<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 JUNE 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 July 30, 1999, was 6,248,080.
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MENLEY & JAMES, INC.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
<S> <C>
Item 1. Financial Statements (unaudited).
Condensed Consolidated Balance Sheets
June 30, 1999 and December 31, 1998........................................................ 3
Condensed Consolidated Statements of Operations - Three and Six Months
Ended June 30, 1999 and 1998............................................................... 4
Consolidated Statements of Stockholders' Equity
June 30, 1999 and December 31, 1998........................................................ 5
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 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
</TABLE>
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MENLEY & JAMES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------ -----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 14,009 $ 14,062
Other current assets............................................................ 151 195
--------- ---------
Total current assets........................................................ 14,160 14,257
--------- --------
Total assets................................................................ 14,160 14,257
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................ $ 21 $ 16
Accrued expenses................................................................ 61 269
--------- --------
Total current liabilities....................................................... 82 285
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 6,222,680 shares in
1999 and 6,163,520 in 1998.................................................. 63 62
Additional paid-in capital...................................................... 45,693 45,620
Accumulated deficit............................................................. (31,678) (31,710)
--------- ---------
Total stockholders' equity........................................................... 14,078 13,972
--------- ---------
Total liabilities and stockholders' equity...................................... $ 14,160 $ 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 Six Months
Ended Ended
June 30, June 30,
------------------------ ------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales................................................. $ $ 3,649 $ $ 6,922
Cost of goods sold........................................ 1,688 3,218
-------- --------- -------- --------
Gross profit.............................................. 1,961 3,704
Selling, general and administrative expenses.............. 130 1,551 265 3,520
Depreciation and amortization............................. 336 667
-------- --------- -------- --------
Income (loss) from operations............................. (130) 74 (265) (483)
Interest income........................................... 149 41 298 80
-------- --------- -------- --------
Income (loss) before income taxes......................... 19 115 33 (403)
Provision (benefit) for income taxes...................... 296 (585)
-------- --------- -------- --------
Net income................................................ 19 $ (181) $ 33 $ 182
======== ========= ======== ========
Basic income per share.................................... $ 0.00 $ (0.03) $ 0.00 $ 0.03
======== ========= ======== ========
Diluted income per share.................................. $ 0.00 $ (0.03) $ 0.00 $ 0.03
======== ========= ======== ========
Weighted average number of common shares
outstanding - basic.................................... 6,188 6,163 6,176 6,163
======== ========= ======== ========
Weighted average number of common shares
outstanding - diluted.................................. 6,304 6,197 6,285 6,190
======== ========= ======== ========
</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............................. 33 33
Exercise of stock options.............. 1 72 73
------------ ----------- ------------ ----------
Balance, June 30, 1999.................... $ 63 $ 45,692 $ (31,677) $ 14,078
============ =========== ============ ==========
</TABLE>
See accompanying notes.
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MENLEY & JAMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income....................................................................... $ 33 $ 182
Adjustments to reconcile net income to net
cash (used) provided by operating activities:
Depreciation and amortization............................................. 667
Allowance for accounts receivable......................................... (6)
Amortization of deferred financing costs..................................
Deferred income taxes (benefit)........................................... (585)
Changes in operating assets and liabilities:
Accounts receivable.................................................... 263
Inventory.............................................................. (326)
Prepaid expenses....................................................... 44 503
Accounts payable....................................................... 5 199
Accrued expenses....................................................... (208) (17)
--------- ---------
Net cash (used) provided by operating activities.................................... (126) 880
Cash flows used in investing activities:
Other, principally property purchases, net....................................... (127)
Cash flows used in financing activities:
Repayment of borrowings.......................................................... (7)
Proceeds from issuance of common stock........................................... 73
--------- ---------
Net increase (decrease) in cash..................................................... (53) 746
Cash and cash equivalents, beginning of period...................................... 14,062 2,879
--------- ---------
Cash and cash equivalents, end of period............................................ $ 14,009 $ 3,625
========= =========
</TABLE>
See accompanying notes.
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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 June 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 maximize stockholder value.
Selling, general and administrative expenses for the three and six
month periods ending June 30, 1999, were $130 thousand and $265 thousand
compared to $1.6 million and $3.5 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 $149 thousand and $298 thousand, respectively, for
the quarter and six months ending June 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 June 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. Our strategic focus is 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 $13.79
million is invested in short-term highly liquid funds.
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
<TABLE>
<CAPTION>
<S> <C> <C>
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
At the Company's Annual Meeting of Stockholders held May 19, 1999,
the stockholders of the Company elected six directors of the Company
and ratified the appointment of Ernst & Young LLP as the Company's
independent auditors for the year ending December 31, 1999. Messrs.
Carr, Kearl, McMillian, Simpson, Thomas and White were elected to
serve as directors at the meeting. The voting results were as
follows: 5,987,945 shares were in favor of Mr. Carr and 6,775 shares
withheld; 5,986,921 shares were in favor of Mr. Kearl and 7,799
shares withheld: 5,987,945 shares were in favor of Mr. McMillian and
6,775 shares withheld; 5,987,745 shares were in favor of Mr. Simpson
and 6,975 shares withheld; 5,987,945 shares were in favor of Mr.
Thomas and 6,775 shares withheld; 5,984,421 shares were in favor of
Mr. White and 10,299 shares withheld. The vote ratifying the
appointment of Ernst & Young, LLP as independent auditors was
5,986,795 shares for, 4,625 shares against and 3,300 shares withheld.
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 June 30, 1999.
</TABLE>
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: August 3, 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 June 30, 1999 (unaudited) and the Condensed
Consolidated Statement of Operations for the Six Months Ended June 30, 1999
(unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 14,009
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,160
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,160
<CURRENT-LIABILITIES> 82
<BONDS> 0
0
0
<COMMON> 63
<OTHER-SE> 14,078
<TOTAL-LIABILITY-AND-EQUITY> 14,160
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 265
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (298)
<INCOME-PRETAX> 33
<INCOME-TAX> 0
<INCOME-CONTINUING> 33
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
