UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A, AMENDMENT NO. 1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998
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: 3,636,285 shares of Common Stock on February 1, 1999
<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.
CONSOLIDATED BALANCE SHEET
<CAPTION>
December 31, June 30,
1998 1998
----------- -------------
(Unaudited) (Derived from
Audited
Financial
Statements)
<S> <C> <C>
ASSETS
Current Assets:
Cash $298,298 $557,565
Trade accounts receivable, less allowance for
doubtful accounts of $7,098 985,157 863,843
Inventories 347,589 352,715
Prepaid expenses and other assets 55,157 93,219
Deferred tax asset 422,300 422,300
---------- ----------
Total current assets 2,108,501 2,289,642
Machinery and equipment 4,140,620 3,868,825
Less: accumulated depreciation and
amortization 2,497,705 2,294,054
---------- ----------
1,642,915 1,574,771
---------- ----------
Other assets
Security deposits 65,412 65,412
---------- ----------
65,412 65,412
---------- ----------
$3,816,828 $3,929,825
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Line of Credit $100,000
Accounts payable trade 553,970 $525,613
Accrued expenses 77,823 256,901
Current maturities of long-term debt 113,339 222,154
Current maturities of capital lease obligations 17,650 9,939
Taxes payable 4,515 32,091
---------- ---------
Total current liabilities 867,297 1,046,698
---------- ----------
Long-term debt, excluding current maturities 659,663 659,663
Capital lease obligations, less current maturities 106,769 9,439
---------- ----------
Total liabilities 1,633,729 1,715,800
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
3,636,285 shares 647,094 647,094
Retained earnings 1,536,005 1,566,931
---------- ----------
Total shareholders' equity 2,183,099 2,214,025
---------- ----------
$3,816,828 $3,929,825
========== ==========
</TABLE>
<PAGE>
<TABLE>
STERITEK, INC.
(UNAUDITED)
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Six Months Ended
December 31,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Sales $3,572,799 $4,318,553
Cost of sales 2,244,499 2,584,422
---------- ----------
Gross profit 1,328,300 1,734,131
Selling, general and administrative expenses 1,310,873 1,245,877
---------- ----------
Operating income 17,427 488,254
Interest expense (48,351) (31,948)
---------- ----------
Income before provision for income taxes (30,924) 456,306
---------- ----------
Provision for income taxes:
Provision for federal income taxes - deferred 139,957
Provision for state income taxes - deferred 41,068
--------- ----------
181,025
--------- ----------
Net income ($30,924) $275,281
========== ==========
Weighted-average number of common shares
outstanding 3,636,285 4,001,285
========== ==========
Net income per common share ($0.01) $0.07
========== ==========
</TABLE>
<PAGE>
<TABLE>
STERITEK, INC.
(UNAUDITED)
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
December 31,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Sales $1,955,165 $2,307,871
Cost of sales 1,126,433 1,386,487
---------- ----------
Gross profit 828,732 921,384
Selling, general and administrative expenses 678,621 624,259
---------- ----------
Operating income 150,111 297,125
Interest expense (30,342) (15,927)
---------- ----------
Income before provision for income taxes 119,769 281,198
---------- ----------
Provision for income taxes:
Provision for federal income taxes - deferred 25,756 92,153
Provision for state income taxes - deferred 10,779 25,308
---------- ----------
36,535 117,461
---------- ----------
Net income $83,234 $163,737
========== ==========
Weighted-average number of common shares
outstanding 4,001,285 4,001,285
=========== ==========
Net income per common share $0.02 $0.04
=========== ==========
</TABLE>
<PAGE>
<TABLE>
STERITEK, INC.
(UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Six Months Ended
December 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income ($30,924) $275,281
Adjustments to reconcile net (loss) income
to net cash provided by (used in) operating
activities:
Depreciation and amortization of machinery
and equipment 203,651 175,257
Changes in operating assets and liabilities:
(Increase) decrease in trade accounts
receivable (121,314) 26,587
Decrease (Increase) in inventories 5,126 (115,008)
Decrease (increase) in prepaid expenses
and other assets 38,062 39,366
Decrease in deferred tax asset 181,025
(Decrease) increase in state income
taxes payable (27,576) 8,124
(Decrease) Increase in accounts payable
and accrued expenses (150,721) 153,331
---------- ---------
Net cash (used in) provided by operating
activities (83,696) 743,963
---------- ----------
Cash flows from investing activities:
Expenditures for purchase of machinery
and equipment (271,795) (487,026)
---------- -----------
Net cash used in investing activities (271,795) (487,025)
---------- ----------
Cash flows from financing activities:
Principal payments on long-term debt (108,815) (70,000)
Principal payments on capital lease obligations (7,711) (64,780)
Proceeds from bank line of credit 100,000 0
Borrowings on capital lease obligations 112,750
Proceeds from officer's loan 50,000
---------- ----------
Net cash provided by (used in) financing
activities 96,224 (84,780)
---------- ----------
Net (decrease) increase in cash (259,267) 172,158
Cash at beginning of period 557,565 212,127
---------- ----------
Cash at end of period $298,298 $384,285
========= ==========
Supplemental disclosures of cash flow
information:
Interest paid $48,351 $31,948
========== ==========
</TABLE>
<PAGE>
STERITEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 1998
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, 1998 are not necessarily
indicative of the results that may be expected for the year
ending June 30, 1999. 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, 1998.
<PAGE>
STERITEK, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Six Months Ended December 31, 1998 as Compared to the Six Months
Ended December 31, 1997
Revenues for the six months ended December 31, 1998 decreased to
$3,572,799 from $4,318,553 for the same period in 1997. Revenues for
the six months ended December 31, 1998 reflect a decreased level of
activity in the Company's contract packaging business. December 31,
1998 revenues included approximately: (i) $3,066,531 from contract
packaging, as compared to $3,933,740 for the same period in 1997;
and (ii) $506,268 from the Physicians Fax Network, as compared to
$384,813 for the same period in 1997. The Company has continued to
aggressively market its contract packaging business.
The Company's cost of sales represented 62.8% of sales (or
$2,244,499) for the six months ended December 31, 1998, as compared
to 59.8% of sales (or $2,584,422) for the six months ended December
31, 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
six months ended December 31, 1998 was 36.7% of sales (or $1,310,873),
as compared to 28.9% of sales (or $1,245,877) for the six months ended
December 31, 1997. 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, 1998 in the amount of $17,427 (or 0.05% of sales), as
compared to $488,254 (or 11.3% of sales) for the six months ended
December 31, 1997. The lower profit for the current period is
principally attributable to the lower 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, 1998 as Compared to the Three Months
Ended December 31, 1997
Revenues for the three months ended December 31, 1998 were
$1,955,165 as compared to $2,307,871 for the same period in 1997.
Revenues for the three months ended December 31, 1998 included
approximately $1,790,318 from contract packaging and $264,847 from
the Physicians Fax Network. For the three months ended December
31, 1997, the Company derived approximately $2,071,613 in revenues
from contract packaging and $236,258 from the Physicians Fax
Network.
The Company's cost of sales were $1,126,433 (or 57.6% of sales)
for the three months ended December 31, 1998 as compared to $1,386,487
(or 60.0% of sales) for the three months ended December 31, 1997. 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
three months ended December 31, 1998 was $678,621 (or 34.7% of sales)
as compared to $624,259 (or 27.0% of sales) for the three months
ended December 31, 1997. SG&A, in dollar terms, remained relatively
constant between the two periods.
Operating income for the three months ended December 31, 1998
was $150,111 (or 7.7% of sales), as compared to income of $297,125
(or 12.9% of sales) for the three months ended December 31, 1997.
The decrease in operating income is principally attributable to
the lower revenues for the period ended December 31, 1998.
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 June 30, 1998 was $1,242,944, as
compared to working capital of $1,241,204 on December 31, 1998.
Working capital remained relatively constant during the periods
compared.
On March 12, 1998, the Company executed a Note with the Bank of
New York in the amount of $785,000, payable over four years at a
fixed interest rate of 8.09%. The Note was issued to provide working
capital and to refinance a loan on June 17, 1997, in the amount of
$700,000 from the Bank of New York, payable monthly until June 17,
2002, at prime plus 1%. The proceeds of the June 17, 1997 borrowing
were used to retire prior indebtedness of the Company and to provide
working capital for operations. On April 13, 1998, the Company
executed an additional Note with the Bank of New York in the
amount of $146,000, payable over three years at a fixed interest
rate of 8.09%. The Note was issued to provide working capital
to the Company.
On March 12, 1998, the Company obtained a line of credit from
the Bank of New York in the amount of $250,000, at prime plus 1/2%.
The Company has drawn $100,000 on this line of credit as of December 31,
1998.
The Company believes that, for the twelve months following the date hereof,
funding for anticipated operations and capital needs will come
from existing working capital and anticipated future operations. The
Company has no material commitments or capital expenditures planned
outside of the ordinary course of business. For periods in beyond the
twelve months following the date hereof, the Company expects to continue
to fund its anticipated operations and capital needs from working
capital and draws on its line of credit. The Company has approximately
$150,000 available under its line of credit. In addition, the Company
expects that it will be able to finance certain of its future machinery
and equipment needs through lease arrangements.
Year 2000 Disclosure
The "year 2000" problem arises because many computer programs use
only the last two digits to refer to a year. These programs do not
properly distinguish a year that begins with "20" from a year that begins
with "19". If not corrected, these programs may fail or create
erroneous results. The extent of the potential impact from this problem is
not yet known.
The Company has evaluated internally its software systems
and machinery and equipment for "year 2000" readiness. The Company's
information technology systems consist principally of personal computers
and related software systems. The Company's principal automated packaging
machinery and equipment does not contain date sensitive features. The
Company believes that such systems, machinery and equipment are year 2000
compliant and that it will not be materially adversely affected by year
2000 issues. The Company has undertaken to survey its vendors to ensure
that they are also year 2000 compliant. The Company has not yet completed
this survey. The costs incurred by the Company on year 2000 issues has
not been material and is not expected to be material in the future.
Because of the nature of the Company's business, the Company does not
believe that it faces significant risks as a result of the year 2000
problem. The Company views its principal risks as those arising from
its contracting parties (for example, banks, service providers and
customers), being unable to process financial transactions. The Company
does not have a contingency plan.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company has no market risk sensitive instruments. The
amounts included in the balance sheets for cash and cash
equivalents, accounts receivable, prepaid expenses and other
assets, and accounts payable and accrued expenses approximated fair
value due to the short term nature of these instruments. The carrying
amount of long term debt and capital lease obligations approximate
fair value based on borrowing rates currently available to the
Company.
<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
On December 17, 1998, the Company filed a report on Form 8-K to report that
it had entered into an Agreement and Plan of Merger, as of December 4, 1998,
with respect to the merger of the Company with and into a subsidiary of
Quality Packaging Specialists, Inc.
<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: March 31, 1999
<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, 1998 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-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 298,298
<SECURITIES> 0
<RECEIVABLES> 985,157
<ALLOWANCES> 7,098
<INVENTORY> 347,589
<CURRENT-ASSETS> 2,108,501
<PP&E> 4,140,620
<DEPRECIATION> 2,497,705
<TOTAL-ASSETS> 3,816,828
<CURRENT-LIABILITIES> 867,297
<BONDS> 766,432
0
0
<COMMON> 647,094
<OTHER-SE> 1,536,005
<TOTAL-LIABILITY-AND-EQUITY> 3,816,828
<SALES> 1,955,165
<TOTAL-REVENUES> 1,955,165
<CGS> 1,126,433
<TOTAL-COSTS> 1,126,433
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,342
<INCOME-PRETAX> 119,769
<INCOME-TAX> 36,535
<INCOME-CONTINUING> 83,234
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,234
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
