|
Delaware
|
95-2639686
|
|
|
(STATE
OR OTHER JURISDICTION OF INCORPORATION)
|
(I.R.S.
EMP I.D. NO)
|
|
5737
Kanan Rd. PMB # 188, Agoura Hills, California
|
91301
|
|
|
(ADDRESS
OF PRINCIPAL EXECUTIVE OFFICES)
|
(ZIP
CODE)
|
|
Common
stock, par value $1
|
1,222,900
|
|
|
(Class)
|
Outstanding
at March 31, 2008
|
|
PART
I:
|
FINANCIAL
INFORMATION
|
PAGE NO.
|
|
Item
1: Financial Statements
|
||
|
Consolidated
Balance Sheets
|
||
|
March
31, 2008 and December 31, 2007
|
3
|
|
|
Consolidated
Statements of Operations
|
||
|
Three
Months Ended March 31, 2008 and 2007
|
4
|
|
|
Consolidated
Statements of Cash Flows
|
||
|
Nine
Months Ended March 31, 2008 and 2007
|
5
|
|
|
Notes
to Consolidated Financial Statements
|
6
|
|
|
Item
2: Management's Discussion and Analysis
|
||
|
of
Financial Condition and Results of Operations
|
7
|
|
|
PART
II:
|
OTHER
INFORMATION
|
|
|
Item
1: Legal Proceedings
|
8-9
|
|
|
Item
5: Other Information
|
9
|
|
|
Item
6: Exhibits and Reports on Form 8-K
|
9
|
|
| SIGNATURES |
10
|
|
|
MARCH 31,
|
DECEMBER 31,
|
||||||
|
2008
|
2007
|
||||||
|
(Unaudited)
|
|||||||
|
ASSETS
|
|||||||
|
CURRENT
ASSETS
|
|||||||
|
Cash
|
$
|
4,000
|
$
|
14,000
|
|||
|
Accounts
receivable, net
|
4,000
|
4,000
|
|||||
|
Prepaid
expenses and other current assets
|
5,000
|
18,000
|
|||||
|
TOTAL
CURRENT ASSETS
|
13,000
|
36,000
|
|||||
|
Real
estate investments, net
|
457,000
|
457,000
|
|||||
|
Investment
in partnership
|
16,000
|
16,000
|
|||||
|
TOTAL
ASSETS
|
$
|
486,000
|
$
|
509,000
|
|||
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|||||||
|
CURRENT
LIABILITIES
|
|||||||
|
Notes
payable to stockholders
|
$
|
2,397,000
|
$
|
2,387,000
|
|||
|
Accounts
payable and accrued expenses
|
169,000
|
173,000
|
|||||
|
Interest
payable to related parties
|
2,112,000
|
2,050,000
|
|||||
|
Deposits
|
374,000
|
374,000
|
|||||
|
TOTAL
CURRENT LIABILITIES
|
5,052,000
|
4,984,000
|
|||||
|
LONG
TERM LIABILITIES
|
|||||||
|
Long
term note payable
|
160,000
|
160,000
|
|||||
|
TOTAL
LIABILITIES
|
5,212,000
|
5,144,000
|
|||||
|
STOCKHOLDERS’
DEFICIT:
|
|||||||
|
Preferred
stock, par value $1 per share:
|
|||||||
|
Authorized,
1,000,000 shares; none issued
|
|
|
|||||
|
Common
stock, par value $1 per share;
|
|||||||
|
Authorized,
6,000,000 shares, issued
|
|||||||
|
1,414,217
shares
|
1,414,000
|
1,414,000
|
|||||
|
Capital
surplus
|
17,209,000
|
17,209,000
|
|||||
|
Accumulated
deficit
|
(22,588,000
|
)
|
(22,497,000
|
)
|
|||
|
(3,965,000
|
)
|
(3,874,000
|
)
|
||||
|
Less
common stock in treasury,
|
|
|
|||||
|
191,312
shares (at cost)
|
(761,000
|
)
|
(761,000
|
)
|
|||
|
TOTAL
STOCKHOLDERS’ DEFICIT
|
(4,726,000
|
)
|
(4,635,000
|
)
|
|||
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
$
|
486,000
|
$
|
509,000
|
|||
|
|
Three Months Ended
MARCH 31,
|
||||||
|
2008
|
2007
|
||||||
|
REVENUES:
|
|||||||
|
Other
income
|
$
|
-
|
$
|
-
|
|||
|
COSTS
AND EXPENSES:
|
|||||||
|
Selling,
general and administrative expenses
|
29,000
|
62,000
|
|||||
|
Interest
expense
|
62,000
|
52,000
|
|||||
|
TOTAL
COSTS AND EXPENSES
|
91,000
|
114,000
|
|||||
|
NET
LOSS
|
$
|
(
91,000
|
)
|
$
|
(114,000
|
)
|
|
|
NET
LOSS PER SHARE, COMMON
|
$
|
(0.07
|
)
|
$
|
(0.09
|
)
|
|
|
FULLY
DILUTED
|
$
|
(0.07
|
)
|
$
|
(0.09
|
)
|
|
|
Weighted
average number of Common shares outstanding
|
1,222,900
|
1,222,900
|
|||||
|
|
Three Months Ended
|
||||||
|
MARCH 31,
|
|||||||
|
2008
|
2007
|
||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
|
Net
loss
|
$
|
(
91,000
|
)
|
$
|
(114,000
|
)
|
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|||||||
|
Changes
in operating assets and liabilities:
|
|||||||
|
Short
and long-term accounts receivable, net
|
-
|
-
|
|||||
|
Prepaid
expenses and other current assets
|
13,000
|
16,000
|
|||||
|
Accounts
payable and accrued liabilities
|
58,000
|
31,000
|
|||||
|
TOTAL
ADJUSTMENTS
|
71,000
|
47,000
|
|||||
|
NET
CASH USED IN OPERATING
ACTIVITIES
|
(
20,000
|
)
|
(
67,000
|
)
|
|||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
|
Short-term
debt borrowings from related party
|
10,000
|
78,000
|
|||||
|
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
(10,000
|
)
|
11,000
|
||||
|
CASH,
BEGINNING OF PERIOD
|
14,000
|
7,000
|
|||||
|
CASH,
END OF PERIOD
|
$
|
4,000
|
$
|
18,000
|
|||
| NOTE 1: |
In
the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present
fairly
the financial position as of March 31, 2008, and the results of operations
and changes in cash flows for the three months then
ended.
|
| NOTE 2: |
The
results of operations for the three months ended March 31, 2008 as
compared to the results of 2007 are not necessarily indicative of
results
to be expected for the full year.
|
| ITEM 2: |
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
|
For
the quarter ended March 31, 2008, the real estate operating loss
was
$74,000 compared to a loss of $88,000 for the same period in 2007.
However, real estate losses will continue as the Company incurs carrying
costs and improvements required to sell the remaining
properties.
|
|
In
February 2004, the Company received notice from Los Angeles County
that
the county intends to severely restrict grading permits and may require
condition use permits for grading on the Company’s property. In addition,
the County of Los Angeles announced its intention to restrict the
building
of residences on three of the Company’s six parcels of land because of new
ridgeline building ordinances. Prior to the ordinance deadline, the
Company received grandfathering status on three of its remaining
parcels.
Because the grandfathering clause is conditional, it is unclear whether
or
not the Company will be able to take advantage of this grandfathering
status until the Company completes the permit process. The above
regulations potentially require multi-year processing to reach the
point
that a parcel can be sold to a third
party.
|
|
If
an agreement cannot be reached with Los Angeles County, these new
regulations may force the Company to liquidate its real estate, make
settlements with its lenders and close down its real estate development
business. As of March 31, 2008, no decision has been made by management
regarding liquidation, nor can they determine the potential financial
impact to the Company. Accordingly, the March 31, 2008 financial
statements do not reflect any adjustments that might result from
these new
and more stringent regulations.
|
|
After
the closing of the financial period, the Company received rough grading
sign off for one of the three parcels that the company has previously
received grandfathering status. The company is currently marketing
this
property for sale. The real estate broker , has informed the company
there
are no current lenders for real estate sales involving land only
sales,
because there is not financing for land sales, the Company will have
to
seek a cash buyer or may involve discounts to the sale
price.
|
|
The
Company’s recurring losses from continuing operations and difficulties in
generating cash flow sufficient to meet its obligations raise substantial
doubt about its ability to continue as a going
concern.
|
|
Real
Estate and Corporate overhead are producing losses that the real-estate
business is unable to absorb. The required investments in real estate
are
currently funded from loans.
|
| The Company intends to meet its obligations through real estate sales. The limited resources available to the Company will be directed at reducing operating expenses and selling real estate. |
|
On
December 31, 1991, the Company and approximately 90 other companies
were
named in a formal complaint. The Company joined a group of defendants,
each of whom was so notified and which is referred to as Potentially
Responsible Parties (PRPs) for the purpose of negotiating with the
DTSC
and for undertaking remediation of the site. Between 1995 and 1998,
the
State of California adjusted the estimated cost of remediation on
several
occasions. As a result, the Company has increased their recorded
liability
to reflect their share. In January, 1999, the PRP’s consent decree was
approved by the Court. As of March 31, 2008 the Company had paid
into the
PRP Group approximately $1,040,000, which includes the assignment
of a
$250,000 note receivable with recourse.
|
|
During
the past several years, the Company had requested a Hardship Withdrawal
Settlement with the PRP group due to the Company’s financial condition.
The PRP group had continually denied the Company’s request. In December
2003, the Company again formally requested a Hardship Withdrawal
Settlement with the PRP Group. The Company’s proposal was for payment of
$240,000 over four years in exchange for complete release from all
further
legal and financial responsibility related to the environmental
liability.
|
|
On
July 16, 2004, the Company entered in a settlement agreement with
the
Chatham Site PRP Group Trust for a $240,000 payment to be paid as
follows:
$100,000 on December 31, 2004, $50,000 on December 31, 2005, $50,000
on
December 31, 2006 and $40,000 on December 31, 2007. The Company would
not
be fully released from the environmental liability until the settlement
agreement note of $240,000 and the assigned note in the amount of
$250,000
were paid in full. During 2007, the assigned note was paid in full.
|
|
Complying
with the terms of the note relieves Frawley Corporation from any
liability
related to the Chatham Site action approved by the State of California
in
1999. However, the PRP Group did not indemnify Frawley Corporation
for any
third party lawsuits related to the Chatham Site cleanup that are
not
considered in the remediation action plan approved in
1999.
|
|
In
June 2004 the Corporation received a new environmental claim against
its
former Harley pen division in the amount of approximately $99,000.
The
claim has been made by the United States Environmental Toxic Agency
concerning the Company’s alleged responsibility for the Omega Chemical
Superfund Site. During 2006, the Company agreed to pay the liability
in
installment payments through January 2007. The Company made payments
of
approximately $52,000 during 2006 and of approximately $26,000 during
2007. In September 2007, the Company was granted a postponement of
the
additional payments due until March 2009. The balance of approximately
$21,000 is included in current
liabilities.
|
|
ITEM
5:
|
Other
Information
|
|
During
the first quarter ended March 31, 2008, the Company borrowed approximately
$10,000 from the Frawley Family Trust. These loans are secured by
Deeds of
trust on the Company’s real estate property.
|
|
ITEM
6:
|
Exhibits
and Reports on Form 8-K
|
|
FRAWLEY
CORPORATION
|
|
(REGISTRANT)
|
|
Date:
December 02, 2008
|
By:
|
/s/
Michael P. Frawley
|
|
MICHAEL
P. FRAWLEY, President
|
||
|
(Authorized
Officer and
|
||
|
Chief
Financial Officer)
|
||