
Deferred taxes:
Federal - - 146,200
State - - 38,700
--------- ---------- ---------
Total (361,400) 100,000 184,900
--------- ---------- ----------
Income (loss) from operations 140,192 (523,882) 212,112
--------- --------- ---------
Discontinued operations:
Income (loss) from operations of
Bio Medical Services Segment sold
on October 6, 1995 - 5,346 (66,738)
Gain on sale of Sterimed, Inc. (67,427) 39,998 -
--------- --------- ---------
Total (67,427) 45,344 (66,738)
-------- -------- --------
Net income (loss) $ 72,765 (478,538) 145,374
========== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Continued)
<CAPTION>
Years Ended June 30,
-----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Weighted-average number of
common and common equivalent
shares outstanding 3,586,285 3,586,285 3,976,285
========== ========== ==========
Earnings (loss) per share:
Income from continuing operations $ .04 (.14) $ .05
Discontinued operations (.02) .01 (.01)
----------- ---------- -----------
Net income (loss) per common and
common equivalent share $ .02 $(.13) $ .04
=========== ========== ==========
</TABLE>
As of June 30, 1997, 405,000 options to purchase common stock were
outstanding, priced at $.125 to $1.50, but were not included
in the computation of diluted earnings per share since the options'
exercise price equalled or exceeded management's estimate of the
average market price of common shares at June 30, 1997. (See Note
1).
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Common Stock
No Par Value Retained
--------------------
Shares Amount Earnings Total
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Balance, June 30, 1996 3,586,285 $640,844 $ 568,790 $1,209,634
Net income for the fiscal
year ended June 30, 1997 - - 72,765 72,765
---------- -------- --------- ----------
Balance, June 30, 1997 3,586,285 $640,844 641,555 1,282,399
========== ========= ========= ==========
Balance, June 30, 1995 3,586,285 $640,844 1,047,328 1,688,172
Net loss for the year ended
June 30, 1996 - - (478,538) (478,538)
---------- -------- --------- ---------
Balance, June 30, 1996 3,586,285 $640,844 568,790 1,209,634
========== ========= ========= =========
Balance, June 30, 1994 3,586,285 $640,844 901,954 1,542,798
Net income for the fiscal
year ended June 30, 1995 - - 145,374 145,374
---------- -------- --------- ----------
Balance, June 30, 1995 3,586,285 $640,844 1,047,328 1,688,172
========== ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years Ended June 30,
--------------------------------------
1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 72,765 $ (478,538) $ 145,374
Adjustments to reconcile net
income(loss) to net cash
provided (used) by
operating activities:
Depreciation and amortization 364,052 326,715 268,343
Amortization of patents and
excess of cost over net assets
of business acquired - 1,029 4,116
(Gain) loss on sale of Sterimed,
Inc. 67,427 (39,998) -
(Increase) decrease in valuation
of the deferred tax asset (361,400) 100,000 -
Deferred taxes - - 184,900
Amortization of Physicians Fax
Network 100,159 100,158 100,159
Uncollectible accounts - 19,511 -
Changes in assets and liabilities:
Accounts receivable (425,921) 116,829 (210,243)
Inventories (83,233) 27,269 31,734
Prepaid expenses and other assets (18,423) (4,292) (18,797)
Assets transferred under
contractual arrangement 1,233 7,100 34,865
Net assets of discontinued segment - (25,795) 32,263
Accounts payable and accrued
expenses 378,551 48,152 93,390
Taxes payable 35,272 - -
---------- --------- ---------
Net cash provided by operating
activities 130,482 198,140 666,104
---------- --------- ---------
Cash flows from investing activities:
Increase security deposits (22,035) - -
Payments received on loan
receivable - 3,784 -
Expenditures for purchase of
machinery and equipment (351,938) (231,545) (602,501)
Proceeds from officer's loan 100,000
Proceeds from sale of discounted
business - 300,000 -
---------- --------- ---------
Net cash provided (used) by
investing activities (273,973) 72,239 (602,501)
========== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
STERITEK, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<CAPTION>
Years Ended June 30,
--------------------------------------
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Cash flow from financing activities:
Principal payments:
Long-term debt $(581,667) (450,000) (140,000)
Capital lease obligations (59,144) (87,612) (45,433)
Note payable - bank - - (300,000)
Borrowings:
Long-term debt 700,000 300,000 -
Capital lease obligations - - 283,150
--------- --------- --------
Net cash provided (used) by
financing activities: 59,189 (237,612) (202,283)
--------- --------- --------
Net increase (decrease) in cash
and cash equivalents (84,302) 32,767 (138,680)
Cash and cash equivalents:
Beginning 296,429 263,662 402,342
--------- --------- --------
Ending $ 212,127 296,429 263,662
========= ========= ========
Supplemental disclosure of cash
flow information:
Interest paid $ 47,846 56,521 79,578
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996, AND 1995
NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
BUSINESS DESCRIPTION:
- --------------------
The Company's principal business is providing contract packaging services and
promotional materials assembly for distribution by the pharmaceutical,
medical, personal health and beauty industries. The Company is also engaged
in the communication, on behalf of pharmaceutical companies and others, of
medically oriented information to physicians through its Physicians Fax
Network (PFN). Sterimed, Inc., a wholly owned subsidiary, was a manufacturer
and supplier of products and accessories for electron microscope
laboratories, whose assets were sold in October 1995 and are presently
inactive. The Company's distribution business involving the distribution of
its Intracranial Pressure Monitors (ICP) through its Bio Medical Services
segment was discontinued in October 1995.
DISCONTINUED OPERATION:
- ----------------------
On October 6, 1995, the Company sold all assets used in the ICP business,
and all assets subject to all liabilities of Sterimed, Inc., collectively
the Bio Medical Services Segment, to a former director/employee.
The aggregate purchase price of $600,000 includes $300,000 for Sterimed,
Inc.'s electron microscope business, paid in cash, and $300,000 for the ICP
business paid by a non-interest bearing note due in monthly installments,
equal to 10% of future gross receipts of ICP. The note receivable balance of
$67,427 was written off during the current year due to the uncertainty of its
collectibility, and accordingly, the prior year transaction has not been
considered a sale for accounting purposes and the gain on disposal of the ICP
business not recognized. The assets involved in the transaction have been
segregated in the balance sheets for the prior year under the caption "assets
transferred under contractual arrangement".
Gain of the sale of Sterimed, Inc.'s electron microscope business was
$39,998.
Operating results of the Bio Medical Services Segment for the period July 1,
1995 to October 6, 1995 are shown separately in the accompanying consolidated
statements of operations. The consolidated statements of operations for
the year ended June 30, 1995 have been restated with operating results of
the discontinued operations shown separately.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
PRINCIPLES OF CONSOLIDATION
- ---------------------------
The consolidated financial statements include the accounts of Steritek, Inc.
and Sterimed, Inc., a wholly owned subsidiary (inactive). All material
intercompany balances and transactions for these years have been eliminated.
USE OF ESTIMATES
- ----------------
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts or assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the amounts of sales and
expenses during the reporting period. Actual results could differ from those
estimates.
CONCENTRATION OF CREDIT RISK;
- ----------------------------
The Company maintains a bank account balance as of June 30, 1997, which
exceeds the FDIC insured limit by $135,950.
Credit sales are made to customers in the normal course of business and are
unsecured. For the year ended June 30, 1997, the three largest customers
accounted for approximately 67% of net sales; five customers accounted for
approximately 85% of accounts receivable at June 30, 1997.
CASH AND CASH EQUIVALENTS:
- -------------------------
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments with a ninety day or less maturity
to be cash equivalents.
INVENTORIES:
- -----------
Valued at the lower of cost or market, determined by the first-in,
first-out (FIFO) method.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
PROPERTY, EQUIPMENT AND IMPROVEMENTS AND RELATED DEPRECIATION AND
- -----------------------------------------------------------------
AMORTIZATION:
- ------------
Property, equipment and improvements - Stated at cost. Costs of major
acquisitions, replacements and renewals that extend the useful lives of
the property and equipment are capitalized. Upon retirement or other
disposition, the costs and related accumulated depreciation and/or
amortization are removed from the accounts with gain or loss recognized in
income. Cost of maintenance and repairs are charged to expense as incurred.
Depreciation and amortization - Calculated under the straight-line method for
financial reporting purposes at rates based on the following estimated useful
lives:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Property held under capital lease 5 - 10
Machinery and equipment 5 - 10
Furniture, fixtures and office equipment 5 - 7
Leasehold improvements 5 - 39
</TABLE>
The accelerated cost recovery and modified accelerated cost recovery systems
are utilized for federal income tax purposes and for assets acquired
subsequent to December 31, 1980. The tax effect of the greater expense
allowable under this method has been provided for in the financial statements
as deferred taxes.
Depreciation and amortization was $364,052, $326,715 and $268,343 for the
years ended June 30, 1997, 1996 and 1995, respectively.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
PHYSICIANS FAX NETWORK:
- ----------------------
Marketing communication system utilizing electronic facsimile transmission
acquired June 30, 1993 for $527,000. During the year ended June 30, 1994,
the asset was reduced by $226,525 due to poor performance in the delivery of
the originally agreed upon network. Amortization was not recorded for the
year ended June 30, 1994, as the network was not operational, and
accordingly, not placed in service until the year ended June 30, 1995.
During the years ended June 30, 1997, 1996 and 1995, amortization of
$100,159, $100,157 and $100,159 was charged to operations, based on a three-
year life.
COMPENSATED ABSENCES:
- --------------------
Employees are entitled to paid vacations, sick days and personal days off,
depending on job classification, length of service, and other factors. It is
impracticable to estimate the amount of compensation for future absences,
and, accordingly, no liability has been recorded in the accompanying balance
sheets. The Company's policy is to recognize these costs when paid.
INCOME TAXES:
- ------------
Accounted for in accordance with the Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," wherein the asset and
liability method is used. Deferred taxes are recognized for temporary
differences between the basis of assets and liabilities for financial
statement and income tax purposes. The temporary differences relate
primarily to different accounting methods used for depreciation and
amortization of property and equipment, goodwill, allowance for doubtful
accounts and net operating loss carryforwards.
A valuation allowance is recorded for deferred tax assets when it is more
likely than not that some or all of the deferred tax assets will not be
realized through future operations. Accordingly, the Company has provided
a valuation allowance (based on estimated future taxable income) for the
portion of the total deferred income tax asset that will not be realized
as related to the operating loss carryforward. It is management's belief
that a substantial portion of the loss carryforward will be used in the
subsequent fiscal year and therefore the valuation allowance recorded in
the prior year has been decreased accordingly.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
NET INCOME (LOSS) PER SHARE:
- ---------------------------
Net income per common and common equivalent share was computed by dividing
net income by the weighted-average number of common shares and equivalents
(stock options) outstanding during the year ended June 30, 1997 and 1995.
Net loss per common and common equivalent share was computed by dividing net
loss by the weighted average number of common shares outstanding during the
year ended June 30, 1996.
STOCK BASED COMPENSATION:
- ------------------------
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation", which requires adoption of the disclosure provisions no later
than fiscal years beginning after December 15, 1995 and adoption of the
measurement and recognition provisions for non-employee transactions no later
than after December 15, 1995. The new standard defines a fair value method
of accounting for the issuance of stock options and other equity instruments.
Under the fair value method, compensation cost is measured at the grant date
based on the fair value of the award and is recognized over the service
period, which is usually the vesting period. Pursuant to SFAS No. 123, the
Company is not required to adopt the fair value method of accounting for
employee stock-based transactions. The Company is permitted to continue to
account for such transactions under Accounting Principles Board Opinion (APB)
No. 25, "Accounting for Stock Issued to Employees", but commencing during the
first quarter of fiscal 1997 was required to disclose in a note to the
consolidated financial statements proforma net income, and per share amounts
as if the Company had applied the method of accounting. The adoption of this
new requirement did not effect the Company's consolidated financial
statements, nor was there any effect on proforma net income.
NOTE 2 -INVENTORIES:
<TABLE>
<CAPTION>
June 30,
-------------------
1997 1996
-------- --------
<S> <C> <C>
Raw materials $190,341 103,054
Finished goods - 4,054
--------- --------
Total $190,341 107,108
========= ========
</TABLE>
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 3 - LONG-TERM DEBT:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Bank of New York:
Payable in monthly installments of
$11,667 plus interest at bank base rate
plus 1% through June 2002; secured by
substantially all assets and personally
guaranteed by the President. $700,000 -
Payable in monthly installments of
$11,667 plus interest at bank base rate
plus 1/2% through July 1998; secured by
substantially all assets and personally
guaranteed by the President. - 291,667
Payable in monthly installments of
$5,000 plus interest at bank base rate
plus 1/2% through April 2001; secured by
substantially all assets and personally
guaranteed by the President. - 290,000
-------- --------
Total 700,000 581,667
Less: Current portion 140,000 200,000
-------- --------
Long-term portion $560,000 381,667
======== ========
</TABLE>
<TABLE>
Maturities at June 30, 1997:
<CAPTION>
Years Ending June 30
- --------------------
<S> <C>
1998 $140,000
1999 140,000
2000 140,000
2001 140,000
2002 140,000
--------
Total $700,000
</TABLE>
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 4 - CAPITAL LEASE OBLIGATIONS:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
For machinery and equipment, payable
in monthly installments of $6,661,
maturing December 1997, non-interest
bearing (In arrears six months as of
June 30, 1997). $ 79,946 133,234
For machinery and equipment, payable
in monthly installments of $402,
including interest at 9.9%; maturing
January 2000. 11,015 14,871
For machinery and equipment payable
in monthly installments of $2,400,
including interest at 20%; matured
April 1996. - 2,000
-------- -------
Total 90,961 150,105
Less: Current portion 83,894 99,114
-------- -------
Long-term portion $ 7,067 50,991
======== =======
</TABLE>
<TABLE>
Maturities at June 30, 1997:
<CAPTION>
Years Ending June 30
--------------------
<S> <C>
1998 $83,894
1999 5,700
2000 1,367
-------
Total $90,961
=======
</TABLE>
NOTE 5 - LOAN PAYABLE - STOCKHOLDER:
Interest at 8.5%; payable on demand.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 6 - COMMITMENTS:
LEASES
- ------
The Company leases its operating and corporate facilities under operating
leases expiring in 1997 and 2004 with provision for additional payments for
annual rent increases in real estate taxes and insurance. The Company leases
a warehouse facility on a month to month basis since October 1992. Total
rent expense amounted to $353,421, $356,973 and $314,553 for the years ended
June 30, 1997, 1996 and 1995, respectively. The rent expense for
discontinued operations was immaterial. Rent for its corporate facilities
were in arrears in the amount of $16,637 (accrued in the current year).
Future minimum rental commitments under leases:
<TABLE>
<CAPTION>
Years Ending
June 30 Amount
------------ ------
<S> <C>
1998 $ 260,986
1999 267,224
2000 273,463
2001 279,702
2002 285,940
Thereafter 596,835
----------
Total $1,964,150
==========
</TABLE>
NOTE 7 - STOCK OPTIONS:
Plan adopted on June 24, 1992, authorizing the granting of either incentive
or nonqualified stock options to purchase up to 400,000 shares of common
stock to certain individuals performing services for the Company.
Nonqualified options to purchase 150,000 shares were issued on this date to
the directors/employees of the Company. The exercise price of $.50 per share
was the Company's estimate of the market value at that date. The options
became exercisable on December 24, 1992 and expire on June 24, 2002.
On December 16, 1992, nonqualified options to purchase 10,000 shares were
issued to a director/employee of the Company. The exercise price of $1.00
per share was the Company's estimate of the market value at that date. The
options became exercisable on June 16, 1993 and expire on December 16, 2002.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 7 - STOCK OPTIONS (Continued):
On August 19, 1993, nonqualified options to purchase 210,000 shares were
issued to the directors/employees of the Company. The exercise price of
$1.50 per share was the Company's estimate of the market value at that date.
The options became exercisable on February 19, 1994 and expire on August 19,
2003.
On August 29, 1993, nonqualified options to purchase 20,000 shares were
issued to an employee. The exercise price of $1.50 per share was the
Company's estimate of the market value at that date. The options became
exercisable on February 29, 1994 and expire on August 29, 2003.
On November 9, 1993, the authorized number of shares of common stock
permitted to be issued pursuant to the plans adopted June 24, 1992 was
increased to 550,000.
On October 26, 1995, nonqualified options to purchase 100,000 shares were
issued to the directors/employees of the Company. The exercise price of $.25
per share was the Company's estimate of the market value at that date. The
options became exercisable on April 26, 1995 and expire on October 26, 2005.
On February 5, 1997 the Board of Directors approved and ratified the
repricing of 5,000 options issued December 12, 1992, 55,000 options
issued August 1, 1993 and 20,000 options issued September 29, 1993 to
a new option price of $.125.
Pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation", the
Company is permitted and has opted to continue to account for such
transactions under Accounting Principals Board Opinion ("APB") No. 25 with the
requirement to disclose proforma income and per share amounts as if the
Company had applied the new method. The fair value per share at grant date
equaled the exercise price, therefore having no effect on proforma income
(See Note 1).
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 7 -STOCK OPTIONS (Continued):
<TABLE>
The following summarizes information relative to stock option plans:
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Options outstanding at beginning
of fiscal year 445,000 390,000 390,000
Options granted - 100,000 -
Options cancelled (40,000) (45,000) -
------- ------- -------
Options outstanding at end of
fiscal year 405,000 445,000 390,000
======= ======= =======
Options exercisable at end of
fiscal year 405,000 445,000 390,000
======= ======= =======
Option prices per share:
Granted - $.25 -
======= ======= =======
Cancelled $ .25-1.50 $1.00-1.50 -
========== ========== =======
Exercise price of options
outstanding at end of
fiscal year $.125-1.50 $ .25-1.50 $ .50-1.50
========== ========== ==========
</TABLE>
NOTE 8 - SEGMENT INFORMATION:
The Company's operations are divided into two business segments: Contract
Packaging and Physicians Fax Network (see Note 1).
<TABLE>
Operations by business segments:
<CAPTION>
Year Ended June 30, 1997
--------------------------------
Physicians
Fax Contract
Network Packaging Total
--------- --------- ---------
<S> <C> <C> <C>
Sales $598,413 4,309,091 4,907,504
Operating loss (62,070) (122,408) (184,478)
Depreciation and amortization 100,159 263,893 364,052
Aggregate carrying amount of
identifiable assets - 2,955,033 2,955,033
Additions to machinery and equipment - 351,939 351,939
</TABLE>
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 8 - SEGMENT INFORMATION (continued):
<TABLE>
<CAPTION>
Year Ended June 30, 1996
--------------------------------
Bio Medical Contract
Services Packaging Total
----------- --------- ---------
<S> <C> <C> <C>
Sales $193,797 4,714,542 4,908,330
Operating income (loss) 5,346 (409,450) (404,104)
Depreciation and amortization 1,029 326,715 327,744
Aggregate carrying amount of
identifiable assets 2,309,256 2,309,256
Additions to machinery and equipment 231,545 231,545
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30, 1995
---------------------------------
Bio Medical Contract
Services Packaging Total
----------- ---------- ---------
<S> <C> <C> <C>
Sales $849,281 5,095,103 5,944,384
Operating income (loss) (66,738) 464,958 398,220
Depreciation and amortization 13,615 258,844 272,459
Aggregate carrying amount of
identifiable assets 316,878 2,660,376 2,977,254
Additions to machinery and equipment - 602,501 602,501
</TABLE>
NOTE 9 - INCOME TAXES:
Deferred tax asset at June 30, 1997 represents recognition of net
operating loss carryforwards and is comprised of the following components.
<TABLE>
<CAPTION>
Deferred Tax
Temporary Asset
Difference Tax Rate (Liability)
----------- -------- ------------
<S> <C> <C> <C>
Allowance for doubtful accounts $ 5,000 43% 2,150
Accumulated depreciation 171,860 43% 73,900
Net operating loss carryforward 2,900,000 43% 1,247,000
Less: valuation allowance (2,076,860) 43% (893,050)
----------- ---------
Totals $ 1,000,000 430,000
=========== =========
</TABLE>
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 9 - INCOME TAXES (continued):
At June 30, 1997 net operating loss (NOL) carryforwards of approximately
$2,900,000 were available, expiring on various dates from 1998 through 2011.
The valuation allowance as of June 30, 1997 was decreased by $361,400
($.10 per share) due substantially to a change in judgement concerning the
realization of the related deferred tax asset in the subsequent year.
The deferred tax asset of $68,600 at June 30, 1996, was comprised of the
following components:
<TABLE>
<CAPTION>
Deferred Tax
Temporary Asset
Difference Tax Rate (Liability)
----------- -------- ------------
<S> <C> <C> <C>
Allowance for doubtful accounts $ 5,000 43% 2,150
Accumulated depreciation (201,000) 43% (86,430)
Benefit of remaining operating loss
carryforward 2,515,000 43% 1,081,450
Less: valuation allowance (2,159,000) 43% (928,570)
----------- ---------
Totals $ 160,000 68,600
=========== =========
</TABLE>
During the year ended June 30, 1996, the beginning-of-the-year balance of the
valuation allowance was increased by $100,000 due substantially to a change
in circumstances causing a change in judgment about the realization of the
related deferred tax asset in future years.
At June 30, 1996, net operating loss (NOL) carryforwards of approximately
$2,515,000 were available, expiring on various dates from 1997 through 2006.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 9 - INCOME TAXES (continued):
The deferred tax asset of $168,600 at June 30, 1995 was comprised of the
following components:
<TABLE>
<CAPTION>
Deferred Tax
Temporary Asset
Difference Tax Rate (Liability)
---------- -------- ------------
<S> <C> <C> <C>
Inventory $ (95,000) 43% (40,850)
Allowance for doubtful accounts 5,000 43% 2,150
Accumulated depreciation (106,000) 43% (45,580)
Benefit of remaining operating loss
carryforward 2,235,070 43% 961,080
Less: valuation allowance (1,646,070) 43% (708,200)
--------- -------
Totals $ 393,000 168,600
========= =======
</TABLE>
The deferred tax asset was reduced by $184,900 and corresponding Federal and
State tax provisions have been recorded for the year ended June 30, 1995.
At June 30, 1997, investment tax credit carryforwards of approximately
$35,700 and research and development & D) credits of approximately $85,500
were available, expiring on various dates from 1998 through 2002. The Tax
Reform Act of 1986 (the Act) reduced the amount of Investment Tax Credit
carryfowards allowed to 65%. R & D credit carryforwards were unaffected by
the Act.
NOTE 10 FAIR VALUE OF FINANCIAL INSTRUMENTS:
The amounts included in the balance sheet at June 30, 1997 for cash and cash
equivalents, accounts receivable, accounts payable, prepaid expenses, and
accrued expenses approximated fair value due to the short term nature of
these instruments. The carrying amount of long-term debt, capital lease
obligations and loan payable-officer approximate fair value based on
borrowing rates currently available to the Company.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 and 1995
NOTE 11 FOURTH QUARTER 1996 ADJUSTMENTS (UNAUDITED):
The Company revised its accounting for the disposition of its Intracranial
Pressure Monitor (ICP) business and accordingly, an adjustment in the amount
of $236,099 ($.07 per share) was recognized to reduce the previously reported
gain on disposal.
The Company also revised its estimate of the valuation allowance for income
taxes and recognized an adjustment amounting to $100,000 ($.03 per share) to
reduce the previously reported deferred tax asset.
<PAGE>
Market for Registrant's Common Equity and
Related Stockholder Matters
The Company's Common Stock is traded in the "pink sheets" in the
over-the-counter market. The market for the Company's Common Stock
during the periods presented has been represented by low volume and
limited or sporadic quotes. Accordingly, a table presenting the high and
low bid and asked prices for the Company's Common Stock (published by
the National Quotation Service, Inc.) has not been included.
There were 138 holders of record of the Company's Common Stock as
of September 1, 1997, which total does not include individual participants
in security listings.
The Company has not previously declared or paid any cash dividends
on its Common Stock. The Company currently anticipates retaining
any earnings for use in the operation and expansion of its business.
Therefore, it is unlikely that dividends will be declared in the
foreseeable future.
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
There were no disagreements with accountants on accounting
and financial disclosure within the Company's two most recent
fiscal years and all subsequent interim periods.
Directors and Officers
Albert J. Wozniak, James K. Wozniak,
Chairman of the Board, Director, Vice President and
Chief Executive Officer and Secretary
President
Auditors
I. Weismann Associates, 218 Ridgedale Avenue, Morristown, New
Jersey 07962-2207.
Transfer Agent
First City Transfer Company, 505 Thornall Street, Suite 303, Edison, New
Jersey 08837.
Form 10-K
Copies of the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1997, including financial statements and schedules
thereto, filed with the Securities and Exchange Commission, are available
to shareholders without charge upon written request to:
Steritek, Inc., 121 Moonachie Avenue, Moonachie, NJ 07074
