<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
Commission file number: 000-19788
MENLEY & JAMES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 23-2621602
(State of incorporation) (I.R.S. Employer Identification No.)
125 Strafford Avenue, Suite 300
Wayne, Pennsylvania 19087
(Address of principal executive office)
Registrant's telephone number: (610) 975-4540
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
----- -----
The number of shares of the registrant's common stock, par value $.01
per share, outstanding as of October 28, 1999, was 6,266,320.
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MENLEY & JAMES, INC.
INDEX
PART I - FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements (unaudited).
Condensed Consolidated Balance Sheets
September 30, 1999 and December 31, 1998.......................... 3
Condensed Consolidated Statements of Operations - Three and Nine Months
Ended September 30, 1999 and 1998................................. 4
Consolidated Statements of Stockholders' Equity
September 30, 1999 and December 31, 1998.......................... 5
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1999 and 1998..................... 6
Notes to Condensed Consolidated Financial Statements.................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk.. 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................... 9
Item 2. Changes in Securities....................................... 9
Item 3. Defaults Upon Senior Securities............................. 9
Item 4. Submission of Matters to a Vote of Security Holders......... 9
Item 5. Other Information........................................... 9
Item 6. Exhibits and Reports on Form 8-K............................ 9
Signature............................................................... 9
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MENLEY & JAMES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------ -----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................... $ 14,043 $ 14,062
Other current assets ......................................... 158 195
-------- --------
Total current assets ..................................... 14,201 14,257
-------- --------
Total assets ............................................. $ 14,201 $ 14,257
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable ............................................. $ 24 $ 16
Accrued expenses ............................................. 34 269
-------- --------
Total current liabilities .................................... 58 285
Preferred stock, $1 par value, authorized 5,000,000
shares, none issued and outstanding
Stockholders' equity:
Common stock, $.01 par value, authorized 15,000,000
shares, issued and outstanding 6,263,280 shares in
1999 and 6,163,520 in 1998 ............................... 63 62
Additional paid-in capital ................................... 45,744 45,620
Accumulated deficit .......................................... (31,664) (31,710)
-------- --------
Total stockholders' equity ........................................ 14,143 13,972
-------- --------
Total liabilities and stockholders' equity ................... $ 14,201 $ 14,257
======== ========
</TABLE>
See accompanying notes.
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MENLEY & JAMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
----------------------------- -----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales ........................................... $ $ 3,557 $ $ 10,479
Cost of goods sold .................................. 1,734 4,952
-------- -------- -------- --------
Gross profit ........................................ 1,823 5,527
Selling, general and administrative expenses 144 1,292 409 4,812
Depreciation and amortization ....................... 328 995
-------- -------- -------- --------
Income (loss) from operations ....................... (144) 203 (409) (280)
Interest income ..................................... 158 42 456 122
Loss on sale ........................................ 6,632 6,632
-------- -------- -------- --------
Income (loss) before income taxes ................... 14 (6,387) 47 (6,790)
Provision for income taxes .......................... 1,283 698
-------- -------- -------- --------
Net income (loss) ................................... $ 14 $ (7,670) $ 47 $ (7,488)
======== ======== ======== ========
Basic income (loss) per share ....................... $ 0.00 $ (1.24) $ 0.01 $ (1.21)
======== ======== ======== ========
Diluted income (loss) per share ..................... $ 0.00 $ (1.24) $ 0.01 $ (1.21)
======== ======== ======== ========
Weighted average number of common shares
outstanding - basic .............................. 6,247 6,163 6,200 6,163
======== ======== ======== ========
Weighted average number of common shares
outstanding - diluted ............................ 6,356 6,242 6,297 6,208
======== ======== ======== ========
</TABLE>
See accompanying notes.
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MENLEY & JAMES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Accumulated Stockholders'
Stock Capital Deficit Equity
----- ------- ------- ------
<S> <C> <C> <C> <C>
Balance, December 31, 1998 ........ $ 62 $ 45,620 $(31,710) $ 13,972
Net income ..................... 47 47
Exercise of stock options ...... 1 123 124
-------- -------- -------- --------
Balance, September 30, 1999 ....... $ 63 $ 45,743 $(31,663) $ 14,143
======== ======== ======== ========
</TABLE>
See accompanying notes.
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MENLEY & JAMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................... $ 47 $ (7,488)
Adjustments to reconcile net income to net
cash (used) provided by operating activities:
Depreciation and amortization ........................ 995
Allowance for accounts receivable .................... 13
Amortization of deferred financing costs
Deferred income taxes (benefit) ...................... 692
Loss on sale ......................................... 6,632
Changes in operating assets and liabilities:
Accounts receivable ................................ (287)
Inventory .......................................... (215)
Prepaid expenses ................................... 37 678
Accounts payable ................................... 8 (78)
Accrued expenses ................................... (235) (239)
---------- ----------
Net cash (used) provided by operating activities ........... (143) 703
Cash flows used in investing activities:
Other, principally property purchases, net ............... (170)
Cash flows used in financing activities:
Repayment of borrowings .................................. (36)
Proceeds from issuance of common stock ................... 124
---------- ----------
Net increase (decrease) in cash ............................ (19) 497
Cash and cash equivalents, beginning of period ............. 14,062 2,879
---------- ----------
Cash and cash equivalents, end of period ................... $ 14,043 $ 3,376
========== ==========
</TABLE>
See accompanying notes.
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<PAGE>
MENLEY & JAMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1998.
Operating results for the three-month period ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999.
NOTE A - INCOME TAXES
The effective tax rate used is based on the estimated effective tax rate
for the full year and is less than the statutory federal tax rate primarily as a
result of the use of net operating loss carryforwards.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
Menley & James commenced operation on May 29, 1990 with the acquisition
from SmithKline Beecham of the trademarks, product formulations and production
methodologies, packaging artwork and related inventories for thirty-two
over-the-counter pharmaceutical and toiletry products.
Effective November 23, 1998, we sold substantially all of our assets
and assigned substantially all of our liabilities to Numark Laboratories, Inc.
for a purchase price of $13,430,000.
Results of Operations
Consummation of the sale terminated Menley & James' production and
marketing operations. We presently have no operating business. Since the sale,
we have been seeking to effect a business combination, outside of the
over-the-counter pharmaceutical and toiletry business, with an operating
business in an effort to increase stockholder value.
Selling, general and administrative expenses for the three and nine
month periods ending September 30, 1999, were $144 thousand and $409 thousand
compared to $1.3 million and $4.8 million for the respective 1998 periods. The
decrease is the result of the fact that we completed the sale of our operating
business effective November 23, 1998.
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Interest income of $158 thousand and $456 thousand, respectively, for
the quarter and nine months ending September 30, 1999, result from the
investment in short-term highly liquid funds.
At December 31, 1998, we had a net operating loss carryforward for
federal income tax purposes of approximately $5.6 million which will expire in
the years 2005 through 2008 and a capital loss carryforward of approximately
$24.1 million.
Impact of Inflation
We believe that, to date, inflation has not had a significant impact on
our operations.
Liquidity and Capital Resources
At September 30, 1999, we had working capital of $14.1 million. Working
capital was primarily provided by the net proceeds from the sale of assets to
Numark.
At the present time, we have minimal cash requirements and operating
activities. Since the November 1998 divestiture of our operating assets, our
strategic focus has been to effect a business combination with a new operating
business which Menley & James believes has potential to increase stockholder
value. It is anticipated that Menley & James would use cash, equity, debt or a
combination of these to achieve a business combination. We may borrow funds to
increase the amount of capital available for a business combination or otherwise
finance the operation of the new operating business. Cash of $13.95 million is
invested in short-term highly liquid funds. No assurance can be given that we
will effect any such business combination or that, if one is effected, it will
increase stockholder value.
Impact of Year 2000
We are currently not engaged in any substantial business operations,
and management, therefore, does not believe that computer problems associated
with the change of year to the year 2000 will have any material effect on our
operations. However, the possibility exists that we may merge with or acquire a
business that will be negatively affected by the "Year 2000" problem. The effect
of such issues on us in the future can not be predicted with any accuracy until
such time as we identify a merger or acquisition target.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Changes in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits None
b. Reports on Form 8-K
The registrant was not required to file any current reports on
Form 8-K during the three months ended September 30, 1999.
SIGNATURE
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.
MENLEY & JAMES, INC.
Date: November 5, 1999 /s/ Lawrence D. White
-------------------------------------
Lawrence D. White
President and Chief Executive Officer
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Exhibit Index
Exhibit No. Description
27 Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information only
and not filed.
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the Condensed
Consolidated Balance Sheet at September 30, 1999 (unaudited) and the Condensed
Consolidated Statement of Operations for the Nine Months Ended September 30,
1999 (unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 14,043
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,201
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,201
<CURRENT-LIABILITIES> 58
<BONDS> 0
0
0
<COMMON> 63
<OTHER-SE> 14,080
<TOTAL-LIABILITY-AND-EQUITY> 14,201
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 409
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (456)
<INCOME-PRETAX> 47
<INCOME-TAX> 0
<INCOME-CONTINUING> 47
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
