-----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, CeaJ3e8CJnSyLpehHMe7vyhc7JYeWDRIZD6VKVUi/1VW/eoLXnotnzRVVvUN2M8r K4BNy/PMzScKRD/GP/GLJQ== 0000898430-99-003384.txt : 19990823 0000898430-99-003384.hdr.sgml : 19990823 ACCESSION NUMBER: 0000898430-99-003384 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990820 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: SEC FILE NUMBER: 001-06436 FILM NUMBER: 99697024 BUSINESS ADDRESS: STREET 1: 28720 ROADSIDE DRIVEUITE 1201 STREET 2: SUITE 128 CITY: AGOURA HILLS STATE: CA ZIP: 91301 BUSINESS PHONE: 8183823640 MAIL ADDRESS: STREET 1: 28720 ROADSIDE DRIVE STREET 2: SUITE 128 CITY: AGOURA HILLS STATE: CA ZIP: 91301 FORMER COMPANY: FORMER CONFORMED NAME: FRAWLEY ENTERPRISES INC DATE OF NAME CHANGE: 19780107 10-Q 1 FORM 10-Q FOR QUARTER ENDED 03-31-99 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 March 31, 1999 -------------------------------------------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the transition period from _____________________ to ________________________ Commission File Number 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) 28720 Roadside Dr., Suite 128, Agoura Hills, California 91301 - -------------------------------------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (818)735-6622 - -------------------------------------------------------------------------------- (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 March 20, 1999 - -------------------------------------- -------------------------------------- Common stock, par value $1 1,222,905 Total Number of Pages 11 ----- FRAWLEY CORPORATION AND SUBSIDIARIES INDEX PART I: FINANCIAL INFORMATION PAGE NO. Item 1: Financial Statements Consolidated Balance Sheets - March 31, 1999 and December 31, 1998............................3 Consolidated Statements of Operations - Three Months Ended March 31, 1999 and 1998......................4 Consolidated Statements of Operations - Three Months Ended March 31, 1999 and 1998......................5 Notes to Consolidated Financial Statements......................6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations ...............7-8 PART II: OTHER INFORMATION Item 1: Legal Proceedings .....................................9 Item 5: Other Information .....................................10 Item 6: Exhibits and Reports on Form 8-K.......................10 SIGNATURES...........................................................11 2 ITEM I: FINANCIAL STATEMENTS FRAWLEY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, ASSETS 1999 1998 ------ ------------ ------------ (Unaudited) CURRENT ASSETS Cash $ 62,000 $ 16,000 Accounts receivable, net 462,000 514,000 Prepaid expenses and other deposits 101,000 135,000 ------------ ------------ TOTAL CURRENT ASSETS 625,000 665,000 Long-term accounts receivable, net 92,000 79,000 Real estate investments, net 3,153,000 3,134,000 Property, plant and equipment, net 458,000 463,000 ------------ ------------ TOTAL ASSETS $ 4,328,000 $ 4,341,000 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES Notes payable to stockholders $ 2,594,000 $ 2,529,000 Accounts payable and accrued expenses 1,062,000 1,040,000 Environmental reserve 154,000 121,000 Unearned revenue 188,000 84,000 ------------ ------------ TOTAL CURRENT LIABILITIES 3,998,000 3,774,000 LONG TERM LIABILITIES Notes payable 70,000 70,000 Environmental reserve 1,497,000 1,497,000 ------------ ------------ TOTAL LONG TERM LIABILITIES 1,567,000 1,567,000 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 (18,876,000) (18,639,000) ---------- ------------ (476,000) (239,000) Less common stock in treasury, 191,312 shares (at cost) (761,000) (761,000) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY (1,237,000) (1,000,000) ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $ 4,328,000 $ 4,341,000 ============ ============
See notes to consolidated financial statements. 3 FRAWLEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, ----------------------- 1999 1998 ---------- ---------- REVENUES: Net revenues $ 582,000 $ 645,000 --------- --------- COSTS AND EXPENSES: Cost of operations 438,000 445,000 Selling, general and administrative expenses 315,000 271,000 Interest expense 66,000 69,000 --------- --------- TOTAL COSTS AND EXPENSES 819,000 785,000 --------- --------- NET LOSS $(237,000) $(140,000) ========= ========= NET LOSS PER SHARE: Continuing operations $ (.19) $ (.11) ----------- --------- (.19) (.11) ========== ========= 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 STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, ------------------------ 1999 1998 ---------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $(237,000) $(140,000) --------- --------- Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 7,000 8,000 Disposals of property, plant and equipment Changes in operating assets and liabilities: Short- and long-term accounts receivable, net 39,000 4,000 Prepaid expenses and deposits 35,000 38,000 Accounts payable and accrued expenses 55,000 (55,000) Unearned revenue 104,000 80,000 --------- --------- TOTAL ADJUSTMENTS 240,000 75,000 --------- --------- Net cash used in operating activities 3,000 (65,000) --------- --------- CASH FLOW FROM INVESTING ACTIVITIES: Equipment purchases (3,000) (8,000) Refunds received on real estate (19,000) --------- ---------- Net cash provided by investing activities (22,000) (8,000) --------- --------- CASH FLOWS FROM FINANCING ACTIVITES: Short-term debt borrowings 65,000 7,000 --------- --------- Net cash provided or used by financing activities 65,000 7,000 --------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS 46,000 (66,000) CASH, BEGINNING OF PERIOD 16,000 73,000 --------- --------- CASH, END OF PERIOD $ 62,000 $ 7,000 ========= =========
See notes to consolidated financial statements 5 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 March 31, 1999, the results of operations and changes in cash flow for the three months then ended. NOTE 2: Revenues from continued operations for the three months ended March 31, 1999 totaled $582,000. NOTE 3: The results of operations for the three months ended March 31, 1999 and 1998 are not necessarily indicative of results to be expected for the full year. 6 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 March 31, 1999, operating revenues from Specialized Health Services decreased by $54,000 when compared to the same period in 1998. In 1999, the health care operation lost $77,000 as compared to a $27,000 loss in 1998. 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. The Company plans to continue to improve operations through additional reduction in overhead and increasing patients in both the inpatient and outpatient treatment programs. 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 March 31, 1999 was $61,000 as compared to a loss of $51,000 for the same period in 1998. Real estate losses continue as the company incurs carrying costs, improvements required to sell the property. The undeveloped real estate market in Southern California is showing signs of improvement. The Company is actively advertising the undeveloped real estate for sale. Los Angeles County Regional Planning Commission which governs real estate development has announced that they will have public hearings to review a plan to down zone undeveloped land in the Santa Monica Mountains. The effect of this plan is not clear yet. 7 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 Seattle Hospital and outpatient treatment program reported a $77,000 loss for the three months ended March 31, 1999 compared to a $27,000 loss for the three months ended March 31, 1998. Management believes the results will continue as the Company continues to experience a transition from third party reimbursement to direct payment from patients. Debt secured by the Seattle Hospital in the amount of $800,000 is due September 1, 1999. The Company continues to incur legal expenses and has an obligation in 1999 to contribute to the Chatham Brothers toxic waste cleanup lawsuit. Servicing outstanding debt continues to be a significant burden on the Company's operations. The Company intends to raise capital for the health care business by seeking partners in health care 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 increase the marketability of the property. The limited resources available to the Company will be directed at revitalization of the health care business and the continued reduction of non-producing assets. 8 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. Between 1995 and 1998, the State of California adjusted the estimated cost of remediation on several occasions. As a result, the Company has increased their recorded liability to reflect their share. In January of 1998 the final remediation plan was approved by the State and in January of 1999 the PRP's consented to it, as well as the allocation of costs, and the consent decree was approved by the Court. As of December 31, 1998, the Company had paid over $500,000 into the PRP group and had a cash call contribution payable of $47,000. In addition, they carried accrued short-term and long-term liabilities of $121,000 and $1,497,000 respectively. The company is in dispute with its 1988 licensee over the trademark "Classics Illustrated." In 1998, the Company terminated its license agreement for breach of contract. The licensee has objected to the termination stating that the company failed to notify the licensee of a potential problem with the trademark in Greece. A Greek court has ruled against a sublicensee in Greece. In the license agreement the Company notified the licensee that the license would have to investigate the international trademark involving "Classics Illustrated." Management does not foresee any significant risk in connection with the case. The Company is named as a defendant in a sexual harassment case involving two of its employees at one of the outpatient clinics. The case was previously decided in the Company's favor but this was set aside in the appeals court decision. The case is expected to go to trial again in late 1999. Management does not believe there to be any merit to the case and does not foresee any significant risk. All costs to date have been paid by the Company's insurance. 9 ITEM 5: Other Information ----------------- Related Party Transactions. In 1999, Michael P. Frawley, Chairman of the Board, loaned the Corporation funds to meet short term borrowing and operating expenses. The loans were secured by the Company's real estate. The following loans were made: February 5th, 1999 $25,000.00 March 19th, 1999 40,000.00 ITEM 6: Exhibits and Reports on Form 8-K -------------------------------- None 10 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: July 21, 1999 By: /s/ Michael P. Frawley ------------------------- ----------------------------------- Michael P. Frawley (Authorized Officer and CEO and Chairman of the Board) 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 61,000 0 1,228,000 674,000 56,000 46,000 4,787,000 1,176,000 4,328,000 5,565,000 0 0 0 1,414,000 (2,651,000) 4,328,000 582,000 582,000 438,000 438,000 315,000 0 66,000 (237,000) 0 (237,000) 0 0 0 (237,000) (.19) 0
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