UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2000
---------------------------------------------
OR
( ) THE TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ______________ to ______________
Commission File Number 01-21617
THE QUIGLEY CORPORATION
-----------------------
(Exact name of registrant as specified in its charter)
Nevada 23-2577138
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
(MAILING ADDRESS: PO Box 1349, Doylestown, PA 18901.)
Kells Building, 621 Shady Retreat Road, Doylestown, PA 18901
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(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 345-0919
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(Registrant's telephone number, including area code)
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. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's class of
Common Stock, as of the latest practicable date. The number of shares
outstanding of each of the registrant's classes of Common Stock, as of April
15, 2000, was 10,349,731 all of one class of $.0005 par value Common Stock.
<PAGE>
TABLE OF CONTENTS
Page No.
PART I - Financial information
Item 1. Consolidated Financial Statements 3-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-12
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 12
PART II - Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a
Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
EDGAR Exhibit 27 14
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<PAGE>
<TABLE>
<CAPTION>
THE QUIGLEY CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS March 31, 2000 December 31, 1999
(unaudited)
-------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ..................................... $ 12,106,089 $ 13,990,475
Accounts receivable (less doubtful accounts
of $408,865 and $239,065) .................................. 2,233,256 6,639,687
Inventory ..................................................... 6,017,782 6,170,005
Prepaid income taxes .......................................... 2,485,247 2,485,247
Prepaid expenses and other current assets ..................... 1,452,729 1,390,702
------------ ------------
TOTAL CURRENT ASSETS ...................................... 24,295,103 30,676,116
------------ ------------
PROPERTY, PLANT AND EQUIPMENT - net ..................................... 1,967,232 1,943,313
------------ ------------
OTHER ASSETS:
Patent rights - Less accumulated amortization ................. 175,522 197,463
Other assets .................................................. 329,400 454,164
------------ ------------
TOTAL OTHER ASSETS ....................................... 504,922 651,627
------------ ------------
TOTAL ASSETS ............................................................ $ 26,767,257 $ 33,271,056
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .............................................. $ 312,691 $ 395,778
Accrued royalties and sales commissions ....................... 1,078,143 1,722,715
Accrued advertising ........................................... 2,752,528 4,523,901
Accrued freight ............................................... 90,560 104,263
Other current liabilities ..................................... 241,164 308,790
------------ ------------
TOTAL CURRENT LIABILITIES ................................ 4,475,086 7,055,447
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.0005 par value; authorized 50,000,000;
Issued: 14,831,384 shares ................................. 7,415 7,415
Additional paid-in-capital .................................... 28,807,108 28,807,108
Retained earnings ............................................. 18,522,232 22,445,670
Less: Treasury stock, 4,481,653 shares, at cost ............... (25,044,584) (25,044,584)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY ............................... 22,292,171 26,215,609
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .............................. $ 26,767,257 $ 33,271,056
============ ============
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
<TABLE>
<CAPTION>
THE QUIGLEY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
------------------ -------------------
<S> <C> <C>
NET SALES ........................ $ 6,614,786 $ 6,136,902
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COST OF SALES .................... 2,274,928 2,052,650
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GROSS PROFIT ..................... 4,339,858 4,084,252
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OPERATING EXPENSES:
Sales and marketing ........ 6,679,656 6,011,413
Administration ............. 1,758,799 1,470,864
------------ ------------
TOTAL OPERATING EXPENSES ......... 8,438,455 7,482,277
------------ ------------
LOSS FROM OPERATIONS ............ (4,098,597) (3,398,025)
INTEREST and OTHER INCOME ........ 175,159 356,689
------------ ------------
LOSS BEFORE TAXES ................ (3,923,438) (3,041,336)
------------ ------------
INCOME TAX BENEFIT ............... -- (1,186,122)
------------ ------------
NET LOSS ......................... ($ 3,923,438) ($ 1,855,214)
============ ============
Loss per common share:
Basic ...................... ($ 0.38) ($ 0.15)
============ ============
Diluted .................... ($ 0.38) ($ 0.15)
============ ============
Weighted average common shares
Basic ....................... 10,349,731 12,279,450
============ ============
Diluted ..................... 10,349,731 12,279,450
============ ============
</TABLE>
See accompanying notes to financial statements
-4-
<PAGE>
<TABLE>
<CAPTION>
THE QUIGLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31, 2000 March 31, 1999
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<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES .................... ($ 1,807,434) $ 942,827
------------ ------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures ..................................... (76,952) (24,278)
Patent rights and other assets ........................... -- (33,030)
------------ ------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES .............. (76,952) (57,308)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Tax benefits from stock options, warrants and common stock -- 250,808
Proceeds from exercises of options and warrants .......... -- 375,000
Repurchase of Common stock ............................... -- (6,150,258)
------------ ------------
NET CASH FLOWS FROM FINANCING ACTIVITIES ................. -- (5,524,450)
------------ ------------
NET DECREASE IN CASH ..................................... (1,884,386) (4,638,931)
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD ................ 13,990,475 28,331,765
------------ ------------
CASH & CASH EQUIVALENTS, END OF PERIOD ...................... $ 12,106,089 $ 23,692,834
============ ============
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>
THE QUIGLEY CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATIONAL AND GENERAL
The Quigley Corporation (the "Company"), organized under the laws of the state
of Nevada, is primarily engaged in the development, manufacturing, and
marketing of health products that include homeopathic cold remedies. The
products developed are being offered to the general public. For the fiscal
periods presented, the Company's proprietary "Cold-Eeze(R)" products
contribute the majority of revenues and profits.
In the last half of 1998, the Company launched Cold-Eeze(R) in a sugar free
version of the product to benefit diabetics and other consumers concerned with
their sugar intake. Late in the fourth quarter of 1998, the Company launched a
bubble gum version of Cold-Eeze(R) and a dietary supplement product.
Cold-Eeze(R) products are based upon a proprietary zinc gluconate glycine
formula which, in two double blind studies have been shown to reduce the
severity and duration of common cold symptoms by nearly half. The results of
the latest randomized double-blind placebo-controlled study of the common cold
were published in 1996 in the Annals of Internal Medicine - Vol. 125 No 2.
Research is continuing on this product in order to maximize its full potential
use by the general public.
The Company has an exclusive agreement for worldwide representation,
manufacturing, marketing and distribution rights for the zinc gluconate
glycine lozenge formulation, known as "Cold-Eeze(R)", which is patented in the
United States, United Kingdom, Sweden, France, Italy, Canada, Germany, and
pending in Japan. In 1996, the Company also acquired exclusive license for a
United States zinc gluconate use patent number RI 33,465 from the patent
holder. This use patent gives the Company exclusive rights to both the use and
formulation patents on zinc gluconate for reducing the duration and severity
of common cold symptoms.
The business of the Company is subject to federal and state laws and
regulations adopted for the health and safety of users of the Company's
products. Cold-Eeze(R) is a homeopathic remedy that is subject to regulations
by various federal, state and local agencies, including the FDA and the
Homeopathic Pharmacopoeia of the United States.
The Company competes with suppliers varying in range and size in the cold
remedy products arena. Cold-Eeze(R) which has been clinically proven, offers a
significant advantage over other suppliers in the over-the-counter cold remedy
market. The management of the Company believes there should be no future
impediment on the ability to compete in the marketplace now, or in the
immediate future, since factors concerning the product, such as, price,
product quality, availability, reliability, credit terms, name recognition,
delivery and support are all properly positioned. The Company has several
Broker, Distributor and Representative Agreements, both nationally and
internationally and the product is distributed through numerous independent
and chain drug and discount stores throughout the United States. During 1998,
the Company commenced international sales to Canada and the Peoples' Republic
of China.
The Company continues to use the resources of independent national and
international brokers to represent the Company's Cold-Eeze(R) and Bodymate(TM)
products, thereby saving capital and other ongoing expenditures that would
otherwise be incurred.
Different manufacturing sources are used for the production of the
Cold-Eeze(R) bubble gum and sugarfree products and the same manufacturer
produces the Cold-Eeze(R) lozenge and Bodymate(TM) products. In addition, the
lozenge and Bodymate(TM) manufacturer commenced manufacturing exclusively for
the Company in 1997.
-6-
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated Balance Sheet as at March 31, 2000, the consolidated
Statements of Income for the three month periods ended March 31, 2000 and
1999, and the consolidated Statements of Cash Flows for the three month
periods ended March 31, 2000 and 1999, have been prepared without audit. In
the opinion of management, all adjustments necessary to present fairly the
consolidated financial position, consolidated results of operations and
consolidated cash flows, for the periods indicated, have been made. All
adjustments made were of a normal recurring nature.
The consolidated financial statements include the accounts of The Quigley
Corporation and Darius International Inc. a new wholly-owned subsidiary which
was formed in January 2000 to implement alternative methods of marketing and
distribution for existing and new product lines. All inter-company
transactions and balances have been eliminated.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted. It is suggested that these
financial statements be read in conjunction with the financial statements and
accompanying notes for the fiscal year ended December 31, 1999, in the
Company's Form 10-K.
Concentration of Risks
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash, investments and
trade accounts receivable.
The Company maintains cash and cash equivalents with three major financial
institutions. Since the Company maintains amounts in excess of guarantees
provided by the Federal Depository Insurance Corporation, the Company performs
periodic evaluations of the relative credit standing of these financial
institutions and limits the amount of credit exposure with any one
institution.
The Company currently uses three separate suppliers to produce Cold-Eeze(R) in
lozenge, bubble gum, and sugar free tablet form. The Bodymate(TM) product and
the Cold-Eeze(R) lozenge are manufactured by a third party manufacturer that
produces exclusively for the Company. Substantially all of the Company's
revenues are currently generated from the sale of the Cold-Eeze(R) lozenge
product. The other forms are manufactured by third parties that produce a
variety of other products for other customers. Should these relationships
terminate or discontinue for any reason, the Company has formulated a
contingency plan in order to prevent such discontinuance from materially
affecting the Company's operations. Any such termination may, however, result
in a temporary delay in production until the replacement facility is able to
meet the Company's production requirements.
Raw material used in the production of the product is available from numerous
sources. Currently, it is being procured from a single vendor in order to
secure purchasing economies. In a situation where this one vendor is not able
to supply the contract manufacturer with the ingredients, other sources have
been identified.
Business Segments and Related Information
Statement of Financial Accounting Standard ("SFAS") No. 131, "Disclosure about
Segments of an Enterprise and Related Information," requires public companies
to report certain information about operating segments within their financial
statements. The Company had international sales in 2000 to date and 1999, the
resulting revenues relating to which are not considered material. During the
remainder of 2000, the Company expects further international activities that
may require additional disclosures in compliance with the requirements of the
Standard.
NOTE 3 - TRANSACTIONS AFFECTING STOCKHOLDERS' EQUITY
Since the inception of the stock buy-back program in January 1998, the Board
subsequently increased the authorization on four occasions, for a total
authorized buy-back of 4,000,000 shares or approximately 30% of the previous
shares outstanding. Such shares are reflected as treasury stock and will be
available for general corporate purposes. From the initiation of the plan,
3,994,791 shares have been repurchased at a cost of $23,899,226 or an average
cost of $5.98 per share. There were no buy-backs during the first three months
of 2000.
-7-
<PAGE>
At March 31, 2000, there were 4,272,400 unexercised and vested options and
warrants of the Company's stock available for exercise with an additional
100,000 options awarded which are subject to vesting requirements.
NOTE 4 - INCOME TAXES
Certain exercises of options and warrants, and restricted stock issued for
services that became unrestricted during various periods, resulted in
reductions to taxes currently payable and a corresponding increase to
additional-paid-in-capital totaling $14,660,288 for the years ended December
31, 1999, 1998, and 1997. The tax benefit effect of option and warrant
exercises during 1999 was $697,208, however, this benefit is being deferred
because of a net operating loss carry-forward for tax purposes ("NOLs") that
occurred during the fourth quarter of 1999 from a cumulative effect of
deducting a total value of $42,800,364 attributed to these options, warrants
and unrestricted stock deductions from taxable income during the tax years
1997 and 1998. The net operating loss carry-forwards arising from the option,
warrant and stock activities approximate $7.4 million for federal purposes,
which will expire in 2019 and $13.6 million for state purposes, which will
expire in 2009. Until sufficient taxable income to offset the temporary timing
differences attributable to operations and the tax deductions attributable to
option, warrant and stock activities are assured, a deferred tax asset of
$3,818,707 equaling the valuation allowance is being provided. The three
months period ended March 31, 2000 losses are reflected at 39% for both the
increase in Deferred taxes and the Valuation Allowance. Until profits become
available, the overall effective tax rate for 2000 will be 0% as compared to
the previous effective tax rate of 39%.
NOTE 5 - EARNINGS PER SHARE
Basic earnings per share ("EPS") excludes dilution and is computed by dividing
income available to Common Stockholders by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue Common
Stock were exercised or converted into Common Stock or resulted in the
issuance of Common Stock that then shared in the earnings of the entity.
Diluted EPS also utilizes the treasury stock method that prescribes a
theoretical buy-back of shares from the theoretical proceeds of all options
and warrants outstanding during the period. Since there is a large number of
options and warrants outstanding, fluctuations in the actual market price can
have a varying of results for each period presented. Since the periods
presented reflect losses, no effect was given for options and warrants because
the result would be anti-dilutive.
A reconciliation of the applicable numerators and denominators of the income
statement periods presented is as follows (millions, except earnings per share
amounts):
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
Income Shares EPS Income Shares EPS
----------- ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS ($3.9) 10.3 ($0.38) ($1.9) 12.3 ($0.15)
Dilutives:
Options/Warrants - - - -
----------- ------------ ----------- ----------- ----------- ------------
Diluted EPS ($3.9) 10.3 ($0.38) ($1.9) 12.3 ($0.15)
=========== ============ =========== =========== =========== ============
</TABLE>
NOTE 6 - RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company has sales brokerage and other
arrangements with entities whose major stockholders are also stockholders of
The Quigley Corporation, or are related to major stockholders of the Company.
Commissions and other items paid or payable under such arrangements amounted
to approximately $111,983 and $111,321, respectively, for the three months
periods ended March 31, 2000 and 1999.
The Company is in the process of acquiring licenses in certain countries
through related party entities. For the three month periods ended March 31,
2000 and 1999, fees amounting to $44,838 and $10,000, respectively, have been
paid to a related entity to obtain such licenses.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company maintains certain royalty and founders commission agreements with
the developers, licensors, founders, and consultants for the Cold-Eeze(R)
products. These payments are 13% of sales collected less certain deductions.
Of this percentage, a three percent royalty of sales collected less certain
deductions is payable to the patent holder whose agreement
-8-
<PAGE>
expires in 2002, a three percent royalty of sales collected less certain
deductions is payable to the developer of the product formulation together
with a two percent consulting fee based on an agreement that expires in 2007.
Additionally, a founders' commission is payable totaling 5% of sales collected
less certain deductions, which is shared by two of the officers whose
agreements expire in 2005.
The Company has remaining contractual commitments for advertising and other
purchases amounting to approximately $920,000.
The Company has a revolving line of credit with a commercial bank for $10
million to be used for general corporate purposes. This facility is
collateralized by accounts receivable and inventory, and renews in May 2000,
with interest accruing at the Prime Rate, or 225 basis points above the
Eurodollar Rate, each to move with the respective base rate. There were no
borrowings under this line during the three-month period ended March 31, 2000.
The Company is subject to legal proceedings and claims noted in Part II,
"Other Information", Item I, Legal Proceedings, and claims which have arisen
in the ordinary course of its business. Although there can be no assurance as
to the ultimate disposition of these matters, it is the opinion of the
Company's management based upon the information available at this time, that
the expected outcome of these matters, individually or in the aggregate, will
not have a material adverse effect on the financial position, results of
operations or cash flows of the Company.
-9-
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
In addition to historical information, this Report contains forward-looking
statements. These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
reflected in these forward-looking statements. Factors that might cause such a
difference include, but are not limited to management of growth, competition,
pricing pressures on the Company's product, industry growth and general
economic conditions. Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect management's opinions only as
of the date hereof. The Company undertakes no obligation to revise or publicly
release the results of any revision to these forward-looking statements. The
Company is subject to a variety of additional risk factors more fully
described in the Company's annual report on Form 10-K filed with the
Securities and Exchange Commission.
Overview
- --------
Revenues for the three month periods ended March 31, 2000 and 1999 were
$6,614,786 and $6,136,902, respectively. The first quarter of 2000 reflects a
$477,884 or 7.8% increase in revenues over the 1999 comparable period. There
are continuing indications that prior overstocking by our customers has been
considerably reduced. As a result of many zinc products exiting the
marketplace in the last number of months, Cold-Eeze(R) now has more visibility
as the original clinically proven zinc product on the market, effective in
reducing the severity and duration of symptoms of the common cold. Throughout
the quarter, the Company has attempted to counteract the efforts by the media
and all other sources to discredit Cold-Eeze(R). The market place continues to
alter its complexion through mergers and consolidation as is evident in other
sectors of the economy.
In conjunction with the foregoing consumer misconception and the low consumer
use of Cold-Eeze(R) (approximately 4% of US household population), a
substantial investment in advertising initiated in 1998 continued until March
2000. This investment was necessary to establish brand awareness for
Cold-Eeze(R) and also to promote new product introductions of Cold-Eeze(R)
sugar free, Cold-Eeze(R) Bubble gum and Bodymate(TM).
The advertising program also involved substantial retail support in the
product sell-through to the consumer during the first quarter of 2000. The
advertising cost approximated $6.0 million for the three months ended March
31, 2000 as compared with approximately $5.6 million for the comparable period
in 1999, substantially contributing to the net loss of ($3,923,438) for the
three months ended March 31, 2000 as compared to a net loss of ($1,855,214)
for the three months ended March 31, 1999. The net loss for the three months
period ended March 31, 2000 is not tax effected for the potential benefit,
which cannot be reflected until the Company returns to profitability.
Therefore, consistent comparisons for the periods reflect a loss, before
income tax benefit, of ($3,923,438) for the three months period ended March
31, 2000 and a loss, before income tax benefit, of ($3,041,336) for the three
months ended March 31, 1999.
The Company continues to use the resources of a contract manufacturer and
independent national and international brokers to represent the Company's
Cold-Eeze(R) and Bodymate(TM) products, thereby saving capital and other
ongoing expenditures that would otherwise be incurred.
Different manufacturing sources are used for the production of the
Cold-Eeze(R) bubble gum and sugar free products with the same manufacturer
producing the Cold-Eeze(R) lozenge and Bodymate(TM) products. In addition, the
lozenge and Bodymate(TM) manufacturer commenced manufacturing exclusively for
the Company in 1997, thereby increasing their output and the availability of
the product. All three manufacturing sites have the capacity to respond
quickly to market requirements.
-10
<PAGE>
Results of Operations
- ---------------------
Three months ended March 31, 2000 compared to three months ended March 31,
- ------------------------------------------------------------------------------
1999
- ----
For the three months ended March 31, 2000, the Company reported revenues of
$6,614,786 and a net loss of ($3,923,438) as compared to revenue of $6,136,902
and a net loss of ($1,855,214), for the comparable period ended March 31,
1999. The first quarter results have been supported by indications that prior
overstocking by our customers has been significantly reduced and by the sales
resulting from Cold-Eeze(R) bubble gum.
The net loss in quarter 1, 2000 is not tax effected for the potential benefit,
which cannot be reflected until the Company returns to profitability.
Therefore, consistent comparisons for the periods reflect a loss, before
income tax benefit, of ($3,923,438) for the three months period ended March
31, 2000 and a loss, before income tax benefit, of ($3,041,336) for the three
months ended March 31, 1999.
Cost of Sales as a percentage of net sales for the three months ended March
31, 2000 was 34.4% compared to 33.4% for the comparable period ended March 31,
1999. Increased international activity and greater sales of Cold-Eeze(R)
bubble gum in 2000 over 1999, both of which carry a higher cost of goods
contributed to the higher cost of sales.
For the three months ended March 31, 2000, total operating expenses were
$8,438,455 compared to $7,482,277 for the comparable period ended March 31,
1999. The operating expenses increase reflects the necessity to support the
products with adequate promotional expenditure in order to establish and
promote the Cold-Eeze(R) brand including new products introduced in late 1998.
During the three months ended March 31, 2000, the major operating expenses of
delivery, salaries, brokerage commissions, promotion, advertising, and legal
costs accounted for $7,301,472 (87%) of total operating costs. The remaining
items for this period remained relatively fixed in that they do not follow
sales trends. These expense categories for the comparable period in 1999
accounted for $6,731,161 (90%) of total operating costs.
Liquidity and Capital Resources
- -------------------------------
The total assets of the Company at March 31, 2000 and December 31, 1999 were
$26,767,257 and $33,271,056, respectively. Working capital decreased to
$19,820,017 from $23,620,669 during the period. The significant movement
within total assets represents the reduction in accounts receivable of
$4,406,431, cash and cash equivalents decreasing by $1,884,386, prepaid
expenses and other current assets increasing by $62,027 and inventory
decreasing by $152,223. From a working capital perspective, accounts payable,
accrued royalties and sales commissions were reduced over the period by
$83,087 and $644,572 respectively while the advertising accrual decreased by
$1,771,373. Total cash balances at March 31, 2000 were $12,106,089, as
compared to $13,990,475 at December 31, 1999.
The Company believes that its increased marketing efforts and increased
national publicity concerning the Cold-Eeze(R) products, the Company's
increased manufacturing availability, newly available products, further growth
in international sales together with its current working capital should
provide an internal source of capital to fund the Company's business
operations. In addition to anticipated funding from operations, the Company
may raise capital through the issuance of equity securities to finance
anticipated growth.
Notwithstanding current period negative cash flows from operations, management
believes amounts of cash on hand combined with credit line availability,
provide adequate liquidity to support future operations. Any challenge to the
Company's patent rights could have a material adverse effect on future
liquidity of the Company; however, the Company is not aware of any condition
that would make such an event probable.
The Company has a revolving line of credit with a commercial bank for $10
million to be used for general corporate purposes. This facility is
collateralized by accounts receivable and inventory, and renews in May 2000,
with interest accruing at the Prime Rate, or 225 basis points above the
Eurodollar Rate, each to move with the respective base rate. There were no
borrowings under this line during the three month period ended March 31, 2000.
-11-
<PAGE>
Capital Expenditures
- --------------------
Since the Cold-Eeze(R) and Bodymate(TM) products are manufactured for the
Company by an outside source, capital expenditures during 2000 are not
anticipated to be material.
Item 3: Quantitative and Qualitative Disclosure about Market Risk
Not Applicable
Part II. Other Information
--------------------------
Item 1. Legal Proceedings
- -------------------------
The Company is subject to other legal proceedings and claims which have arisen
in the ordinary course of its business. Although there can be no assurance as
to the ultimate disposition of these matters, it is the opinion of the
Company's management based upon the information available at this time, that
the expected outcome of these matters, individually or in the aggregate, will
not have a material adverse effect on the Company 's financial position,
results of operations or liquidity.
Item 2. Changes in Securities
- -----------------------------
None
Item 3. Defaults Upon Senior Securities
- ---------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
None
Item 5. Other Information
- -------------------------
None
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K
On March 7, 2000, the Registrant filed a Current Report on Form 8-K for the
following event:
The Company reported under:
Item 5. Other Events
On March 1, 2000, Mr. Gurney P. Sloan resigned as a member of the
Registrant's board of directors. Mr. Sloan had served as a director since
December 1997. Mr. Sloan resigned for personal reasons and to pursue
other professional interests.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE QUIGLEY CORPORATION
By: /s/George J. Longo
------------------
George J. Longo
Vice President,
Chief Financial Officer
Date: May 4, 2000
-13-
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