February 18, 1997
US Securities & Exchange Commission,
450 Fifth Street, N.W.
Washington, DC 20549
RE: The Quigley Corporation ("Registrant")
Form 10-QSB - Period Ended December 31, 1996
Dear Sir:
Enclosed herewith is original and 2 copies of above Registrant's Form
10-QSB, together with 5 additional conformed copies of such 10-QSB.
Kindly acknowledge receipt of the enclosed by signing and returning the
enclosed self address post card.
Sincerely,
/s/ Guy J. Quigley
--------------
Guy J. Quigley
President, Chief Executive Officer
cc: William Reilly Esq.
Nathhan Blumenfrucht CPA
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended
or
[XX] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from October 1, 1996 to December 31, 1996
Commission File Number: 01-21617
THE QUIGLEY CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 23-2577138
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
(MAILING ADDRESS: PO Box 1349, Doylestown, PA 18901.)
Landmark Building, 10 South Clinton Street,
Doylestown, PA 18901
(Address of principle executive offices) (Zip Code)
(215) 345-0919
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Former fiscal year, October 1, 1995 to September 30, 1996
Indicate by the 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 filed such reports), and (2) has been subject to
such filing requirements for the past 90 days. [XX] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's class of common stock, as of the latest
practicable date. The number of shares outstanding of each of the registrant's
classes of common stock, as of December 31, 1996 12,099,192 shares, all of one
class of $.0005 par value common stock.
<PAGE>
Table Of Contents
Page No.
Part I - Financial Information
Item 1. Financial Statements 3-7
Item 2. Managements' Discussion And Analysis Of
Financial Condition And Results Of Operations 8
Part II - Other Information
Item 3. Legal Proceedings 9
Item 2. Changes In Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission Of Matters To A Vote Of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits And Reports On Form 8-K 9
Signatures 9
Edgar Exhibit 27 10
-2-
<PAGE>
<TABLE>
<CAPTION>
THE QUIGLEY CORPORATION
BALANCE SHEETS
<S> <C> <C>
(Unaudited)
December 31, September 30,
1996 1996
ASSETS
Current Assets:
Cash ........................................ $2,455,973 $ 370,147
Notes receivable ............................ 54,189 88,389
Accounts receivable, net .................... 2,200,824 607,078
Due from attorneys' escrow account .......... 260,000 --
Inventory ................................... 300,732 58,339
Other current assets ........................ 9,857 --
---------- ----------
TOTAL CURRENT ASSETS .................... 5,281,575 1,123,953
---------- ----------
EQUIPMENT - Less accumulated depreciation ......... 66,599 65,314
---------- ----------
OTHER ASSETS:
Patent rights - Less accumulated amortization 267,985 206,866
Deferred income taxes ....................... 715,825 56,521
Other assets ................................ 3,389 3,377
---------- ----------
TOTAL OTHER ASSETS ..................... 987,199 266,764
---------- ----------
TOTAL ASSETS ...................................... $6,335,373 $1,456,031
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable ..................... $ 131,797 $ 63,139
Accrued expenses ..................... 749,996 21,114
Accrued income taxes ................. 622,318 --
Stock subscription payable ........... -- 41,000
----------- -----------
TOTAL CURRENT LIABILITIES ....... 1,504,111 125,253
----------- -----------
STOCKHOLDER'S EQUITY:
Common Stock, $.0005 par value;
authorized 25,000,000; issued and
outstanding 12,099,192 and 9,539,528
shares (Note 2) ...................... 6,049 4,769
Additional paid-in capital ........... 5,978,390 4,129,256
Deficit .............................. (851,758) (2,803,247)
Stock subscription receivable ........ (301,419) --
----------- -----------
TOTAL STOCKHOLDE'S EQUITY ...... 4,831,262 1,330,778
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.. $ 6,335,373 $ 1,456,031
=========== ===========
See accompanying notes to financial statements
-3-
<PAGE>
THE QUIGLEY CORPORATION
STATEMENTS OF OPERATIONS
(Unuadited)
Three months ended
December 31, December 31,
1996 1995
----------- -----------
<S> <C> <C>
NET SALES ................................... $4,091,653 $ 147,718
----------- -----------
COST OF SALES ............................... 1,374,327 17,975
----------- -----------
GROSS PROFIT ................................ 2,717,326 129,743
----------- -----------
OPERATING EXPENSES:
Sales and marketing ...................... 585,202 37,510
Administration ........................... 217,621 96,580
----------- -----------
TOTAL OPERATING EXPENSES..................... 802,823 134,090
----------- -----------
INCOME BEFORE TAXES ......................... 1,914,503 (4,347)
----------- -----------
INCOME TAXES (Note 4)........................ (36,986) --
----------- -----------
NET INCOME .................................. $1,951,489 ($ 4,347)
=========== ===========
Earnings per common share:
Primary (Notes 2 and 3)................... $ .14 --
==========
Fully diluted (Notes 2 and 3)............. $ .14 --
==========
Weighted average common shares outstanding:
Primary (Notes 2 and 3)................... 13,881,028 10,562,828
Fully diluted (Notes 2 and 3)............. 13,881,028 10,562,828
See accompanying notes to financial statements
-4-
<PAGE>
THE QUIGLEY CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
December 31, December 31,
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ................................ $1,951,489 $ (4,347)
---------- --------
Adjustments to reconcile net income (loss)
to net cash used by operating activities:
Depreciation and amortization .............. 18,807 --
Deferred income taxes ...................... (659,304) --
(Increase) decrease in assets:
Notes receivable ...................... 34,200 (1,080)
Accounts receivable ................... (1,593,746) (76,317)
Inventory ............................. (242,393) 8,333
Other current assets .................. (9,857) 253
Increase (decrease) in liabilities:
Accounts payable ...................... 68,658 23,793
Accrued expenses ...................... 728,882 (1,002)
Accrued income taxes .................. 622,318 --
Stock subscription payable ............ (41,000) --
---------- --------
Total adjustments ................ (1,073,435) (46,020)
---------- --------
NET CASH PROVIDED BY OPERATING ACTIVITES ... 878,054 (50,367)
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................. (6,212) (2,760)
Patent rights and other assets ................... (75,011) --
---------- --------
NET CASH FLOWS FROM INVESTING ACTIVITIES ... (81,223) (2,760)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued for services performed ....... 217,814 --
Common stock issued from exercise of options
and warrants ..................................... 1,590,000 --
Common stock issued from sale of stock and options 42,600 --
Due from attorneys' escrow account ............... (260,000)
Stock subscription receivable .................... (301,419)
---------- --------
NET CASH FLOWS FROM FINANCING ACTIVITIES ... 1,288,995 --
---------- --------
NET INCREASE (DECREASE) IN CASH ............ 2,085,826 (53,127)
CASH AT BEGINNING OF PERIOD ......................... 370,147 132,739
---------- --------
CASH AT END OF PERIOD ............................... $2,455,973 $ 79,612
========== ========
See accompanying notes to financial statements
-5-
<PAGE>
</TABLE>
THE QUIGLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND GENERAL
The Quigley Corporation (the "Company"), organized under the laws of the state
of Nevada, is primarily engaged in the development and marketing of
homeopathic cold remedies. The products developed are being offered to the
general public through distributors, brokers, mail order, and are currently
being featured on the QVC Cable TV shopping network. For the fiscal periods
presented, and for the immediate future, the Company plans to continue
concentrating its efforts in the promotion of its major product "Cold-Eeze".
This product is covered by patents registered in the United States, United
Kingdom, Sweden, France, Italy, Canada, Germany and pending in Japan. Research
is continuing on this product in order to maximize its full potential use for
the general public.
On July 15, 1996, results were published in the Annals of Internal Medicine -
Vol. 125 No 2, of a new randomized double-blind placebo-controlled study of
the common cold, which had commenced at the Cleveland Clinic Foundation, on
October 3, 1994. This study had results that showed a 42% reduction in the
duration of the common cold.
The Company has exclusive worldwide use, manufacturing, marketing and
distribution rights for the zinc gluconate/glycine lozenge formulation, known
as "Cold-Eeze". The goal of the Company is to have consumers worldwide make
"Cold-Eeze" their preferred choice for relief from the common cold.
The Balance Sheet as of December 31, 1996, the Statements of Operations, and
the Statements of Cash Flows for the three month periods ended December 31,
1996 and 1995, have been prepared without audit. In the opinion of management,
all adjustments necessary to present fairly the financial position, results of
operations and cash flows, for the periods indicated, have been made. All
adjustments made were of a normal recurring nature.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted. It is suggested that these
financial statements be read in conjunction with the financial statements and
accompanying notes for the fiscal year ended September 30, 1996 in the
Companys' Form 10-KSB.
NOTE 2 - TRANSACTIONS AFFECTING STOCKHOLDERS' EQUITY
On January 15, 1997, the Company split its common stock on a two-for-one
basis. Therefore, all share data such as, par value, earnings per share,
options exercised, warrants granted, cash received or to be received for
outstanding options and warrants are all on a post-split basis.
During the three month period ended December 31, 1995, there were no
transactions affecting stockholders equity.
From October 1, 1996 to December 31, 1996, there were 2,365,000 shares issued
through the exercise of stock options and warrants of the Company, shares
numbering 54,664 were issued for cash payment, and 140,000 were issued for
services rendered to the Company. The difference between the option payment
price, cash received, or fair market value for services rendered, resulted in
an increase to the additional paid-in-capital of the Company.
As of October 1, 1996, there were 5,810,000 unexercised options and warrants.
During the period ended December 31, 1996, 2,265,000 options and warrants were
exercised at various prices. In November of 1996, the Company issued 350,000
warrants to purchase the Companys' stock at $2.50 per share. At December 31,
1996, there were a total of 3,895,000 (of which 3,595,000 are currently
exercisable) of unexercised issued options and warrants of the Companys'
stock.
-6-
<PAGE>
NOTE 2 - TRANSACTIONS AFFECTING STOCKHOLDERS' EQUITY (continued)
Of the shares issued through the exercise of stock options and warrants,
monies in the amount of $301,419, still owing to the Company, are classified
as a contra account in stockholders' equity.
In addition, the contract, as modified in November 1996, with Sands Brothers &
Co., Ltd., the Companys' investment banker, for the purpose of raising
additional capital needed for expansion, stipulates that "Sands" has the
conditional right to purchase, at $10 per share, 200,000 shares of the
Companys' stock, for every million dollars they identify for the Company in a
private placement of the Companys' stock pursuant to Regulation D. Current
plans of the Company is that the private placement is not to exceed $10
million.
NOTE 3 - EARNINGS PER SHARE
Earnings and net loss per share is based on the weighted average number of
common shares outstanding during the three months ended December 31, 1996 and
1995. During the period ended December 31, 1995, no effect has been given to
unexercised stock options or warrants because the effect would be
antidilutive.
NOTE 4 - INCOME TAXES
Income taxes resulted in a credit for the period ended December 31, 1996
because of an excess valuation account at September 30, 1996 that provided for
deferred taxes at a rate of 15% instead of the 40.5% used at December 31,
1996. Based upon the expectations for the Company at September 30, 1996, a
"qualification for a going concern" was made in the audit report of the
Company. Thereby indicating the valuation account and rates used were
determined to be adequate at that time.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
In November 1996, the Company and George J. Longo entered into an employment
agreement for a period of five years. This agreement provides for, among other
things, that Mr. Longo, commencing in January 1997, is to serve as the Chief
Financial Officer for the Company, a starting base salary of $80,000 per
annum, and the granting of 50,000 warrants to purchase the Companys' stock at
$2.50 per share.
NOTE 6 - OTHER MATTERS
On January 2, 1997, the Board of Directors approved the change of the
Comapnys' fiscal year from September 30 to December 31 to reflect the fiscal
year which has been generally adopted by the pharmaceutical industry. The
audited statements for the transition period October 1, 1996 to December 31,
1996 will be filed by the Company of Form 10-KSB for the calendar year ended
December 31, 1997, and will be audited by Nachum Blumenfrucht, CPA.
On January 29, 1997, the Company engaged the independent accounting firm of
Coopers & Lybrand L.L.P. to audit the Companys' financial statements for the
calendar year 1997. The replacement of the previous certifying accountant,
Nachum Blumenfrucht, CPA, was made by approval of the Board of Directors of
the Company and with agreement of Mr. Blumenfrucht. This change was due to the
dramatic expansion of business operations undertaken by the Company since the
close of the prior fiscal year. There have been no disagreements with the
former accountant on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope of procedure, nor any
reportable event required to be disclosed.
-7-
<PAGE>
ITEM 2: MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
After extensive research and development, coupled with consumer test
marketing, the Company launched its products into the marketplace on a limited
basis on October 1, 1994. The Companys' major product,"Cold-Eeze TM", is
designed for the commercial marketplace of Health Food Stores, Drug and Chain
Stores and Supermarkets. Upon completion of a second double-blind
placebo-controlled study at the Cleveland Cleveland Clinic Foundation, which
proved that Cold-Eeze, utilizing 13.3mg of zinc gluconate/glycine, reduced the
duration and severity of the common cold by 42%. These results were then
peer-published in The Annals Of Internal Medicine. This study also confirmed a
previous Cold-Eeze study conducted at the Dartmouth College Cold Clinic which
was peer-published in the Journal Of International Medical Research. The
Dartmouth study, using a 23mg zinc gluconate/glycine lozenge, also resulted in
a 42% reduction in the duration and severity of the common cold.
In keeping with Homeopathy "less is more" was achieved in foregoing a
reduction of dosage and under the previously reported direction of David Riley
MD, a known authority on homeopathy and the only physician authorized by HPUS,
the company has completed the process of a homeopathic proving on zinc
gluconate (the active ingredient of our cold therapy). At our Compan's sole
expense, zinc gluconate now has a homeopathic drug proving and a clinical
trial demonstrating its effectiveness. A monograph has been filed with HPCUS
(Homeopathic Pharmacopoeia Convention of the United States) for consideration
and has been approved by the HPUS preliminary committee and the Pharmacy
committee. It should be included in the pharmacopoeia without any difficulty.
Cold-Eeze is currently distributed, but not limited to the following
distribution outlets, Chain Stores and/or Distributors Inc.: McKesson - Zee
Medical - Foxmeyer Corp. - F. Dohman Company, - Bergen Brunswick - Amerisourse
- - US Health Distributors Cardinal Health - Walgreen's - Eckerd - Revco -
RiteAid- Thrift Drug - CVS - Albertsons - Kmart - Osco/Savon - American Stores
- - H.E. Butt and endless other smaller chains and independent outlets. Sister
product, Cold-Eezer Plus, continues to be sold successfully in the alternative
marketplace of Doctor's Offices and the home shopping channel QVC where the
product has appeared over 50 times.
For those with access to the Internet, the Company has created an information
web site, which can be visited by using the following address:
http://www.quigleyco.com - The Company can also be E-mailed at:
[email protected].
RESULTS OF OPERATIONS
For the three months ended December 31, 1996, the Compnay reported revenues of
$4,091,653 and a net income of $1,951,489, as compared with revenues of
$147,718 and a net loss of ($4,347) for the comparable period ended December
31, 1995. This substantial increase in revenue and profits is primarily due to
the Companys' national marketing program coupled with the publication of a
recent clinical trial study in a medical journal, proving the effectivess of
Cold-Eeze as a remedy for the common cold. Prior to the release of this study,
financial information reported does not really compare to the financial
relationships that are present in the three months period ended December 31,
1996. Also, It is expected that the Company will experience significant
continued growth for the calendar year 1997. The current gross profit rate of
66.4% should remain as a relative constant going forward, especially for the
immediate future. Accordingly, until other strategies are implemented in the
future, an effective tax rate for the Company should approximate 40% .
Operating expenses, such as delivery, brokerage commissions, promotion, and
advertising costs, increased significantly over the prior comprable period due
to the national marketing efforts of the Cold-Eeze product. These expenses
accounted for approximately $585,202 of the total operating costs of $802,823
for the three months ended December 31, 1996 as compared to total operating
costs of $134,090 for the prior comprable period.
-8-
<PAGE>
ITEM 2: RESULTS OF OPERATIONS (continued)
Although the Company expects that sales levels will be highest during the peak
cold season from September through March, new marketing plans are under way as
well as exploring sales in the Southern Hemisphere, which has a cold season
that is opposite of North America to help counteract the current seasonality
for the product.
Total assets of $6,335,373, working capital of $3,777,464 and shareholders'
equity of $4,831,262 for the period ended December 31, 1996, increased
dramatically from the prior comprable period. This occurred primarily from
significant sales increases which thereby increased accounts receivable by
$1,593,746 and inventories by $242,393. Also, issuance of common stock related
transactions totaling $1,815,795 contributed to the balance sheet increases.
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) Form 8-K was
filed on February 4, 1997 covering all items
specified in Note 6 to the Companys' financial
statements
SIGNATURES
Pursuant to the requirements of the be signed Securities Exchange Act of 1934,
the registrant has duly caused this report to on its behalf by the undersigned
thereunto duly authorized.
THE QUIGLEY CORPORATION
By: /s/ Guy J. Quigley
--------------
Guy J. Quigley
President, Chief Executive Officer
Date: February 18, 1997
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000868278
<NAME> E.H. Kaytes
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,455,973
<SECURITIES> 0
<RECEIVABLES> 2,542,890
<ALLOWANCES> 27,877
<INVENTORY> 300,732
<CURRENT-ASSETS> 5,281,575
<PP&E> 66,599
<DEPRECIATION> 4,926
<TOTAL-ASSETS> 6,635,373
<CURRENT-LIABILITIES> 1,504,111
<BONDS> 0
0
0
<COMMON> 6,049
<OTHER-SE> 4,825,213
<TOTAL-LIABILITY-AND-EQUITY> 6,335,373
<SALES> 4,091,653
<TOTAL-REVENUES> 4,091,653
<CGS> 1,374,327
<TOTAL-COSTS> 2,177,150
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,914,503
<INCOME-TAX> (36,986)
<INCOME-CONTINUING> 1,951,489
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,951,489
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
