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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
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
THE QUIGLEY CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 23-2577138
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Landmark Building, PO Box 1349, Doylestown, PA 18901
(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. 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, 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 Registrants 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 and COLD-EEZER PLUS cold-remedy lozenge products and on development
of various product extensions. The Registrant' 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.
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The COLD-EEZE TM lozenge products are distributed through hundreds of
independent and chain drug and discount stores throughout the United States,
including Walgreen's, Revco, Osco/Sav-On, Thrift Drug, CVS, RiteAid, Eckhard,
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.
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.
In 1996, the Registrant also acquired an exclusive license to manufacture
and market a zinc-formulated lozenge which had been patented by George Eby
III, thereby assuring the Registrant of exclusivity in the manufacturing and
marketing of zinc-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 their 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.
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 Broker, Distributor 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 has completed its research and development projects with
respect to the COLD-EEZE product and consequently no such expenditures were
incurred in the fiscal year ending September 30, 1996. However, the Registrant
will in the 1997 fiscal year incur research and development expenditures to
develop extensions of the lozenge product, including potential pediatric,
chewing gum and mouthwash formulations of the COLD-EEZE product.
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.
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 Nathan Blumenfrucht, CPA, as independent auditor of the
Registrant for fiscal year 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 Year Ended September 30, 1995 (2)
By Quarter
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Common Stock
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 Year Ended September 30, 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 $2.250 $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.
(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 the fiscal years ended
September 30, 1995 and September 30, 1996. 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. Selected Financial Data
For the Fiscal Years Ended
1996 1995
Statement of Operations Summary:
Net Sales $1,049,561 $501,903
Net Loss ($694,269) ($152,556)
Net Loss Per Share ($.15) (1)
Balance Sheet Summary:
Total Assets $1,456,031 $498,951
Total Liabilities $125,253 $ 93,836
Stockholder's Equity $1,330,778 $361,015
(1) Less than one cent per Share
ITEM 7. Management's Discussion And Analysis of Financial Condition
And Results of Operations
During this fiscal year ended September 30, 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" cold relief lozenge product and the
development and marketing of brand extension products based upon the
Registrant's proprietary zinc gluconate formula.
By commencing national distribution of the only 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 brokers and marketers to represent the Registrant's
COLD-EEZE 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 fiscal quarter on 1996. As a
result of the release of the clinical study by The Cleveland Clinic in July,
1996, and the resultant increased national publicity concerning the COLD-EEZE
product, revenue from product sales greatly increased during the fourth
quarter ending September 30, 1996. For the full fiscal year ending September
30, 1996, the Registrant had a net loss of ($694,269) on revenues of
$1,049,561.
OUTLOOK
The statements contained in this Outlook are based upon management's
current expectations for Fiscal Year 1997. These statements are
forward-looking, and actual results may differ materially.
Due to the release in July, 1996 of the results of the clinical study
conducted by The Cleveland Clinic which found the Registrant's COLD-EEZE
formulation to significantly decrease the duration and severity of the common
cold, the Registrant in the fourth quarter of Fiscal Year 1996 experienced a
dramatic increase in purchase orders for the COLD-EEZE product. As a result of
national media coverage of the study's positive results of the efficacy of the
Registrant's COLD-EEZE formulation, public demand for the COLD-EEZE product
quickly resulted in a significant backlog in purchase orders by the close of
Fiscal Year 1996.
Based upon continuing strong consumer demand for the COLD-EEZE product,
the Registrant in September, 1996 initiated a program designed to increase
manufacturing capacity in several stages throughout Fiscal Year 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 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 product, and was, during the months of
November, 1996 and December, 1996, manufacturing and shipping COLD-EEZE
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 Year 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
product to fill their distribution pipeline and meet increasing consumer
demand for the product. In addition, the Registrant expects that it will
during Fiscal Year 1997 utilize its increased manufacturing capacity to
manufacture sufficient product for international distribution of COLD-EEZE.
Although the Registrant has begun to establish an international network of
independent distributors, the current inability to meet domestic demand for
the COLD-EEZE product has delayed the introduction of the COLD-EEZE 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.
Trends and Uncertainties
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. The Registrant believes that its increased marketing efforts and
increased national publicity concerning the COLD-EEZE product, together with
the Registrant's increased manufacturing capacity, will result in
significantly increased revenues in Fiscal 1997 and positive trends for the
Registrant's business operations.
RESULTS OF OPERATIONS
Fiscal 1996 Compared With Fiscal 1995
For the fiscal year ended September 30, 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 loss of ($152,556) for the comparable period ended September
30, 1995. This substantial increase in revenue is due primarily to the
Registrant's national marketing program for its "Cold-Eeze" lozenge products
which commenced in the fourth quarter, and the Registrant anticipates that
this increase in revenue will continue through the 1997 fiscal year. The total
assets of the Registrant at September 30, 1996 and September 30, 1995 were
$1,456,031 and $498,951 respectively. This significant increase in assets was
due primarily to increased cash and accounts receivable attributable to the
increased sales as well as increased capital infusions from the exercise of
Common Stock options and warrants.
During this period, the Registrant experienced a significant increase in
operating expenses which were directly related to the increased revenue and
the expenses associated with the national marketing effort of the COLD-EEZE
product. In particular, the major expense items of advertising and promotion
expenses increased to $570,752 in Fiscal 1996 from $93,931 in Fiscal 1995, and
officer salaries increased to $558,281 in Fiscal 1996 from $106,660 in Fiscal
1995. As a result of these increased expenses, the loss from operations
increased to ($694,269) for Fiscal 1996 from ($152,556) for Fiscal 1995. Total
general and administrative expenses for Fiscal 1996 were $1,493,794.
Management anticipates that greatly increased revenues during Fiscal 1997 will
result in increased expenditures for brokerage and sales commissions,
advertising and promotion, and product packaging and freight, whereas other
categories of general and administrative expenses should remain stable.
As of September 30, 1996 and September 30, 1995, the Registrant had
working capital of $998,700 and $349,156 respectively. The increase in working
capital primarily attributed to the increase in total current assets
attributable to increased accounts receivable and cash as a result of
increased revenues from product sales, and from the exercise of Common Stock
options and warrants.
Fiscal 1995 Compared with Fiscal 1994
The Registrant had working capital of $349,156 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, 1993. This improvement in working
capital was due primarily to a significant increase in revenues from $76,907
in Fiscal 1994 to $509,903 in Fiscal 1995, combined with additional capital
obtained by the Company through sale of Common Stock. Interest expense for
Fiscal 1995 increased to $3,728 from $3,676 in Fiscal 1992.
As of September 30, 1995, the Registrant did not have any current
material commitments for capital expenditures. The Registrant intends to seek
additional capital during Fiscal 1996, which, together with an anticipated
increase in revenues, should be sufficient to fund anticipated expenses.
Fiscal 1994 Compared with Fiscal 1993
The Registrant had a working capital deficiency of ($68,610) for its
fiscal year ended September 30, 1994, as compared to a working capital
deficiency of ($118,464) for its fiscal year ended September 30, 1993. This
improvement in working capital was due primarily to a significant increase in
revenues from $35,932 in Fiscal 1993 to $76,907 in Fiscal 1994, combined with
a significant decrease in General and Administrative Expenses. Interest
expense for Fiscal 1994 increased to $3,676 from $1,289 from Fiscal 1993. This
increase in revenues results from increasing sales of the Registrant's
products which occurred primarily due to the Registrant's marketing program.
Administrative expenses, comprised primarily of office expense and
supplies and employee business expenses, increased to $26,949 in Fiscal 1994
from $14,002 in Fiscal 1993, while Travel and Entertainment Expenses increased
to $15,551 in Fiscal 1994 from $8,058 in Fiscal 1993. Increases in these
categories of general and administrative expense during this period were
directly related to increased marketing and sales of the Registrant's
products.
During fiscal year ended September 30, 1994, the Registrant reached an
agreement with its prior attorney for a reduction in legal fees owed for the
fiscal year ended September 30, 1993. As a result of this reduction of
$17,500, the Statement of Operations for the fiscal year ended September 30,
1994 reflects a negative balance of ($8,081) in the category of Professional
Fees.
As of September 30, 1994, the Registrant did not have any current
material commitments for capital expenditures. The Registrant sought
additional capital during Fiscal 1995, which, together with an anticipated
increase in revenues, should be sufficient to fund anticipated expenses.
Material Commitments and Significant Elements of Income/Loss
The Registrant does not have any material commitments for capital
expenditures, although it anticipates making reasonable capital expenditures
during Fiscal 1997 to increase its manufacturing capacity. There have not been
any significant elements of income or loss that did not arise as a result of
the Registrant's continuing operations, with accumulated losses due primarily
to the Registrant's research and development costs associated with the
development and marketing of the COLD-EEZE lozenge product.
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 8. Financial Statements and Supplementary Data
The information required by Item 8 is included immediately following Item
14 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 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
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PART III
ITEM 10. 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:
Year First
Name Age Position Elected
Guy J. Quigley 55 President, CEO 1989
301 Dorset Court and Director
Doylestown PA 19801
Eric H. Kaytes 41 Vice President of 1989
15210 Wayside Road Finance, CFO,
Phila., PA 19116 Secretary-Treas.
and Director
Charles A. Phillips 50 Vice President, COO 1989
35 Swamp Road and Director
Erwinna, PA 18920
Robert L. Pollack, Ph.D. 72 Director of Research 1993
8442 Chippewa Road and Development, and
Phila., PA 19128 Director
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.
ITEM 11. 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 the fiscal year ended September 30, 1996:
(i) Each of the Registrant's five most compensated executive
officers whose cash compensation exceeded $60,000; and
(ii) all executive officers of the Registrant as a group.
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Name Position Salary
Guy J. Quigley President, CEO $125,000
301 Dorset Court and Director
Doylestown PA 19801
Eric H. Kaytes Vice President of $75,000
15210 Wayside Road Finance, CFO,
Phila., PA 19116 Secretary-Treas.
and Director
Charles A. Phillips Vice President, COO $85,000
35 Swamp Road and Director
Erwinna, PA 18920
All Executive Officers $285,000 as a group (3 Persons)
(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:
Options
To Purchase
#of Shares Exercise Date
Name Indicated Price Granted Expires
Guy J. Quigley 100,000 $1.00 12/95 12/00
150,000 3.50 7/96 6/01
Charles A. Phillips 75,000 $1.00 12/95 12/00
150,000 3.50 7/96 6/01
Eric H. Kaytes 30,000 $1.00 12/95 12/00
25,000 3.50 7/96 6/01
Robert L. Pollack 30,000 $1.00 12/95 12/00
25,000 3.50 7/96 6/01
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
The following individuals or entities are known to the Registrant to
be the beneficial owners of more than 5% of the 6,049,596 shares of
Common Stock issued and outstanding as of December 31, 1996. Each
individual or entity has beneficial ownership of the shares and has sole
voting power and sole investment power with respect to the number of
shares beneficially owned.
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Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership (1) of Class
NUTRITIONAL FOODS, LTD. 364,964 (2) 6.0%
539 Park Terrace
Harrisburg, PA 17111
(1) All shares referred to herein are "restricted" securities as
that term is defined under the Securities Act of 1933, as amended.
(2) 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. To date none of these shares has ever
been presented for transfer, nor has the Registrant been able to
contact NFL via Certified Mail within the past two years despite
several attempts to do so.
(b) Security Ownership of Management
As of September 30, 1996, the total number of shares of Common Stock
of the Registrant, exclusive of stock options, beneficially owned by each
officer and director and all officers and directors of the Registrant as
a group (4 persons) are set forth as follows. Each individual has
beneficial ownership of the shares and has sole voting power and sole
investment power with respect to the number of shares beneficially owned.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership (1)(3) of Class
GUY J. QUIGLEY 1,153,427 (2) 19.0%
301 Dorset Court
Doylestown, PA 18901
ERIC H. KAYTES 134,496 0.2%
15210 Wayside Road
Philadelphia, PA 19116
CHARLES A. PHILLIPS 436,496 0.7%
35 Swamp Road
Erwinna, PA 18920
ROBERT L. POLLACK, Ph.D. 81,000 0.1%
8442 Chippewa Road
Phila., PA 19128
ALL DIRECTORS AND OFFICERS
AS A GROUP (4 PERSONS) 1,805,419 20.0%
(1) All shares referred to herein are "restricted" securities as
that term is defined under the Securities Act of 1933, as amended.
(2) Does not include an aggregate of 156,496 shares of Common Stock
owned by members of Guy J. Quigley's family, which number of shares
is inclusive of 100,000 shares owned by Wendy Quigley, his wife. Mr.
Quigley disclaims any beneficial interest in or control over those
shares owned by his wife other than that which may be attributed to
him by operation of law.
(3) Does not include an aggregate of 585,000 Common Stock Purchase
Warrants issued in December, 1995 and July, 1996 to Messrs. Quigley,
Kaytes, Phillips and Pollack. These Warrants entitle the holder to
purchase the Registrant's shares of Common Stock at various prices
ranging for $1.00 to $3.50 per share.
(c) 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 13. Certain Relationships and Related Transactions
For the fiscal year ended September 30, 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]
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
Reference is herewith made to (i) pages F-1 through F-15 inclusive of
this 10-K with respect to the financial statements and notes thereto and
Report of the independent Certified Public Account with respect thereto; and
(ii) the cover page of this 10-K with respect to documents incorporated by
reference in accordance with Rule 12b-23.
SUPPLEMENTAL INFORMATION
Not applicable.
<PAGE>
N. BLUMENFRUCH
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.
/s/ Nathum Blumenfrucht
-------------------
Nathum Blumenfrucht
Certified Public Accountant
Brooklyn, New York
December 12, 1996
1
<PAGE>
<TABLE>
<CAPTION>
THE QUIGLEY CORPORATION
Balance Sheet
As of September 30,
ASSETS
------
1996 1995
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash ............................................. $ 370,147 $ 132,739
Accounts receivable-Note 1 ....................... 607,078 135,983
Notes receivable-Shareholder-Note 6 .............. 88,389 64,659
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 ...................... 1,123,953 429,286
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 ........................................ $1,456,031 $498,951
========== ==========
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 shares-Note 10 ..................... 0 44,100
STOCKHOLDERS' EQUITY - Note 10
Common Stock, $.001 par value; authorized 25,000,000
shares, issued and outstanding, 4,769,764
shares in 1996 and 3,361,414 shares in 1995 ........ 4,769 3,361
Additional paid-in capital ......................... 4,129,256 2,466,632
Accumulated Deficit ................................ (2,803,247) (2,108,978)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY ......................... 1,330,778 361,015
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......... $1,456,031 $498,951
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
THE QUIGLEY CORPORATION
Statement of Operations
Years Ended September 30,
1996 1995 1994
<S> <C> <C> <C>
REVENUE
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
Waages 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 ............... (.15) (.00) (.01)
Cumulative effect adjustment .................... (.15) (.00) -
------------ ------------ ------------
NET LOSS PER SHARE ................................... $ (.15) $ (.00) $ (.01)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
THE QUIGLEY CORPORATION
Statement of Cash Flows
Years Ended
September 30,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
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)
Conversion of put option ............. (44,100) 0 0
Change in assets and liabilities:
Accounts receivable .................. (471,095) (135,983) 0
Inventory ............................ 24,098 (64,912) (8,318)
Prepaid expenses ..................... 4,468 (4,468) 8,474
Notes and escrow receivable .......... (14,730) (73,659) 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 Used by Operations .............. (51,122) (315,044) (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
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of restricted common stock ...... 515,346 433,925 20,388
Conversion of put option into equity . 44,100 0 0
Exercise and issuance of various options 0 38,042 0
Loans and notes payable .............. (18,159) 6,919 3,440
---------- --------- ---------
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.
4
<PAGE>
<TABLE>
<CAPTION>
THE QUIGLEY CORPORATION
Statement of Cash Flows (continued)
Years 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.
5
<PAGE>
<TABLE>
<CAPTION>
THE QUIGLEY CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
NOTE 10 Additional Retained
Common Stock Issued Paid-In Earnings
Shares Amount Capital (Deficit) Total
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance
Sept. 30, 1993 ............................ 24,455,253 $ 2,445 $ 1,761,729 $(1,882,638) $ (118,464)
Sale of S registration
shares-net of commissions
June 1994 ................................. 285,500 29 16,359 16,388
Exercise of options by officers August 1994 3,000,000 300 20,700 21,000
Exercise of options-
August 1994 ............................... 500,000 50 (50) 0
Issuance of stock in settlement of
accounts payable balance-
August 1994 .............................. 256,667 26 3,474 3,500
Issuance of stock in exchange of
loan and notes payable-
August and September 1994 ................. 600,000 60 29,940 30,000
Sale of shares-
Sept. 1994 ................................ 53,334 5 3,995 4,000
Issuance of stock for services rendered -
September 1994 ............................ 100,000 10 8,740 8,750
Expenses incurred without cost
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 ................. 29,250,754 2,925 1,884,887 (1,956,422) (68,610)
Issuance of stock for services rendered
Oct. 1, 1994-Sept. 30, 1995 ............... 881,711 88 110,126 110,214
Exercise of warrants-Jan. 1995 ............ 211,343 21 38,021 38,042
---------- ----------- ----------- ----------- ----------
Subtotal .................................. $30,343,808 $ 3,034 $ 2,033,034 $(1,956,422) $ 79,646
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
THE QUIGLEY CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(Continued)
NOTE 10 Additional Retained
Common Stock Issued Paid-In Earnings
Shares Amount Capital (Deficit) Total
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance ....................... 30,343,808 $3,034 $2,033,034 $(1,956,422) $79,646
Sale of 504 Stock-
December 1994 for cash & notes-
Net of expenses ............... 1,597,000 160 185,715 185,875
Sale of Stock Oct. 1, 1994-
Sept. 30, 1995 for cash ....... 1,673,333 167 247,883 248,050
Net Loss for period ended
September 30, 1995 ............ (152,556) (152,556)
----------- --------- --------- ----------- --------
Balance at Sept. 30, 1995 ..... 33,614,141 3,361 2,466,632 (2,108,978) 361,015
Reverse-1 for 10 Stock
split Dec. 1995 ............... (30,252,727)
Conversion of put option to
equity Jan. 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
Sale of Stock, options &
exercise of options-
Oct. 1, 1995- Sept. 30, 1996
for cash & notes .............. 497,087 497 512,779 513,276
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) $1,330,778
========== ========== ========== ==+======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<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". 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 -Lased 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.
(g) Deposits
Deposits are comprised of rent security and the related accrued
interest.
8
<PAGE>
THE QUIGLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
(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) Expenses Incurred Without Cost
Certain expenses were incurred without cost. For the fiscal year
ended Sept. 30, 1994 these costs were for $40,000 of officers' salaries.
The corresponding expenses was charged on the Statement of operations 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.
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.
9
<PAGE>
THE QUIGLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
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 a shareholder.
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 untill 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.
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.
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.
10
<PAGE>
THE QUIGLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
NOTE 10- CAPITALIZATION
(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 restricted shares of the Company for each $1,000
invested up to an initial maximum of 1,800,000 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 420,000 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 285,500 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 3,000,000 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 $.10 per share Gary Quigley relinquished the remaining 500,000
options issued to him. The options were then cancelled by the Company.
(f) In August 1994 the Company issued 360,000 restricted shares to Dr.
Robert Pollack in total repayment of a debt of $18,000 ($.05 per share). The
debt was incurred over a period of fifteen months and included $820 worth of
interest.
(g) In Sept-ember 1994 the Company issued 240,000 restricted shares to
Drs. Godfrey in full repayment of a loan owing to them in the amount of
$12,000 ($. 05 per share) .
(h) In August 1994, 6,667 restricted shares were issued to Robert Moore in
payment of a debt owed to him of $1,000 ($.15 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 53,334 restricted
shares of the Company at $.075 for a total cash consideration of $4,000.
11
<PAGE>
THE QUIGLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
NOTE 10- CAPITALIZATION (Continued)
(j) In August 1994 the Company issued 100,000 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. 1,884,676 shares were
sold for which the Company received consideration of $243,050 or an average
price of approximately $.13 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 211,343 in consideration of an $38,042
exercise price or a per share price of $.18.
(m) In December 1994 and January 1995 the Company sold 1,597,000 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 881,711. The statement of
operations was charged a total of $110,214 or $.125 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 $.OOI 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.
(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 (postreverse split) 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
========
12
<PAGE>
THE QUIGLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
NOTE 10- CAPITALIZATION (Continued)
(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) 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 to officers
which was never paid.
(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.
13
<PAGE>
THE QUIGLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
NOTE 12- EXPENSES
(a) Certain expenses were incurred without cost. 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.
NOTE 14- STOCK OPTIONS AND WARRANTS
As of September 30, 1996 the following is a list of stock warrants
outstanding:
PRICE ---------DATE OF---------
AMOUNT CLASS EXERCISE ISSUANCE EXPIRATION
------ ----- -------- -------- ----------
850,000 E $3.50 JULY 1996 JUNE 2001
250,000 D $1.00 DEC. 1995 DEC. 2000
250,000 D $1.00 DEC. 1994 DEC. 2000
300,000 D $1.00 FEB. 1996 DEC. 2000
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.
14
<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: December 31, 1996
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:
Signature Title Date
/s/ Guy J. Quigley
--------------
Guy J. Quigley Chairman of the Board, 12/31/96
President, Chief
Executive Officer
and Director
/s/ Eric H. Kaytes
--------------
Eric H. Kaytes Vice Pres. of Finance, 12/31/96
CFO, Secretary-Treas.,
and Director
/s/ Charles A. Phillips
-------------------
Charles A. Phillips Vice President, COO 12/31/96
and Director
/s/ Dr. Robert L. Pollack
---------------------
Dr. Robert L. Pollack Director 12/31/96
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