-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UVYLJBw/RCsGqorqd1zGZ4g1EsG8RSLeEjWUrRfB99Om5ucqRxXWHSqgbMToe+g2 Vswwmoqzt0s2oW85sikLxg== 0000898430-96-003758.txt : 19960814 0000898430-96-003758.hdr.sgml : 19960814 ACCESSION NUMBER: 0000898430-96-003758 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRAWLEY CORP CENTRAL INDEX KEY: 0000038824 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOSPITALS [8060] IRS NUMBER: 952639686 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06436 FILM NUMBER: 96610351 BUSINESS ADDRESS: STREET 1: 15760 VENUTRA BLVD SUITE 1201 CITY: ENCINO STATE: CA ZIP: 91436 BUSINESS PHONE: 8183823640 MAIL ADDRESS: STREET 1: 15760 VENTURA BLVD STREET 2: SUITE 1201 CITY: ENCINO STATE: CA ZIP: 91436 FORMER COMPANY: FORMER CONFORMED NAME: FRAWLEY ENTERPRISES INC DATE OF NAME CHANGE: 19780107 10-Q 1 FORM 10-Q U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ----- EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 -------------------------------------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES - ----- EXHCANGE ACT OF 1934 For the transition period from to --------------------- ---------------------- Commission File Number 1-6436 ---------------------------- FRAWLEY CORPORATION - --------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 95-2639686 - --------------------------------------------------------------------------- (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMP I.D. NO) 15760 Ventura Boulevard, Suite 1201, Encino, California 91436 - --------------------------------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) - -- (818)382-3682 - --------------------------------------------------------------------------- (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) - --------------------------------------------------------------------------- (FORMER NAME, ADDRESS AND FISCAL YEAR, IF CHANGED SINCE LAST REPORT) Indicated 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_____ ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the latest practicable date. Class Outstanding at June 30, 1996 - -------------------------------- ---------------------------------------- Common stock, par value $1 1,222,905 Total Number of Pages 12 ----- FRAWLEY CORPORATION AND SUBSIDIARIES INDEX [CAPTION] PART I: FINANCIAL INFORMATION PAGE NO. Item 1: Financial Statements Consolidated Balance Sheets - June 30, 1996 and December 31, 1995...............................3 Consolidated Statements of Operations - Three Months Ended June 30, 1996 and 1995.........................4 Consolidated Statements of Operations - Six Months Ended June 30, 1996 and 1995...........................5 Consolidated Statements of Cash Flows - Six Months Ended June 30, 1996 and 1995...........................6 Notes to Consolidated Financial Statements........................7 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations..................8-9 PART II: OTHER INFORMATION Item 1: Legal Proceedings........................................10 Item 5: Other Information........................................11 Item 6: Exhibits and Reports on Form 8-K.........................11 SIGNATURES.............................................................12
2 ITEM I: FINANCIAL STATEMENTS FRAWLEY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31, ASSETS 1996 1995 ------ ----------- ----------- (Unaudited) CURRENT ASSETS Cash $ 109,000 $ 470,000 Accounts receivable, net 580,000 613,000 Note receivable 547,000 547,000 Prepaid expenses and other deposits 198,000 184,000 Other assets 0 150,000 ----------- ----------- TOTAL CURRENT ASSETS 1,434,000 1,964,000 Long-term accounts receivable, net 164,000 138,000 Long-term notes receivable 215,000 215,000 Real estate investments, net 3,305,000 3,407,000 Property, plant and equipment, net 533,000 603,000 ----------- ----------- TOTAL ASSETS $ 5,651,000 $ 6,327,000 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES Notes payable to stockholders $ 1,336,000 $ 1,261,000 Accounts payable and accrued expenses 1,972,000 2,451,000 Unearned revenue 108,000 148,000 Notes payable 696,000 696,000 ----------- ----------- TOTAL CURRENT LIABILITIES 4,112,000 4,556,000 STOCKHOLDERS' EQUITY: Preferred stock, par value $1 per share: Authorized, 1,000,000 shares; none issued Common stock, par value $1 per share; Authorized, 6,000,000 shares, issued 1,414,217 shares 1,414,000 1,414,000 Capital surplus 16,986,000 16,986,000 Accumulated deficit (16,100,000) (15,868,000) ----------- ----------- 2,300,000 2,532,000 Less common stock in treasury, 191,312 shares (at cost) (761,000) (761,000) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 1,539,000 1,771,000 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,651,000 $ 6,327,000 =========== ===========
See notes to consolidated financial statements. 3 FRAWLEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, ----------------------- 1996 1995 ----------------------- REVENUES: Net revenues $ 721,000 $ 860,000 ---------- ---------- COSTS AND EXPENSES: Cost of operations 484,000 503,000 Selling, general and administrative expenses 251,000 536,000 Interest expense 67,000 93,000 ---------- ---------- TOTAL COSTS AND EXPENSES 802,000 1,132,000 ---------- ---------- LOSS FROM CONTINUING OPERATIONS (81,000) (272,000) DISCONTINUED OPERATIONS: Loss from discontinued operations (16,000) ---------- ---------- NET LOSS $ (81,000) $ (288,000) ========== ========== NET LOSS PER SHARE: Continuing operations $ (.07) $ (.22) Discontinued operations (.01) ---------- ---------- (.07) (.23) ========== ========== Weighted average number of common shares outstanding 1,222,905 1,222,905 ========== ==========
See notes to consolidated financial statements 4 FRAWLEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATMENTS OF OPERATIONS (UNAUDITED)
Six Months Ended June 30, ------------------------- 1996 1995 ------------------------- REVENUES: Net Revenues $1,464,000 $1,700,000 Loss on sale of real estate investment (52,000) ---------- ---------- TOTAL REVENUES 1,464,000 1,648,000 COSTS AND EXPENSES: Cost of operations 946,000 991,000 Selling, general and administrative expenses 609,000 1,061,000 Interest expense 141,000 183,000 ---------- ---------- TOTAL COST AND EXPENSES 1,696,000 2,235,000 ---------- ---------- Loss from continuing operations (232,000) (587,000) Income from discontinued operations 63,000 ---------- ---------- NET LOSS $ (232,000) (524,000) ========== ========== NET (LOSS) INCOME PER SHARE: Continuing operations $ (0.19) $ (0.48) Discontinued operations 0.05 ---------- ---------- (0.19) (0.43) ========== ========== Weighted average number of common shares outstanding 1,222,905 1,222,905 ========== ==========
5 FRAWLEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Six Months Ended June 30, ----------------------- 1996 1995 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $(232,000) $(524,000) --------- --------- Adjustments to reconcile net loss to net cash used in non-operating activities: Loss on sale of real estate investment 52,000 Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 78,000 105,000 Changes in operating assets and liabilities: Short- and long-term accounts receivable, net 7,000 288,000 Prepaid expenses and deposits (14,000) (64,000) Other assets 150,000 Accounts payable and accrued expenses (480,000) (90,000) Unearned revenue (40,000) (595,000) --------- --------- TOTAL ADJUSTMENTS (299,000) (304,000) --------- --------- Net cash used in operating activities (531,000) (828,000) --------- --------- CASH FLOW FROM INVESTING ACTIVITIES: Equipment purchases (8,000) (3,000) Proceeds from sale of real estate investment 285,000 Payments for real estate investments (51,000) (115,000) Refunds received on real estate 153,000 --------- --------- Net cash provided by investing activities 94,000 167,000 --------- --------- CASH FLOWS FROM FINANCING ACTIVITES: Short-term debt borrowings 76,000 144,000 Repayment of borrowings (193,000) --------- --------- Net cash provided or used by financing activities 76,000 (49,000) --------- --------- Net cash used for continuing operations (361,000) (710,000) --------- --------- Net cash provided by discontinued operations 500,000 --------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS (361,000) (210,000) CASH, BEGINNING OF PERIOD 470,000 245,000 --------- --------- CASH, END OF PERIOD $109,000 $35,000 ========= =========
6 FRAWLEY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position at June 30, 1996, the results of operations and changes in cash flow for the six months then ended. NOTE 2: Revenues from discontinued operations for the six months ended June 30, 1995 totaled $988,000. NOTE 3: The results of operations for the six months ended June 30, 1996 and 1995 are not necessarily indicative of results to be expected for the full year. 7 FRAWLEY CORPORATION AND SUBSIDIARIES ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Specialized Health Services - --------------------------- During the quarter ended June 30, 1996, operating revenues from Specialized Health Services remained constant when compared to the same period in 1995. The Company continues to face serious difficulties in attracting patients. There is a decreasing number of insurance carriers providing benefits for inpatient treatment and in many HMO plans there is little coverage for chemical dependency treatment. Emphasis by insurance carriers on less expensive outpatient treatment programs makes the Company's inpatient treatment less accessible to many potential patients. The Company continues to present a strong argument for the success rate of the Schick program, compared to other programs, but a more prevalent theme in health care today is the cost of a program not the efficacy of the treatment. The Company will continue to explore more effective ways of attracting patients to the inpatient program, expanding the program through unit operation and outpatient treatment programs. Revenues from stop smoking centers remained constant for the three months ended June 30, 1996 when compared to the same period in 1995. The Company is competing with less expensive programs and the success of the treatment does not appear to be a factor. The non-prescription access, to stop-smoking patches and gum products provides individuals with another option in selecting a program. The Company is seeking to expand the business through the development of programs which meet the Company's standard of treatment and is also price competitive. Schick will continue to offer educational material regarding the addiction cycle and chemical dependency and to popularize aversion treatment methodology. Real Estate - ----------- The real estate operating loss during the quarter ended June 30, 1996 was $73,000 as compared to a loss of $464,000 for the same period in 1995. Real estate losses result from lack of sales, carrying costs, improvements required to sell the property and litigation cost. The undeveloped real estate market in Southern California is showing signs of improvement. The Company is actively advertising the undeveloped real estate for sale. Management is confident the real estate market will continue to improve along with overall economic conditions in Southern California. 8 Liquidity and Capital Resources - ------------------------------- The Company's recurring losses from continuing operations and difficulties in generating cash flow sufficient to meet its obligations raise substantial doubt about its ability to continue as a going concern. The Company's operating losses have decreased significantly as revenue has stabilized and operating subsidiaries previously posting large losses, have been sold. The Company anticipates further reductions in Corporate overhead as excess office space is subleased and less expensive space is leased. The Seattle Hospital and outpatient treatment program reported a $90,000 profit for the three months ended June 30, 1996 compared to a $56,000 profit for the three months ended June 30, 1995. Management believes the positive results will continue. The Company has retired some debt obligations but continues to struggle to service remaining debt. Debt secured by the Seattle Hospital in the amount of $680,000 was due July 1, 1996. A sixty-day extension was given by the lender. The Company is confident alternative financing will be obtained during the extension period. If replacement financing is not secured the Company could face penalties on the existing loan. The Company continues to incur legal expenses and has an obligation in 1996 to contribute $180,000 to the Chatham Brothers toxic waste cleanup lawsuit. The Company intends that the contribution will be funded from real estate sales or loans. Real estate improvements have increased the cash shortage as the Company must borrow in order to pay for the improvements. The Company has retired some debt obligations but continues to struggle to service remaining debt. The settlement of certain legal matters has removed cash requirements to support litigation which was generally funded by loans. The Company plans to raise needed capital by forming alliances with other health care providers and selling real estate. The sale of real estate may require further expenditures to prepare the land for sale which would be financed through borrowings. The sale of the property is unpredictable and highly uncertain and there is no assurance that the improvements will improve the marketability of the property. 9 PART II - OTHER INFORMATION ITEM 1: Legal Proceedings ----------------- The Company is named as a defendant in the Chatham Brothers toxic waste cleanup lawsuit. In February 1991, the Company was identified as one of many "Potentially Responsible Parties" (PRPs) in the Chatham Brothers toxic waste cleanup site case, filed by the State of California - Environmental Protection Agency, Department of Toxic Substances Control (DTSC) and involved the Hartley Pen Company previously owned by the Company. On December 31, 1991, the Company and approximately 90 other companies were named in a formal complaint. The Company joined a group of defendants, each of whom was so notified and which are referred to as Potentially Responsible Parties (PRPs) for the purpose of negotiating with the DTSC and for undertaking remediation of the site. During 1995, the State of California adjusted the estimated cost of remediation. Soil remediation is estimated at $2,000,000 with the Company's participation at 3.8% or $76,000. Water clean up is estimated at $6,000,000 with the Company's share at 5.67% or $340,000. The Company has recorded a liability for its estimated share of the assessments, net of insurance recovery, in the accompanying financial statements. These amounts are estimates and in 1996, the PRPs will finalize a new contract with the DTSC on total cost of remediation. The Company is also liable for its share of site study costs and in connection with such costs, the Company paid into the PRP group $38,000 in 1993, $271,000 in 1994 and has an unfunded cash call contribution of $90,000 in 1995 and an estimated contribution in 1996 of $93,000. The Company continues to incur legal cost for representation in this matter. In June 1989, the Company filed a lawsuit in the Los Angeles County Superior Court, Frawley Corporation vs. Harold Spinner, etc. et al, -------------------------------------------------- which involves the rights to the proceeds from the sale of certain property once allegedly owned by the Company and Mr. Spinner. In November 1989, Harold Spinner cross-complained against the Company and individuals, and in January 1990, Harold Spinner amended the cross- complaint. The Spinners seek approximately $4.4 million in damages and punitive damages based on fraud. On July 8, 1990, the Company amended its complaint against Mr. Spinner, seeking an accounting of the purchase price and carrying costs, as well as adding a claim of fraud. In 1993, the matter was set for trial on two occasions and was continued at each date. On October 7, 1993, Harold Spinner filed personal bankruptcy and listed his claim against the Company at $1 million. The filing of bankruptcy causes an automatic stay of the state court proceedings. Mr. Spinner has been discharged from bankruptcy. The Company filed a motion to have the case dismissed and a hearing was held August 23, 1995 whereby an order dismissing the complaint was signed by the court and entered on September 6, 1994. Mr. Spinner filed an appeal on October 29, 1995. Due to court congestion it generally takes 18 months to two years from the time notice of appeal is filed to the issuance of written decision. The Company expects the appeal court to uphold the original decision for dismissal. 10 ITEM 5: Other Information ----------------- None ITEM 6: Exhibits and Reports on Form 8-K -------------------------------- Exhibits -------- 27 Financial Data Schedule No reports on form 8-K were filed during the quarter ended June 30, 1996. 11 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. FRAWLEY CORPORATION --------------------------------------- (REGISTRANT) Date: August 13, 1996 By: /s/ Betty R. Hurn --------------------------- --------------------------------- (Authorized Officer and Chief Financial Officer) 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1996 APR-01-1996 JUN-30-1996 109,000 0 2,118,000 612,000 60,000 138,000 6,088,000 2,250,000 5,651,000 4,112,000 0 0 0 1,414,000 125,000 5,651,000 1,464,000 1,464,000 946,000 946,000 609,000 0 141,000 (232,000) 0 (232,000) 0 0 0 (232,000) (.19) 0
-----END PRIVACY-ENHANCED MESSAGE-----