-----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, Epcj1IAJVL6VClqJVVvxAjZXqRFl8PpCy5jvoW9dZr5WKYezkNYFnc9XdmiRqv3J KJFBiNVFTlezyKVZ53We/Q== 0000898430-99-004369.txt : 19991124 0000898430-99-004369.hdr.sgml : 19991124 ACCESSION NUMBER: 0000898430-99-004369 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991123 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: 99763099 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 (PERIOD ENDED 9-30-99) 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 September 30, 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 (I.R.S. EMP I.D. NO) OR ORGANIZATION) 28720 Roadside Drive. 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 September 30, 1999 - ----------------------------------- ---------------------------------------- Common stock, par value $1 1,222,905 Total Number of Pages 12 ----- FRAWLEY CORPORATION AND SUBSIDIARIES INDEX PART I: FINANCIAL INFORMATION PAGE NO. Item 1: Financial Statements Consolidated Balance Sheets - September 30, 1999 and December 31, 1998......................... 3 Consolidated Statements of Operations - Three Months Ended September 30, 1999 and 1998................... 4 Consolidated Statements of Operations - Nine Months Ended September 30, 1999 and 1998.................... 5 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1999 and 1998.................... 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 SEPTEMBER 30, DECEMBER 31, ASSETS 1999 1998 ------ ------------- ------------ (Unaudited) CURRENT ASSETS Cash $ 27,000 $ 16,000 Accounts receivable, net 418,000 514,000 Prepaid expenses and other deposits 112,000 135,000 ------------- ------------ TOTAL CURRENT ASSETS 557,000 665,000 Long-term accounts receivable, net 34,000 79,000 Real estate investments, net 2,952,000 3,134,000 Property, plant and equipment, net 484,000 463,000 ------------- ------------ TOTAL ASSETS $ 4,027,000 $ 4,341,000 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES Notes payable to stockholders $ 2,853,000 $ 2,529,000 Accounts payable and accrued expenses 1,099,000 1,040,000 Environmental reserve 31,000 121,000 Unearned revenue 48,000 84,000 ------------- ------------ TOTAL CURRENT LIABILITIES 4,031,000 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 (19,210,000) (18,639,000) ------------- ------------ (810,000) (239,000) Less common stock in treasury, 191,312 shares (at cost) (761,000) (761,000) ------------- ------------ TOTAL STOCKHOLDERS' EQUITY (1,571,000) (1,000,000) ------------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,027,000 $ 4,341,000 ============= ============ See notes to consolidated financial statements. 3 FRAWLEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended September 30, -------------------------- 1999 1998 ---------- ---------- REVENUES: Net revenue $ 620,000 $ 845,000 (Loss) from sale of real estate (22,000) (80,000) ---------- ---------- TOTAL REVENUES 598,000 765,000 COSTS AND EXPENSES: Cost of operations 434,000 492,000 Selling, general and administrative expenses 402,000 167,000 Interest expense 73,000 67,000 ---------- ---------- TOTAL COSTS AND EXPENSES 909,000 726,000 ---------- ---------- NET INCOME(LOSS) $ (311,000) $ 39,000 ========== ========== NET INCOME(LOSS) PER SHARE: Continuing operations $(.25) $ (.03) ========== ========== 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)
Nine Months Ended September 30, -------------------------- 1999 1998 ----------- ----------- REVENUES: Net Revenues $1,969,000 $2,244,000 (Loss) from sale of real estate (22,000) (80,000) ----------- ----------- TOTAL REVENUES 1,947,000 2,164,000 COSTS AND EXPENSES: Cost of operations 1,321,000 1,353,000 Selling, general and administrative expenses 990,000 798,000 Interest expense 207,000 198,000 ----------- ----------- TOTAL COST AND EXPENSES 2,518,000 2,349,000 ----------- ----------- NET LOSS $ (571,000) $ (185,000) =========== =========== NET (LOSS) PER SHARE: Continuing operations $ (0.47) $ (0.15) =========== =========== Weighted average number of common shares outstanding 1,222,905 1,222,905 =========== ===========
5 FRAWLEY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30, ------------------------ 1999 1998 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Profit (Loss) $(571,000) $(185,000) ----------- ----------- Adjustments to reconcile net loss to net cash used in non-operating activities: Loss on sale of real estate investment (22,000) 80,000 Write down of real estate investments 343,000 Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 24,000 24,000 Changes in operating assets and liabilities: Short and long-term accounts receivable, net 140,000 118,000 Prepaid expenses and deposits 24,000 12,000 Accounts payable and accrued expenses 59,000 (120,000) Notes payable write down Unearned revenue (36,000) 30,000 ----------- ----------- TOTAL ADJUSTMENTS 532,000 144,000 ----------- ----------- Net cash used in operating activities (39,000) (41,000) ----------- ----------- CASH FLOW FROM INVESTING ACTIVITIES: Equipment purchases (45,000) (39,000) Environmental reserve paydown (90,000) Payments for real estate improvements (161,000) (35,000) ----------- ----------- Net cash provided by investing activities (296,000) (74,000) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Short-term debt borrowings 374,000 101,000 Proceeds from sale of real estate 22,000 103,000 Repayment of borrowings (50,000) (99,000) ----------- ----------- Net cash provided or (used in) financing activities 346,000 105,000 ----------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS (11,000) (10,000) CASH, BEGINNING OF PERIOD 16,000 73,000 ----------- ----------- CASH, END OF PERIOD $ 27,000 $ 63,000 =========== ===========
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 September 30, 1999, the results of operations and changes in cash flow for the nine months then ended. NOTE 2: Revenues from continued operations for the nine months ended September 30, 1999 totaled $1,969,000 compared to $2,244,000 for 1998. Operating loss results for 1999 were $571,000 as compared to $185,000 in 1998. NOTE 3: The results of operations for the nine months ended September 30, 1999 and 1998 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 September 30, 1999, operating revenues from Specialized Health Services decreased by $173,000 when compared to the same period 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 is currently seeking an investor to finance marketing and expansion of the health care services or a purchaser for this subsidiary. Real Estate - ----------- The real estate operating loss during the quarter ended September 30, 1999 was $233,000 when compared to a loss of $165,000 for the same period in 1998. Real estate losses continue as the company incurs carrying costs and improvements required to sell the properties. In the third quarter, the Company sold a 10 Acre parcel for $321,000. The undeveloped real estate market in Southern California is showing signs of improvement. The Company is actively advertising the undeveloped real estate for sale. The 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. 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 programs reported a net operating loss of $14,000 for the nine months ended September 30, 1999 compared to a $135,000 profit for the same period in 1998. Management believes these results will continue as the Company goes through the 8 transition from third party reimbursement to direct payment from patients. Debt secured by the Seattle Hospital in the amount of $800,000 has been extended until August 1, 2000. The Company continues to incur legal expenses and has an obligation in 1999 to contribute to the Chatham Brothers toxic waste cleanup lawsuit. Real Estate and Corporate overhead continue to produce losses which the operating business is unable to absorb. The sale of real estate may require further expenditure to prepare the land for sale, which would be financed through borrowings. The sale of real estate 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. 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. 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 $75,091,000. In addition, they carried accrued short-term and long-term liabilities of $31,000 and $1,497,000 respectively. In September 1999 the Company made A $20,000 payment to the PRP Group. The company is in dispute with its 1988 licensee over the trademark "Classics Illustraded". 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 licensee agreement the Company notified the licensee that the license would have to investigate the international trademark involving " Classics Illustraded." 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 being retried in court at this time. 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. 10 ITEM 5: Other Information ----------------- Related Party Transactions In 1999, Michael Frawley, Chairman of the Board, loaned the Corporation funds to meet short term borrowings and operating expenses. The loans were secured by the Company's real estate. The following loans were made: July 9/th/, 1999 $40,000.00 July 26/th/ 1999 15,000.00 August 13/th/ 1999 35,000.00 September 3/rd/ 1999 24,000.00 On August 31/st/, 1999, the Company sold a 10 acre parcel of land to an unrelated party for $321,000. As part of that transaction secured loans on the property were paid off. P. Joseph Frawley, MD, brother of the Chairman , received $60,862,and Gerardine Frawley mother of the Chairman, received $105,242. ITEM 6: Exhibits and Reports on Form 8-K -------------------------------- No reports on form 8-K were filed during the quarter ended September 30, 1999. Exhibit 27 -Financial Data Schedule 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: November 22, 1999 By: /s/ Michael P. Frawley ----------------------------- ------------------------------ Michael P. Frawley, President Authorized Officer and Chief financial Officer) 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 27,000 0 1,019,000 567,000 57,000 56,000 4,627,000 1,192,000 4,027,000 5,598,000 0 0 0 1,414,000 (2,985,000) 4,027,000 1,947,000 1,947,000 1,321,000 1,321,000 990,000 0 207,000 (571,000) 0 (571,000) 0 0 0 (571,000) (0.47) 0
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