<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 March 31, 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 May 10, 1999, was 6,184,240.
<PAGE>
MENLEY & JAMES, INC.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
<S> <C>
Item 1. Financial Statements (unaudited).
Condensed Consolidated Balance Sheets
March 31, 1999 and December 31, 1998....................................................... 3
Condensed Consolidated Statements of Operations - Three Months
Ended March 31, 1999 and 1998.............................................................. 4
Consolidated Statements of Stockholders' Equity
March 31, 1999 and December 31, 1998....................................................... 5
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1999................................................. 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>
-2-
<PAGE>
MENLEY & JAMES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................................................... $ 13,926 $ 14,062
Other current assets............................................................ 170 195
--------- ---------
Total current assets........................................................ 14,096 14,257
--------- ---------
Total assets................................................................ 14,096 14,257
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................ $ 26 $ 16
Accrued expenses................................................................ 77 269
--------- ---------
Total current liabilities....................................................... 103 285
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 6,169,040 shares in
1999 and 6,163,270 in 1998.................................................. 62 62
Additional paid-in capital...................................................... 45,627 45,620
Accumulated deficit............................................................. (31,696) (31,710)
--------- ---------
Total stockholders' equity........................................................... 13,993 13,972
--------- ---------
Total liabilities and stockholders' equity...................................... $ 14,096 $ 14,257
========= =========
</TABLE>
See accompanying notes.
-3-
<PAGE>
MENLEY & JAMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
<S> <C> <C>
Net sales............................................................................ $ $ 3,273
Cost of goods sold................................................................... 1,530
--------- --------
Gross profit......................................................................... 1,743
Selling, general and administrative expenses......................................... 135 1,969
Depreciation and amortization........................................................ 331
--------- --------
Income (loss) from operations........................................................ (135) (557)
Interest income...................................................................... 149 39
--------- --------
Income (loss) before income taxes.................................................... 14 (518)
Provision (benefit) for income taxes................................................. (881)
--------- --------
Net income........................................................................... $ 14 $ 363
========== ========
Basic income per share............................................................... $ 0.00 $ 0.06
========= ========
Diluted income per share............................................................. $ 0.00 $ 0.06
========= ========
Weighted average number of common shares
outstanding - basic............................................................... 6,165 6,163
========= ========
Weighted average number of common shares
outstanding - diluted............................................................. 6,301 6,183
========= ========
</TABLE>
See accompanying notes.
-4-
<PAGE>
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............................. 14 14
Exercise of stock options.............. 7 7
--------- --------- ---------- ----------
Balance, March 31, 1999................... $ 62 $ 45,627 $ (31,696) $ 13,993
========= ========= ========== ==========
</TABLE>
See accompanying notes.
-5-
<PAGE>
MENLEY & JAMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
<S> <C> <C.
Cash flows from operating activities:
Net income....................................................................... $ 14 $ 363
Adjustments to reconcile net income to net
cash (used) provided by operating activities:
Depreciation and amortization............................................. 331
Allowance for accounts receivable......................................... (12)
Amortization of deferred financing costs..................................
Deferred income taxes (benefit)........................................... (881)
Changes in operating assets and liabilities:
Accounts receivable.................................................... 871
Inventory.............................................................. (219)
Prepaid expenses....................................................... 25 558
Accounts payable....................................................... 10 (82)
Accrued expenses....................................................... (192) (175)
-------- --------
Net cash (used) provided by operating activities.................................... (143) 784
Cash flows used in investing activities:
Other, principally property purchases, net....................................... (32)
Cash flows used in financing activities:
Repayment of borrowings.......................................................... (3)
Proceeds from issuance of common stock........................................... 7
-------- --------
Net increase (decrease) in cash..................................................... (136) 749
Cash and cash equivalents, beginning of period...................................... 14,062 2,879
-------- --------
Cash and cash equivalents, end of period............................................ $ 13,926 $ 3,628
======== ========
</TABLE>
See accompanying notes.
-6-
<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 March 31, 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 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 quarter ending
March 31, 1999, were $135 thousand compared to $2.0 million for the prior year
first quarter. The decrease is the result of the fact that we completed the sale
of our operating business effective November 23.
-7-
<PAGE>
Interest income of $149 thousand for the quarter ending March 31, 1999
results 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 March 31, 1998, we had working capital of $14 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 $13.64
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.
-8-
<PAGE>
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 None
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 March 31, 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: May 12, 1999 /s/ Lawrence D. White
-------------------------------------
Lawrence D. White
President and Chief Executive Officer
-9-
<PAGE>
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.
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the Condensed
Consolidated Balance Sheet at March 31, 1999 (unaudited) and the Condensed
Consolidated Statement of Operations for the Three Months Ended March 31, 1999
(unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 13,926
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,096
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,096
<CURRENT-LIABILITIES> 104
<BONDS> 0
0
0
<COMMON> 62
<OTHER-SE> 13,930
<TOTAL-LIABILITY-AND-EQUITY> 14,096
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 135
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (149)
<INCOME-PRETAX> 14
<INCOME-TAX> 0
<INCOME-CONTINUING> 14
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
