UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended September 30, 1996
COMMISSION FILE NO. 01-21617
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THE QUIGLEY CORPORATION
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(Exact name of registrant as specified in its charter)
Nevada 23-2577138
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
LANDMARK BUILDING, PO BOX 1349, DOYLESTOWN, PA 18901
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(Address of principal executive offices)
Registrant's telephone number, including area code:
215-345-0919
Securities registered pursuant to Section 12(b)
of the Act: NONE
Securities registered pursuant to Section 12(g)
of the Act: COMMON STOCK ($.001 PAR VALUE)
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/ /
As of December 31, 1996, the aggregate market value of the voting stock (all of
one class $.001 par value Common Stock) held by non-affiliates of the Registrant
was $74,674,850 based upon the average of the closing Bid and Asked prices of
the Common Stock on that date as reported on the OTC Bulletin Board.
Number of shares of each of the Registrant's classes of securities (all of one
class of $.001 par value Common Stock) outstanding on December 31, 1996:
6,049,596.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
The Quigley Corporation (hereinafter referred to as "the Registrant") is a
Nevada corporation which was organized on August 24, 1989 and commenced business
operations in October, 1989. Pursuant to a Registration Statement filed in
accordance with the Securities Act of 1933, as amended, and declared effective
by the Securities and Exchange Commission on February 7, 1991, the Registrant in
August of 1991 sold 2,113,433 Units of its securities to the public.
The Registrant's offices are located at Landmark Building, PO Box 1349,
Doylestown, PA 18901. The telephone number is (215) 345-0919. The Registrant
maintains a home page on the Internet at http://www.quigleyco.com and can be
reached by e-mail at [email protected].
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
SEE, Consolidated Financial Statements.
NARRATIVE DESCRIPTION OF BUSINESS OPERATIONS
Since its inception, the Registrant has conducted research and development into
various types of health-related food supplements and homeopathic cold remedies.
Prior to the current fiscal year, the Registrant has had minimal revenues from
operations and as a result had suffered continuing losses due to research and
development and operations expenses. However, the Registrant's product line has
been developed, and during the most recent fiscal year ended September 30, 1996
("Fiscal 1996"), the Registrant has had increasing and significant revenues from
its national marketing program and increasing public awareness of its
Cold-Eeze(TM) lozenge product.
The Registrant's initial business was the marketing and distribution of a line
of nutritious health supplements (hereinafter "Nutri-Bars"). Beginning in 1995,
the Registrant minimized its marketing of the Nutri-Bars and focused its efforts
on the development and marketing of the Registrant's patented Cold-Eeze(TM) zinc
gluconate cold relief lozenge product.
Since June, 1996, the Registrant has concentrated its business operations
exclusively on the manufacturing, marketing and development of its proprietary
Cold-Eeze(TM) and Cold-Eezer Plus cold-remedy lozenge products and on
development of various product extensions. The Registrant's lozenge products are
based upon a proprietary zinc gluconate formula which in a clinical study
conducted by The Cleveland Clinic has been shown to reduce the severity and
duration of the common cold. The Quigley Corporation acquired world-wide
manufacturing and distribution rights to this formulation in 1992 from Dr. John
Godfrey and commenced national marketing in 1996.
PRODUCTS
THE COLD-EEZE(TM) COLD REMEDY LOZENGE
In May, 1992, the Registrant entered into an exclusive agreement for worldwide
representation, manufacturing, marketing and distribution rights to a zinc
gluconate/glycine lozenge formulation developed by Dr. John C. Godfrey, Ph.D.,
and patented in the United States, United Kingdom, Sweden, France, Italy,
Canada, Germany, and pending in Japan. This product is presently being marketed
by the Registrant under the tradename Cold-Eeze(TM) by the Registrant directly
and also through independent brokers and marketers, and is a featured product on
the QVC Cable TV shopping network.
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In 1996, the Registrant also acquired an exclusive license to a zinc gluconate
use patent which had been patented by George Eby III, thereby assuring the
Registrant of exclusivity in the manufacturing and marketing of zinc gluconate
formulated cold relief products.
Under an FDA approved Investigational New Drug Application, filed by Dartmouth
College, a randomized double- blind placebo-controlled study (randomized study),
conducted at Dartmouth College Health Science, Hanover, New Hampshire, concluded
that the lozenge formulation treatment, initiated within 48 hours of symptom
onset, resulted in a significant reduction in the total duration of the common
cold.
On May 22, 1992, ZINC AND THE COMMON COLD, A CONTROLLED CLINICAL STUDY, by Dr.
Godfrey, et al., was published in England, in the "Journal of International
Medical Research", Volume 20, Number 3, Pages 234-246. According to Dr. Godfrey
(a) flavorings used in other Zinc lozenge products (citrate, tartrate, separate,
orotate, picolinate, mannitol or sorbitol) render the Zinc inactive and
unavailable to the patient's nasal passages, mouth and throat, where cold
symptoms have to be treated, (b) this new, patented pleasant-tasting formulation
delivers approximately 93% of the active Zinc to the mucosal surfaces and (c)
the patient has the same sequence of symptoms as in the absence of treatment,
but goes through the phases at an accelerated rate and with reduced symptom
severity.
On July 15, 1996, results of a new randomized double-blind placebo-controlled
study on the common cold, which commenced at the CLEVELAND CLINIC FOUNDATION on
October 3rd, 1994 was published. The study called "ZINC GLUCONATE LOZENGES FOR
TREATING THE COMMON COLD" was completed and published in the ANNALS OF INTERNAL
MEDICINE - VOL. 125 NO. 2. Using a 13.3mg lozenge (almost half the strength of
the lozenge used in our Dartmouth Study), the results still showed a 42%
reduction in the duration of the Common Cold.
ROYALTY AND EMPLOYMENT AGREEMENTS
The Cold-Eeze(TM) product is manufactured for the Registrant by an independent
manufacturer and marketed by the Registrant in accordance with the terms of the
licensing agreement (between the Registrant and Godfrey Science & Design, Inc.
and John C. Godfrey, Ph.D; hereinafter "Dr. Godfrey"). The contract is
assignable by the Registrant with Dr. Godfrey's consent. Throughout the duration
of the agreement Dr. Godfrey is to receive a three percent (3%) royalty on all
gross sales (subsequent to the Registrant receiving payment upon such gross
sales).
A separate consulting agreement between the parties referred to directly above
was similarly entered into on May 4, 1992 whereby Dr. John C. Godfrey and Dr.
Nancy J. Godfrey are to receive a consulting fee of two percent (2%) of gross
sales of the lozenge by the Registrant for his consulting services to the
Registrant with respect to such product.
Pursuant to the License Agreement entered into between the Registrant and George
Eby Research, the Registrant pays a royalty fee. Throughout the duration of the
agreement George Eby of George Eby Research is to receive a three percent (3%)
royalty on all gross sales (subsequent to the Registrant receiving payment upon
such gross sales).
An employment agreement between the Registrant and Guy J. Quigley was entered
into on June 1, 1995, whereby Guy J. Quigley, along with the normal
considerations of an Executive Employment Agreement, in consideration of the
acquisition of the cold therapy product, is to receive a royalty of five percent
(5%) of gross sales of the Lozenge by the Registrant for the termination of said
agreement on May 31, 2005.
An employment agreement between the Registrant and Charles A. Phillips was
entered into on June 1, 1995, whereby Charles A. Phillips, along with the normal
considerations of an Executive Employment Agreement, shall receive 25% (twenty
five per cent) of the royalty received by Guy J. Quigley, either directly from
Guy J. Quigley or, if requested, directly from the Registrant. Should Charles A.
Phillips make such request upon Registrant, the said 25% (twenty five per cent)
would be deducted from any royalties due to Guy J. Quigley.
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BROKER, DISTRIBUTOR AND REPRESENTATIVE AGREEMENTS
The Registrant has several Broker, Distributor and Representative Agreements,
both Nationally and Internationally. These agreements are sales performance
based and in addition the Registrant has also issued incentive common stock
purchase options to its Brokers, Distributors and Representatives.
PATENTS
The Registrant currently owns no patents. However, the Registrant has been
granted an exclusive agreement for worldwide representation, manufacturing,
marketing and distribution rights to a zinc/gluconate/glycine lozenge
formulation developed by Dr. John C. Godfrey, Ph.D., and patented as follows:
UNITED STATES: No. 4 684 528 (August 4, 1987) AND
No. 4 758 439 (July 19, 1988)
GERMANY: No. 3,587,766 (March 2, 1994)
FRANCE & ITALY: No. EP 0 183 840 B1 (March 2, 1994)
SWEDEN. No. 0 183 840 (March 2, 1994)
CANADA: No. 1 243 952 (November 1, 1988)
GREAT BRITAIN: No. 2 179 536 (December 21, 1988)
JAPAN: Pending.
In 1996, the Registrant also acquired exclusive license for a United States ZINC
GLUCONATE USE PATENT NUMBER RI 33,465 from the patent holder George Eby of
George Eby Research. This use patent gives The Registrant the only world-wide
entity with rights to both USE and FORMULATION patents on zinc gluconate for
reducing the duration and severity of the common cold.
RESEARCH AND DEVELOPMENT
The Registrant's research and development costs for Fiscal 1996 and the fiscal
year ending September 30, 1995 ("Fiscal 1995") was $41,856 and $70,711,
respectively. The decrease in research and development costs is attributable to
the Registrant's completion of its research and development projects with
respect to the Cold-Eeze(TM) product. The clinical study conducted by The
Cleveland Clinic was done at no cost to the Registrant. The Registrant will in
the fiscal year ending September 30, 1997 ("Fiscal 1997") incur research and
development expenditures to develop extensions of the lozenge product, including
potential pediatric Cold-Eeze, along with chewing gum and mouthwash formulations
of the Cold-Eeze(TM) product.
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REGULATORY MATTERS
The business of the Registrant is subject to federal and state laws and
regulations adopted for the health and safety of users of the Registrant's
products. The Registrant's Cold-Eeze(TM) product is a homeopathic remedy which
is subject to regulation by various federal, state and local agencies, including
the FDA and the Homeopathic Pharmacopoeia of the United States. These regulatory
authorities have broad powers, and the Registrant is subject to regulatory and
legislative changes that can affect the economics of the industry by requiring
changes in operating practices or by influencing the demand for, and the costs
of providing its products. Management believes that the Registrant is in
compliance with all such laws, regulations and standards currently in effect
including the Food, Drug and Cosmetic Act of 1938 and the Homeopathic
Pharmacopoeia Regulatory Service. Management further believes that the cost of
compliance with such laws, regulations and standards has not and will not have a
material adverse effect on the Registrant.
COMPETITION
The Registrant competes with other suppliers of cold remedy products. These
suppliers range widely in size. Some of the Registrant's competitors have
significantly greater financial, technical or marketing resources than the
Registrant. Many of the products offered by the Registrant's competitors only
relieve the symptoms of the common cold and management believes that its
product, which has been clinically proven to reduce the severity and duration of
the common cold, offers a significant advantage over many of its competitors in
the over-the-counter cold remedy market. The Registrant believes that its
ability to compete depends on a number of factors, including price, product
quality, availability and reliability, credit terms, name recognition, delivery
time and post-sale service and support.
EMPLOYEES
At September 30, 1996 the Registrant had 4 full-time employees, of whom all were
involved in an executive, marketing or administrative capacity. None of the
Registrant's employees is covered by a collective bargaining agreement or is a
member of a union. The Registrant considers its relationship with its employees
to be good.
CUSTOMERS AND SUPPLIERS
The Cold-Eeze(TM) lozenge products are distributed through numerous independent
and chain drug and discount stores throughout the United States, including
Walgreen's, Revco, Osco/Sav-On, Thrift Drug, CVS, RiteAid, Eckerd, PharMor,
K-Mart, and wholesale distribution including, McKesson, Bergen Brunswick,
Foxmeyer, US Health Distributors. The Cold-Eezer Plus product is marketed
through an exclusive sales agreement with the QVC cable shopping network. The
Registrant is not dependent on any single customer.
The Registrant currently uses a single supplier to provide its zinc gluconate
products. Should this relationship terminate, the Registrant believes that the
contingency plans which it has formulated would prevent such termination from
materially affecting the Registrant's operations. Any such termination may,
however, result in a temporary delay in production until a replacement facility
with available production time is located.
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ITEM 2. PROPERTIES
The Registrant currently maintains its executive offices at the Landmark
Building, 10 South Clinton Street, Doylestown, PA (and its alternative mailing
address is P.O. Box 1349, Doylestown, PA 18901) where it occupies approximately
2,000 square feet of office space pursuant to a written 3-year lease agreement
with an unaffiliated landlord. The Registrant also occupies approximately 2,500
square feet of warehouse space under a one-year lease agreement with an
unaffiliated landlord. The monthly aggregate lease payments for both premises is
$ 2,355. The Registrant believes that its existing facilities are adequate for
its current needs and that additional facilities in its service area are
available to meet future needs.
ITEM 3. LEGAL PROCEEDINGS
The Registrant is not presently a party to any material litigation nor, to the
knowledge of management, is any material litigation threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 19, 1995, the Registrant held its annual meeting of stockholders at
Doylestown, PA, the number of shares necessary to constitute a quorum being
present either in person or by proxy. At this meeting, the stockholders ratified
all actions and appointments of the Board of Directors taken and made since the
previous Annual Meeting of Stockholders in June, 1993. The stockholders also
elected the slate of Directors nominated by the Registrant to hold such office
until the next Annual Meeting, and ratified the appointment of Nachum
Blumenfrucht, CPA, as independent auditor of the Registrant for Fiscal 1996.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(A) MARKET INFORMATION
The Registrant's Common Stock, $.001 par value, is traded on the
over-the-counter market (Bulletin Board) under the trading symbol QUIG. The
following table sets forth the average range of bid and ask quotations for the
Registrant's Common Stock as reported by the NASD Bulletin Board for each full
quarterly period within the two most recent fiscal years (1).
Fiscal 1995 (2)
BY QUARTER COMMON STOCK
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QUARTER DATE HIGH LOW
------- ---- ---- ---
1st December 31, 1994 $1.25 $1.00
2nd March 31, 1995 $1.25 $1.00
3rd June 30, 1995 $1.25 $1.00
4th September 30, 1995 $1.25 $1.00
Fiscal 1996 (2)
BY QUARTER COMMON STOCK
- ---------- ------------
QUARTER DATE HIGH LOW
------- ---- ---- ---
1st December 31, 1995 $ 1.375 $0.875
2nd March 31, 1996 $ 1.375 $0.875
3rd June 30, 1996 $ 2.25 $0.625
4th September 30, 1996 $10.50 $1.625
(1) Trading transactions in the Registrant's securities has been
limited to the over-the-counter market and, accordingly, an
"established public trading market" for such securities currently
exists and has existed for more than the past sixty business days. Bid
and asked quotations at fixed prices have appeared regularly in the
established quotation systems on at least one-half of such business
days. All prices indicated herein are as reported to the Registrant by
broker-dealer(s) making a market in its securities. The aforesaid
securities are not traded or quoted on any automated quotation system.
The over-the-counter market quotes indicated above reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not
necessarily represent actual transactions.
(2) Prices for Fiscal Years 1995 and 1996 have been adjusted to reflect
the 10 for-One Reverse Split of Common Stock in December, 1995.
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(B) HOLDERS. As of September 30, 1996 there were approximately 253
holders of record of Registrant's Common Stock, including brokerage firms,
clearing houses, and/or depository firms holding the Registrant's securities for
their respective clients. The exact number of beneficial owners of the
Registrant's securities is not known but would necessarily exceed the number of
record owners indicated above.
(C) DIVIDENDS. No cash dividends were paid during Fiscal 1996 and
Fiscal 1995. The Registrant has not paid or declared any dividends upon its
Common Stock since its inception, and, by reason of its present financial status
and projected financial requirements, does not anticipate paying any dividends
upon its Common Stock in the foreseeable future.
(D) WARRANTS. In addition to the Registrant's aforesaid outstanding
Common Stock, there are as of December 26, 1996 issued and outstanding Common
Stock Purchase Warrants which are exercisable at the price-per- share indicated
and which expire on the date indicated, as follows:
WARRANT NUMBER EXERCISE PRICE EXPIRATION DATE
------- ------ -------------- ---------------
CLASS "D" 800,000 $1.00 December 31, 2000
CLASS "E" 1,550,000 $3.50 June 30, 2001
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE REGISTRANT'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE
SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THE REGISTRANT'S EXPANSION
INTO NEW MARKETS, COMPETITION, TECHNOLOGICAL ADVANCES AND AVAILABILITY OF
MANAGERIAL PERSONNEL.
OVERVIEW
During Fiscal 1996, management of the Registrant made a strategic marketing
decision to change the focus and business operations of the Registrant to the
manufacture and marketing of the Registrant's patented Cold-Eeze(TM) cold relief
lozenge product and the development and marketing of brand extension products
based upon the Registrant's proprietary zinc gluconate glycine formula.
By commencing national distribution of a cold-relief product clinically proven
to reduce the severity and duration of the common cold, the Registrant believes
that it is offering a significant addition to the huge over-the-counter cold
remedy market. Through greatly increased sales and expansion of manufacturing
capacity and by holding down operation, marketing and distribution costs, the
Registrant believes it will in Fiscal 1997 reverse the negative cash flow from
operations associated with the product development. The Registrant also intends
to continue to utilize the financial and marketing resources of independent
national and international brokers and marketers to represent the Registrant's
Cold-Eeze(TM) lozenge product and product extensions, thereby saving the
Registrant from the expenses and capital outlays which the Registrant would
otherwise be required to expend.
The Registrant had not generated significant revenues from its business
operations from its inception through the third quarter of Fiscal 1996. As a
result of the release of the clinical study by The Cleveland Clinic in July,
1996 citing positive results of the efficacy of the Registrant's Cold-Eeze(TM)
formulation, and the resultant increased national publicity concerning the
Cold-Eeze(TM) product, revenue from product sales greatly increased during the
fourth quarter ending September 30, 1996. For Fiscal 1996, the Registrant had a
net loss of ($694,269) on revenues of $1,049,561. The dramatic increase in
purchase orders for the Cold-Eeze(TM) product resulted in a significant backlog
in purchase orders by the close of Fiscal 1996.
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Based upon continuing strong consumer demand for the Cold-Eeze(TM) product, the
Registrant in September, 1996 initiated a program designed to increase
manufacturing capacity in several stages throughout Fiscal 1997. As a result of
this program, the Registrant will have the ability to manufacture and ship in
excess of $1.5 million of the Cold- Eeze(TM) product by the end of January,
1997, with additional manufacturing capacity coming on-line shortly thereafter.
As of December 26, 1996, the Registrant had a purchase order backlog of
approximately $7.5 million of Cold-Eeze(TM) product, and was, during the months
of November, 1996 and December, 1996, manufacturing and shipping Cold- Eeze(TM)
product at the rate of approximately $500,000 per week. These sales levels are
significantly higher than any previous sales results of the Registrant and
management expects that these sales levels will continue for the immediate
future and therefore will have a materially positive effect on the Registrant's
results for Fiscal 1997.
Although the Registrant expects that sales levels will be highest during the
peak cold season from September through March, near-term sales levels should
continue to increase as the Registrant ships its backlog of orders and
distributors and retailers order increasing quantities of the Cold-Eeze(TM)
product to fill their distribution pipeline and meet increasing consumer demand
for the product. In addition, the Registrant expects that it will during Fiscal
1997 utilize its increased manufacturing capacity to manufacture sufficient
product for international distribution of Cold- Eeze(TM). Although the
Registrant has begun to establish an international network of independent
distributors, the current inability to meet domestic demand for the
Cold-Eeze(TM) product has delayed the introduction of the Cold- Eeze(TM) product
outside the United States.
The Registrant believes that it has developed an effective, proprietary cold
remedy product which is beginning to meet with widespread consumer acceptance.
Future results of the Registrant's operations, however, will be dependent upon a
number of factors, including competitive and financial pressures associated with
national distribution of an over-the-counter cold remedy. Future revenues,
costs, margins and profits will continue to be influenced by the Registrant's
ability to increase its manufacturing capacity and marketing and distribution
capabilities in order to compete on the national and international level.
The following table sets forth selected financial information for the periods
indicated:
For the Fiscal Year Ended
1996 1995
---- ----
Statement of Operations Summary:
Net Sales $1,049,561 $501,903
Net Loss ($694,269) ($152,556)
Net Loss Per Share ($.17) ($.05)
Balance Sheet Summary:
Total Assets $1,368,301 $437,076
Total Liabilities $125,253 $137,936
Stockholder's Equity $1,243,048 $299,140
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RESULTS OF OPERATIONS
FISCAL 1996 COMPARED WITH FISCAL 1995
For Fiscal 1996, the Registrant reported revenues of $1,049,561 and a net loss
of ($694,269), as compared with revenues of $501,903 and a net loss of
($152,556) for the comparable period ended September 30, 1995. This substantial
increase in revenue is primarily attributable to gradual market acceptance of
the Cold-Eeze(TM) lozenge products. The gradual market acceptance of the
Cold-Eeze(TM) product resulted from a national marketing program commenced in
the fourth quarter of Fiscal 1996 and the release of the results of The
Cleveland Clinic Study in July, 1996. Sales in Fiscal 1995 were $501,903, most
of which resulted following the Registrant's marketing shift from health food
bars to cold-relief products.
Cost of Goods sold, as a percentage of net sales, increased to 27.1% for Fiscal
1996 from 22.3% for Fiscal 1995. The slight increase was similarly caused by the
Registrant's change in its product mix toward developing and marketing the
Cold-Eeze(TM) products instead of health food bars. During Fiscal 1996,
operating expenses similarly increased to $1,493,794 from $552,696 in Fiscal
1995. This was primarily a result of increased costs associated with a national
marketing program and the increased sales volume from the Cold-Eeze(TM) product
during Fiscal 1996.
During Fiscal 1996, the Registrant's major operating expenses included $558,281
for salaries and $570,752 for advertising which collectively accounted for
$1,129,033 or approximately 75.6% of the Registrant's operating expenses. Other
operating costs for this period maintained their fixed attributes, in that they
did not follow sales volume but maintained a relative constant dollar value for
Fiscal 1995. During Fiscal 1995, these expenses included $106,660 for salaries
and $93,931 for advertising. If these two categories of expenses maintained the
same relationship to net sales from Fiscal 1995, then the net loss for Fiscal
1996 would have changed to basically a break even.
For future periods, a normal profitable relationship should develop for all
costs and operating expenses as they relate to sales. However, this will not
occur until certain break even sales volume levels are achieved to absorb
certain fixed costs of the Registrant. The pricing structure of the Registrant's
product is designed to render the Registrant profitable after base line sales
volume levels are attained.
The total assets of the Registrant at September 30, 1996 and September 30, 1995
were $1,368,301 and $437,076 respectively. Working capital increased to $910,970
from $287,281 for the respective periods. These significant increases are due
primarily to increased sales volume, the acquisition of the use patent, and
funds or paid in capital generated from the sale, exercise or exchange for
services of the Registrant's Common Stock, options, and warrants.
At September 30, 1996, the Registrant's backlog was approximately $2 million as
compared to no backlog at September 30, 1995. The backlog increase was
attributable to a growth in sales of the Registrant's Cold-Eeze(TM) lozenge
products.
FISCAL 1995 COMPARED WITH FISCAL 1994
For Fiscal 1995, the Registrant reported revenues of $501,903 and a net loss of
($152,556), as compared with revenues of $76,907 and a loss of ($73,784) for the
comparable period ended September 30, 1994 ("Fiscal 1994"). This dramatic change
in revenue is primarily attributable to the Registrant's initial marketing
efforts of its cold-relief products, through the "QVC" television shopping
network, which represents approximately $261,000 or 52% of the total revenues
for Fiscal 1995, and growing interest of the product by consumers in the
marketplace.
Cost of goods sold, as a percentage of net sales, decreased to 22.3% for Fiscal
1995 from 34.8% for Fiscal 1994. The occurred because the Registrant's change in
its product mix toward developing and marketing the Cold-Eeze(TM) products
primarily through QVC, which carried a lower cost of sales than health food and
other cold-relief products.
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During Fiscal 1995, the health food bars accounted for approximately 1% of total
net sales as opposed to approximately 27% in Fiscal 1994.
During Fiscal 1995, operating expenses increased to $552,696 from $180,015 in
Fiscal 1994. However, as a percentage of net sales, operating costs decreased to
110.1% in Fiscal 1995 from 234.1% in Fiscal 1994. Even though total operating
costs were lower as a percentage of net sales, certain expenses increased in
Fiscal 1995 causing a greater loss from operations to be reported. During Fiscal
1995, advertising and professional expenses increased to $93,931 and $69,325,
respectively, compared to $3,056 and ($8,081), respectively for Fiscal 1994.
The Registrant had working capital of $287,281 for its fiscal year ended
September 30, 1995, as compared to a working capital deficiency of ($59,998) for
its fiscal year ended September 30, 1994. This improvement in working capital
was due primarily to a significant increase in revenues to $501,903 in Fiscal
1995 from $76,907 in Fiscal 1994, combined with additional capital obtained by
the Company through sale of Common Stock.
As of September 30, 1995, the Registrant did not have any current material
commitments for capital expenditures.
FISCAL 1994 COMPARED WITH FISCAL 1993
The Registrant's operations for Fiscal 1994 produced revenues of $76,907 and a
net loss of ($73,784) as compared with revenues of $35,932 and a net loss of
($219,388) for the comparable period ended September 30, 1993 ("Fiscal 1993").
This 114% improvement in revenues was due to the Registrant starting to sell a
new product for the cold remedy market which accounted for approximately 73% of
net sales for Fiscal 1994. Prior to Fiscal 1994, the primary source of revenues
were through the sales of a line of nutritious health food supplements.
Gross profits improved to $50,156, or 65.2% of net sales, for Fiscal 1994 as
compared to $18,887, or 61.9% of net sales, for Fiscal 1993. This occurred
because of increased sales volume and a lower cost of production associated with
the cold remedy lozenge, as compared to the health food supplements products.
Operating expenses decreased to $180,015, or 234.1% of net sales, for Fiscal
1994 as compared to $238,275, or 663.1% of net sales, for Fiscal 1993. The major
cost associated with this reduction is that professional expenses decreased to
($8,081) during Fiscal 1994 as compared to $71,676 for Fiscal 1993. The negative
amount occurred because of a settlement, with a previous attorney, waiving
$17,500 of fees.
By adopting FASB 109 during Fiscal 1994, an amount totaling ($21,564) was
reflected as a cumulative tax credit for that period. Also, $32,500 was provided
for the sale of distribution rights as compared to no provision, respectively,
for Fiscal 1993. The specific preceding item changes are reflective in the net
loss of the Registrant which decreased to ($73,784) for Fiscal 1994, as compared
to ($219,388) for Fiscal 1993.
Deferred taxes increased to $23,526 during Fiscal 1994 with no provision during
the prior fiscal year, thereby accounting for the primary change in total assets
to $57,635 for Fiscal 1994 as compared to $28,583 for Fiscal 1993. Working
capital deficits for Fiscal 1994 and 1993 were ($59,998) and ($84,864)
respectively, which remained basically unchanged as did all other significant
categories with the exception of an advance during Fiscal 1993 for $20,000 for
the sale of distribution rights to a Canadian corporation.
As of September 30, 1994, the Registrant did not have any current material
commitments for capital expenditures.
MATERIAL COMMITMENTS AND SIGNIFICANT AGREEMENTS
Since the Cold-Eeze(TM) lozenge product is manufactured for the Registrant by
outside sources, capital expenditures for Fiscal 1997 are not anticipated to be
material.
-11-
<PAGE>
There are significant royalty agreements between the Registrant and the patent
holders of the Registrant's cold-relief product. The Registrant has entered into
royalty agreements with Godfrey Science & Design, Inc. and George Eby Research
that require payments of 3% of gross sales and with Guy J. Quigley and Charles
A. Phillips who share a royalty of 5% of gross sales (in a ratio of 3.75% and
1.25%, respectively). Additionally, Dr. John C. Godfrey and Dr. Nancy J. Godfrey
receive a consulting fee of 2% of gross sales. All such royalty and consulting
arrangements are subject to certain adjustments, and payments are required by
the Registrant only after funds are remitted from such sales. See, Description
of Business- Royalty and Employment Agreements.
The agreements expire as follows: the agreement with George Eby Research expires
on March 5, 2002; the agreements with each of Godfrey Science & Design, Dr. John
C. Godfrey, and Dr. Nancy J. Godfrey expire on May 4, 2007; and the agreements
with Guy J. Quigley and Charles A. Phillips expire on May 31, 2005. All costs
associated with the cold-relief product, including the royalty and consulting
agreements, have been built into the wholesale selling price of the product, in
order to render the operations profitable after a certain base sales volume has
been achieved.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant had working capital of $910,970 and $287,281 at September 30,
1996 and 1995, respectively. The increase in working capital is due to the
proceeds received by the Registrant from the sale or exchange of common stock
for cash or services and increased sales of $547,658. Total cash balances at
September 30, 1996 were $370,147, as compared to $132,739 at September 30, 1995.
The Registrant believes that its increased marketing efforts and increased
national publicity concerning the Cold- Eeze(TM) product, together with the
Registrant's increased manufacturing availability, will result in significantly
increased revenues in Fiscal 1997. These revenues will provide an internal
source of capital to fund the Registrant's business operations. In addition to
anticipated earnings from operations, the Registrant may continue to raise
capital through the issuance of equity securities to finance anticipated growth.
On October 1, 1996, the Registrant entered into an investment banking
arrangement with Sands Brothers & Co. to raise additional capital to assist in
financing an expansion of the Registrant's business. Such financing arrangements
would primarily entail a private placement offering of the Registrant's equity
securities.
Management is not aware of any trends, events or uncertainties that have or are
reasonably likely or expected to have a material negative impact upon the
Registrant's (a) short term or long term liquidity, (b) net sales or revenues or
income from continuing operations and (c) the Registrant's business operations
may not be considered to be cyclical and/or seasonable in nature. Any challenge
to the Registrant's rights under certain patents could have a material adverse
effect on future liquidity of the Registrant, however, the Registrant is not
aware of any condition which would make such an event probable.
Management believes that its present cash balances and future cash provided by
operating activities will be sufficient to support current working capital
requirements and planned expansion through Fiscal 1997. However, should the
Registrant's business expand significantly, additional external sources of
financing would be required. While the Registrant believes that such financing
would be available to it, there can be no assurance in this regard.
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires
that certain long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. Management believes that the adoption of this pronouncement will
not have a significant impact on the Registrant's financial statements.
-12-
<PAGE>
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation," which requires either a change in accounting or disclosures for
stock-based compensation plans. The Registrant expects to select the disclosure
election of the standard.
Both standards will be effective for the Registrant beginning the first quarter
of Fiscal 1997.
IMPACT OF INFLATION
The Registrant is subject to normal inflationary trends and anticipates that any
increased costs should be passed on to its customers.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 7 is included immediately following Item 13 of
this Report. The Financial Statements contained herein have been prepared in
accordance with the requirements of Regulation S-X and supplementary financial
information, if any, has been prepared in accordance with Item 302 of Regulation
S-K.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
-13-
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
Listed below are the names, ages and positions with the Registrant of all
Directors and Executive Officers of the Registrant as of December 26, 1996. Each
director's term is scheduled to expire at the next annual meeting of
shareholders and when his successor is duly elected:
NAME AGE POSITION YEAR FIRST ELECTED
---- --- -------- ------------------
Guy J. Quigley 55 President, CEO and 1989
Landmark Building Director
10 South Clinton Street
Doylestown, PA 18901
Eric H. Kaytes 41 Vice President of 1989
Landmark Building Finance, CFO,
10 South Clinton Street Secretary-Treas. and
Doylestown, PA 18901 Director
Charles A. Phillips 49 Vice President, COO 1989
Landmark Building and Director
10 South Clinton Street
Doylestown, PA 18901
Robert L. Pollack, Ph.D. 72 Director of Research 1993
Landmark Building and Development,
10 South Clinton Street and Director
Doylestown, PA 18901
GUY J. QUIGLEY has been Chairman of the Board, President, and Chief Executive
Officer of the Registrant since September 1989. Prior to this date, Mr. Quigley,
an accomplished author, established and operated various manufacturing, sales,
marketing and real estate companies located in the United States, Europe and the
African Continent.
CHARLES A. PHILLIPS has been Vice President, Chief Operations Officer and a
Director of the Registrant since September 1989. Before his employment with the
Registrant, Mr. Phillips founded and operated KEB Enterprises, a gold and
diamond mining operation that was based in Sierra Leone, West Africa. In
addition, Mr. Phillips, also served as a technical consultant for Re-Tech, Inc.,
Horsham, Pennsylvania, where he was responsible for full marketing and
production of a prototype electrical device.
ERIC H. KAYTES currently serves as Vice President of Management Information
Systems, Secretary, Treasurer and Director of the Registrant. From 1989 until
January 1997, Mr. Kaytes also served as the Chief Financial Officer of the
Registrant. Prior to 1989 and concurrent with his responsibilities for the
Registrant, Mr. Kaytes has been an independent programmer and designer of
computer software.
-14-
<PAGE>
ROBERT L. POLLACK, B.S., M.S., Ph.D., Professor Emeritus Department of
Biochemistry, Temple University School of Medicine. Dr. Pollack is a biochemist,
researcher, nutritionist, microbiologist, editor and educator having lectured
(both nationally and internationally) on nutritional matters to the general
public and scientific audiences. In addition to publishing several papers in
scientific journals, Dr. Pollack has authored three books on the subject of
nutrition and currently serves as Chairman of the Medical Advisory Board of the
Registrant.
TERM OF OFFICE
Directors are elected to serve until the next annual meeting of shareholders and
until their successors have been elected and have qualified. Officers are
appointed to serve until the meeting of the Board of Directors following the
next annual meeting of shareholders and until their successors have been
appointed.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
-15-
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
(a) CASH COMPENSATION
The following table sets forth information concerning all remuneration paid or
accrued by the Registrant for services rendered by the following persons in all
capacities during Fiscal 1996:
(i) Each of the Registrant's five most compensated executive officers
whose cash compensation exceeded $100,000; and
(ii) all executive officers of the Registrant as a group.
<TABLE>
<CAPTION>
Name and Principal Salary Additional Compensation
Position Year ($)(1) ($)(2)
- --------------------------- ------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
Guy J. Quigley 1996 125,000 235,956
Chairman of the 1995 62,400
Board, President, 1994 25,000
Chief Executive Officer
Charles A. Phillips 1996 85,000 81,547
1995 38,050
1994 25,000
All Executive Officers as 1996 221,300 329,343
a group (3 Persons) 1995 103,850
1994 50,000
</TABLE>
- -----------------------
(1) Compensation paid pursuant to employee agreements.
(2) Additional payments, including stock awards in lieu of cash, for past
and current services.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
-16-
<PAGE>
(b) OUTSTANDING OPTIONS
As of September 30, 1996, Officers and/or Directors of the Registrant have been
issued an aggregate of 585,000 options to purchase shares of the Registrant's
Common Stock at various exercise prices. The following table sets forth
information as to all options to purchase the Registrant's Common Stock which
were granted, and held by each of the individuals listed on the remuneration
table and all directors and officers as a group:
<TABLE>
<CAPTION>
Options To
Purchase # of Percent of
Shares Exercise Date Total
Name Indicated Price Granted Expires Options
- ---- --------- ----- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Guy J. Quigley 100,000 $1.00 12/95 12/00 3.4
150,000 3.50 7/96 6/01 5.1
Charles A. Phillips 75,000 $1.00 12/95 12/00 2.6
150,000 3.50 7/96 6/01 5.1
Eric H. Kaytes 30,000 $1.00 12/95 12/00 2.6
25,000 3.50 7/96 6/01 5.2
Robert L. Pollack 30,000 $1.00 12/95 12/00 1.0
25,000 3.50 7/96 6/01 .8
</TABLE>
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
-17-
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning ownership of the
Registrant's Common Stock, as of December 31, 1996, by (i) each person who is
known by the Company to be the beneficial owner of more than five percent of the
Common Stock outstanding on such date, (ii) each of the Company's directors, and
(iii) all current directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Outstanding
Name and Address Common Stock(1) Percent of Class Warrants(8)
- --------------------------------------- ---------------------- --------------------- ----------------------
<S> <C> <C> <C>
GUY J. QUIGLEY(2)(3) 1,309,923(10) 21.7 100,000(6)
Landmark Building 150,000(7)
10 South Clinton Street
Doylestown, PA 18901
CHARLES A. PHILLIPS(2)(3) 436,496 7.2 75,000(6)
Landmark Building 150,000(7)
10 South Clinton Street
Doylestown, PA 18901
ERIC H. KAYTES(2)(3) 134,496 2.2 30,000(6)
Landmark Building 25,000(7)
10 South Clinton Street
Doylestown, PA 18901
ROBERT L. POLLACK, Ph.D.(2)(4) 81,000 1.3 30,000(6)
Landmark Building 25,000(7)
10 South Clinton Street
Doylestown, PA 18901
NUTRITIONAL FOODS, LTD(5) 324,694 5.4
539 Park Terrace
Harrisburg, PA 17111
ALL DIRECTORS AND 1,961,915 32.4 235,000(6)
EXECUTIVE OFFICERS AS A 350,000(7)
GROUP
(Four Persons)(9)
</TABLE>
- -----------------
(1) Does not include shares issued pursuant to a two-for-one stock split on
January 15, 1997.
(2) Director of the Registrant.
(3) Officer of the Registrant.
(4) Chairman of the Medical Advisory Board of the Registrant.
(5) In accordance with a Resolution adopted by the Board of Directors in
May, 1992, the Registrant's Transfer Agent was directed to stop
transfer of the certificates representing these shares. The Registrant
takes the position that Nutritional Foods, Ltd. ("NFL") should not have
received these shares due to certain false and misleading
representations made by it to the Registrant, including but not limited
to NFL's failure to act as the Registrant's international sales agent.
The Registrant has commenced litigation to cancel the shares of record.
(6) Warrants are exercisable at $1.00 per share, granted December 1995, and
expires December 2000.
(7) Warrants are exercisable at $3.50 per share, granted July 1996, and
expires June 2001.
(8) There are 585,000 shares of common stock underlying these unexercised
warrants.
-18-
<PAGE>
(9) Does not include the Registrant's Chief Financial Officer, George J.
Longo, whose employment agreement provides for a January 1997
commencement date for this position.
(10) Includes an aggregate of 156,496 shares held of record by certain
members of Mr. Quigley's family.
CHANGE OF CONTROL
The Registrant does not know of any arrangement or pledge of its securities by
persons now considered in control of the Registrant that might result in a
change of such control.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For Fiscal 1996, there have not been any material transactions between
the Registrant and any Director, Executive Officer, security holder or any
member of the immediate family of any of the aforementioned which exceeded the
sum of $60,000.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
-19-
<PAGE>
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits:
* 3.1 -- Articles of Incorporation of the Registrant (as amended).
* 3.2 -- Bylaws of the Registrant.
* 4.1 -- Specimen Common Stock Certificate.
* 10.1 -- Stock Option Plan for Consultants, Advisors and
Non-Employee Directors.
**10.2 -- Exclusive Representation and Distribution Agreement dated
May 4, 1992 between the Registrant and Godfrey Science &
Design, Inc. et al.
* 10.3 -- Employment Agreement dated June 1, 1995 between the
Registrant and Guy J. Quigley.
* 10.4 -- Employment Agreement dated June 1, 1995 between the
Registrant and Charles A. Phillips.
**10.5 -- Consulting Agreement dated May 4, 1992 between the
Registrant and Godfrey Science & Design, Inc., et al.
* 10.6 -- Licensing Agreement dated August 24, 1996 between the
Registrant, George A. Eby III and George Eby Research.
* 10.7 -- Exclusive Master Broker Wholesale Distributor and
Non-Exclusive National Chain Broker Agreement dated July
22, 1994 between the Registrant and Russell Mitchell.
* 11.1 -- Statement of Computation of Per Share Earnings.
* 23.1 -- Consent of Nachum Blumenfrucht, CPA dated April 4, 1997.
* 27.1 -- Financial Data Schedule.
- ---------------------------
* Filed herewith.
** Incorporated by reference to the Registrant's Registration Statement on
Form S-18, filed with the Commission on September 21, 1990 (Commission
File No. 33-36934), as amended.
(b) REPORTS ON FORM 8-K
No reports were filed on Form 8-K in the quarter ended September 30,
1996.
-20-
<PAGE>
N. BLUMENFRUCHT
CERTIFIED PUBLIC ACCOUNTANT
1040 EAST 22ND STREET
BROOKLYN, N.Y. 11210
------------
(718) 692-2743
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
The Board of Directors
The Quigley Corporation
Doylestown, Pennsylvania
I have audited the accompanying balance sheets of The Quigley
Corporation as of September 30, 1996 and 1995, and the related Statements of
Operations, Cash Flows and Stockholders' Equity for the periods ended September
30, 1996, 1995 and 1994. These financial statements are the responsibility of
the Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of The Quigley
Corporation as of September 30, 1996 and 1995 and the results of its operations
and its Cash Flows and Stockholders' Equity for the periods ended September 30,
1996, 1995 and 1994, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. However, the Company suffered
losses since inception, which raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to this matter are
described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
As discussed in Note 1, effective October 1, 1993, the Company has
changed its method of accounting for income taxes in accordance with SFAS No.
109.
/s/ NACHUM BLUMENFRUCHT
-------------------
Nachum Blumenfrucht
Certified Public Accountant
Brooklyn, New York
December 12, 1996
-21-
<PAGE>
THE QUIGLEY CORPORATION
Balance Sheet
As of September 30,
ASSETS
------
<TABLE>
<CAPTION>
1996 1995
---- ----
CURRENT ASSETS
<S> <C> <C>
Cash $ 370,147 $132,739
Accounts receivable-Note 1 607,078 135,983
Interest receivable-Stockholders-Note 6 659 2,784
Inventory-Note 1 58,339 82,437
Due from attorney's escrow 0 9,000
Prepaid expenses-Note 5 0 4,468
------------ --------
TOTAL CURRENT ASSETS 1,036,223 367,411
------------ --------
FIXED AND OTHER ASSETS
Fixed Assets (net of acc. depreciation of $28,337 and
$14,010) - Note 1 65,314 36,884
Intangible Asset - Patent (net of acc. amortization of
$3,134 in 1996)- Note 1 206,866 0
Deposits- Note 1 3,377 3,310
Deferred taxes- Note 1 56,521 29,471
----------- --------
TOTAL FIXED AND OTHER ASSETS 332,078 69,665
----------- --------
TOTAL ASSETS $1,368,301 $437,076
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable & accrued expenses-Note 7 $ 84,253 $ 75,677
Prepaid stock subscription-Note 8 41,000 0
Loans and note payable-Note 9 0 4,453
--------- --------
TOTAL CURRENT LIABILITIES 125,253 80,130
--------- ---------
NON CURRENT LIABILITIES
Auto loan payable-non current portion 0 13,706
Restricted stock sold under put option 420,000 common 0 44,100
shares-Note 10 --------- ---------
TOTAL LIABILITIES 125,253 137,936
--------- ---------
STOCKHOLDERS' EQUITY - Note 10
Common Stock, $.001 par value; authorized 25,000,000 4,769 3,361
shares, issued and outstanding, 4,769,764 shares in
1996 and 3,361,414 shares in 1995
Additional paid-in capital 4,129,256 2,466,632
Deficit (2,803,247) (2,108,978)
Less: Notes receivable stockholders - Note 6 (87,730) (61,875)
---------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,243,048 299,140
---------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,368,301 $437,076
========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-22-
<PAGE>
THE QUIGLEY CORPORATION
Statement of Operations
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------
1996 1995 1994
---- ---- ----
REVENUE
<S> <C> <C> <C>
Sales $1,049,561 $ 501,903 $ 76,907
Cost of Goods Sold 283,967 111,834 26,751
---------- --------- --------
Gross Profit 765,594 390,069 50,156
GENERAL AND ADMINISTRATIVE EXPENSES
Officer salaries & payroll taxes 558,281 106,660 50,000
Services rendered & R&D-Note 10 71,256 80,411 8,750
Administrative expenses-Note 12 42,906 39,305 26,949
Commissions, consulting & royalties 77,030 58,711 6,100
Travel, entertainment and shows 6,009 13,758 15,551
Depreciation and amortization 17,461 4,728 2,773
Utilities 11,013 9,498 9,722
Advertising and promotion 570,752 93,931 3,056
Professional 65,268 69,325 (8,081)
Rent 28,265 20,029 32,893
Interest 4,523 3,728 3,676
Insurance 19,878 25,697 5,390
Office and equipment rental 1,522 1,290 13,446
Wages and outside labor 10,901 18,156 0
Dues and subscriptions 1,777 1,420 0
Stock transfer and maintenance fees 4,462 3,600 5,700
Miscellaneous 2,490 2,449 4,090
----------- --------- ---------
Total General and administrative expenses 1,493,794 552,696 180,015
----------- --------- ---------
Loss before other income provision for income tax and
cumulative effective adjustment (728,200) (162,627) (129,859)
Interest Income 6,881 4,126 49
Sale of distribution rights-Note 11 0 0 32,500
------------- --------- ---------
Subtotal (721,319) (158,501) (97,310)
Less: Provision for Corporate Income Tax -(Credit)-
Note I (27,050) (5,945) 1,962
------------- ---------- ---------
Loss before cumulative adjustment (694,269) (152,556) (95,348)
Less: Cumulative Effect Adjustment - (Credit)- Note 1 -- -- 21,564
------------ --------- ---------
Net Loss $ (694,269) $(152,556) $ (73,784)
============= ========== =========
Loss per share:
Prior to cumulative effect adjust. (.17) (.05) (.04)
Cumulative effect adjustment -- -- .01
------------ --------- ---------
NET LOSS PER SHARE $ (.17) $ (.05) $(.03)
============= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-23-
<PAGE>
THE QUIGLEY CORPORATION
Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended
SEPTEMBER 30,
-------------
1996 1995 1994
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (694,269) $ (152,556) $(73,784)
Adjustments to reconcile net loss to net cash used by
operating activities Non-cash items included in loss:
Amortization and depreciation 17,461 4,728 2,773
Expenses incurred without cost credited to additional
paid in capital 0 0 40,000
Paid through the issuance of common stock 1,104,586 110,214 63,250
Allowance for deferred income taxes (27,050) (5,945) (23,526)
Change in assets and liabilities:
Accounts receivable (471,095) (135,983) 0
Inventory 24,098 (64,912) (8,318)
Due from attorney's escrow account 9,000 (9,000) 0
Prepaid expenses 4,468 (4,468) 8,474
Interest on notes receivable 2,125 (2,784) 0
Deposits (67) 2,765 (3,235)
Prepaid stock subscription 41,000 0 0
Accounts payable and accrued expenses 8,576 4,772 (24,242)
---------- ----------- --------
Cash provided by (used in) operations 18,833 (253,169) (18,608)
---------- ------------ --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed and other assets (42,757) (35,725) (1,000)
Acquisition of patent rights (210,000) 0 0
----------- ------- ------
Total cash provided by (used in)
investing activities (252,757) (35,725) (1,000)
----------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of restricted common stock 515,346 433,925 20,388
Less: shares issued for notes (25,855) (61,875) 0
Exercise and issuance of various options 0 38,042 0
Loan payable by shareholder 0 0 (4,800)
Officers loan payable (440) (10,800) 8,240
Automobile loan payable 17,719 17,719 0
--------- ------- ------
Total cash provided by (used in)
financing activities 471,332 417,011 23,828
--------- ------- ------
NET INCREASE (DECREASE) IN CASH 237,408 128,117 4,220
CASH AT BEGINNING OF PERIOD 132,739 4,622 402
--------- ------- -------
CASH AT END OF PERIOD $370,147 $132,739 $ 4,622
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-24-
<PAGE>
THE QUIGLEY CORPORATION
Statement of Cash Flows (continued)
<TABLE>
<CAPTION>
Year Ended
SEPTEMBER 30,
-------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Expenses paid by issuance of common stock and options $1,104,586 $110,214 $63,250
Non cash investing & financing:
Conversion of put option into equity 44,100
Acquisition of patent rights 210,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
-25-
<PAGE>
THE QUIGLEY CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
NOTE 10
<TABLE>
<CAPTION>
Retained
Common Stock Issued Additional Earnings
Shares Amount Paid-In Capital (Deficit) Total
------ ------ --------------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance at Sept. 30,
1993 2,445,525 $2,445 $1,761,729 $(1,882,638) $(118,464)
Sales of S registration
shares, net of
commission 28,550 29 16,359 16,388
Exercise of options by
officers
August 1994 300,000 300 20,700 21,000
Exercise of options-
August 1994 50,000 50 (50) 0
Issuance of stock in
settlement of accounts
payable balance- August
1994 25,667 26 3,474 3,500
Issuance of stock in
exchange of loan and
notes payable- August
and September 1994 60,000 60 29,940 30,000
Sale of shares- Sept.
1994 5,334 5 3,995 4,000
Issuance of stock for
services rendered -
September 1994 10,000 10 8,740 8,750
Services contributed by
officers credited to paid
in capital-Note 12 40,000 40,000
Net Loss for Period
Ended September 30,
1994 (73,784) (73,784)
---------------------------------------------------------------------------------------------------------
Balance at Sept. 30,
1994 2,925,076 2,925 1,884,887 (1,956,422) (68,610)
Issuance of stock for
services rendered Oct. 1,
1994-Sept. 30, 1995 88,171 88 110,126 110,214
Exercise of warrants Jan.
1995 21,134 21 38,021 38,042
---------------------------------------------------------------------------------------------------------
SUBTOTAL 3,034,381 $3,034 $2,033,034 $(1,956,422) $79,646
</TABLE>
The accompanying notes are an integral part of these financial statements.
-26-
<PAGE>
THE QUIGLEY CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) - NOTE 10 (Continued)
<TABLE>
<CAPTION>
Additional Retained Notes
Common Issued Paid-In Earnings Receivable-
Stock Shares Amount Capital (Deficit) Stockholders Total
------------ ------ ------- --------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Balance 3,034,381 $3,034 $2,033,034 $(1,956,422) $ 79,646
Sale of 504 Stock- December 1994
for cash & notes-Net of expenses 159,700 160 185,715 185,875
Less: Shares issued for notes (61,875) (61,875)
Sale of Stock Oct. 1, 1994-Sept.
30, 1995 for cash 167,333 167 247,883 248,050
Net Loss for period ended
September 30, 1995 (152,556) (152,556)
------------------------------------------------------------------------------------------------
Balance at Sept. 30, 1995 3,361,414 3,361 2,466,632 (2,108,978) (61,875) 299,140
Conversion of put option to equity
January 1996 42,000 42 44,058 44,100
Shares issued to officers net of
prior compensation recognized 530,000 530 313,220 313,750
Issuance of stock for services
rendered Oct. 1, 1995 -Sept. 30,
1996 269,320 269 580,567 580,836
Issuance of stock for Patent rights-
Note 1 60,000 60 209,940 210,000
Stock issued to underwriter-June
1996 7,873 8 (8) 0
Exercise of warrants- Jan. 1996 2,070 2 2,068 2,070
Add: partial receipt of notes
receivable on shares sold in prior
period 9,145 9,145
Sale of Stock, options & exercise
of options- Oct. 1, 1995- Sept. 30,
1996 for cash & notes 497,087 497 512,779 513,276
Less: Shares issued for notes (35,000) (35,000)
Net Loss for period ended
September 30, 1996 (694,269) (694,269)
------------------------------------------------------------------------------------------------
BALANCE AT SEPT 30, 1996 4,769,764 $4,769 $4,129,256 $(2,803,247) (87,730) $1,243,048
========= ====== ========== ============ ======== ==========
The accompanying notes are an integral part of these financial statements
</TABLE>
The accompanying notes are an integral part of these financial statements
-27-
<PAGE>
THE QUIGLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION AND OPERATIONS
The Quigley Corporation (the "Company") was organized under
the laws of the State of Nevada on August 24, 1989. The Company started business
October 1, 1989 and has been engaged in the business of marketing health
products . The products are fully developed and are being offered to the general
public. For the fiscal year ended September 30, 1996 the Company had revenues of
approximately $1,049,000 from the sale of these products. For the most recent
fiscal periods the Company has concentrated its efforts in the promotion of a
product known as "Cold-Eeze(TM)". Management believes that it can generate
enough revenue in the next twelve months to sustain -the Company. Management is
also pursuing additional capital through various methods.
(b) REVENUE
Revenue is recognized from product sales when the product is
shipped using the accrual basis of accounting.
(c) ACCOUNTS RECEIVABLE
The direct write off method of accounting for bad debts is
utilized and there is no allowance for doubtful accounts. For the current period
approximately $764 of bad debts was written off.
(d) INVENTORY
Inventory is stated at the lower of cost or market. Cost is
determined by the first in, first out method.
(e) FIXED ASSETS
Fixed assets are reflected on the accompanying statements at
cost less accumulated depreciation. A combination of the straight line and
accelerated methods of depreciation is used utilizing a life of five years for
machinery and equipment and a life of seven years for furniture and fixtures.
(f) PATENT
During the current fiscal period the Company reached an
agreement with an individual who had patent rights on the use of zinc gluconate
which is used in the formulation of the Company's products. The Company issued
60,000 of its common shares in return for the exclusive and sole right to this
license / patent. The stock issued had a fair value of $210,000 and is being
amortized over the remaining patent life which expires in March 2002. In
addition to the payment of stock , the Company has agreed to pay royalties to
the previous patentholder for the remaining term of the patent.
The Company is obligated under a licensing agreement to pay
Drs. John and Nancy Godfrey a total of 5% of all sales of the Cold-Eeze product.
This is comprised of a royalty fee of 3% and a consulting fee of 2%.
The Company is also obligated under a separate licensing
agreement with George Eby to pay him a 3% royalty fee of all sales collected for
the remaining term of the patent. The patent expires in March 2002.
The Company is obligated under an employment contract to its
two principal officers, Guy J. Quigley and Charles A. Phillips, whereby the
above-mentioned officers are to receive a combined royalty of 5% of gross sales
from the Cold-Eeze product. Amounts paid to the officers under the
aforementioned contract were included in officers compensation on the Statement
of Operations.
-28-
<PAGE>
THE QUIGLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
(g) DEPOSITS
Deposits are comprised of rent security and the related
accrued interest.
(h) INCOME TAXES
Effective October 1, 1993 the Company changed its method of
accounting for income taxes to comply with SFAS No. 109, "Accounting for Income
Taxes." The Company has suffered net losses since inception and has a NOL carry
forward of approximately $1,500,000. Using an 15% income tax rate results in a
deferred tax asset of approximately $225,000. A valuation allowance of $168,479
was established to reduced deferred tax assets to amounts expected to be
realized. This resulted in a net deferred tax asset of $56,521. Of this $27,050
was derived from the current year's NOL (after provision for the valuation
allowance). This amount was credited to provision for Corporate Income Tax. Of
the total tax asset- $21,564 represented prior years tax benefits, before the
adoption by the Company of SFAS No.109. This credit was reported as a Cumulative
Effect Adjustment on the Statement of Operations for the period ended September
30, 1994.
(i) FISCAL YEAR
The Company's fiscal year ends September 30th.
(j) SERVICES CONTRIBUTED BY OFFICERS
Prior to October 1, 1994, the officers received no significant
remuneration. The Statement of Operations was charged an amount needed in order
to obtain an annual officers compensation expense of $50,000. For the fiscal
year ended Sept. 30, 1994 these charges totaled $40,000 and additional paid-in
capital was credited for such amounts. For the fiscal years ended September 30,
1996 and 1995 the officers received remuneration of approximately $555,000 and
$106,000 respectively. This includes common stock issued to the officers which
was shown at fair value at the time of issuance.
NOTE 2- MANAGEMENTS PLANS
It is managements contention that they will be able to
generate sufficient cash from sales to support its operations for the following
twelve month period. In addition the Company is contemplating various equity
offerings in the next fiscal year.
-29-
<PAGE>
THE QUIGLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 3- LEASE COMMITMENTS
Operating Leases- The Company has a lease agreement on its
office space which expires in December 1998. There is no lease agreement on its
warehouse space and the Company occupies the premises on a month to month basis.
The following table represents the future minimum rent payments required on the
operating lease with terms in excess of one year as of September 30, 1996.
Fiscal Year Ended September 30,
1997 16,440
1998 18,213
1999 4,701
--------
$39,354
Capital Leases- in the most recent fiscal year the Company was
not obligated under any capital lease.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company had various transactions with the Ruyala
Corporation since inception. Ruyala is owned in its entirety by Wendy Quigley
(the wife of the Company's President, Guy Quigley). For part of the current
fiscal year officer compensation owing to Guy and Wendy Quigley was paid to the
Ruyala corporation and was charged to officers compensation on the Statement of
Operations.
NOTE 5- PREPAID EXPENSES & BANK LOAN PAYABLE
Prepaid expenses represents prepaid interest on an automobile
loan. The automobile loan was satisfied in its entirety in the current fiscal
period.
NOTE 6- NOTES RECEIVABLE-SHAREHOLDERS
Notes receivable include principal and interest due from
shareholders. The Company sold shares under a Section 504 registration and
received a note in the amount of $61,875 in 1995. The note was originally due
June 1, 1996 and bore interest at a rate of 6% per annum. The Board of Directors
authorized an extension on the due date of the note until July 1, 1997. The
balance as of September 30, 1996 was $53,389.
Additionally, certain option and warrant holders exercised
their options in September 1996. The full proceeds of the exercise were not
received in the current period. As of September 30, 1996 the balance owing to
the Company was $35,000.
The principal amount of the notes has been shown as a
reduction in shareholders equity pending the collection of such notes. The
interest receivable has been carried as a current asset on the balance sheet.
NOTE 7- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses represent various short
term operating expenses of the Company including the purchase of merchandise.
-30-
<PAGE>
THE QUIGLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 8- PREPAID STOCK SUBSCRIPTION
As of September 30, 1996 an investor deposited $41,000 for the
purchase of common shares which were issued in October 1996.
NOTE 9- LOANS AND NOTES PAYABLE
(a) As of September 30, 1995 loans payable represented an amount due to
officers of $440. The loan was satisfied in full during the current fiscal
period.
(b) The Company purchased an automobile and financed part of the
purchase through a bank loan. The total amount financed was $15,324 at an
approximate rate of 11% for a period of 60 months. As of September 30, 1995
approximately $17,700 was owed. The loan was satisfied in full in the current
period.
NOTE 10-CAPITALIZATION
In December 1995, the Company initiated a 1 for 10 reverse stock
split and changed the par value of its stock to $.001 per common share. All
shares referred to in the financial statements and notes to the financial
statements (unless specifically stated otherwise) refer to post split amounts.
(a) In August of 1994 an option holder exercised 250,000 options in
lieu of the $2,500 owed to him by the Company for advertising services rendered.
The Statement of Operations reflects a charge to advertising in the period where
incurred.
(b) In November 1992 , January and February 1993 the Company received a
total of $35,000 from an investor. The agreement provided that the investor was
to receive 12,000 (pre-split) restricted shares of the Company for each $1,000
invested up to an initial maximum of 1,800,000 (pre-split) restricted common
shares for a maximum, investment of $150,000.
The Company had granted the investor certain resale rights where
the investor could require the Company to repurchase the shares at increasing
prices ranging from $.0972 to $.105 per share. This option commenced 24 months
from January 1993 and expired 36 months from such date. As of September 30, 1995
the Company had issued 42,000 shares of stock to the investor.
Due to the potential exercise of the put option, the above
mentioned shares had been segregated from the stockholders' permanent equity and
had been included in the mezzanine section of the balance sheet in the amount of
$44,100 (the maximum repurchase price). In the current- fiscal period the put
option expired and the shares were moved to the permanent equity section.
(c) In June of 1994 the Company sold 28,550 shares in a Regulation "S"
sale of common shares of the Company. The shares were offered exclusively to
non-US persons. The shares were sold at $.07 a share for total gross proceeds of
$19,985. Commissions totaling $3,597 were deducted from these proceeds resulting
in a net amount of $16,388 being forwarded to the Company.
(d) In August 1994 various officers and / or their spouses exercised
options which were issued in 1992. A total of 300,000 shares were issued upon
the exercise of these options. The options exercised ranged in price from $.001
through $.10 per share. Total consideration was to have been $21,000. In lieu of
payment, the officers applied monies owed to them by the Company.
(e) In August 1994 Gary Quigley (a relative of the Company's President)
exercised 500,000 options out of the 1,000,000 granted to him in 1992. in lieu
of paying the exercise price Gary Quigley relinquished the remaining 500,000
options issued to him. The options were then cancelled by the Company.
-31-
<PAGE>
THE QUIGLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 10- CAPITALIZATION (CONTINUED)
(f) In August 1994 the Company issued 36,000 restricted shares to Dr.
Robert Pollack in total repayment of a debt of $18,000 ($.50 per share). The
debt was incurred over a period of fifteen months and included $820 worth of
interest.
(g) In September 1994 the Company issued 24,000 restricted shares to
Dr. and Mrs. John Godfrey in full repayment of a loan owing to them in the
amount of $12,000 ($. 50 per share) .
(h) In August 1994, 667 restricted shares were issued to Robert Moore
in payment of a debt owed to him of $1,000 ($1.50 per share) for the
installation of some fixed assets The balance sheet account- fixed assets was
charged for this item in a prior period in the amount of $1,000.
(i) In September 1994 Mrs. Robert Pollack purchased 5,334 restricted
shares of the Company at $.75 for a total cash consideration of $4,000.
(j) In August 1994 the Company issued 10,000 restricted shares of
common stock to Dr. John Godfrey for services rendered. A charge in the amount
of $8,750 was made to services rendered on the Statement of Operations for the
fair value of the stock.
(k) During the period October 1, 1994 through September 30, 1995
various individuals purchased restricted stock from the Company. 167,333 shares
were sold for which the Company received consideration of $243,050 or an average
price of approximately $1.48 per share.
(l) In January 1995 warrants which were originally issued to the
underwriter were exercised by a third party who had the warrants transferred to
him. Total shares issued were 21,134 in consideration of an $38,042 exercise
price or a per share price of $1.80.
(m) In December 1994 and January 1995 the Company sold 159,700 shares
of stock under a Registration D private placement offering for total
consideration of $199,625. The Company paid commissions on the sale in the
amount of $13,750 which was charged against paid in capital. The Company
received an interest bearing note receivable in the amount of $61,875 from some
investors. This note is due June 1, 1997.
(n) During the period October 1, 1994 through September 30, 1995
various individuals were issued restricted shares in return for goods and
services rendered. The total number of shares issued was 88,171. The statement
of operations was charged a total of $110,214 or $1.25 per share for these
issuance. The various expenses categories charged were:
Services rendered\ R&D $ 70,711
Advertising & Promotion 19,813
Legal 7,500
Commissions 6,875
Purchases of goods 2,815
Office expense 2,500
--------
Total $110,214
========
The valuation was based on the fair value of the stock which approximated the
value of goods and services rendered.
(o) In December 1995 the Company initiated a 1 for 10 reverse stock
split and changed the par value of the stock to $.001 per common share. In
January 1996 all a, b, and c warrants exercising prices were reduced from $.25,
$.50 and $.75 to $.10, $.15 and $.20 respectively. All warrants of these classes
expired as of January 31, 1996.
-32-
<PAGE>
THE QUIGLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 10- CAPITALIZATION (CONTINUED)
(p) During the period October 1, 1995 through September 30, 1996
various individuals were issued shares in return for goods and services
rendered. The total number of shares issued was 269,320. The statement of
operations was charged a total of $580,836 or an average of $2.16 per share for
these issuance. The various expenses categories charged were:
Services rendered\ R&D $ 41,836
Advertising & Promotion 434,000
Legal 105,000
--------
Total $580,836
========
(q) In addition, an underwriter was issued 7,873 shares for services
rendered. Additional paid in capital was charged for this transaction. The
valuation was based on the fair value of the stock at the time of issuance.
(r) For periods prior to October 1, 1994 officers compensation actually
received by officers was minimal. For those periods the Statement of Operations
was charged an amount needed in order to obtain an annual officers compensation
expense of $50,000. Additional paid in capital was credited for such amounts.
During the period October 1, 1995 through September 30, 1996, 530,000 shares
were issued to various officers for past service rendered. The fair value of
these shares was $463,750. This amount was reduced by $150,000 which represents
amounts charged in prior periods for compensation which was never actually paid
to the officers.
(s) In January and February 1996 20,700 of A warrants were exercised by
various individuals who received 2,070 shares for a total consideration of
$2,070.
(t) During the period October 1, 1995 through September 30, 1996
various individuals purchased shares, options and or exercised options in the
Company. The total shares issued was 497,087 and total consideration received
was $515,346. By agreement with the optionholders, 1,250,000 shares of common
stock underlying the purchase options were registered pursuant to Form S-8 in
August and October 1996.
(u) During the current period the Company entered into a marketing
agreement with Pacific Rim Pharmaceuticals for developing the Company's product
in the Far East. Pacific Rim Pharmaceutical was issued 300,000 common stock
Class D warrants exercisable at $1 and expiring in December 2000.
NOTE 11- INCOME
On June 21, 1993, the Company received a non refundable deposit in the
amount of $20,000 from a Canadian corporation (Cold-Eeze Canada Inc.) These
monies were a deposit toward a total of $250,000 for an option to acquire the
distribution rights for one of the Company's product.
In November 1993 Cold-Eeze Canada Inc. transferred their distribution
rights to Sunburst Resources. The Company and Sunburst had renegotiated the
original agreement to allow for distribution in the United States on a non
exclusive agreement. Sunburst agreed to pay $75,000 to the Company prior to
March 15, 1994. On January 15, 1994 the Company received the first installment
of $12,500. In January 1994 the Company terminated its agreement with Sunburst
as they had reneged on any further payments. The receipt of these monies was
shown as income from the sale of distribution rights on the Statement of
Operations in the period that negotiations ceased.
-33-
<PAGE>
THE QUIGLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 12- EXPENSES
(a) Services contributed by officers was charged to officer's
compensation even though no monies were paid to those officers. Management's
estimate of the value of these costs are:
For year ended September 30,
1995 and 1996
---------------------------- 1994
----
Officer's Salary $0 $40,000
The corresponding expense was charged on the statement of operations and
additional paid-in capital was credited for such amounts.
(b) Administrative expenses are comprised mainly of office expense,
supplies and employee business expenses.
NOTE 13- COMMITMENTS AND CONTINGENCIES
The Company is obligated on a lease on its office which expires
December 1998. The current monthly rent is $1,370.
The Company is obligated under a licensing agreement to pay Drs. John
and Nancy Godfrey a total of 5% of all sales of the Cold-Eeze product. This is
comprised of a royalty fee of 3% and a consulting fee of 2%. These fees amounted
to $19,999 and $0 for Fiscal 1996 and Fiscal 1995.
The Company is also obligated under a separate licensing agreement with
George Eby to pay him a 3% royalty fee of all sales collected for the remaining
term of the patent. The patent expires in March 2002. No royalties were paid
under this agreement in Fiscal 1996 and Fiscal 1995.
The Company is obligated under an employment contract to its two
principal officers, Guy J. Quigley and Charles A. Phillips, whereby the
above-mentioned officers are to receive a combined royalty of 5% of gross sales
from the Cold-Eeze product. No royalties were paid under this agreement in
Fiscal 1996 and Fiscal 1995.
-34-
<PAGE>
THE QUIGLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 14- STOCK OPTIONS AND WARRANTS
The following is a summary of stock warrants and options outstanding for the
dates listed:
THE QUIGLEY CORPORATION
SCHEDULE OF OUTSTANDING WARRANTS AND OPTIONS
<TABLE>
<CAPTION>
Sale
Warrants Warrants Warrants Incentive
Security $1.00 $3.50 $.10,.15,.20 Options Options Options Warrants
Exercise Price Class D Class E Class A,B,C Various $1.00 $1.25-$1.50 Underwriters
- ----------------- ----------- ---------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
Oct. 1, 1994 0 0 634,030 1,710,000 0 0 84,536
Exercised
Oct. 1, 1994 -
Sept. 30, 1995 0 0 0 0 0 0 21,134
----------------------------------------------------------------------------------------------------------------
Subtotal 0 0 634,030 1,710,000 0 0 63,402
Add:
New items issued 0 0 0 0 1,500,000 140,000 63,402
----------------------------------------------------------------------------------------------------------------
Balance
Sept. 30, 1995 0 0 634,030 1,710,000 1,500,000 140,000 63,402
Exercised
Oct. 1, 95 -
Sept. 30, '96 0 0 20,700 0 385,000 0 20,000
Expired
Oct. 1, 95 -
Sept. 30, '96 0 0 613,330 1,710,000 0 0 0
----------------------------------------------------------------------------------------------------------------
Subtotal 0 0 0 0 1,115,000 140,000 43,402
Add:
New items issued 800,000 850,000 0 0 0 0 0
----------------------------------------------------------------------------------------------------------------
Balance
Sept. 30, 1996 800,000 850,000 0 0 1,115,000 140,000 43,402
======= ======= ======== ========== ========= ======= =======
</TABLE>
During the current period the Company sold incentive stock options to
various salesman. The Company received a total of $960 from the sale of these
options. 140,000 options were issued in total and the exercise price ranges from
$1.25 to $1.50. The options expire in 1998 and are exercisable upon reaching
certain sales goals.
NOTE 15- SUBSEQUENT EVENTS
On October 1, 1996 the Company hired the investment banking firm, Sands
Brothers & Co. to assist in raising additional capital needed for expansion
purposes. The company is considering a private placement of common stock
pursuant to Regulation D. It is estimated that total funds raised will be in
range of $6,000,000 - $8,000,000.
-35-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
THE QUIGLEY CORPORATION
By: /S/GUY J. QUIGLEY
-----------------------------
Guy J. Quigley, President and
Chief Executive Officer
Dated: April 4, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/S/ GUY J. QUIGLEY Chairman of the Board, President, April 4, 1997
- --------------------------------------- Chief Executive Officer and
Guy J. Quigley Director
/S/ GEORGE J. LONGO Vice President, Chief Financial April 4, 1997
- -------------------------------------- Officer and Director (Principal
George J. Longo Financial and Accounting Officer)
/S/ ERIC H. KAYTES Vice President, Secretary, April 4, 1997
- ------------------------------------- Treasurer, and Director
Eric H. Kaytes
/S/ CHARLES A. PHILLIPS Vice President, Chief Operating April 4, 1997
- ------------------------------------- Officer and Director
Charles A. Phillips
- ------------------------------------- Director April 4, 1997
Dr. Robert L. Pollack
</TABLE>
-36-
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
THE QUIGLEY CORPORATION
(as amended)
The undersigned natural person(s), of the age of 21 or more, acting to form a
corporation under Chapter of the Corporate Laws of the State of Nevada do hereby
state the following:
ARTICLE I. The name of the corporation shall be THE QUIGLEY
CORPORATION.
ARTICLE II. The address of the initial registered office of the
corporation is 821 Riverside Drive, in the City of
Reno County of Washoe. The name of its initial
Registered Agent at said address is Oliver Merservy.
ARTICLE III. The purpose for which the corporation is organized
shall be: To engage in any activity within the
purposes for which Corporations may be organized,
including the buying and selling of real estate and
other property, borrow or loan money, under the
Business Corporation Act.
ARTICLE IV. The total number of shares of stock which the
corporation is authorized to have outstanding is
26,000,000 defined as follows: 25,000,000 Shares of
Common Stock, $.001 par value, 1,000,000 Shares of
Preferred Stock (unclassified), $.01 par value.
ARTICLE V. The names and addresses of the persons who are to act
as incorporators are as follows:
NAMES ADDRESSES
----- ---------
Kimberly Andras 725 Market Street
Wilmington, DE 19801
ARTICLE VI. The number of directors constituting the initial
board of directors is 3, and the names and address of
the persons who will serve as directors until the
first annual meeting of shareholders or until their
successors are elected are:
<PAGE>
NAMES ADDRESSES
----- ---------
Guy Quigley 301 Dorset Ct.
Doylestown, PA 18901
Charles Phillips Roaring Rocks Road
Erwinna, PA 18920
Eric Kaytes 15210 Wayside Road
Philadelphia, PA 19116
ARTICLE VII. The duration of the corporation shall be perpetual.
We (I), the undersigned, being all the incorporators of the corporation
identified above, declare that we have examined the foregoing this 31st day of
July, 1989 and do declare it to be true and correct.
NAMES ADDRESSES
----- ---------
/s/ Kimberly Andras 725 Market Street
Wilmington, DE 19801
State of Delaware County of New Castle
THIS IS TO CERTIFY that on this date 7-31-89 before me, a notary public,
personally appeared Kimberly Andras and whom I am satisfied are the persons
named as incorporators and executors of the foregoing Articles of Incorporation,
and who by their respective signatures in my presence have acknowledged the same
as their voluntary act.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal
on the date given above.
/S/ REGINA CEPHAS
---------------------------
Notary Public
-2-
EXHIBIT 3.2
BY-LAWS
ARTICLE I - OFFICES
Section 1. The principal office of the corporation in the State of
Nevada shall be at 821, Riverside Drive, RENO, Nevada. and the resident agent in
charge thereof is Oliver Merservy.
Section 2. The corporation may have such other offices within or
without the State of Nevada as the Board of Directors may designate or as the
business of the corporation may require from time to time.
ARTICLE II - STOCKHOLDERS
Section 1. ANNUAL MEETING: The annual meeting of the stockholders shall
be held at a place to be designated by the Board on the 20th day of January at
2:00 P.M., beginning with the year 1990, or at such other time on such other day
within such month as shall be fixed by the Board of Directors, for the purpose
of electing directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting shall be a legal
holiday, such meeting shall be held on the next succeeding business day. If the
election of directors shall not be held on the day designated herein for any
annual meeting of the stockholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
stockholders as soon thereafter as conveniently may be.
<PAGE>
Section 2. SPECIAL MEETINGS: Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the Board of Directors, and shall be called by the president at the request
of the holders of not less than ten percent of all outstanding shares of the
corporation entitled to vote at the meeting. Unless requested by stockholders
entitled to cast a majority of all the votes entitled to be cast at the meeting,
a special meeting need not be called to consider any matter which is
substantially the same as a matter voted on at any special meeting of the
stockholders held during the preceding twelve months.
Section 3. PLACE OF MEETING: The Board of Directors may designate any
place, either within or without the State of Nevada, as the place of meeting for
any annual meeting or for any special meeting called by the Board of Directors.
A waiver of notice signed by all stockholders entitled to vote at a meeting may
designate any place, either within or without the State of Nevada, as the place
for the holding of such meeting. If no designation is made, or if a special
meeting be otherwise called, the place of meeting shall be the principal office
of the corporation.
Section 4. NOTICE OF MEETING: Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall, unless otherwise prescribed by statute,
be delivered not less than ten nor more than fifty days before the date of the
-2-
<PAGE>
meeting, either personally or by mail, by or at the direction of the president,
or the secretary, or the officer or other persons calling the meeting, to each
stockholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
Section 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE: For the
purpose of determining stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or stockholders entitled to
receive payment of any dividend, or in order to make a determination of
stockholders for any other proper purpose, the board of directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, twenty days. In lieu of closing
the stock transfer books, the board of directors may fix in advance a date as
the record date for any such determination of stockholders, such date in any
case to be not more than fifty days, and, in case of a meeting of stockholders,
not less than ten days prior to the date on which the particular action,
requiring such determination of stockholders, is to be taken. If the stock
transfer books are not closed and no record date is fixed for the determination
of stockholders entitled to notice of or to vote at a meeting of stockholders,
or stockholders entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or
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<PAGE>
the date on which the resolution of the board of directors declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination of stockholders. But payment or allotment of dividends may not be
made more than sixty days after the date on which the resolution is adopted.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination shall
apply to any adjournment thereof regardless of its length except where the
determination has been made through the closing of the stock transfer books and
the stated period of closing has expired.
Section 6. BOOKS AND ACCOUNTS: This corporation shall keep and maintain
at its principal office in this State:
(a) A certified copy of its certificate of incorporation or
articles of incorporation, and all amendments thereto.
(b) A certified copy of its by-laws and all amendments.
(c) A stock ledger or a duplicate stock ledger, revised annually,
containing the names, alphabetically arranged, of all persons who are
stockholders of the corporation, showing their places of residence, if known,
and the number of shares held by them respectively; or
(d) In lieu of the stock ledger or duplication stock ledger specified
in paragraph (c), a statement setting out the name of the custodian of the stock
ledger or duplicate stock ledger, and the present and complete post office
address, including street
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<PAGE>
and number, if any, where such stock ledger or duplicate stock ledger specified
in this section is kept.
Any person who has been a stockholder of record of a corporation for a
least 6 months immediately preceding his demand, or any person holding, or
thereunto authorized in writing by the holders of, at least 5 percent of all its
outstanding shares, upon at least 5 days' written demand, or any judgment
creditor of the corporation without prior demand, shall have the right to
inspect in person or by agent or attorney, during usual business hours, the
stock ledger or duplicate stock ledger, whether kept in the principal office of
the corporation in this state or elsewhere as provided in paragraph (d) and to
make extracts therefrom. Holders of voting trust certificates representing
shares of the corporation shall be regarded as stockholders for the purpose of
this subsection.
Section 7. QUORUM: A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The stockholders present at a duly organized meeting may
continue to
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<PAGE>
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Section 8. PROXIES: At any meeting of stockholders, a stockholder may
vote in person or by proxy executed in writing by the stockholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. A proxy shall not be valid
after six months from the date of its execution, unless coupled with an
interest, but no proxy shall be valid after seven years from the date of its
execution, unless renewed or extended at any time before its expiration.
Notwithstanding that a valid proxy is outstanding the powers of the proxy holder
are suspended, except in the case of a proxy coupled with an interest which is
designated as irrevocable, if the person executing the proxy is present at a
meeting and elects to vote in person.
Section 9. VOTING OF SHARES: Subject to the provisions of Section 13.
of this Articles II, each outstanding share entitled to vote shall be entitled
to one vote upon each matter submitted to a vote at a meeting of stockholders.
Section 10. VOTING OF SHARES BY CERTAIN HOLDERS: Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
by-laws or a resolution of the board of directors of such corporation may
prescribe, and a certified copy of the by-law or resolution is presented at the
meeting.
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<PAGE>
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of shares into
his name. A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the corporation, nor
shares held by another corporation if a majority of the shares entitled to vote
for the election of directors of such other corporation are held by the
corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
Section 11. VOTING TRUSTS: A stockholder, by agreement in writing, may
transfer his stock to a voting trustee or trustees for the purpose of conferring
the right to vote thereon for a period not exceeding 15 years upon the terms and
conditions therein stated. The certificates of stock so transferred shall be
surrendered and canceled and new certificates therefor issued to such trustee or
trustees in which it shall appear that they are issued pursuant to such
agreement, and in the entry of such ownership in the proper books of such
corporation that fact shall also be noted, and thereupon such trustee or
trustees may vote upon the stock so transferred during the terms of such
agreement. A duplicate of every such agreement shall be filed in the
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principal office of the corporation and at all times during such terms be open
to inspection by any stockholder or his attorney.
Section 12. INFORMAL ACTION BY STOCKHOLDERS: Any action, except
election of directors, required or permitted to be taken at a meeting of the
stockholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the stockholders entitled
to vote with respect to the subject matter thereof.
Section 13. REMOVAL OF DIRECTORS: Any director may be removed from
office by the vote or written consent of stockholders representing not less than
two-thirds of the issued and outstanding capital stock entitled to voting power.
All vacancies, including those caused by an increase in the number of
directors may be filled by a majority of the remaining directors though less
than a quorum.
When one or more directors shall give notice of his or their
resignation to the board, effective at a future date, the board shall have power
to fill such vacancy or vacancies to take effect when such resignation or
resignations shall become effective, each director so appointed to hold office
during the remainder of the term of office of the resigning director or
directors.
ARTICLE III - DIRECTORS
Section 1. The business of this corporation shall be managed by a board
not less than 3 directors or trustees, all of whom shall be of full age and at
least one of whom shall be a citizen of the United States, except that, in cases
where all the shares
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<PAGE>
of the corporation are owned beneficially and of record by either one or two
stockholders, the number of directors may be less than three but not less than
the number of stockholders. Unless otherwise provided in the certificate or
articles of incorporation, or an amendment thereof, it shall not be necessary
for directors to be stockholders.
Section 2. REGULAR MEETINGS: A regular meeting of the Board of
Directors shall be held without other notice than this By-Law immediately after,
and at the same place as, the annual meeting of stockholders. The Board of
Directors may provide, by resolution, the time and place, either within or
without this state, for the holding of additional regular meetings without other
notice than such resolution.
Section 3. SPECIAL MEETINGS: Special meetings of the Board of Directors
may be called by or at the request of the president or any two directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix any place, either within or without the state, as the place for holding
any special meeting of the Board of Directors called by them.
Section 4. NOTICE: Notice of any special meeting shall be given at
least five days previously thereto by written notice delivered personally or
mailed to each director at his business address, or by telegram. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
so addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be
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<PAGE>
delivered when the telegram is delivered to the telegraph company. Any director
may waive notice of any meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting.
Section 5. QUORUM: A majority of the number of directors fixed by
Section 1. of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
Section 6. MANNER OF ACTING: The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Section 7. INFORMAL OR IRREGULAR ACTION BY DIRECTORS OR COMMITTEES: (a)
Action taken by the required majority of the directors or members of a committee
without a meeting is nevertheless board or committee action if:
Written consent to the action in question is signed by all the
directors or members of the committee, as the case
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<PAGE>
may be, and filed with the minutes of the proceedings of the board or
committee, whether done before or after the action so taken.
(b) Any one or more directors or members of a committee may participate
in a meeting of the board or committee by means of a conference telephone or
similar communications device which allows all persons participating in the
meeting to hear each other, and such participation in a meeting shall be deemed
presence in person at such meeting.
Section 8. EXECUTIVE AND OTHER COMMITTEES: (a) The Board of Directors,
by resolution adopted by a majority of the number of directors then in office
may designate from among its members an executive committee and one or more
other committees, each consisting of two or more directors, and each of which,
to the extent provided in the resolution or in the charter or these ByLaws shall
have and may exercise all of the authority of the Board of Directors except the
power to:
(i) Declare dividends or distributions on stock;
(ii) Issue stock other than as provided in subsection (b) of this
section.
(iii) Recommend to the stockholders any action which requires
stockholder approval.
(iv) Amend the By-Laws; or
(v) Approve any merger or share exchange which does not require
stockholder approval.
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<PAGE>
(b) If the Board of Directors has given general authorization for the
issuance of stock, a committee of the Board, in accordance with a general
formula or method specified by the board by resolution or by adoption of a stock
option or other plan, may fix the terms of stock subject to classification or
reclassification and the terms on which any stock may be issued, including all
terms and conditions required or permitted to be established or authorized by
the Board of Directors under the Nevada General Corporation Law.
(c) The appointment of any committee, the delegation of authority to it
or action by it under that authority does not constitute of itself, compliance
by any director not a member of the committee, with the standard provided by
statute for the performance of duties of directors.
Section 9. COMPENSATION: By resolution of the Board of Directors, each
director may be paid his expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 10. PRESUMPTION OF ASSENT: A director of the corporation who is
present at a meeting of the board of Directors at which action on any corporate
matter is taken unless he shall announce his dissent at the meeting and his
dissent is entered in the minutes and he shall forward such dissent by
registered mail
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<PAGE>
to the secretary of the corporation immediately after the Adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
ARTICLE IV - OFFICERS
Section 1. NUMBER: The corporation shall have a president, a secretary,
a treasurer, and a resident agent, each of whom shall be elected by the Board of
Directors. Such other officers and assistant officers as may be deemed necessary
may be elected or appointed by the Board of Directors. Any two or more offices
may be held by the same person.
Section 2. ELECTION AND TERM OF OFFICE: The officers of the corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the stockholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until he shall resign or
shall have been removed in the manner hereinafter provided.
Section 3. REMOVAL: Any officer or agent may be removed by the Board of
Directors whenever in its judgment, the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of any officer
or agent shall not of itself create contract rights.
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<PAGE>
Section 4. VACANCIES: A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
Section 5. PRESIDENT: The president shall be the principal executive
officer of the corporation, and subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. The president shall have authority to institute or
defend legal proceedings when the directors are deadlocked. He shall, when
present, preside at all meetings of the stockholders and of the Board of
Directors. He may sign, with the secretary or any other proper officer of the
corporation thereunto authorized by the Board of Directors, certificates for
shares of the corporation, any deeds, mortgages, bonds, contracts, or other
instruments which the Board of Directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated by
the Board of Directors or by these By-Laws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed; and
in general shall perform all duties incident to the office of the president and
such other duties as may be prescribed by the Board of Directors from time to
time.
Section 6. THE SECRETARY: The secretary shall: (a) keep the minutes of
the proceedings of the stockholder and of the
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<PAGE>
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these By-Laws or
as required by law; (c) be custodian of the corporate records and of the seal of
the corporation and see that the seal of the corporation is affixed to all
documents the execution of which on behalf of the corporation under its seal is
duly authorized; (d) keep a register of the post office address of each
stockholder which shall be furnished to the secretary by such stockholder; (e)
sign with the president, certificates for shares of the corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors; (f) have general charge of the stock transfer books of the
corporation; (g) in general perform all duties incident to the office of
secretary and such other duties as from time to time may be assigned to him by
the president or by the Board of Directors.
Section 7. THE TREASURER: The treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the corporation;
(b) receive and give receipts for moneys due and payable to the corporation from
any source whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Article VI of these By-Laws; and
(c) in general perform all of the duties incident to the office of treasurer and
such other duties as from time to time may be assigned to him by the president
or by the
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Board of Directors. If required by the Board of Directors, the treasurer shall
give a bond for the faithful discharge of his duties in such sum with such
surety or sureties as the Board of Directors shall determine.
Section 8. SALARIES: The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V - INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS
Section 1. The corporation shall indemnify any person who was or is a
party or threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was
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<PAGE>
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. No officer, director or stockholder may become surety on
behalf of the corporation for any of its obligations under any circumstances
whatsoever.
ARTICLE VI - CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS: The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of on behalf of the corporation, and such authority
may be general or confined to specific instances.
Section 2. LOANS: No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 3. CHECKS, DRAFTS, ETC.: All checks, drafts, or other orders
for the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be
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<PAGE>
signed by such officer or officers, agent or agents of the corporation and in
such manner as shall from time to time be determined by resolution of the Board
of Directors.
Section 4. DEPOSITS: All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. CERTIFICATES FOR SHARES: Certificates representing shares of
the corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the president or a
vice-president and countersigned by the secretary or an assistant secretary and
sealed with the corporation seal or a facsimile thereof. The signatures of such
officers upon a certificate may be facsimile signatures if the certificate is
manually signed on behalf of a transfer agent or a registrar other than the
corporation or an employee of the corporation. Each certificate for shares shall
be consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
corporation. All certificates surrendered to the corporation for transfer shall
be cancelled and no new certificates shall be issued until the former
certificates for a like number of shares shall have been
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surrendered and cancelled, except that in case of a lost, destroyed or mutilated
certificate a new one may be issued therefor upon such terms and indemnity to
the corporation as the Board of Directors may prescribe
Section 2. TRANSFER OF SHARES: Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the secretary of the corporation,
and on surrender for cancellation of the certificate for such shares. The person
in whose name shares stand on the books of the corporation shall be deemed by
the corporation to be the owner thereof for all purposes.
ARTICLE VIII - FISCAL YEAR
Section 1. The fiscal year of the corporation shall begin on the first
day of October.
ARTICLE IX - DIVIDENDS
Section 1. The board of Directors may, from time to time, declare and
the corporation may pay dividends on its outstanding shares in the manner, and
upon the terms and conditions provided by law and its Articles of Incorporation.
ARTICLE X - CORPORATE SEAL
Section 1. The Board of Directors shall provide a corporate seal which
shall be circular in form and shall have inscribed
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thereon the name of the corporation, the year of its incorporation and the
words, "Corporate Seal, Nevada".
ARTICLE XI - WAIVER OF NOTICE
Section 1. Whenever any notice is required to be given to any
stockholder or director of the corporation under the provisions of these By-Laws
or under the provisions of the ByLaws or under the provisions of the Articles of
Incorporation or under the provisions of the general corporation law of the
State of Nevada, a waiver thereof in writing signed by any person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice.
ARTICLE XII - AMENDMENTS
Section 1. The board of Directors shall have the power to make, alter
and repeal By-Laws, but By-Laws made by the board may be altered or repealed,
and new By-Laws made, by the stockholders.
Section 2. Any amendments to these By-Laws shall not become effective
for a period of twelve months following adoption thereof.
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EXHIBIT 4.1
NUMBER SHARES
CUSIP NO. 74838L 30 4
INCORPORATED UNDER THE LAWS
OF THE STATE OF NEVADA
THE QUIGLEY CORPORATION
THIS CERTIFIES THAT is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF PAR VALUE $.001
PER SHARE OF
THE QUIGLEY CORPORATION
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed.
This certificate is not valid unless countersigned by the transfer
agent and registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
/S/ERIC H. KAYTES /S/GUY QUIGLEY
- ----------------- --------------
SECRETARY/TREASURER PRESIDENT
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST
COMPANY (New York, NY)
TRANSFER AGENT AND REGISTRAR,
BY
--------------------------
AUTHORIZED OFFICER
<PAGE>
The Company is authorized to issue Common Stock and Preferred Stock.
The Board of Directors of the Company has authority to fix the number of shares
and the designation of any series of Preferred Stock and to determine or alter
the rights, preferences, privileges, and restrictions granted to or imposed upon
any unissued Preferred Stock.
A statement of the rights, preferences, privileges, and restrictions
granted to or imposed upon the respective classes or series of stock and upon
the holders thereof as established, from time to time, by the Articles of
Incorporation of the Company and by any certificate of determination, the number
of shares constituting each class and series, and the designation thereof, may
be obtained by the holder hereof upon request and without charge from the
Company.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______ Custodian ______
(Cust) (Minor)
under Uniform Gifts to Minors
Act__________________________
(State)
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as
tenants in common
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------ Shares
of capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ----------------------------------------------------------------------- Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated:
-----------------------------
-----------------------------------------------------
NOTICE: The signatures to this assignment and
correspond with the name as written upon
the face of this certificate in every
particular, without alteration or
enlargement of any change whatever.
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EXHIBIT 10.1
THE QUIGLEY CORPORATION
STOCK OPTION PLAN
FOR
CONSULTANTS, ADVISORS AND NON-EMPLOYEE DIRECTORS
The securities issued pursuant to this Plan have not been registered
pursuant to the Securities Act of 1933, as amended. The securities may be
offered or sold only pursuant to (i) a Registration Statement pursuant to such
Act, including a Registration Statement on Form S-8, or (ii) an opinion of
counsel, satisfactory to the Company, that an exemption from registration
pursuant to such Act is available.
1. PURPOSE. The purpose of this Plan is to secure long term
relationships for The Quigley Corporation, and thereby afford its stockholders
the benefits arising from capital stock ownership by the Company's Consultants,
Advisors, and Non-Employee Directors, who can help in the company's growth and
success and to provide an effective means of compensation for such persons and
entities providing services to the Company in lieu of cash payments therefor.
2. ADMINISTRATION. The Plan shall be administered by a "Compensation
Committee" which shall consist of not less than two members appointed by the
Board of Directors, but who need not be members of such Board, and all of whom
shall be disinterested persons. The term "disinterested person" shall mean a
person who, at the time he or she exercises discretion in administering the
Plan, has not at any time one year prior thereto has been issued shares of
Common Stock pursuant to exercise of Options granted under the Plan. The Board
of Directors may from time to time and in its sold discretion remove members
from or add members to the Committee. Vacancies, however caused, shall be filled
by the Board of Directors. The Committee may act at a meeting, including
telephonically, in which a majority are present, or by written consent of a
majority of the Committee. The Committee shall have the authority to construe
and interpret the Plan, to define the terms used herein, and to review,
deliberate and act upon the written recommendations of the Chief Executive
Officer of the Company with respect to shares of Common Stock proposed to be
issued pursuant to the Plan. All determinations and interpretations made by the
Committee shall be binding and conclusive upon all participants in the Plan and
on their legal representatives and beneficiaries. The initial Compensation
Committee shall consist of Mr. Guy Quigley and Mr. Charles Phillips, Directors
of the Company.
3. ELIGIBILITY AND PARTICIPATION. Consultants, Advisors and
Non-Employee Directors, to the Company, or any of its subsidiary corporations,
shall be eligible for participation in the Plan. Each person or entity acquiring
shares of Common Stock pursuant to exercise of Options granted under the Plan
shall be acquiring such shares for investment purposes only, in lieu of cash
compensation for services rendered to the Company, and at such exercise price(s)
as shall be determined by the Compensation Committee at time of grant. Such
shares issuable upon exercise of any Option shall be issued only upon opinion of
counsel that an exemption from registration pursuant to the Securities Act of
1933, as amended, is available
<PAGE>
for such issuance. The Company may, but is not required to, register such shares
for public sale pursuant to the Act, including but not limited to a Registration
on Form S-8.
4. SHARES SUBJECT TO PLAN. Subject to modification by the Board of
Directors in accordance with the By-Laws of the Company, the stock to be issued
pursuant to Options granted pursuant to this Plan shall be limited to 15,000,000
shares of Common Stock ($.0001 par value), which number of shares have been
reserved for issuance in accordance with the terms of this Plan by prior action
of the Board.
5. ADJUSTMENTS. If the outstanding shares of the Common Stock of the
Company are increased, decreased, or changed into or exchanged for a different
number or kind of shares or securities of the Company, through reorganization,
recapitalization, reclassification, stock split or reverse stock split, an
appropriate and proportionate adjustment shall be made in the maximum number and
kind of shares authorized to be issued pursuant to this Plan.
6. ASSIGNMENT OR TRANSFER OF OPTIONS. Options granted pursuant to the
Plan may not be transferred by the Option grantee without the express written
consent of the Compensation Committee, except that an Option grantee shall not
be required to obtain such consent for transfer or sale of such Option to any
member of the Option grantee's immediate family, including a transfer by
operation of law, or a transfer or sale to a corporation or partnership of which
the Option grantee holds at least a 25% interest at the time of such transfer or
sale.
7. AMENDMENT AND TERMINATION OF PLAN. The Board of Directors of the
Company may at any time, by appropriate action, suspend or terminate the Plan,
or amend the terms and conditions of the Plan.
8. INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification as they may have as directors of the Company, the members of the
Committee shall be indemnified by the Company to the full extent permitted by
the Business Corporation Law of the State of Nevada, and to indemnify and hold
harmless each member with respect to any action, claim, suit or proceeding to
which such indemnification applies, including the costs and expenses of defense.
9. APPLICABLE LAW. The terms and conditions of this Plan, and all
proceedings related thereto, shall be interpreted and construed in accordance
with the Laws of the Commonwealth of Pennsylvania. Sole jurisdiction and venue
for any action or proceeding arising in connection with the Plan shall reside
with the appropriate court of the Commonwealth of Pennsylvania held in and for
the County of Bucks.
10. EFFECTIVE DATE. The Plan shall be come effective as of the 15th day
of November, 1994, and shall expire of the 14th day of November, 1999, unless
further extended by appropriate action of the Board of Directors.
-2-
EXHIBIT 10.3
AGREEMENT
AGREEMENT MADE and effective as of the First day of June, 1995 by and
between THE QUIGLEY CORPORATION, a Nevada corporation with its principal office
at Landmark Building, 10 South Clinton Street, Doylestown, Pennsylvania, 18901
(hereinafter "Employer"), and GUY J. QUIGLEY residing at 301 Dorset Court,
Doylestown, Pennsylvania, 18901 (hereinafter "Executive").
WHEREAS, Employer is in the business of developing and marketing health
related and/or various other consumer products for sale in the commercial
marketplace, television, mail order and network marketing; and
WHEREAS, Employer desires to assure the services of Executive for the
period in this Agreement and Executive is willing to serve in the employ of
Employer on a full-time basis for said period upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. EMPLOYMENT. Employer agrees to employ Executive and Executive agrees
to enter employ of the Employer for the period stated in Paragraph "3" hereof
and upon the other terms and conditions set forth herein.
2. POSITION AND RESPONSIBILITIES. During the period of his employment
hereunder, Executive agrees to serve as the President and/or Chief Officer
and/or Chairman of the Board of the Employer and to be responsible for the
general management of the business affairs of the Company, reporting directly to
the Board of Directors of the Employer ("the Board").
3. TERM OF EMPLOYMENT. The period of Executive's employment under this
Agreement shall be deemed to have commenced as of June 1st; 1995, and shall
continue for a period of ten (1 0) years until May 31st; 2005, and thereafter
from year to year as mutually agreed upon.
4. DUTIES. During the period of his employment hereunder and except for
illness, vacation periods and reasonable leaves of absence, Executive shall
devote substantially all his business time, attention, skill and efforts to the
faithful performance of his duties hereunder; provided, however, that the
foregoing shall not be construed to prevent Executive from acting as a Director
or Counsel of any other non-competing corporation or entity when such activity
does not materially affect the performance of Executive's duties to this
Agreement.
5.1 COMPENSATION. Employer shall pay Executive as compensation for his
services hereunder, during the first year of
<PAGE>
this Agreement, (i) a minimum base salary of $125,000.00 per year, payable
weekly, or bi-weekly and (ii) such bonus or additional compensation as may be
awarded to Executive from time to time by the Board or by a committee designated
by the Board. Additionally, Executive shall be entitled to four (4) weeks paid
vacation per year. For each subsequent year of this Agreement, Executive's base
salary shall increase each year on January 1 by the lesser of (i) 20% of the
preceding year's base salary, or (ii) 2% of the increase in gross revenues of
the Employer over the gross revenues of the preceding calendar year. In either
event, the increase in base salary shall be payable as additional compensation
in two (2) equal installments, on March 1st; and September 1st; of each year, or
alternatively on a monthly basis.
5.2 ROYALTY COMPENSATION. Employer shall pay Executive an independent
monthly "founders" royalty in keeping with the existing agreement duly signed
with the product developers and patent holders (Godfrey et.al.), for the
Exclusive Worldwide Rights of the Employer's cold therapy products, as was
negotiated by the Executive on behalf of the Employer. The royalty payable shall
be 5% (five per cent) of the Gross sales secured by the Employer, after outward
shipping costs and sales Broker fees have been deducted and shall be for a
period of ten (10) years from the date of this agreement.
5.3 NETWORK MARKETING COMPENSATION. Executive shall design and execute
a network marketing program on behalf of the Employer and shall be entitled to
be the "founder" of such program, with the top level position held in reserve
for the Executive. The Executive shall be entitled to share this position with
any person and/or entity the Executive deems suitable for the expansion and
benefit of the Employer.
6. REIMBURSEMENT OF EXPENSES. Employer shall pay or reimburse Executive
for all reasonable travel and other expenses incurred by Executive in
performance of his obligations under this Agreement. Employer further agrees to
provide and pay for a telephone line at Executive's residence to be utilized by
Executive for the business purposes of the Employer.
7. BENEFITS. Employer shall provide to Executive the following
additional benefits: (i) health and dental insurance for Executive and his
family members at least equivalent to the executive level program offered by
Blue Cross/Blue Shield, (ii) a term life insurance policy of $ 1,000,000 on
Executive's life with a beneficiary to be named by Executive, (iii) an
automobile owned or leased and maintained by the Company, plus fuel for business
purposes, insurance, tolls and parking and (iv) such profit sharing, stock
option, or retirement plans as may be adopted or offered to any employee by the
Employer or the Owner at any time during the term of this Agreement.
-2-
<PAGE>
8. DISABILITY BENEFITS. As used in this Agreement, the term
"disability" shall mean the total and complete inability of the Executive to
perform his duties under this Agreement as determined by an independent
physician selected with the approval of the Employer and the Executive. With the
exception of Clauses 5.2 and 5.3, which cannot be revoked, in the event of such
disability, the Employer shall continue to pay Executive the compensation set
forth in Paragraph "5" hereof during the period of such disability; provided,
however, that in the event the Executive is disabled for a continuous period in
excess of eighteen calendar months, the Employer may, at its election, terminate
this agreement in which event Executive shall be entitled to a lump-sum
termination payment of $250,000.
9. PAYMENTS PAYABLE UPON DEATH. With the exception of Clauses 5.2 and
5.3, which will continue to exist and will automatically be passed to the
Executive's beneficiaries, in the event of the death of Executive during the
term of this Agreement, all other compensation and benefits required to be paid
hereunder shall continue to be paid for a period of twelve (12) months to the
wife or dependent(s) of Executive, if surviving.
10.(a) TERMINATION AND EXTENSION. This Agreement may not be terminated
during its term by the Employer for any reason other than a material breach by
the Executive of the terms of this Agreement. Upon its expiration, this
Agreement shall be automatically renewed for additional one-year periods unless
Employer shall provide Executive with written Notice of Intent not to renew this
Agreement not less than three (3) months prior to the expiration of the initial
term or any extension term thereof.
10.(b) SEVERANCE. For whatever reason the Employer shall buy out the
remaining value of this contract, it shall pay to the Executive two years base
compensation, determined at the rate of the Executive's base rate, plus any
bonus plan payments that would have been accrued had the Executive remained as
an employee of the Employer. This provision applies regardless of the fact that
the Executive obtains new employment and such earning are not mitigated against
the remaining and severance values of this contract.
11. NOTICES. All notices, demands or communications hereunder shall be
in writing and unless otherwise provided, shall be deemed to have been duly
given on the first business day after United States mailing by certified mail,
return receipt requested, addressed to the parties at such address as they shall
advise from time to time.
-3-
<PAGE>
12. AMENDMENT. No modification, waiver, amendment or discharge of this
Agreement shall be valid unless the same is in writing and signed by each party
hereto.
13. SURVIVAL. The representations, warranties, covenants and
indemnifications contained herein shall survive the execution hereof and shall
be effective regardless of the expiration or termination hereof.
14. ENFORCEMENT. Severability. It is the desire and the intent of the
parties hereto that the provisions of this Agreement hereof be enforced to the
fullest extent permissible under the laws and public policy of the jurisdictions
in which enforcement is sought. Accordingly, if any particular portion or
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
the remaining portion or such provision or the remaining provisions of this
Agreement, or the application of such provision or portion of such provision as
is held invalid or unenforceable to persons or circumstances other than those to
which it is held invalid or unenforceable, shall not be effected thereby.
15. ASSIGNABILITY. Employee and the Executive agree that this Agreement
may be assigned to a corporation controlled by the Executive.
16. GOVERNING LAW AND VENUE. This Agreement shall be construed in
accordance with the laws of the State of Pennsylvania and any proceeding arising
between the Parties in any matter pertaining or relating to this Agreement shall
be held or brought in the Supreme Court of the State of Pennsylvania in and for
the County of Bucks.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the First day of June, 1995:
/S/ CHARLES PHILLIPS
------------------------------
By: THE QUIGLEY CORPORATION
/S/ CHARLES J. QUIGLEY
------------------------------
By: EMPLOYEE
-4-
<PAGE>
Charles A. Phillips
35 Swamp Creek Road
Erwinna, PA 18920
December 1, 1996
Guy Quigley
c/o The Quigley Corporation
Landmark Building
10 South Clinton Street
Doylestown, PA 18901
Dear Guy,
As we have commenced to receive royalty payments, and you verbally
agreed to pass to me, 25% of the royalties you may receive from the company,
could you execute the following. Please have said royalty paid directly to me,
from The Quigley Corporation, rather than paid by you personally.
Your attention in this matter will be greatly appreciated.
Sincerely yours,
/S/ CHARLES PHILLIPS
- --------------------
Charles A. Phillips
EXHIBIT 10.4
AGREEMENT
AGREEMENT MADE and effective as of the First day of June, 1995 by and
between THE QUIGLEY CORPORATION, a Nevada corporation with its principal office
at Landmark Building, 10 South Clinton Street, Doylestown, Pennsylvania, 18901
(hereinafter "Employer"), and CHARLES A. PHILLIPS residing at 35 Swamp Creek
Road, Erwinna, Pennsylvania, 18920 (hereinafter "Executive").
WHEREAS, Employer is in the business of developing and marketing health
related and/or various other consumer products for sale in the commercial
marketplace, television, mail order and network marketing; and
WHEREAS, Employer desires to assure the services of Executive for the
period in this Agreement and Executive is willing to serve in the employ of
Employer on a full-time basis for said period upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. EMPLOYMENT. Employer agrees to employ Executive and Executive agrees
to enter employ of the Employer for the period stated in Paragraph "3" hereof
and upon the other terms and conditions set forth herein.
2. POSITION AND RESPONSIBILITIES. During the period of his employment
hereunder, Executive agrees to serve as Vice President and Technology Transfer
Coordinator of the Employer and to be responsible for the overall product
production of the Company, reporting directly to the President and the Board of
Directors of the Employer ("the Board").
3. TERM OF EMPLOYMENT. The period of Executive's employment under this
Agreement shall be deemed to have commenced as of June 1st; 1995, and shall
continue for a period of ten (10) years until May 31st; 2005, and thereafter
from year to year as mutually agreed upon.
4. DUTIES. During the period of his employment hereunder and except for
illness, vacation periods and reasonable leaves of absence, Executive shall
devote substantially all his business time, attention, skill and efforts to the
faithful performance of his duties hereunder; provided, however, that the
foregoing shall not be construed to prevent Executive from acting as a Director
or Counsel of any other non-competing corporation or entity when such activity
does not materially affect the performance of Executive's duties to this
Agreement.
<PAGE>
5.1 COMPENSATION. Employer shall pay Executive as compensation for his
services hereunder, during the first year of this Agreement, (i) a minimum base
salary of $75,000.00 per year, payable weekly or bi-weekly and (ii) such bonus
or additional compensation as may be awarded to Executive from time to time by
the Board or by a committee designated by the Board. Additionally, Executive
shall be entitled to four (4) weeks paid vacation per year. For each subsequent
year of this Agreement, Executive's base salary shall increase each year on
January 1 by the lesser of (i) 20% of the preceding year's base salary, or (ii)
2% of the increase in gross revenues of the Employer over the gross revenues of
the preceding calendar year. In either event, the increase in base salary shall
be payable as additional compensation in two (2) equal installments, on March
1st; and September 1st; of each year, or alternatively on a monthly basis.
5.2 NETWORK MARKETING COMPENSATION. Executive shall be entitled to a
prominent position in any network marketing program undertaken by the Employer.
6. REIMBURSEMENT OF EXPENSES. Employer shall pay or reimburse Executive
for all reasonable travel and other expenses incurred by Executive in
performance of his obligations under this Agreement. Employer further agrees to
provide and pay for a telephone line at Executive's residence to be utilized by
Executive for the business purposes of the Employer.
7. BENEFITS. Employer shall provide to Executive the following
additional benefits: (i) health and dental insurance for Executive and his
family members at least equivalent to the executive level program offered by
Blue Cross/Blue Shield, (ii) a suitable automobile for business purposes, owned
or leased and maintained by the Company, plus fuel for business purposes,
insurance, tolls and parking and (iii) such profit sharing, stock option, or
retirement plans as may be adopted or offered to any employee by the Employer or
the Owner at any time during the term of this Agreement.
8. DISABILITY BENEFITS. As used in this Agreement, the term
"disability" shall mean the total and complete inability of the Executive to
perform his duties under this Agreement as determined by an independent
physician selected with the approval of the Employer and the Executive. With the
exception of Clause 5.2, which cannot be revoked, in the event of such
disability, the Employer shall continue to pay Executive the compensation set
forth in Paragraph "5" hereof during the period of such disability; provided,
however, that in the event the Executive is disabled for a continuous period in
excess of eighteen calendar months, the Employer may, at its election, terminate
this agreement in which event Executive shall be entitled to a lump-sum
termination payment of $100,000.
-2-
<PAGE>
9. PAYMENTS PAYABLE. UPON DEATH. In the event of the death of Executive
during the term of this Agreement, the compensation and benefits required to be
paid hereunder shall continue to be paid for a period of twelve (12) months to
the wife or dependent(s) of Executive, if surviving.
10. (a) TERMINATION AND EXTENSION. This Agreement may not be terminated
during its term by the Employer for any reason other than a material breach by
the Executive of the terms of this Agreement. Upon its expiration, this
Agreement shall be automatically renewed for additional one-year periods unless
Employer shall provide Executive with written Notice of Intent not to renew this
Agreement not less than three (3) months prior to the expiration of the initial
term or any extension term thereof.
10. (b) SEVERANCE. For whatever reason the Employer shall buy out the
remaining value of this contract, it shall pay to the Executive two years base
compensation, determined at the rate of the Executive's base rate, plus any
bonus plan payments that would have been accrued had the Executive remained as
an employee of the Employer. This provision applies regardless of the fact that
the Executive obtains new employment and such earning are not mitigated against
the remaining and severance values of this contract.
11. NON-COMPETITION. Executive shall not, at any time during the term
of this Agreement or any extension thereof, or within one year of the expiration
thereof, directly or indirectly engage in the business of developing or
marketing cold therapy products.
12. INDEMNIFICATION. The Employee hereby covenants and agrees that he
will not do any act or incur any obligation on behalf of the Employer of any
kind whatsoever unless authorized by the Employer. The Employer hereby covenants
and agrees that it will indemnify Employee and hold him harmless from any
obligation or liability incurred by the Employer or by the Employee as an
Officer, Director, Employee or Agent of the Employer, including the reasonable
expenses of legal defense thereof, for any act, omission or liability undertaken
or incurred during the course of this Agreement.
13. NOTICES. All notices, demands or communications hereunder shall be
in writing and unless otherwise provided, shall be deemed to have been duly
given on the first business day after United States mailing by certified mail,
return receipt requested, addressed to the parties at such address as they shall
advise from time to time.
-3-
<PAGE>
14. AMENDMENT. No modification, waiver, amendment or discharge of this
Agreement shall be valid unless the same is in writing and signed by each party
hereto.
15. SURVIVAL. The representations, warranties, covenants and
indemnifications contained herein shall survive the execution hereof and shall
be effective regardless of the expiration or termination hereof.
16. ENFORCEMENT. Severability. It is the desire and the intent of the
parties hereto that the provisions of this Agreement hereof be enforced to the
fullest extent permissible under the laws and public policy of the jurisdictions
in which enforcement is sought. Accordingly, if any particular portion or
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
the remaining portion or such provision or the remaining provisions of this
Agreement, or the application of such provision or portion of such provision as
is held invalid or unenforceable to persons or circumstances other than those to
which it is held invalid or unenforceable, shall not be effected thereby.
17. ASSIGNABILITY. Employee and the Executive agree that this Agreement
may be assigned to a corporation controlled by the Executive.
18. GOVERNING LAW AND VENUE. This Agreement shall be construed in
accordance with the laws of the State of Pennsylvania and any proceeding arising
between the Parties in any matter pertaining or relating to this Agreement shall
be held or brought in the Supreme Court of the State of Pennsylvania in and for
the County of Bucks.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the First day of June, 1995:
GUY QUIGLEY
-----------------------
By: THE QUIGLEY CORPORATION
By: EMPLOYEE:/S/ CHARLES PHILLIPS
--------------------
-4-
EXHIBIT 10.6
LICENSING AGREEMENT
AND NOW, this 24TH day of AUGUST , 1996, it is hereby stipulated and
agreed by and between GEORGE A. EBY III and GEORGE EBY RESEARCH (hereinafter
referred to as "Licensor(s)" or "Eby"), residing at 2109 Paramount Avenue,
Austin, Texas 78704, and QUIGLEY CORPORATION (hereinafter referred to as
"Licensee" or "QUIGLEY"), with a place of business at 10 South Clinton Street,
Doylestown, Pennsylvania 18901, that:
WHEREAS, EBY is the holder and sole owner of various United States
Letters Patent including Patent 4,503,070, originally issued on March 5, 1985,
later surrendered and subsequently reissued on November 27, 1990 as Reissue
Patent Number 33,495;
WHEREAS, Reissue Patent Number 33,465 (hereafter referred to as "The
Patent") is the operative patent under which this license is to be granted;
WHEREAS, QUIGLEY is the manufacturer, producer, and distributor of
certain lozenge products which are marketed under various trademarks, including
"Cold-Eeze" and "Cold-Eezer Plus", and is desirous of producing and marketing
lozenges containing zinc gluconate under license granted by EBY;
NOW THEREFORE, in consideration of the mutual promises and the
licensing agreement herein contained, and intending to be legally bound hereby,
the parties do agree as follows;
1. PURPOSE OF AGREEMENT - This agreement is to provide
Page 1 of 15 Agreed and initialed by George A. Eby III /S/ GAE and Guy Quigley
/S/ GQ
<PAGE>
QUIGLEY with sole and exclusive rights to make, use, and sell various products,
including lozenges, under The Patent by license granted by Licensor.
2. DURATION OF AGREEMENT - This Agreement shall be and becomes
effective upon execution hereof, and shall remain in effect until expiration of
The Patent which occurs at the latest on March 5, 2002, or until The Patent is
held invalid on a decision which is not subject to appeal. EBY releases QUIGLEY
from any liability whatsoever prior to the effective date of this agreement.
3. SOLE RELEVANT AND NECESSARY PATENT -
a. It is agreed that Reissue Patent Number 33,465 incorporates all
rights that belonged to EBY under Patent 4,503,070 (which is no longer in force
as a separate patent, having been surrendered to the U.S. Patent and Trademark
Office when the reissue application was filed).
b. It is also agreed that Reissue Patent 33,465 is the sole U.S. patent
or patent application which belongs to EBY which contains patent claims that
cover or apply to the lozenges being sold by QUIGLEY, and that QUIGLEY does not
need a license to any other patent or patent application owned by EBY in order
to sell lozenges which contain zinc gluconate or a zinc gluconate-glycine
mixture as the only zinc salts in such lozenges.
c. EBY hereby warrants and guarantees to QUIGLEY that (1) Reissue
Patent 33,465 is and remains valid; (2) the last and final maintenance fee,
which is due to be paid to the US. Patent
Page 2 of 15 Agreed and initialed by George A. Eby III /S/ GAE and Guy Quigley
/S/ GQ
<PAGE>
Office by September 5, 1996, will be paid before that deadline; (3) EBY is not
aware of any reason to doubt the validity of The Patent, or of any legal action
that has been taken by any party to declare The Patent invalid; and (4) The
Patent is and remains, and has been at all times since its issuance, the sole
and exclusive property of EBY.
4. CONSIDERATION: ROYALTIES -
a. In exchange for sole licensing rights under The Patent, EBY shall
receive one of the two following alternative royalty payments:
(1) three percent (3%) of gross sales (as defined below) of products
containing zinc gluconate (including but not limited to "Cold-Eeze" or
"Cold-Eezer Plus" lozenges) which are made, used, or sold by QUIGLEY for the
term of The Patent, if royalties continue to be paid by QUIGLEY to John Godfrey
or to any person related to or entity controlled by John Godfrey under Godfrey's
U.S. patent 4,684,528; OR,
(2) five percent (5%) of gross sales (as defined below) of products
containing zinc gluconate which are made, used, or sold by QUIGLEY for the term
of The Patent, if royalties are no longer being paid by QUIGLEY to John Godfrey
or to any entity controlled by John Godfrey under Godfrey's U.S. patent
4,684,528.
b. The decision as to whether QUIGLEY will continue paying royalties to
John Godfrey, under Godfrey's U.S. patent 4,684,528, will be at the sole
discretion of QUIGLEY, which shall however have a good-faith obligation to
obtain counsel from a third-party
Page 3 of 15 Agreed and initialed by George A. Eby III /S/ GAE and Guy Quigley
/S/ GQ
<PAGE>
patent attorney who specializes in biochemical or pharmaceutical patents as to
whether such royalty obligations are due to Godfrey under Godfrey's patent. The
patent attorney shall consult with EBY during the attorney's evaluation, but EBY
shall have no control or authority over such patent attorney.
c. "Gross sales" as defined herein includes all payments that are
received by QUIGLEY for zinc gluconate-containing products, less shipping
charges, broker commissions and outside contracted repackaging services. Such
payments become subject to a royalty payment to EBY when payment is received by
QUIGLEY.
d. Royalties shall be paid by QUIGLEY to EBY on a quarterly basis.
Payment shall be made within forty-five days following the end of each quarter.
Such payments shall be processed through Patrick D. Kelly, Esq., of St. Louis,
Missouri, who is EBY's attorney of record in the civil action listed below in
Clause 6, unless other agreement is made in writing by both parties.
e. Minimum annual royalties of $30,000, beginning with sales made
during calendar year 1997, shall be paid to EBY by QUIGLEY. If an additional
payment is required to complete the minimum annual royalty payment, after
payment of the royalty payment for the last quarter of each calendar year, then
EBY shall notify QUIGLEY in writing of any such deficit, by certified mail, and
such deficit shall be paid by QUIGLEY within 30 days after such notification is
received. Failure to pay the minimum annual royalties specified herein shall not
terminate QUIGLEY's
Page 4 of 15 Agreed and initialed by George A. Eby III /S/ GAE and Guy Quigley
/S/ GQ
<PAGE>
rights to continue selling lozenges or other cold-treatment or anti-viral
products containing zinc gluconate. Instead, such failure shall render this
Agreement non-exclusive, and shall entitle EBY to subsequently grant other,
additional non-exclusive licenses to other parties, unless such right is waived
by EBY in exchange for other consideration, to be negotiated and agreed upon by
both parties.
5. CONSIDERATION: STOCK - In addition to royalty payments as provided
in Clause 4, EBY shall also be paid both of the following:
a. Fifty thousand (50,000) shares of Rule 144-restricted common stock
in QUIGLEY, which will not be salable by EBY until 2 years after issuance to
EBY; and,
b. Ten thousand (10,000) shares of unrestricted common stock in
QUIGLEY.
Such stock shares shall provide full and adequate consideration for any
royalties due to EBY on any and all sales by QUIGLEY prior to the execution date
of this Agreement.
6. PAYMENT AND TRANSFERAL OF STOCK - QUIGLEY shall tender stock
certificates to EBY, as provided in Clause 5, upon dismissal with prejudice of a
civil legal action entitled George A. Eby and George Eby Research v. Walgreen
Drugstores, Inc. and The Quigley Corporation, Civil Action Number
4:96CV01530(SNL), filed July 30, 1996 in the United States District Court for
the Eastern District of Missouri, upon execution of this Agreement.
Page 5 of 15 Agreed and initialed by George A. Eby III /S/ GAE and Guy Quigley
/S/ GQ
<PAGE>
Stock shares shall be transferred to EBY through EBY's attorney of record.
7. ANNOUNCEMENTS, PUBLICITY, ETC. -
a. Any announcement of a settlement, or any other press
release or other statement in written or electronic form by either QUIGLEY or
EBY (including any information posted on an Internet site or comparable
electronic forum) must be approved by the other party, in advance of being
released, if it:
(1) mentions the other party by name;
(2) lists the number of any patent owned by EBY, in a
release by QUIGLEY; or,
(3) relates to zinc gluconate, glycine, or any other ingredient in any
product being sold by QUIGLEY, in a release by EBY.
b. Such approval will not be withheld unreasonably, and any such public
statement shall be deemed to be approved if not objected to within five (5)
business days after transmittal by facsimile or electronic mail, by the
requesting party to the other party.
c. Both parties hereby agree to promptly review their electronic
Internet sites and any other sources of information under their control, and to
treat any postings or other written or electronic releases of information which
mention the other party by name, or in any other identifiable manner, as being
subject to this clause from that date forward.
Page 6 of 15 Agreed and initialed by George A. Eby III /S/ GAE and Guy Quigley
/S/ GQ
<PAGE>
d. Any statements that were made or released by either party, prior to
the date of this agreement, which would be covered by this agreement if made
after the date of this agreement, are hereby agreed to be exempt from this
agreement and from any claims of liability. Both parties hereby agree and
covenant that they will endeavor to work cooperatively, in good faith, from the
date of this agreement, to present a public image that encourages confidence in
zinc-containing lozenges as an effective treatment for the common cold.
8. WARRANTIES AND COVENANTS OF LICENSEE -
a. QUIGLEY hereby warrants and covenants that it will use its best
efforts to successfully market products covered by this Licensing Agreement
which contain zinc gluconate, including "Cold-Eeze" and "Cold-Eezer Plus"
lozenges, and shall use reasonable business judgment in its practices in the
production, packaging, and marketing of said products covered by this Licensing
Agreement.
b. QUIGLEY hereby warrants and covenants that, after depletion of
existing packages, QUIGLEY will properly mark any products covered by The Patent
as being covered by "US Patent Re. 33,465" in a manner that satisfies the
requirements of 35 USC 287.
c. QUIGLEY assumes and bears full and exclusive liability in any legal
or regulatory action against any product that is manufactured or sold by
QUIGLEY, and QUIGLEY agrees to indemnify and defend EBY against any action taken
by any person,
Page 7 of 15 Agreed and initialed by George A. Eby III /S/ GAE and Guy Quigley
/S/ GQ
<PAGE>
governmental authority, or other legal entity, if such action involves a product
sold by QUIGLEY.
9. WARRANTIES AND COVENANTS OF LICENSOR -
a. EBY hereby warrants and covenants that he will not interfere with
QUIGLEY's rights to exclusively manufacture and sell products which contain zinc
gluconate under this Agreement.
b. EBY shall not, throughout the duration of this Agreement, offer
and/or grant, assign, or sell a license or licensing rights under The Patent to
another person or entity, unless such action becomes lawful due to a failure of
QUIGLEY to pay a minimum yearly royalty as specified by Clause 4(e), above.
10. OTHER AND FUTURE PRODUCTS -
a. EBY and QUIGLEY both hereby recognize and agree that this agreement
is limited to cold treatment or anti-viral products containing zinc gluconate.
EBY retains the right to continue selling and otherwise commercially exploit
lozenges containing zinc acetate, and certain other zinc salts, which are
covered by separate patents owned by EBY. Both parties agree that (1) sales or
other use of lozenges containing zinc acetate or other zinc salts, by EBY, do
not violate the conditions of this Agreement and (2) any potential license of
EBY's patent rights to allow sales, by QUIGLEY, of lozenges containing any zinc
salt other than zinc gluconate shall be covered by a separate and subsequent
licensing agreement, if such an agreement is desired by both parties.
Page 8 of 15 Agreed and initialed by George A. Eby III /S/ GAE and Guy Quigley
/S/ GQ
<PAGE>
b. EBY shall have an obligation to promptly disclose to QUIGLEY any
scientific or technical improvements in treatments for colds which involve zinc
gluconate. EBY's obligation may be satisfied by sending to QUIGLEY a copy of any
patent application filed by EBY on any such development, within 15 days after
EBY receives notification that the patent application has been granted a filing
date and a serial number by the U.S. Patent Office.
c. If QUIGLEY wishes to license any such improvement created and owned
by EBY, EBY shall provide to QUIGLEY a right of first refusal, which shall
entitle QUIGLEY to obtain such a license under terms that are not less favorable
than EBY may offer to any other company.
11. WARRANTIES AND COVENANTS OF LICENSEE AND LICENSOR -
a. Both QUIGLEY and EBY warrant and covenant that neither party will
interfere in the patent, legal, personal, or business rights of the other upon
and thereafter execution of this Agreement, except as may be provided for in
this Agreement.
b. Both QUIGLEY and EBY recognize that it is in the mutual interests of
both Licensor and Licensee for products that are made, used and sold under The
Patent to be marketed successfully.
12. ASSIGNMENT OF RIGHTS - QUIGLEY shall maintain the right to assign,
sub-license, sub-contract, or otherwise commercially exploit its rights under
The Patent in any manner that QUIGLEY deems most appropriate, but only if the
royalty obligations provided herein remain intact and apply to any such
sub-licensee
Page 9 of 15 Agreed and initialed by George A. Eby III /S/ GAE and Guy Quigley
/S/ GQ
<PAGE>
or sub-contractor. EBY shall not infringe upon such rights of QUIGLEY.
13. MEDIATION OR ARBITRATION OF DISPUTES -
a. If QUIGLEY and EBY are unable after reasonable efforts to reach an
agreement on the interpretation or implementation of any portion of this
agreement, the dispute shall be submitted to a mediator, who shall attempt to
help the parties negotiate a mutually satisfactory agreement.
b. If an agreement cannot be reached with mediation, or if both parties
agree to bypass mediation, a dispute arising hereunder shall be submitted to
binding arbitration, under the auspices of a member of the American Arbitration
Association.
c. In order to minimize travel expenses and inconvenience, any mediator
or arbitrator used hereunder shall be located in Philadelphia, and QUIGLEY shall
be obliged to pay for a business- class round-trip plane ticket between Austin
and Philadelphia, for EBY for the first meeting of a mediation on any new issue.
d. Any mediator or arbitrator used as provided herein shall be
acceptable to both parties. If the parties are unable to agree upon an
acceptable mediator or arbitrator, the highest- ranking or most senior official
of the American Arbitration Association working in Philadelphia shall designate
a mediator or arbitrator.
e. Unless otherwise agreed in writing, the costs of mediation or
arbitration will be divided equally among EBY and QUIGLEY. However, this shall
exclude any expenses for attorneys
Page 10 of 15 Agreed and initialed by George A. Eby III /S/ GAE and Guy Quigley
/S/ GQ
<PAGE>
or witnesses for either side; any such expenses will be borne by the party that
obtains such services. Each party shall cooperate and shall promptly make
available, to the other party and to a mediator or arbitrator, any information
or assistance necessary to settle any such dispute.
f. To satisfy the obligation of making information available hereunder,
a party must mail a photocopy of all document(s) which are directly related to
the dispute, and which are not legally privileged, to the other party,
accompanied by a signed statement stating either (1) that all known information
which is directly relevant to the dispute is included, or (2) that certain
documents were withheld because they are legally privileged. In addition, the
party supplying the information must make the relevant nonprivileged business
records available, at its offices, for inspection and copying by the other party
and/or by a legal or accounting representative of the other party.
14. APPLICABLE LAW - This agreement shall be governed by and construed
according to the laws of the Commonwealth of Pennsylvania.
15. AMENDMENT - This agreement cannot be changed or amended except by
agreement of both parties, in writing, signed by both parties.
16. NOTICE - Any notice required or permitted hereunder shall be deemed
sufficient if given in writing and delivered personally or sent by registered or
certified mail, return
Page 11 of 15 Agreed and initialed by George A. Eby III /S/ GAE and Guy Quigley
/S/ GQ
<PAGE>
receipt requested, postage prepaid, to the addresses shown below or to such
other addresses as are specified by similar notice:
If to Licensor: With a copy to:
George A. Eby III Patrick D. Kelly, Esq.
George Eby Research 33 Berry Oaks
2109 Paramount Avenue St. Louis, MO 63122
Austin, TX 78704
If to Licensee: With copies to:
The QUIGLEY Corporation Gregory M. McCauley, Esq.
10 South Clinton Street McCauley & Associates, P.C.
Doylestown, PA 18901 2101 Pine Street
Philadelphia, PA 19103
Thomas F. J. MacAniff, Esq.
Eastburn and Gray
60 East Court Street
Doylestown, PA 18901
17. ACCESS TO FINANCIAL RECORDS - Quigley will provide to EBY a copy of
the quarterly financial records that are used to calculate EBY's royalty
payments. In addition, as a stockholder of the company, EBY shall have the right
to reasonable access to the company's financial records.
18. SEVERABILITY - In the event that any provision of this Agreement
shall be held to be invalid, such invalidity shall not affect in any respect
whatsoever the validity of the remainder of this Agreement.
19. CAPTIONS - Any article or paragraph titles or captions contained in
this Agreement are for convenience only and shall not be deemed to amplify,
modify or give full notice of the provisions thereof.
Page 12 of 15 Agreed and initialed by George A. Eby III /S/ GAE and Guy Quigley
/S/ GQ
<PAGE>
20. PARTIES BOUND - This Agreement shall inure to the benefit of, and
be binding upon, all the parties, their respective assigns, successors in
interest, personal representatives, estates, heirs and successors.
21. INTERPRETATION - When the context in which words are used in this
Agreement indicate that such is the intent, words in the singular shall include
the plural and the plural shall include the singular. Words in the masculine
gender shall include the feminine and neuter genders.
Page 13 of 15 Agreed and initialed by George A. Eby III /S/ GAE and Guy Quigley
/S/ GQ
<PAGE>
22. ENTIRE AGREEMENT - All parties stipulate and agree that this
document constitutes the entire Agreement between the parties.
ACCEPTED AND AGREED:
/S/ GEORGE A. EBY III AUG. 24, 1996
- ----------------------------------------- --------------
George A. Eby III, in behalf of himself Date
and in behalf of GEORGE EBY RESEARCH
/S/ GUY QUIGLEY AUG. 28, 1996
---------------------------------------- -------------
Guy Quigley, President, in behalf of Date
THE QUIGLEY CORPORATION
Page 14 of 15 Agreed and initialed by George A. Eby III /S/ GAE and Guy Quigley
/S/ GQ
<PAGE>
STATE OF TEXAS :
: SS
COUNTY OF TRAVIS :
On this 24TH day of AUGUST , 1996, before me personally appeared GEORGE
A. EBY III, to me known to be the person described in the foregoing document,
who executed this document as his free act and deed.
In witness thereof, I have hereunto set my hand and affixed my notary
seal the day and year last above written.
/S/ WILLIAM L. SWAIL
--------------------
Notary Public
My commission expires: 6/6/97
STATE OF PENNSYLVANIA :
: SS
COUNTY OF BUCKS :
On this 3RD day of SEPTEMBER , 1996, before me personally appeared GUY
QUIGLEY, to me known to be the person described in the foregoing document, who
executed this document as his free act and deed.
In witness thereof, I have hereunto set my hand and affixed my notary
seal the day and year last above written.
/S/ JOAN M. CONDUIT
-------------------
Notary Public
My commission expires:
Page 15 of 15 Agreed and initialed by George A. Eby III /S/ GAE and Guy Quigley
/S/ GQ
EXHIBIT 10.7
EXCLUSIVE MASTER BROKER WHOLESALE DISTRIBUTOR
&
NON EXCLUSIVE NATIONAL CHAIN BROKER
AGREEMENT
This AGREEMENT dated the 22, day of July 1994, by and between The
Quigley Corporation having its principal place of business located at 10 South
Clinton Street, Doylestown in the state of Pennsylvania hereinafter called the
COMPANY and/or their assigns, AND Russell Mitchell having its principal place of
business located at 9727 Sylvan Shore Drive, Minocqua, in the state of
Wisconsin, hereinafter called the BROKER.
WITNESSETH:
That the COMPANY does hereby appoint the BROKER as Sales Agent/Broker
and the BROKER hereby accepts the appointment subject to the following terms and
conditions.
1: The BROKER shall faithfully, diligently and to the best of
its ability, endeavor to promote and extend the sales of the COMPANY and its
products to its customers both existing and prospective in the territory
hereafter described.
2: The territory of the BROKER shall be as follows:
United States of America
3: The BROKER shall be considered to be a NON EXCLUSIVE
COMMISSIONED agent of the COMPANY within said territory, in the pursuit of
establishing the sale of its products, to any acceptable national chain and
shall also be considered EXCLUSIVE MASTER BROKER in the establishment of
national wholesalers.
4: The BROKER shall be entitled to receive commissions upon
all shipments in the territory whether by the BROKER acting as sales agent, or
by direct orders of its established customers to the COMPANY, or otherwise.
5: It shall be the responsibility of the BROKER to provide the
COMPANY with active and continuous sales representation in the territory, by
personal or actual appointed salesman contact with its customers, or entities,
both existing and prospective. Confirmed Customers of the BROKER shall be
identified in "Schedule A" of this agreement, to which further customers will be
added as they are established. The BROKER further agrees to maintain procedures
and records to assure systematic, repeated and complete coverage of its client
base.
<PAGE>
6: It shall be the responsibility of the COMPANY to provide
products directly to the BROKER'S customers, based upon receipt of an acceptable
instrument of payment and to fulfill all orders exceeding the minimum
requirements as identified in "Schedule B" of this agreement, Commissions, Terms
and Procedures.
7: The BROKER shall keep the COMPANY properly advised and
informed as to the general conditions which pertain to or affect the sale of its
line. The BROKER agrees to comply with such directives as may be issued by the
officers of the COMPANY to carry out its policies in dealing with the customer
trade, provided and in so far as such directives are not inconsistent with the
terms, conditions and understanding of this Agreement.
8: The COMPANY will keep the BROKER informed of all
communications between it and the Brokers' customers; will furnish the BROKER
with copies of all customer correspondence; at pre-determined prices, the
COMPANY shall furnish the BROKER with the necessary product price lists and
other sales aids in sufficient quantity to fulfill requirements of its needs.
9: The COMPANY shall pay to the BROKER a commission upon all
shipments as identified in "Schedule B" of this agreement, Commissions, Terms
and Procedures. The term "shipments" shall mean orders for merchandise accepted
by the COMPANY but not including handling and shipping costs and credit
or discount charges.
10: Upon the COMPANY receiving payments, it shall furnish the
BROKER with a weekly commission statement, itemizing commissions due and
payable.
11: The COMPANY shall supply samples at wholesale to the
BROKER. Samples which in the sole judgment of the COMPANY have significant value
must be returned by the BROKER after termination of this agreement.
12: The term of this Agreement shall be for a period of five
years, FROM July 22, 1994 TO July 21, 1999, such Agreements shall be
automatically renewed for a similar period or periods. Any breach of this
Agreement shall give the COMPANY, as well as the BROKER, the right upon fourteen
days notice by Fax, US Regular Mail, or US Registered Mail to declare this
agreement null and void, said declaration will not remove the BROKER'S rights to
receive commission due from accounts established by the BROKER, during the term
of this Agreement, assuming the BROKER is in communication with, services and
nurtures said accounts.
13: It is further understood and agreed that the BROKER is an
independent contractor and that neither COMPANY nor BROKER shall assume any
liability whatsoever, each for the other,
-2-
<PAGE>
directly or indirectly. It is also agreed that this Agreement shall not under
any circumstances create the relationship of joint venture between the parties
hereto.
14: (a) The laws of the Commonwealth of Pennsylvania shall
apply and bind the parties in any and all questions arising hereunder,
regardless of the jurisdiction in which any action or proceeding may be
initiated or maintained. It is understood, however, that this is a general form
of agreement and if any of its provisions in any way violate or contravene the
laws of any state or territory, such provisions shall be deemed not to be a part
of this Agreement and the remainder of this Agreement shall remain in full force
and effect.
(b) Wherever in this Agreement the term "by written
notice" is used to indicate a means of notification from one party to the other,
it shall be understood to be by written notice via registered or certified mail,
return receipt required, to the last known address.
(c) This Agreement shall supersede and cancel any and all
previous options, contracts, arrangements or understandings that may have
existed or may exist between the parties and represents the entire understanding
of the parties.
IN WITNESS WHEREOF, the Principals have caused this Agreement to be
signed by two duly constituted individuals or Principals.
BY: /S/ GUY QUIGLEY BY: /S/ RUSSELL MITCHELL
--------------------------- --------------------
President and CEO Russell Mitchell
The Quigley Corporation
Date 3/4/96 Date 3/8/96
- ----------------------------- -------------------------
Witness /S/ CHARLES PHILLIPS Witness /S/ LYNN MITCHELL
- ---------------------------- -------------------------
-3-
<PAGE>
SCHEDULE "A"
MASTER BROKER'S ESTABLISHED WHOLESALER BASE
NAME: TYPE PRODUCT CONFIRMED
----- ---- ------- ---------
Cardinal Health Wholesaler Cold-Eeze yes
Lotus Light Wholesaler Cold-Eeze yes
Foxmeyer Wholesaler Cold-Eeze yes
William Drug Co. Wholesaler Cold-Eeze yes
F. Dohman Company Wholesaler Cold-Eeze yes
Dakota Drug Co. Wholesaler Cold-Eeze yes
HMS Distributors Wholesaler Cold-Eeze yes
Home Health Products Inc. Wholesaler Cold-Eezer Plus yes
Northwestern Drug Wholesaler Cold-Eeze yes
US Health Distributors Wholesaler Cold-Eeze yes
Walker Drug Company Wholesaler Cold-Eeze yes
ESTABLISHED CHAIN STORES
NAME: TYPE PRODUCT CONFIRMED
----- ---- ------- ---------
Walgreen Chain Cold-Eeze yes
BY: /S/ GUY QUIGLEY BY: /S/ RUSSELL MITCHELL
--------------- --------------------
The Quigley Corporation Russell Mitchell
Date 3/4/96 Date 3/8/96
- ---------------------------- -------------------------
Witness /S/ CHARLES PHILLIPS Witness /S/ LYNN MITCHELL
- ---------------------------- -------------------------------
THIS PAGE WILL BE AMENDED AND ADDED TO AS NEW ACCOUNTS ARE ESTABLISHED
<PAGE>
SCHEDULE "B"
COMMISSION - TERMS - PROCEDURES
1. COMMISSIONS:(a) On moneys received by the Company, from sales established by
the BROKER, through any national commercial chain stores for the sale of
COLD-EEZE, in quantities up to and including $100,000.00, in collective sales,
in any given month, the broker will be entitled to a commission of 10% ten
percent on all sales, after all appropriate deductions have been made.
Thereafter, within that given month, the broker will be entitled to a commission
of 5% five percent.
NOTE: THE APPROPRIATE DEDUCTIONS SHALL BE CONSTRUED AS SHIPPING & HANDLING
CHARGES, REPACKAGING, COOP ADVERTISING AND ANY SPECIAL ARRANGEMENTS MADE BY THE
BROKER IN THE ESTABLISHMENT OF AN ACCOUNT.
COMMISSIONS:(b) On sales secured through an established mail order
entity, for the sale of COLD-EEZER PLUS, where the broker is paying for the
advertising costs, the broker will be entitled to a commission of 20% of the
sale amount, assuming the mail order company is prepared to accept the company's
sale price, which will be in keeping with current available distributor prices.
MASTER BROKER
COMMISSIONS(c) On Sales secured through established National
Wholesalers and Retail Chain Stores, the broker will be entitled to a commission
of 2% (two percent) on all sales for the first year of any account, with 1% (one
per cent) thereafter, in accordance with the terms of this agreement and only
after all appropriate deductions have been made. It is understood to acquire
this commission, the broker will act as liaison between the Company and all
other brokers. This section does not apply to sales secured directly by the
Broker personally.
2. TERMS. Reputable distributors will be offered 2% 10, net 30 days payment
terms, subject to the company accepting their credit information.
3. PROCEDURES. The broker will be responsible for ensuring orders received are
in keeping with the company's terms and that the minimum order to a distributor
using COLD-EEZER PLUS is one master case of sixty units and alternatively within
the commercial COLD-EEZE marketplace where one master case consists of 24 units.
The broker has the facility of having COLD-EEZE shipped in individual cases to
retailers, which have to be paid for in advance, either by check or utilizing
the company's merchant credit card facilities.
<PAGE>
4. PRICE LISTS: Price lists are subject to change on fourteen days notice and
shall be made available by the company to the broker at all times.
BY: /S/ GUY QUIGLEY BY: /S/ RUSSELL MITCHELL
- ----------------------------- ---------------------------------
The Quigley Corporation Russell Mitchell
Date 3/4/96 Date 3/8/96
-------------------- -------------------------
Witness /S/ CHARLES PHILLIPS Witness /S/ LYNN MITCHELL
- ---------------------------- --------------------------
-2-
<PAGE>
ADDENDUM
TO NON EXCLUSIVE BROKER AGREEMENT
between
The Quigley Corporation AND Russell Mitchell
NEW SCHEDULE "B"
COMMISSION - TERMS - PROCEDURES
1. COMMISSIONS: FOR SALES ESTABLISHED THROUGH A COMMERCIAL
DISTRIBUTORSHIP FOR THE SALE OF COLD-EEZE(TM) AND FOR SALES ESTABLISHED THROUGH
A DISTRIBUTOR SERVING THE ALTERNATIVE MARKETPLACE, UTILIZING COLD-EEZER PLUS, IN
QUANTITIES UP TO AND INCLUDING $100,000.00 IN COLLECTIVE SALES IN ANY GIVEN
MONTH, THE BROKER WILL BE ENTITLED TO A COMMISSION OF (8%) EIGHT PERCENT. ON ALL
SALES THEREAFTER THE BROKER WILL BE ENTITLED TO A COMMISSION OF (5%) FIVE
PERCENT.
2. BONUS COMMISSION: ON ALL SALES SECURED IN THE COMMERCIAL MARKETPLACE
FOR THE SALE OF COLD-EEZE(TM) OR COLD-EEZER PLUS, THE BROKER WILL BE ENTITLED TO
SHARE, ON A 50/50 BASIS, ANY EXTRA MONIES, RECEIVED BY THE COMPANY, OVER AND
ABOVE THE COMPANY'S CURRENT DISTRIBUTOR PRICE LIST, AFTER ALL APPROPRIATE
DEDUCTIONS HAVE BEEN MADE.
3. MAIL ORDER COMMISSIONS: FOR SALES SECURED THROUGH AN ESTABLISHED
MAIL ORDER ENTITY, FOR COLD-EEZER PLUS, WHERE THE BROKER IS PAYING FOR THE
ADVERTISING COSTS, THE BROKER WILL BE ENTITLED TO A COMMISSION OF 20% OF THE
SALE AMOUNT ASSUMING THE MAIL ORDER COMPANY IS PREPARED TO ACCEPT THE COMPANY'S
SALE PRICE, WHICH WILL BE IN KEEPING WITH CURRENT AVAILABLE PROFESSIONAL
DISTRIBUTOR PRICES.
4. COOP ADVERTISING: IN THE EVENT THAT ANY ENTITY DOES NOT ACCEPT A
BARTER ARRANGEMENT OF PRODUCT FOR COOP ADVERTISING, THE MONETARY PAYMENTS MADE
TO ANY SUCH ENTITY WILL BE DEDUCTED PRIOR TO ANY COMMISSIONS BEING PAID TO THE
BROKER.
5. TERMS: REPUTABLE DISTRIBUTORS CAN BE OFFERED 2% 10, NET 30 DAYS
PAYMENT TERMS, SUBJECT TO THE COMPANY ACCEPTING THEIR CREDIT INFORMATION.
6. PROCEDURES: THE BROKER WILL BE RESPONSIBLE FOR ENSURING ORDERS
RECEIVED ARE IN KEEPING WITH THE COMPANY'S TERMS AND THAT THE MINIMUM ORDER TO A
DISTRIBUTOR USING COLD-EEZER PLUS IS ONE MASTER CASE OF SIXTY UNITS AND
ALTERNATIVELY WITHIN THE COMMERCIAL COLD-EEZE(TM) MARKETPLACE WHERE ONE MASTER
CASE CONSISTS OF 24 UNITS. THE BROKER HAS THE FACILITY OF HAVING COLD-EEZE(TM)
SHIPPED IN INDIVIDUAL CASES TO RETAILERS, WHICH HAVE TO BE PAID FOR IN ADVANCE,
EITHER BY CHECK OR UTILIZING THE COMPANY'S MERCHANT CREDIT CARD FACILITIES.
<PAGE>
7. PRICE LISTS: CURRENT PRICE LISTS SHALL BE MADE AVAILABLE BY THE
COMPANY TO THE BROKER AT ALL TIMES.
BY: GUY QUIGLEY BY: /S/ RUSSELL MITCHELL
---------------------------- --------------------
The Quigley Corporation Russell Mitchell
Date 6/6/95 Date 6/20/95
-------------------------- -----------------
Witness /S/ CHARLES PHILLIPS Witness /S/ LYNN MITCHELL
-------------------- -----------------
-2-
Exhibit 11
THE QUIGLEY CORPORATION
Computation of Earnings (Loss) Per Share
Net loss per common share is computed by dividing net loss by the
weighted average number of shares of common stock and common stock equivalents
outstanding during each year. As the Company sustained loses in all periods set
forth below, the inclusion of common stock equivalents would be anti-dilutive in
nature and are not included in the per share calculations.
FOR THE YEAR ENDED SEPTEMBER 30,
--------------------------------
1996 1995 1994
---- ---- ----
Earnings (Loss) per
Share:
Net Loss before
cummulative effect
adjustment $(694,269) $(152,556) $(95,348)
Cumulative effect
adjustment _ _ 21,564
--------- --------- --------
Net Income (loss) $(694,269) $(152,556) $(73,784)
========== ========== =========
Weighted average
number of shares
outstanding 4,065,589 3,143,245 2,685,301
--------- --------- ---------
Assumed issuances
under exercise of
stock options and
warrants -(1) -(1) -(1)
Loss per share before
cummulative effect
adjustment $ (.17) $(.05) $ (.04)
Cumulative effect
adjustment _ _ .01
------ ------ --------
Loss per share $ (.17) $(.05) $ (.03)
====== ====== =========
(1) Common stock equivalents outstanding in 1994, 1995 and 1996 were anti-
dilutive and therefore not included.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
To The Quigley Corporation:
As independent public accountant, I hereby consent to the incorporation of my
report dated December 12, 1996, included in this Form 10-KSB into the Company's
previously filed Registration Statements on Form S-8, File Numbers 333-10059 and
333-14687.
/S/ NACHUM BLUMENFRUCT
----------------------
Nachum Blumenfruct
Certified Public Accountant
Brooklyn, New York
April 4, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE QUIGLEY CORPORATION FINANCIAL STATEMENTS AS OF SEPTEMBER 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 370,147
<SECURITIES> 0
<RECEIVABLES> 607,737
<ALLOWANCES> 0
<INVENTORY> 58,339
<CURRENT-ASSETS> 1,036,223
<PP&E> 93,651
<DEPRECIATION> 28,337
<TOTAL-ASSETS> 1,368,301
<CURRENT-LIABILITIES> 125,253
0
0
<BONDS> 0
<COMMON> 4,769
<OTHER-SE> 1,238,279
<TOTAL-LIABILITY-AND-EQUITY> 1,368,301
<SALES> 1,049,561
<TOTAL-REVENUES> 1,056,442
<CGS> 283,967
<TOTAL-COSTS> 1,489,271
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,523
<INCOME-PRETAX> (721,319)
<INCOME-TAX> (27,050)
<INCOME-CONTINUING> (694,269)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (694,269)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
