-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WPiVK3XgHGZTPDn7J3D2kgZAe5b5C/UoeGDtLjcxV8qUS86GZO2lSG0SCquYQA3X Ps/PVaRVHIzlr5YYO1n8jA== 0000921895-05-000408.txt : 20050331 0000921895-05-000408.hdr.sgml : 20050331 20050331132034 ACCESSION NUMBER: 0000921895-05-000408 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20041001 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050331 DATE AS OF CHANGE: 20050331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUIGLEY CORP CENTRAL INDEX KEY: 0000868278 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 232577138 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-21617 FILM NUMBER: 05718367 BUSINESS ADDRESS: STREET 1: KELLS BUILDING STREET 2: 621 SHADY RETREAT RD CITY: DOYLESTOWN STATE: PA ZIP: 18901 BUSINESS PHONE: 2153450919 MAIL ADDRESS: STREET 1: PO BOX 1349 STREET 2: LANDMARK BLDG, 10 S CLINTON ST CITY: DOYLESTOWN STATE: PA ZIP: 18901 8-K/A 1 form8ka03814_10012004.htm sec document 


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                               AMENDMENT NO. 2 ON

                                   FORM 8-K/A


                                 CURRENT REPORT
                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

        Date of Report (Date of earliest event reported) October 1, 2004
                                                         ---------------

                             THE QUIGLEY CORPORATION
                             -----------------------
               (Exact Name of Registrant as Specified in Charter)


       Nevada                         0-21617                  23-2577138
       ------                         -------                  ----------
(State or Other Jurisdiction        (Commission              (IRS Employer
        of Incorporation)           File Number)             Identification No.)


   Kells Building, 621 Shady Retreat Road, P.O. Box 1349, Doylestown, PA 18901
   ---------------------------------------------------------------------------
    (Address of Principal Executive Offices)                         (Zip Code)

        Registrant's telephone number, including area code (215) 345-0919
                                                           --------------

                                       N/A
          -------------------------------------------------------------
          (Former Name or Former Address, if Changed Since Last Report)


      Check the  appropriate  box below if the Form 8-K  filing is  intended  to
simultaneously  satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

      |_|   Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)

      |_|   Soliciting  material  pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)

      |_|   Pre-commencement  communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))

      |_|   Pre-commencement  communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))





            This  Amendment  No. 2 amends the Current  Report on Form 8-K of The
Quigley  Corporation  (the  "Company")  filed with the  Securities  and Exchange
Commission (the "SEC") on October 7, 2004, as amended by Amendment No. 1 on Form
8-K/A filed with the SEC on December 17, 2004 (the  "October  8-K"),  related to
the closing of the Company's  acquisition of substantially  all of the assets of
JoEl,  Inc.  This Form 8-K/A  amends  the  October  8-K to update the  financial
statements  required  by Items  9.01(a)  and  9.01(b) of Form 8-K and to include
exhibits under Item 9.01(c) of Form 8-K. The information  previously reported in
the October 8-K is hereby incorporated by reference into this Form 8-K/A.


ITEM 9.01    FINANCIAL STATEMENTS AND EXHIBITS.

     (a)     Financial Statements of Businesses Acquired.

             The  Independent   Auditor's  Report  is  hereby   incorporated  by
             reference to Exhibit 99.1 hereto.

             The audited balance sheet of JoEl, Inc. as of December 31, 2003 and
             the statement of  operations  and retained  earnings,  statement of
             comprehensive  income and statement of cash flows of JoEl, Inc. for
             the fiscal year ended  December  31,  2003,  and the notes  related
             thereto,  are hereby  incorporated  by  reference  to Exhibit  99.2
             hereto.

             The  unaudited  balance  sheet  as of  September  30,  2004 and the
             audited balance sheet as of December 31, 2003 of JoEl, Inc. and the
             unaudited  statements of  operations,  statements of  comprehensive
             income and  statements  of cash  flows for the nine  month  periods
             ended  September  30, 2004 and  September  30, 2003,  and the notes
             related  thereto,  are hereby  incorporated by reference to Exhibit
             99.3 hereto.

     (b)     Pro Forma Financial Information.

             The following  information  is attached  hereto as Exhibit 99.4 and
             incorporated herein by reference:

             (i)    Unaudited Pro Forma Condensed Combined  Consolidated Balance
                    Sheet as of September 30, 2004.

             (ii)   Unaudited   Pro  Forma   Condensed   Combined   Consolidated
                    Statements  of  Operations  for the year ended  December 31,
                    2003 and the nine months ended September 30, 2004.

             (iii)  Notes  to  the  Unaudited  Pro  Forma   Condensed   Combined
                    Consolidated Financial Statements.







     (c)    Exhibits.

            Exhibit No.       Description
            -----------       -----------

            23.1              Consent  of  McKonly  & Asbury,  LLP,  independent
                              auditors.

            99.1              Independent Auditor's Report.

            99.2              The  audited  balance  sheet of JoEl,  Inc.  as of
                              December 31, 2003 and the  statement of operations
                              and retained earnings,  statement of comprehensive
                              income and  statement of cash flows of JoEl,  Inc.
                              for the fiscal year ended  December 31, 2003,  and
                              the notes related thereto.

            99.3              The  unaudited  balance  sheet as of September 30,
                              2004 and the audited  balance sheet as of December
                              31,  2003  of  JoEl,   Inc.   and  the   unaudited
                              statements    of    operations,    statements   of
                              comprehensive  income and statements of cash flows
                              for the nine month  periods  ended  September  30,
                              2004 and September 30, 2003, and the notes related
                              thereto.

            99.4              Unaudited    Pro    Forma    Condensed    Combined
                              Consolidated  Financial  Statements  and the notes
                              related thereto.







                                   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 hereunto duly authorized.



                                           THE QUIGLEY CORPORATION
                                                 (Registrant)

Date: March 31, 2005
                                           By:    /s/ George J. Longo
                                                  -----------------------------
                                           Name:  George J. Longo
                                           Title: Vice President and Chief
                                                  Financial Officer








                                  EXHIBIT INDEX

Exhibit No.            Description
- -----------            -----------

23.1                   Consent of McKonly & Asbury, LLP, independent auditors.

99.1                   Independent Auditor's Report.

99.2                   The audited  balance  sheet of JoEl,  Inc. as of December
                       31, 2003 and the  statement  of  operations  and retained
                       earnings, statement of comprehensive income and statement
                       of cash flows of JoEl,  Inc.  for the  fiscal  year ended
                       December 31, 2003, and the notes related thereto.

99.3                   The unaudited  balance sheet as of September 30, 2004 and
                       the  audited  balance  sheet as of  December  31, 2003 of
                       JoEl,  Inc. and the unaudited  statements of  operations,
                       statements of comprehensive income and statements of cash
                       flows for the nine month periods ended September 30, 2004
                       and September 30, 2003, and the notes related thereto.

99.4                   Unaudited  Pro  Forma  Condensed  Combined   Consolidated
                       Financial Statements and the notes related thereto.
EX-23.1 2 ex231to8ka_10012004.htm sec document 

                                                                    Exhibit 23.1

                         CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the  incorporation  by reference in Registration  Statement
Nos. 333-119748, 333-104148 and 333-86976 on Form S-3 and Registration Statement
Nos. 333-73456, 333-61313, 333-26589, 333-14687 and 333-10059 on Form S-8 of The
Quigley  Corporation  of our report  dated  February  20,  2004  relating to the
audited financial statements of JoEl, Inc. as of and for the year ended December
31,  2003,  which  appears in this  Current  Report on Form 8-K/A of The Quigley
Corporation.



/S/ McKONLY & ASBURY, LLP
- -----------------------------
McKONLY & ASBURY, LLP
Harrisburg, PA

March 29, 2005
EX-99.1 3 ex991to8ka_10012004.htm sec document 
                                                                    Exhibit 99.1



                     [Letterhead of McKonley & Asbury, LLP]


                          INDEPENDENT AUDITOR'S REPORT



JoEl, Inc.
Elizabethtown, Pennsylvania



We have audited the accompanying  balance sheet of JoEl, Inc. (d/b/a Simon Candy
Company and  Pharmaloz)  (an S  Corporation)  as of December 31,  2003,  and the
related  statements of operations and retained earnings,  comprehensive  income,
and cash  flows for the year then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of JoEl,  Inc. at December 31,
2003,  and the  results of its  operations  and its cash flows for the year then
ended in conformity with accounting  principles generally accepted in the United
States of America.



MCKONLY & ASBURY, LLP
Harrisburg, Pennsylvania
February 20, 2004
EX-99.2 4 ex992to8ka_10012004.htm sec document 

                                                                    Exhibit 99.2


                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (AN S CORPORATION)

                              FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 2003

                                       AND

                          INDEPENDENT AUDITOR'S REPORT






                     [Letterhead of McKonley & Asbury, LLP]


                          INDEPENDENT AUDITOR'S REPORT



JoEl, Inc.
Elizabethtown, Pennsylvania



We have audited the accompanying  balance sheet of JoEl, Inc. (d/b/a Simon Candy
Company and  Pharmaloz)  (an S  Corporation)  as of December 31,  2003,  and the
related  statements of operations and retained earnings,  comprehensive  income,
and cash  flows for the year then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of JoEl,  Inc. at December 31,
2003,  and the  results of its  operations  and its cash flows for the year then
ended in conformity with accounting  principles generally accepted in the United
States of America.



/s/ MCKONLY & ASBURY, LLP

Harrisburg, Pennsylvania
February 20, 2004



                                   JOEL, INC.
                           D/B/A/ SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (AN S CORPORATION)



                                  BALANCE SHEET

                                DECEMBER 31, 2003


                                     ASSETS


Current assets
  Cash and cash equivalents                                         $    22,606
  Investments                                                            79,369
  Accounts receivable, trade                                            234,761
  Inventories                                                           867,532
  Prepaid expenses                                                       54,822
                                                                    -----------

       Total current assets                                           1,259,090
                                                                    -----------


Property, plant and equipment, at cost                               12,134,970
Accumulated depreciation                                             (8,901,591)
                                                                    -----------

      Total property, plant and equipment, net                        3,233,379
                                                                    -----------

Other assets
  Cash value of life insurance                                        1,067,168
  Deposits                                                                  874
  Art and development costs                                              82,227
                                                                    -----------

       Total other assets                                             1,150,269
                                                                    -----------


Total assets                                                        $ 5,642,738
                                                                    ===========


                     The accompanying notes are an integral
                      Part of these financial statements.

                                       2



                                   JOEL, INC.
                           D/B/A/ SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (AN S CORPORATION)


                                  BALANCE SHEET

                                DECEMBER 31, 2003


                      LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities
  Line of credit                                                    $   287,012
  Current maturities of long-term debt                                   73,576
  Accounts payable, trade                                               215,198
  Accrued liabilities
     Payroll                                                             45,923
     Payroll taxes                                                        3,776
     Self-funded health insurance                                        34,829
  Notes payable, stockholders                                           524,550
                                                                    -----------

       Total current liabilities                                      1,184,864
                                                                    -----------

Long-term liabilities
     Notes payable, long-term maturities                                481,711
                                                                    -----------

Stockholders' equity
     Common stock, par value $10 per share;
       authorized 1,000 shares, issued
       and outstanding 1,000 shares                                      10,000
     Additional paid-in capital                                           8,000
     Retained earnings                                                3,927,166
     Accumulated other comprehensive income
       Unrealized gain on investments                                    30,997
                                                                    -----------

       Total stockholders' equity                                     3,976,163
                                                                    -----------

Total liabilities and stockholders' equity                          $ 5,642,738
                                                                    ===========




                     The accompanying notes are an integral
                      Part of these financial statements.

                                       3




                                   JOEL, INC.
                           D/B/A/ SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (AN S CORPORATION)


                  STATEMENT OF OPERATIONS AND RETAINED EARNINGS

                          YEAR ENDED DECEMBER 31, 2003



Net sales                                                           $ 6,073,821

Cost of sales                                                         4,979,212
                                                                    ------------

       Gross profit                                                   1,094,609

Operating expenses
  Sales and marketing                                                   167,467
  Administration                                                      1,132,989
                                                                    ------------

       Total operating expenses                                       1,300,456
                                                                    ------------
       Operating loss                                                  (205,847)
                                                                    ------------

Other income (expense)
  Gain on sale of investments                                             5,489
  Net miscellaneous income                                               34,932
  Interest expense                                                      (79,957)
                                                                    ------------

       Total other income (expense)                                     (39,536)
                                                                    ------------

       Net loss                                                        (245,383)

Retained earnings - beginning                                         4,172,549
                                                                    ------------

Retained earnings - ending                                          $ 3,927,166
                                                                    ============



                     The accompanying notes are an integral
                      Part of these financial statements.

                                       4





                                   JOEL, INC.
                           D/B/A/ SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (AN S CORPORATION)


                        STATEMENT OF COMPREHENSIVE INCOME

                          YEAR ENDED DECEMBER 31, 2003


Net loss                                                              $(245,383)

Unrealized gain on securities
  Unrealized holding gains on
    securities arising during the period                                 36,066
  Gain on sale of available for sale securities                          (5,489)
                                                                      ----------

Comprehensive loss                                                    $(214,806)
                                                                      ==========













                     The accompanying notes are an integral
                      Part of these financial statements.

                                       5







                                   JOEL, INC.
                           D/B/A/ SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (AN S CORPORATION)




                             STATEMENT OF CASH FLOWS

                          YEAR ENDED DECEMBER 31, 2003



Cash flows from operating activities
  Net loss                                                            $ (245,383)
  Adjustments to reconcile net loss to
   net cash provided by operating activities
    Depreciation                                                         465,609
    Amortization                                                          65,455
    Gain on sale of equipment                                            (10,146)
    Gain on sale of investments                                           (5,489)
    Write off of art and development costs                                 1,200
    Interest accrued on stockholder notes                                 23,400
    (Increase) decrease in
      Accounts receivable, trade                                         (86,650)
      Inventories                                                         13,073
      Prepaid expenses and other assets                                   12,252
    Increase (decrease) in
      Accounts payable, trade                                           (197,188)
      Accrued liabilities                                                 (6,687)
                                                                      -----------

        Net cash provided by operating activities                         29,446
                                                                      -----------

Cash flows from investing activities
  Increase in cash value of life insurance                               (83,943)
  Purchase of equipment                                                  (11,496)
  Proceeds from sale of equipment                                         71,765
  Purchase of art and development costs                                  (51,664)
  Proceeds from sale of investments                                       18,803
                                                                      -----------

       Net cash used in investing activities                             (56,535)
                                                                      -----------

Cash flows from financing activities
  Net repayments on line of credit                                      (508,441)
  Proceeds from long-term debt                                           600,000
  Payments on long-term debt                                             (44,713)
                                                                      -----------

       Net cash provided by financing activities                          46,846
                                                                      -----------

Net increase in cash and cash equivalents                                 19,757

Cash and cash equivalents - beginning                                      2,849
                                                                      -----------

Cash and cash equivalents - ending                                    $   22,606
                                                                      ===========

Supplemental disclosures of cash flow information

  Cash paid during the year for interest                              $   79,957
                                                                      ===========


                     The accompanying notes are an integral
                      Part of these financial statements.

                                       6






                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (AN S CORPORATION)

                          NOTES TO FINANCIAL STATEMENTS




1.   SUMMARY OF ACCOUNTING POLICIES

     INCORPORATION

     JoEl,  Inc.  d/b/a Simon Candy  Company and  Pharmaloz  (the  Company)  was
     incorporated  on June  12,  1973  under  the  laws of the  Commonwealth  of
     Pennsylvania for the purpose of  manufacturing  hard candy and cough drops.
     The accompanying  financial statements include the results of operations of
     the Company's two divisions, Simon Candy and Pharmaloz, which is considered
     to be one operating segment.

     ESTIMATES

     The  preparation  of financial  statements  in conformity  with  accounting
     principles  generally  accepted  in the United  States of America  requires
     management  to make  estimates  and  assumptions  that affect the  reported
     amounts of assets and liabilities at the date of the financial  statements,
     and the  reported  amounts of revenue  and  expenses  during the  reporting
     period. Actual results could differ from those estimates.

     CASH EQUIVALENTS

     The Company  considers all highly liquid debt  instruments with an original
     maturity of three months or less to be cash equivalents.

     ALLOWANCE FOR DOUBTFUL ACCOUNTS

     The  Company  considers  accounts   receivable  to  be  fully  collectible;
     accordingly,  no allowance for doubtful accounts is required.  For the year
     ended  December  31,  2003,  bad debt  expense in the amount of $44,036 was
     determined and was expensed.

     Trade accounts receivable  potentially subjects the Company to credit risk.
     The Company extends credit to its customers based upon an evaluation of the
     customer's  financial  condition and credit  history and generally does not
     require collateral.

     INVESTMENTS

     The  Company  classifies  its  marketable  debt and  equity  securities  as
     "available  for sale."  Securities  classified as "available  for sale" are
     carried in the financial  statements  at fair value.  Fair values of equity
     securities  are based on quoted market  prices.  Realized gains and losses,
     determined  using the  specific  identification  method,  are  included  in
     earnings and unrealized holding gains and losses are reported as a separate
     component of stockholders' equity.


                                  (continued)
                                       7



                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (AN S CORPORATION)

                          NOTES TO FINANCIAL STATEMENTS



1.  SUMMARY OF ACCOUNTING POLICIES (CONT'D)

    INVENTORY

    Inventory  is  valued at the  lower of cost or  market  using the  first-in,
    first-out method.

    PROPERTY, PLANT AND EQUIPMENT

    Property,  plant and equipment are carried at cost. Depreciation is computed
    using the  straight-line  method.  When  assets  are  retired  or  otherwise
    disposed of, the cost and related accumulated  depreciation are removed from
    the accounts,  and any resulting gain or loss is reflected in income for the
    period.  The cost of  maintenance  and  repairs  is  charged  to  income  as
    incurred,  whereas significant  renewals and betterments are capitalized and
    deductions  are  made  for  retirements   resulting  from  the  renewals  or
    betterments.

    REVENUE RECOGNITION

    Sales are recognized  when the product is delivered and customer  acceptance
    is obtained. Sales returns and allowances are immaterial.

    SHIPPING AND HANDLING

    Shipping  and  handling  are  included  as part of the price  offered to the
    customer.  In all cases,  costs related to this revenue are recorded in cost
    of sales.

    COMPREHENSIVE INCOME

    In 1998, the Company  adopted  Statement of Financial  Accounting  Standards
    (SFAS) No. 130, "Reporting  Comprehensive  Income." SFAS No. 130 establishes
    reporting   requirements  of   comprehensive   income  and  its  components.
    Comprehensive  income for the Company  consists  of net loss and  unrealized
    gains and losses on available  for sale  securities  and is presented in the
    statement of comprehensive income. Accumulated other comprehensive income is
    presented as a separate component of equity.

    INCOME TAXES

    Effective  January 1, 1987, the Company elected by unanimous  consent of its
    stockholders  to be taxed as an S  Corporation  under the  provisions of the
    Internal  Revenue  Code.  Under these  provisions,  the Company does not pay
    federal or state corporate income taxes on its taxable income.  Instead, the
    stockholders  are liable for  individual  federal and state  income taxes on
    their respective shares of the Company's taxable income.

                                   (continued)

                                       8


                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (AN S CORPORATION)

                          NOTES TO FINANCIAL STATEMENTS


1.  SUMMARY OF ACCOUNTING POLICIES (CONT'D)


    ADVERTISING

    Advertising costs are expensed within the period in which they are utilized.
    For the year ended December 31, 2003,  advertising  expense in the amount of
    $3,119 is presented as part of operating expenses.

    ART AND DEVELOPMENT COSTS

    Art and development costs are costs for printing dies,  artwork design,  and
    cutting  dies for the  candy  and  cough  drop  wrappers.  These  costs  are
    amortized on a straight-line basis over a period of three years.

    IMPAIRMENT

    The Company  reviews its  long-lived  assets for  impairment on an exception
    basis whenever events or changes in circumstances indicate that the carrying
    amount of the assets may not be recoverable through future cash flows. If it
    is  determined  that an impairment  loss has occurred  based on the expected
    cash flows, a loss is recognized in the statement of operations and retained
    earnings.

    BASIS OF PRESENTATION

    The financial statements have been prepared by management. In the opinion of
    management,  all  adjustments  necessary  for a  fair  presentation  of  the
    financial  position,  results of operations  and cash flow,  for the periods
    indicated, have been made.

2.  INVESTMENTS

    Available for sale securities and their fair values at December 31, 2003 are
    as follows:

                                     Gross       Gross
                                  Unrealized   Unrealized
                        Cost        Gains        Losses     Fair Value
    ---------------  ---------  ------------  ------------  -----------
    Common stock     $ 48,143     $ 46,785     $(15,788)     $ 79,140
    Other                 229           --           --           229
                     ---------  ------------  ------------  -----------
                     $ 48,372     $ 46,785     $(15,788)     $ 79,369
                     =========  ============  ============  ===========

                                  (continued)

                                       9



                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (AN S CORPORATION)

                          NOTES TO FINANCIAL STATEMENTS



3.   INVENTORIES

     Inventories at December 31, 2003 consist of the following:

     Raw materials                                                   $   644,504
     Finished goods                                                      223,028
                                                                     ------------

                                                                     $   867,532
                                                                     ============

4.   CASH VALUE OF LIFE INSURANCE

     The cash value of life insurance is recorded net of policy loans of $61,598
     at December 31, 2003.

5.   PROPERTY, PLANT AND EQUIPMENT

     A summary of property, plant and equipment at December 31, 2003 follows:

                                                 Estimated
                                                Useful Lives           Amount
                                                ------------        ------------
     Land                                             ---           $   146,458
     Buildings                                  10-40 Years           3,571,612
     Machinery and equipment                     3-10 Years           7,655,527
     Autos and trucks                             3-5 Years             119,934
     Furniture and fixtures                      3-10 Years             635,788
     Leasehold improvements                         5 Years               5,651
                                                                    ------------

                                                                     12,134,970
     Accumulated depreciation                                        (8,901,591)
                                                                    ------------

                                                                    $ 3,233,379
                                                                    ============
     Depreciation expense totaled $465,609 in 2003.



6.   LINE OF CREDIT

     The Company has available for its use a line of credit with M&T Bank in the
     amount of $700,000 at December 31, 2003.  Any amounts  borrowed are payable
     on demand and bear  interest  at the  bank's  prime rate plus 0.5% (4.5% at
     December 31, 2003). The amount advanced against this line of credit totaled
     $287,012 as of December  31,  2003.  This  agreement  is secured by various
     corporate assets and four life insurance policies on the officers. The line
     of credit agreement expires April 15, 2008.


                                   (continued)

                                        10




                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (AN S CORPORATION)

                          NOTES TO FINANCIAL STATEMENTS


7.   NOTES PAYABLE - STOCKHOLDERS

     Notes payable,  in the amount of $524,550 in 2003 to  stockholders  Kristin
     Deck and Andrew Deck are payable upon demand and bear interest at 5.43% per
     annum. No annual principal  repayments are required per the note agreement.
     However,  these notes are  subordinate to the M&T Bank debt and no payments
     shall be demanded or required  until such time as  repayment  is  permitted
     under the terms of the Company's commercial  financing agreement.  Interest
     continues  to be accrued  during the  deferral  period.  For the year ended
     December 31, 2003, interest expense was $23,400.


8.   LONG-TERM DEBT

     Long-term debt at December 31, 2003 consists of the following:

     Note payable - M&T Bank, requires monthly payments of
     $8,863 including interest at 6.25% through April 2008.
     The note is secured by virtually all assets of the
     Company.                                                       $   555,287

     Less current portion                                                73,576
                                                                    ------------
     Total notes payable - long-term                                $   481,711
                                                                    ============

     Maturities of long-term debt in each of the next five years are as follows:

          2004                                                      $    73,576
          2005                                                           78,419
          2006                                                           83,476
          2007                                                           88,859
          2008                                                          230,957
                                                                    -----------

                                                                    $   555,287
                                                                    ===========

9.   LOAN COVENANTS

     There are certain financial covenants  applicable to the line of credit and
     term loan agreement  pertaining to current  ratio,  debt coverage ratio and
     tangible net worth. The Company met each of these financial covenants as of
     December 31, 2003.


                                   (continued)

                                        11




                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (AN S CORPORATION)

                          NOTES TO FINANCIAL STATEMENTS



10.  OPERATING LEASES

     The  Company   leases   computer   equipment   and  lab   equipment   under
     non-cancelable  operating  leases expiring  through May 2007. Lease expense
     under  these  operating  leases for the year ended  December  31,  2003 was
     $29,977.

     Future minimum lease  payments under all operating  leases for years ending
     December 31 are as follows:

          2004                                                      $    14,541
          2005                                                           11,571
          2006                                                           10,681
          2007                                                            4,327
                                                                    -----------

                                                                    $    41,120
                                                                    ===========


11.  SELF-FUNDING GROUP INSURANCE RESERVE

     The Company administers a limited self-funding group insurance plan for the
     medical and dental  health  benefits  of its  employees.  Employee  medical
     claims are paid by the  Company as  incurred up to a maximum of $25,000 per
     person per year. A "stop-loss"  insurance  policy is carried by the Company
     to cover  individual  medical claims in excess of $25,000.  Employee dental
     claims  are paid by the  Company  as  incurred  up to a limit of $1,000 per
     person per year.  At  December  31,  2003,  a reserve  of $34,829  has been
     established  by the Company for estimates to settle claims and for incurred
     but not reported claims.


12.  PENSION PLAN

     In October 1987, the Company adopted a 401(k) plan. The Company contributes
     $10 on the first $2 each  employee  contributes  per week.  If the employee
     contributes   greater  than  $2,  the  Company   matches  50%  of  employee
     contributions to the plan up to 5% of total  compensation.  Pension expense
     totaled $65,617 in 2003.


                                  (continued)

                                       12



                                 JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (AN S CORPORATION)

                          NOTES TO FINANCIAL STATEMENTS



13.  SIGNIFICANT CUSTOMERS

     The Company made sales to the following company,  which is considered to be
     a significant  customer.  Revenues earned from all other customers included
     those whose revenues  earned during the year did not  constitute  more than
     10% of the total.

                            Percentage of Accounts
                                Receivable at            Percentage of
                              December 31, 2003          2003 Net Sales
                            ----------------------    ------------------

     Quigley Corporation              7%                      50%


14.  SIGNIFICANT SUPPLIERS

     The  Company  made  purchases  from  the  following  companies,  which  are
     considered to be significant suppliers.  However,  management believes that
     alternative suppliers of equivalent products are available if these vendors
     are unable to provide necessary products or services.

                                                            Percentage of
                                                         2003 Total Purchases
                                                      ------------------------

           Domino Sugar Corporation                             27%
           C-P Converters, Inc.                                 16%
           DPT Lakewood, Inc.                                   14%


15.  EXCLUSIVE SUPPLY AGREEMENT

     On March 17, 1997, the Company entered into an exclusive  supply  agreement
     with the Quigley  Corporation  (a  significant  customer - see note 13). An
     amendment to the original  agreement  was signed which is effective  for an
     additional  period of two years from March 17,  2004,  with yearly  renewal
     thereafter.


                                       13
EX-99.3 5 ex993to8ka_10012004.htm sec document 


                                                                    EXHIBIT 99.3








                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (An S Corporation)

                              FINANCIAL STATEMENTS

           BALANCE SHEETS AT SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
                                       AND
                     STATEMENTS OF OPERATIONS, COMPREHENSIVE
                         INCOME, AND CASH FLOWS FOR THE
                  NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                                       AND
                   ACCOUNTANT'S REPORT ON FINANCIAL STATEMENTS






Joel, Inc. d/b/a Simon Candy Company and Pharmaloz
Elizabethtown, Pennsylvania



We have reviewed the  accompanying  Balance Sheet of Joel Inc. d/b/a Simon Candy
Company and  Pharmaloz  (an S  Corporation)  as of September  30, 2004,  and the
related Statements of Operations,  Comprehensive  Income, and Cash Flows for the
nine months ended  September 30, 2004 and 2003, in accordance with STATEMENTS ON
STANDARDS FOR ACCOUNTING AND REVIEW SERVICES issued by the American Institute of
Certified  Public  Accountants.  All  information  included  in these  financial
statements is the  representation  of the  management of Joel,  Inc. d/b/a Simon
Candy Company and Pharmaloz.

A review consists  principally of inquiries of Company  personnel and analytical
procedures  applied to financial data. It is substantially less in scope than an
audit in accordance  with auditing  standards  generally  accepted in the United
States of  America,  the  objective  of which is the  expression  of an  opinion
regarding  the financial  statements  taken as a whole.  Accordingly,  we do not
express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying interim financial statements in order for them to be
in conformity with accounting principles generally accepted in the United States
of America.








We have  previously  audited,  in accordance with auditing  standards  generally
accepted in the United States of America,  the Balance Sheet of Joel, Inc. as of
December  31,  2003,  and the  related  Statements  of  Operation  and  Retained
Earnings,  Comprehensive  Income,  and Cash  Flows for the year then  ended (not
presented  herein);  and in our report dated  February 20, 2004, we expressed an
unqualified  opinion  on  those  financial  statements.   In  our  opinion,  the
information set forth in the accompanying balance sheet as of December 31, 2003,
is fairly  stated,  in all material  respects,  in relation to the balance sheet
from which it has been derived.





/S/ McKONLY & ASBURY, LLP
- -----------------------------
McKONLY & ASBURY, LLP
Harrisburg, PA

February 28, 2005

                                        2






                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (An S Corporation)

                                 BALANCE SHEETS

                    SEPTEMBER 30, 2004 AND DECEMBER 31, 2003


                                     ASSETS

                                                                 September 30,    December 31,
                                                                    2004             2003
                                                                  (Unaudited)         (1)
                                                                 -------------    ------------

Current assets
      Cash and cash equivalents                                 $     44,940      $     22,606
      Investments                                                     39,997            79,369
      Accounts receivable, trade                                     584,546           234,761
      Inventories                                                    938,519           867,532
      Prepaid expenses                                                62,881            54,822
                                                                ------------      ------------

                  Total current assets                             1,670,883         1,259,090
                                                                ------------      ------------


Property, plant, and equipment, at cost                           11,183,443        12,134,970
Accumulated depreciation                                          (8,236,577)       (8,901,591)
                                                                ------------      ------------

                  Total property, plant, and equipment, net        2,946,866         3,233,379
                                                                ------------      ------------


Other assets
      Cash value of life insurance                                 1,126,916         1,067,168
      Deposits                                                         1,904               874
      Art and development costs                                       60,253            82,227
                                                                ------------      ------------

                  Total other assets                               1,189,073         1,150,269
                                                                ------------      ------------



Total assets                                                    $  5,806,822      $  5,642,738
                                                                ============      ============


(1) Derived from the audited  financial  statements  for the year ended December
    31, 2003.

                 See accompanying notes and accountant's report.

                                        3






                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (An S Corporation)



                                 BALANCE SHEETS

                    SEPTEMBER 30, 2004 AND DECEMBER 31, 2003


                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                September 30,   December 31,
                                                    2004           2003
                                                 (Unaudited)        (1)
                                                 ----------     -----------
Current liabilities
      Line of credit                             $  199,710     $  287,012
      Current maturities of long-term debt           81,080         73,576
      Accounts payable, trade                       401,416        215,198
      Cash overdraft                                248,884           --
      Accrued liabilities
          Payroll                                    38,662         45,923
          Payroll taxes                               8,483          3,776
          Self-funded health insurance               37,677         34,829
      Notes payable, stockholders                   540,410        524,550
                                                 ----------     ----------

                  Total current liabilities       1,556,322      1,184,864
                                                 ----------     ----------

Long-term liabilities
      Notes payable, long-term maturities           424,512        481,711
                                                 ----------     ----------

Stockholders' equity
      Common stock, par value $10 per share;
       authorized 1,000 shares, issued
       and outstanding 1,000 shares                  10,000         10,000
      Additional paid-in capital                      8,000          8,000
      Retained earnings                           3,779,542      3,927,166
      Accumulated other comprehensive income
          Unrealized gain on investments             28,446         30,997
                                                 ----------     ----------

                  Total stockholders' equity      3,825,988      3,976,163
                                                 ----------     ----------

Total liabilities and stockholders' equity       $5,806,822     $5,642,738
                                                 ==========     ==========



(1) Derived from the audited  financial  statements  for the year ended December
    31, 2003.

                 See accompanying notes and accountant's report.

                                        4





                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (An S Corporation)



                      STATEMENTS OF OPERATIONS - UNAUDITED

                  NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003


                                                 2004             2003
                                             ------------     ------------

Net sales                                    $ 4,704,703      $ 4,212,075

Cost of sales                                  3,757,315        3,538,151
                                             -----------      -----------

Gross Profit                                     947,388          673,924
                                             -----------      -----------

Operating expenses
      Sales and marketing                         99,160          110,064
      Administrative                             943,680          941,284
                                             -----------      -----------

Total operating expenses                       1,042,840        1,051,348
                                             -----------      -----------

Operating loss                                   (95,452)        (377,424)
                                             -----------      -----------

Other income (expense)
      Net miscellaneous income (expense)            (776)         (10,461)
      Interest expense                           (51,396)         (47,332)
                                             -----------      -----------

Total other income (expense)                     (52,172)         (57,793)
                                             -----------      -----------

Net loss                                     $  (147,624)     $  (435,217)
                                             ===========      ===========


                 See accompanying notes and accountant's report.

                                        5




                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (An S Corporation)

                 STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

                  NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003


                                                   2004           2003
                                                -----------    ----------

Net loss                                        $(147,624)     $(435,217)

Unrealized gain (loss) on securities
      Unrealized holding gains (losses) on
       securities arising during the period        (2,551)        25,241
                                                ---------      ---------

Comprehensive loss                              $(150,175)     $(409,976)
                                                =========      =========

                 See accompanying notes and accountant's report.

                                        6





                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (An S Corporation)


                     STATEMENTS OF CASH FLOWS - UNAUDITED

                  NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003


                                                                              2004          2003
                                                                          -----------    ----------
Cash flows from operating activities
      Net loss                                                            $(147,624)     $(435,217)
      Adjustments to reconcile net loss to net cash
       provided by (used in) operating activities
          Depreciation                                                      292,939        353,914
          Amortization                                                       76,054         45,000
          (Gain) loss on sale of equipment                                   12,161         (8,146)
          Interest accrued on stockholder notes                              15,860         17,550
          (Increase) decrease in
              Accounts receivable, trade                                   (349,785)       (16,280)
              Inventories                                                   (70,987)      (289,429)
              Prepaid expenses and other assets                              (8,059)         2,108
          Increase (decrease) in
              Accounts payable, trade                                       186,218        214,938
              Accrued liabilities                                               294          2,932
                                                                          ---------      ---------

                  Net cash provided by (used in)
                   operating activities                                       7,071       (112,630)
                                                                          ---------      ---------

Cash flows from investing activities
      Increase in cash value of life insurance                              (59,748)       (62,958)
      Purchase of equipment                                                 (21,587)       (11,500)
      Proceeds form sale of investments                                      36,820           --
      Proceeds from sale of equipment                                         3,000         69,773
      Purchase of art and development costs                                 (54,080)       (52,425)
      Increase in deposits                                                   (1,030)          --
                                                                          ---------      ---------

                  Net cash used in investing activities                     (96,625)       (57,110)
                                                                          ---------      ---------

Cash flows from financing activities
      Net advances (repayments) on line of credit                           (87,302)      (193,875)
      Proceeds from long-term debt                                             --          600,000
      Payments on long-term debt                                            (49,694)       (27,086)
      Cash overdraft                                                        248,884           --
                                                                          ---------      ---------

                  Net cash provided by financing activities                 111,888        379,039
                                                                          ---------      ---------

Net increase in cash and cash equivalents                                    22,334        209,299

Cash and cash equivalents - beginning                                        22,606          2,849
                                                                          ---------      ---------

Cash and cash equivalents - ending                                        $  44,940      $ 212,148
                                                                          =========      =========

                                   (continued)

                                        7




                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (An S Corporation)

                      STATEMENTS OF CASH FLOWS - UNAUDITED

             NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (Cont'd)



Supplemental disclosures of cash flow information
      Cash paid during the year for interest                              $35,280        $29,782
                                                                          =======        =======

                 See accompanying notes and accountant's report.

                                        8





                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (An S Corporation)

1.         SUMMARY OF ACCOUNTING POLICIES

           INCORPORATION

           Joel,  Inc. d/b/a Simon Candy Company and Pharmaloz (the Company) was
           incorporated  on June 12, 1973 under the laws of the  Commonwealth of
           Pennsylvania  for the purpose of  manufacturing  hard candy and cough
           drops. The accompanying  financial  statements include the results of
           operations of the Company's two divisions, Simon Candy and Pharmaloz,
           which are considered to be one operating segment.

           ESTIMATES

           The preparation of financial statements in conformity with accounting
           principles  generally  accepted  in  the  United  States  of  America
           requires management to make estimates and assumptions that affect the
           reported  amounts  of  assets  and  liabilities  at the  date  of the
           financial  statements,  and  the  reported  amounts  of  revenue  and
           expenses  during the reporting  period.  Actual  results could differ
           from those estimates.

           CASH EQUIVALENTS

           The Company  considers  all highly  liquid debt  instruments  with an
           original maturity of three months or less to be cash equivalents.

           ALLOWANCE FOR DOUBTFUL ACCOUNTS

           The Company considers  accounts  receivable to be fully  collectible;
           accordingly, no allowance for doubtful accounts is required. Bad debt
           expense in the amount of zero and $75,874 for the nine months  ending
           September 30, 2004 and 2003 were determined and were expensed.

           Trade accounts receivable  potentially subjects the Company to credit
           risk.  The  Company  extends  credit to its  customers  based upon an
           evaluation of the customer's  financial  condition and credit history
           and generally does not require collateral.

           INVESTMENTS

           The Company  classifies its marketable debt and equity  securities as
           "available for sale."  Securities  classified as "available for sale"
           are carried in the financial statements at fair value. Fair values of
           equity  securities are based on quoted market prices.  Realized gains
           and losses,  determined using the specific identification method, are
           included  in earnings  and  unrealized  holding  gains and losses are
           reported as a separate component of stockholders' equity.


                                  (continued)

                                       9




                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (An S Corporation)


1.         SUMMARY OF ACCOUNTING POLICIES (Cont'd)

           INVENTORY

           Inventory  is  valued  at the  lower  of cost  or  market  using  the
           first-in, first-out method.

           PROPERTY, PLANT, AND EQUIPMENT

           Property,  plant, and equipment are carried at cost.  Depreciation is
           computed using the straight-line  method.  When assets are retired or
           otherwise disposed of, the cost and related accumulated  depreciation
           are removed  from the  accounts,  and any  resulting  gain or loss is
           reflected  in income  for the  period.  The cost of  maintenance  and
           repairs  is  charged  to  income  as  incurred,  whereas  significant
           renewals and  betterments are capitalized and deductions are made for
           retirements resulting from the renewals or betterments.

           REVENUE RECOGNITION

           Sales are  recognized  when the  product is  delivered  and  customer
           acceptance is obtained. Sales returns and allowances are immaterial.

           SHIPPING AND HANDLING

           Shipping and  handling  are included as part of the price  offered to
           the  customer.  In all  cases,  costs  related  to this  revenue  are
           recorded in cost of sales.

           COMPREHENSIVE INCOME

           In 1998,  the  Company  adopted  Statement  of  Financial  Accounting
           Standards (SFAS) No. 130, "Reporting  Comprehensive Income." SFAS No.
           130 establishes  reporting  requirements of comprehensive  income and
           its components.  Comprehensive income for the Company consists of net
           loss and unrealized gains and losses on available for sale securities
           and  is  presented  in  the   statement  of   comprehensive   income.
           Accumulated  other  comprehensive  income is  presented as a separate
           component of equity.

           INCOME TAXES

           Effective  January 1, 1987, the Company elected by unanimous  consent
           of  its  stockholders  to be  taxed  as an S  Corporation  under  the
           provisions of the Internal Revenue Code. Under these provisions,  the
           Company does not pay federal or state  corporate  income taxes on its
           taxable income.  Instead,  the stockholders are liable for individual
           federal  and state  income  taxes on their  respective  shares of the
           Company's taxable income.

                                  (continued)

                                       10



                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (An S Corporation)

1.         SUMMARY OF ACCOUNTING POLICIES (Cont'd)

           ADVERTISING

           Advertising  costs are  expensed  within the period in which they are
           utilized.  For the nine  months  ended  September  30, 2004 and 2003,
           advertising  expense in the amount of $4,924 and $3,064 is  presented
           as part of operating expenses.

           ART AND DEVELOPMENT COSTS

           Art and  development  costs  are  costs for  printing  dies,  artwork
           design, and cutting dies for the candy and cough drop wrappers. These
           costs are amortized on a  straight-line  basis over a period of three
           years.

           IMPAIRMENT

           The  Company  reviews  its  long-lived  assets for  impairment  on an
           exception basis whenever events or changes in circumstances  indicate
           that the carrying amount of the assets may not be recoverable through
           future cash flows.  If it is determined  that an impairment  loss has
           occurred  based on the expected  cash flows,  a loss is recognized in
           the statement of operations and retained earnings.

           BASIS OF PRESENTATION

           The financial  statements  have been prepared by  management.  In the
           opinion  of  management,   all  adjustments   necessary  for  a  fair
           presentation  of the financial  position,  results of operations  and
           cash flows, for the periods indicated, have been made.

           NEW ACCOUNTING PRONOUNCEMENTS

           The Company has  considered  new  accounting  pronouncements  and has
           determined  that  no new  accounting  pronouncements  had a  material
           impact on the financial  reporting  process for the nine months ended
           September 30, 2004 and 2003.

2.         INVESTMENTS

           Available for sale  securities and their fair values at September 30,
           2004 and December 31, 2003 are as follows:

                                                        Gross          Gross
                                                      Unrealized    Unrealized
            September 30, 2004         Cost              Gains         Losses     Fair Value
           ---------------------    -----------     --------------  -----------  -----------

           Common stock             $ 11,380           $ 34,977      $ (6,531)     $ 39,826
           Other                         171               --            --             171
                                    -----------        --------      --------      --------

                                    $ 11,551           $ 34,977      $ (6,531)     $ 39,997
                                    ===========        ========      ========      ========

                                    (continued)

                                       11



                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (An S Corporation)

2.         INVESTMENTS (Cont'd)

                                                        Gross          Gross
                                                      Unrealized    Unrealized
            December 31, 2004          Cost              Gains         Losses     Fair Value
           ---------------------    -----------     --------------  -----------  -----------

           Common stock             $ 48,143           $ 46,785      $(15,788)     $ 79,140
           Other                         229               -             -              229
                                    -----------        --------      --------      --------
           Equity securities        $ 48,372           $ 46,785      $(15,788)     $ 79,369
                                    ===========        ========      ========      ========

3.         INVENTORIES

           Inventories  at  September  30, 2004 and December 31, 2003 consist of
           the following:

                                                                        2004         2003
                                                                      ----------   --------


           Raw materials                                              $687,662     $644,504
           Finished goods                                              250,857      223,028
                                                                      --------     --------
                                                                      $938,519     $867,532
                                                                      ========     ========


4.         CASH VALUE OF LIFE INSURANCE

           The cash value of life  insurance  is recorded net of policy loans of
           $71,785 and $61,598 at September 30, 2004 and December 31, 2003.


                                  (continued)

                                       12




                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (An S Corporation)

5.         PROPERTY, PLANT, AND EQUIPMENT

           A summary of property, plant, and equipment at September 30, 2004 and
           December 31, 2003 as follows:

                                         Estimated
                                        Useful Lives         2004             2003
                                       -------------    --------------    ------------

           Land                                --       $    146,458      $    146,458
           Buildings                    10-40 Years        3,530,898         3,571,612
           Machinery and equipment      3-10 Years         7,112,736         7,655,527
           Autos and trucks             3-5 Years            108,672           119,934
           Furniture and fixtures       3-10 Years           284,679           635,788
           Leasehold improvements       5 Years                 --               5,651
                                                        ------------      ------------

                                                          11,183,443        12,134,970
           Accumulated depreciation                       (8,236,577)       (8,901,591)
                                                        ------------      ------------

                                                        $  2,946,866      $  3,233,379
                                                        ============      ============

           Depreciation  expense  totaled  $292,939  and  $353,914  for the nine
           months ended September 30, 2004 and 2003.

6.         LINE OF CREDIT

           The Company has  available for its use a line of credit with M&T Bank
           in the amount of $700,000 at  September  30,  2004 and  December  31,
           2003. Any amounts borrowed are payable on demand and bear interest at
           the bank's prime rate plus 0.5% (5.25% at September 30, 2004 and 4.5%
           at December  31,  2003).  The amount  advanced  against  this line of
           credit  totaled  $199,710 and  $287,012 as of September  30, 2004 and
           December 31,  2003.  This  agreement is secured by various  corporate
           assets and four life insurance policies on the officers.  The line of
           credit agreement expires April 15, 2008.

7.         NOTES PAYABLE - STOCKHOLDERS

           Notes  payable,  in the amount of $540,410 at September  30, 2004 and
           $524,550 at December 31, 2003 to stockholders Kristin Deck and Andrew
           Deck were payable  upon demand and bore  interest at 5.43% per annum.
           No annual principal  repayments were required per the note agreement.
           However,  these  notes  are  subordinate  to the M&T Bank debt and no
           payments  shall be demanded or required  until such time as repayment
           is permitted  under the terms of the Company's  commercial  financing
           agreement.  Interest  continues  to be accrued  during  the  deferral
           period until the notes were reclassified  into accounts payable.  For
           the nine month  periods ended  September 30, 2004 and 2003,  interest
           expense was $15,860 and $17,550.


                                  (continued)

                                       13





                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (An S Corporation)

8.         LONG-TERM DEBT

           Long-term  debt at September  30, 2004 and December 31, 2003 consists
           of the following:

                                                                                        2004           2003
                                                                                   -----------      ----------

           Capital Lease Payable - Susquehanna Commercial  Leasing requires
           monthly payments of $182 including interest at 11% through March
           2007.                                                                   $     4,701        $  -

           Note  payable  - M&T Bank,  requires  monthly  payments  of $8,863
           including  interest  at  6.25%  through  April  2008.  The note is
           secured by virtually all assets of the Company.                             500,891         555,287
                                                                                   -----------      ----------

                                                                                       505,592         555,287

           Less current portion                                                         81,080          73,576
                                                                                   -----------      ----------

           Total notes payable - long-term                                         $   424,512      $  481,711
                                                                                   ===========      ==========

           Maturities  of  long-term  debt in each of the next four years are as
           follows:

             For the 12 Months Ended
           ---------------------------

               September 30, 2005                                                                   $   81,080
               September 30, 2006                                                                       85,508
               September 30, 2007                                                                       89,142
               September 30, 2008                                                                      249,862
                                                                                                    ----------

                                                                                                    $  505,592
                                                                                                    ==========
9.         LOAN COVENANTS

           There  are  certain  financial  covenants  applicable  to the line of
           credit and term loan  agreement  pertaining  to current  ratio,  debt
           coverage ratio, and tangible net worth. The Company met each of these
           financial covenants as of September 30, 2004 and December 31, 2003.

                                  (continued)

                                       14





                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (An S Corporation)

10.        OPERATING LEASES

           The  Company  leases  computer  equipment  and  lab  equipment  under
           non-cancelable  operating  leases expiring through August 2007. Lease
           expense  under  these  operating  leases  for the nine  months  ended
           September 30, 2004 and 2003 was $17,118 and $24,005.

           Future minimum lease  payments  under all operating  leases for years
           ending September 30 are as follows:

                       2005                               $    22,031
                       2006                                    17,933
                       2007                                    10,848
                                                          -----------

                                                          $    50,812
                                                          ===========

11.        SELF-FUNDING GROUP INSURANCE RESERVE

           The Company  administers a limited  self-funding group insurance plan
           for the medical and dental health benefits of its employees. Employee
           medical claims are paid by the Company as incurred up to a maximum of
           $25,000  per  person  per year.  A  "stop-loss"  insurance  policy is
           carried by the Company to cover  individual  medical claims in excess
           of  $25,000.  Employee  dental  claims  are  paid by the  Company  as
           incurred  up to a limit of $1,000 per person per year.  At  September
           30, 2004 and  December 31, 2003, a reserve of $37,677 and $34,829 has
           been established by the Company to settle claims and for incurred but
           not reported claims.

12.        PENSION PLAN

           In October  1987,  the  Company  adopted a 401(k)  plan.  The Company
           contributes  $10 on the first $2 each employee  contributes per week.
           If the employee  contributes greater than $2, the Company matches 50%
           of employee contributions to the plan up to 5% of total compensation.
           For the periods ended September 30, 2004 and 2003 pension expense was
           $47,702 and $48,543.


                                  (continued)

                                       15




                                   JOEL, INC.
                            D/B/A SIMON CANDY COMPANY
                                  AND PHARMALOZ
                               (An S Corporation)

13.        SIGNIFICANT CUSTOMERS

           The Company made sales to the following company,  which is considered
           to  be  a  significant  customer.  Revenues  earned  from  all  other
           customers  included those whose  revenues  earned during the year did
           not constitute more than 10% of the total.

                         Percentage of Accounts          Percentage of Net Sales,
                              Receivable at                 Nine Months Ended
                         -----------------------         ------------------------
                      September 30,    December 31,    September 30,   September 30,
                          2004            2003             2004             2003
                      -------------   -------------    -------------  --------------

         The Quigley
          Corporation      42%              7%              58%             47%


14.        SIGNIFICANT SUPPLIERS

           The Company made  purchases from the following  companies,  which are
           considered to be significant suppliers.  However, management believes
           that  alternative  suppliers of equivalent  products are available if
           these vendors are unable to provide necessary products or services.

                                                                        Total Purchases,
                                                                       Nine Months Ended
                                                        --------------------------------------
                                                             September 30,       September 30,
                                                                 2004                2003
                                                        --------------------     -------------

           The American Sugar Refining Co.                        6%                  9%
           C-P Converters, Inc.                                   4%                  6%

15.        EXCLUSIVE SUPPLY AGREEMENT

           On March 17,  1997,  the Company  entered  into an  exclusive  supply
           agreement with The Quigley Corporation.  An amendment to the original
           agreement was signed which is effective  for an additional  period of
           two years from March 17, 2004.

16.        ASSET SALE

           Effective October 1, 2004, the Company sold substantially all assets,
           exclusive of trade accounts  receivable and life insurance  policies,
           to The Quigley Corporation for $5,100,000.


                                       16
EX-99.4 6 ex994to8ka_10012004.htm sec document 


                                                                    EXHIBIT 99.4


                             THE QUIGLEY CORPORATION
    UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS


INTRODUCTION

The Quigley  Corporation (the "Company"),  through its wholly-owned  subsidiary,
Quigley  Manufacturing  Inc.  ("QMI")  purchased  certain  assets of JoEL,  Inc.
("JoEL")  for  approximately  $5.2  million on October 1, 2004,  which  includes
payments of $4.2 million in cash, $3.0 million of the cash required was financed
through a term loan, and the issuance of $1.0 million of the Company's stock, or
113,097 shares.

The acquisition of these assets, includes inventory, land, buildings,  machinery
and  equipment of two  manufacturing  facilities  and the  assumption of accrued
vacation wages of approximately $70,000 of the former employees of JoEL that are
now employees of QMI.

JoEL is a FDA approved  contract  manufacturer  of lozenges and other candy food
products and has been the exclusive  manufacturer of the Company's  Cold-Eeze(R)
lozenge since its launch in 1995. JoEL has also manufactured  private label hard
candies, lozenges and throat drops for other prominent Over-the-Counter  product
companies.

The  Company is engaged in the  development,  manufacturing,  and  marketing  of
homeopathic and health products that are being offered to the general public and
the research and development of potential  prescription products. The Company is
organized  into  four  business   segments  which  are  Cold  Remedy,   Contract
Manufacturing,   Health  and  Wellness,  and  Ethical  Pharmaceutical.  For  the
historical fiscal periods  presented,  the Company's revenues have come from the
Company's  Cold Remedy  business  segment and the Health and  Wellness  business
segment.

The pro forma information set forth includes the condensed combined consolidated
balance sheet as of September 30, 2004 and the condensed  combined  consolidated
statements  of  operations  for the year  ended  December  31,  2003 and for the
nine-months ended September 30, 2004 of the Company and JoEL, which includes the
elimination of intercompany  transactions  and adjustments  necessary to reflect
current fair values of the assets acquired,  loans and liabilities  assumed with
their related effects in the incomes statements presented.





                             THE QUIGLEY CORPORATION
        UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET
                               SEPTEMBER 30, 2004

                                                                     Historical
                                                          ---------------------------------      Pro Forma                Pro Forma
                                   ASSETS                      TQC                 JoEl           Adjustments             Combined
                                                           ------------      --------------    ---------------       ------------------      ---------------------
CURRENT ASSETS:
  Cash and Cash equivalents                                $ 11,703,398      $     44,940      ($    44,940)     a
                                                                                                 (1,162,539)     b     $ 10,540,859
  Investments                                                                      39,997           (39,997)     a
  Accounts Receivable, net                                    3,968,166           584,546          (584,546)     a        3,968,166
  Inventory                                                   4,269,799           938,519
                                                                                                 (1,030,960)     d        4,177,358
  Prepaid expenses and current assets                           614,947            62,881           (62,881)     a
                                                                                                     39,868      b          654,815
                                                           ------------      ------------      ------------            ------------
      TOTAL CURRENT ASSETS                                   20,556,310         1,670,883        (2,885,995)             19,341,198
                                                           ------------      ------------      ------------            ------------


PROPERTY, PLANT AND EQUIPMENT - NET                           2,192,297         2,946,866        (2,946,866)     a
                                                                                                  4,360,829      b        6,553,126
                                                           ------------      ------------      ------------            ------------
OTHER ASSETS:
  Cash value of life insurance                                                  1,126,916        (1,126,916)     a
  Goodwill                                                       30,763                                                      30,763
  Other Assets                                                   62,813            62,157           (62,157)     a           62,813
                                                           ------------      ------------      ------------            ------------
      TOTAL OTHER ASSETS                                         93,576         1,189,073        (1,189,073)                 93,576
                                                           ------------      ------------      ------------            ------------
TOTAL ASSETS                                               $ 22,842,183      $  5,806,822      ($ 2,661,105)           $ 25,987,900
                                                           ============      ============      ============            ============

                    LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Current portion of long term debt                        $         --      $     81,080      ($    81,080)     a     $        --
  Line of credit                                                     --           199,710          (199,710)     a              --
  Cash overdraft                                                     --           248,884          (248,884)     a              --
                                                                                                    428,571      c          428,571
  Notes payable, stockholders                                                     540,410          (540,410)     a
  Accounts payable                                              425,732           401,416          (401,416)     a          425,732
  Accrued royalties and sales commissions                     1,100,375                                                   1,100,375
  Accrued advertising                                           434,603                                                     434,603
  Other current liabilities                                   1,797,876            84,822           (14,822)     a
                                                                                                    172,708      b        2,040,584
                                                           ------------      ------------      ------------            ------------
      TOTAL CURRENT LIABILITIES                               3,758,586         1,556,322          (885,043)              4,429,865
                                                           ------------      ------------      ------------            ------------

Long term debt                                                                    424,512          (424,512)     a
                                                                                                  2,571,429      c        2,571,429
                                                           ------------      ------------      ------------            ------------
Commitments and Contingencies

TOTAL LIABILITIES                                             3,758,586         1,980,834         1,261,874               7,001,294
                                                           ------------      ------------      ------------            ------------

Minority Interest                                                59,676              --                --                    59,676
                                                           ------------      ------------      ------------            ------------

STOCKHOLDERS' EQUITY:
  Common stock                                                    8,084            10,000           (10,000)     a
                                                                                                         57      b            8,141
  Additions paid-in-capital                                  34,295,450             8,000            (8,000)     a
                                                                                                    895,393      b       35,190,843
  Retained earnings                                           9,908,546         3,779,542        (3,779,542)     a
                                                                                                   (992,441)     d        8,916,105
  Accumulated other comprehensive income                                           28,446           (28,446)     a
  Less : Treasury stock                                     (25,188,159)                                                (25,188,159)
                                                           ------------      ------------      ------------            ------------
      TOTAL STOCKHOLDERS' EQUITY                             19,023,921         3,825,988        (3,922,979)             18,926,930
                                                           ------------      ------------      ------------            ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                 $ 22,842,183      $  5,806,822      ($ 2,661,105)           $ 25,987,900
                                                           ============      ============      ============            ============





                             THE QUIGLEY CORPORATION
   UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
                          YEAR ENDED DECEMBER 31, 2003

                                                     Historical
                                          ---------------------------------      Pro Forma         Pro Forma
                                              TQC                 JoEl           Adjustments       Combined
                                          ------------      --------------    --------------    ------------

Net Sales                                 $ 41,499,163      $  6,073,821      ($ 2,585,971) e   $ 44,987,013

Cost of Sales                               21,487,763         4,979,212        (3,172,141) f     23,294,834
                                          ------------      ------------      ------------      ------------

Gross Profit                                20,011,400         1,094,609           586,170        21,692,179
                                          ------------      ------------      ------------      ------------

Operating Expenses:
          Sales and marketing                6,166,318           167,467                           6,333,785
          Administration                     9,843,846         1,132,989            70,052  g     11,046,887
          Research and development           3,365,698                                             3,365,698
                                          ------------      ------------      ------------      ------------

Total Operating Expenses                    19,375,862         1,300,456            70,052        20,746,370
                                          ------------      ------------      ------------      ------------

Income (Loss) from Operations                  635,538          (205,847)          516,118           945,809
                                          ------------      ------------      ------------      ------------

Interest, net and Other Income                  93,385           (39,536)          (65,206) h        (11,357)
                                          ------------      ------------      ------------      ------------

Income from Continuing
  Operations before taxes                      728,923          (245,383)          450,912           934,452
                                          ------------      ------------      ------------      ------------

Income Taxes                                      --                --                --                --
                                          ------------      ------------      ------------      ------------

Income from Continuing
  Operations                              $    728,923      ($   245,383)     $    450,912      $    934,452
                                          ============      ============      ============      ============

Basic earning per common share:
  Income  from continuing operations             $0.06                                                 $0.08
                                         =============                                          ============
  Weighted average shares outstanding       11,467,087                                            11,580,184
                                         =============                                          ============

Diluted earning per common share:
  Income  from continuing operations             $0.05                                                 $0.06
                                         =============                                          ============
  Weighted average shares outstanding       14,910,246                                            15,023,343
                                         =============                                          ============






                             THE QUIGLEY CORPORATION
   UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
                      NINE MONTHS ENDED SEPTEMBER 30, 2004

                                                           Historical
                                               --------------------------------      Pro Forma         Pro Forma
                                                    TQC               JoEl          Adjustments        Combined
                                               --------------    --------------    --------------     -------------

Net Sales                                      $ 26,197,657      $  4,704,703      ($ 2,868,071)  e    $ 28,034,289

Cost of Sales                                    15,100,419         3,757,315        (2,593,038)  i      16,264,696
                                               ------------      ------------      -------------       ------------

Gross Profit                                     11,097,238           947,388          (275,033)         11,769,593
                                               ------------      ------------      -------------       ------------

Operating Expenses:
         Sales and marketing                      3,373,090            99,160                            3,472,250
         Administration                           7,118,849           943,680            58,637   j      8,121,166
         Research and development                 2,395,193                                              2,395,193
                                               ------------      ------------      -------------       -----------

Total Operating Expenses                         12,887,132         1,042,840            58,637         13,988,609
                                               ------------      ------------      -------------       ------------

Loss from Operations                             (1,789,894)          (95,452)         (333,670)        (2,219,016)
                                               ------------      ------------      -------------       ------------

Interest, net and Other Income                       66,073           (52,172)          (42,330)  k        (28,429)
Gain on dividend-in-kind                            207,090                                                207,090
                                               ------------      ------------      -------------       ------------
Total Other Income (Expense)                        273,163           (52,172)          (42,330)           178,661
                                               ------------      ------------      -------------       ------------

Loss from Continuing
  Operations before taxes                        (1,516,731)         (147,624)         (376,000)        (2,040,355)
                                               ------------      ------------      -------------       ------------

Income Taxes                                           --                --                --                --
                                               ------------      ------------      -------------       ------------

Loss from Continuing
  Operations                                    ($1,516,731)     ($   147,624)     ($   376,000)       ($2,040,355)
                                               ============      ============      =============       ============

Basic earning per common share:
  Income (loss) from continuing operations      ($     0.13)                                           ($     0.18)
                                              =============                                            ============
  Weighted average shares outstanding            11,511,858                                             11,624,955
                                              =============                                            ============

Diluted earning per common share:
  Income (loss) from continuing operations      ($     0.13)                                           ($     0.18)
                                              =============                                            ============
  Weighted average shares outstanding            11,511,858                                             11,624,955
                                              =============                                            ============





                             THE QUIGLEY CORPORATION
 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS


1. BASIS OF PRESENTATION

The Condensed Combined Consolidated Financial Statements include the accounts of
the Company and its wholly owned subsidiaries.

On October 1, 2004,  the  Company  acquired  substantially  all of the assets of
JoEL, Inc, including inventory, land, buildings,  machinery and equipment of two
manufacturing facilities located in Lebanon and Elizabethtown,  Pennsylvania for
approximately $5.2 million,  which includes payments of $4.2 million in cash and
$1.0 million of the Company's  common stock. The acquisition is accounted for by
the purchase method of accounting and accordingly, the operating results will be
included in the Company's  consolidated  financial  statements  from the date of
acquisition.

The Company  funded the $4.2 million  cash  portion of the  purchase  price with
proceeds  from a commercial  loan and through its current  working  capital.  To
satisfy the common stock  component of the purchase  price,  the Company  issued
113,097 shares of its common stock to the stockholders of JoEL.  Pursuant to the
Agreement,  the  number of shares to be issued  was  determined  by the  average
closing price of the Company's common stock for the period September 23, 2003 to
September  23,  2004.  The fair  value of $8.64  per  share  was  determined  by
averaging  the closing price for four business days before and after the closing
date of October 1, 2004.

The financing  portion  includes a loan obligation in the amount of $3.0 million
payable to PNC Bank,  N.A. and is  collateralized  by mortgages on real property
located in each of Lebanon, Pennsylvania and Elizabethtown, Pennsylvania and was
used to finance the  majority of the cash  portion of the  purchase  price.  The
Company can elect  interest  rate options of either the Prime Rate or LIBOR plus
200 basis points.  The loan is payable in  eighty-four  equal monthly  principal
payments of $35,714 commencing  November 1, 2004, which such amounts payable are
reflected in the pro forma balance sheet as current maturities of long term debt
amounting to $428,571 and long term debt amounting to $2,571,429.

Accordingly,  the pro forma  information  and  corresponding  adjustments of the
aforementioned  transaction  are  made  solely  for  the  purpose  of  providing
unaudited pro forma condensed combined consolidated financial statements.

The Company  utilizes an asset and liability  approach for income  taxes,  which
requires the  recognition of deferred tax assets and  liabilities for the future
tax consequences of events that have been recognized in the Company's  financial
statements or tax returns.  In estimating future tax  consequences,  the Company
generally  considers all expected future events other than enactments of changes
in the tax law or rates. 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 valuation
allowance equaling the total deferred tax asset is being provided.

2. PURCHASE PRICE

The purchase price  allocation for the net assets acquired was also adjusted for
the fair market value of the Company's stock issued in the transaction. The fair
market value of the stock was determined by averaging the closing price for four
business   days  before  and  after  the  closing   date  of  October  1,  2004.
Additionally, the purchase price allocation for the net assets acquired was also
adjusted for $70,000 of vacation  liabilities  assumed,  which was calculated by
multiplying  unused  earned hours at September 30, 2004 times the hourly rate of
each former JoEL employee, and other capitalized transaction costs.

The following is the purchase price allocation for the asset purchase:

   The Company's issued 113,097 shares of its stock at $8.64 per share, net of
         registration costs of $81,709                                               $  895,449
    Cash paid to JoEL, Inc. for net assets acquired                                   4,100,000
   Transaction costs paid by the Company                                                195,380
                                                                                      ----------

    Total purchase price                                                             $5,190,829
                                                                                      ==========






    Fair value of assets acquired:                                               Allocated Excess      Unallocated Excess
                                                                                   Fair Value              Fair Value
                                                                                 ----------------      ------------------

    Inventory                                                                    $   900,000      *     $   900,000
    Land                                                                             386,588      *         528,000
    Building & improvements                                                      982,578      *       1,342,000
    Machinery and equipment                                                        2,933,089      *       4,006,000
    Furniture and fixtures                                                            58,574      *          80,000
                                                                              --------------             ----------
    Total fair value of assets acquired                                            5,260,829              6,856,000
    Vacation pay liability assumed of former JoEL employees                          (70,000)               (70,000)

    Excess of net fair value over purchase price*                                                        (1,595,171)
                                                                              --------------             ----------

Total net assets acquired                                                        $ 5,190,829            $ 5,190,829
                                                                              ==============            ===========


   * The sum of the assets acquired and liabilities assumed exceeded the cost of
     the acquired assets (excess over cost of excess).  This excess is allocated
     as a pro rata  reduction  of the  amounts  that  otherwise  would have been
     assigned to all of the long-lived acquired assets.

The Company uses a  combination  of  straight-line  and  accelerated  methods in
computing  depreciation  for  financial  reporting  purposes.  The provision for
depreciation  reflected  in the  pro  forma  statements  has  been  computed  in
accordance  with the  following  ranges of estimated  asset lives:  building and
improvements - twenty years; machinery and equipment - three to seven years; and
furniture and fixtures - seven years.

Depreciation  expense included in the pro forma Condensed Combined  Consolidated
Financial Statements for the year ended December 31, 2003 and for the nine-month
period ended September 30, 2004 were $1,032,829 and $813,753, respectively.

3. PRO FORMA ADJUSTMENTS

Adjustments   are   included  in  the  column   under  the  heading  "Pro  Forma
Adjustments."

a.    To eliminate  historical  assets,  liabilities  and equity not included as
      part of acquisition.

b.    To reflect  the  allocated  cost of the net assets  acquired at their fair
      market  value  for  property,  equipment  and  inventory,  including  cash
      expended to JoEL and others for transaction  costs or liabilities  assumed
      or incurred and securities issued as payment for the assets purchased. The
      fair value of the  long-lived  assets were based upon values as determined
      by  accredited   independent   third   parties,   which  such  fair  value
      determinations  were  completed  by August  2004,  and were  updated as of
      October 1, 2004.

c.    To  reflect  the  incurrence  of a loan  obligation  in the amount of $3.0
      million payable to PNC Bank, N.A., which is collateralized by mortgages on
      real property,  payable in eighty-four equal monthly principal payments of
      $35,714  commencing  November 1, 2004 and with  interest  rate  options of
      either the Prime Rate or LIBOR plus 200 basis points.  Amounts payable are
      reflected  in the  pro  forma  balance  sheet  as  current  maturities  of
      long-term  debt  amounting to $428,571  and  long-term  debt  amounting to
      $2,571,429.

d.    To eliminate intercompany profit in the Company's historical inventory.

e.    To eliminate intercompany sales.

f.    To eliminate  intercompany  items that are reductions for cost of products
      sold of $2,585,971  and the net change in profit in inventory of $675,115;
      and to  reflect  incremental  depreciation  costs  that are  increases  of
      $88,945.

g.    To reflect  incremental  depreciation  costs of $4,681 and adjust for life
      insurance items not acquired as part of the acquisition of $65,371.

h.    To eliminate  intercompany  miscellaneous income of $46,302 and to reflect
      incremental  interest  expense  costs  of  $18,904.  Additionally,  a  1/8
      fluctuation in the interest rate would approximate $12,434.






i.    To eliminate  intercompany  items that are reductions for cost of products
      sold of  $2,868,071  and to reflect other items that are increases for the
      net  change  in  profit  in  inventory  of   $135,245;   and   incremental
      depreciation costs of $139,788.

j.    To reflect  incremental  depreciation  costs of $2,761 and adjust for life
      insurance items of $55,876.

k.    To reflect incremental interest expense costs of $42,330.  Additionally, a
      1/8 fluctuation in the interest rate would approximate $8,787.


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  shared in the  earnings  of the  entity.  Diluted  EPS also
utilizes the treasury stock method,  which  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 variety  of
results for each period presented.

A  reconciliation  of the  applicable  pro  forma  changes  and  numerators  and
denominators of the income statement periods presented is as follows  (millions,
except earnings per share amounts):


                                                                           Year Ended                 Nine-Months Ended
                                                                       December 31, 2003             September 30, 2004

                                                                   ---------------------------------------------------------
                                                                     Income   Shares     EPS       Loss      Shares    EPS
                                                                   ---------------------------------------------------------

Basic EPS (historical)                                             $  0.7      11.5   $   0.06   ($  1.5)     11.5   ($0.13)

Pro forma adjustments, JoEL historical & 113,097 shares issued     .2        .1       0.02       (.5)       .1    (0.04)
                                                                   ---------------------------------------------------------
        Pro forma combined basic EPS                                  0.9      11.6       0.08      (2.0)     11.6    (0.17)
                                                                   ---------------------------------------------------------

Dilutives (historical):

Options and warrants                                                            3.4
                                                                   ---------------------------------------------------------
      Pro forma combined diluted EPS                               $  0.9      15.0   $   0.06   ($  2.0)     11.6   ($0.17)
                                                                   ==========================================================

Options and warrants  outstanding at December 31, 2003 and at September 30, 2004
were  4,601,000  and  3,827,500,  respectively,  but  were not  included  in the
September 30, 2004  computation of diluted earnings per share because the effect
was anti-dilutive.
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