<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549




                                    FORM 10-Q




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



                 For the quarterly period ended August 31, 1998
                       Commission file number 33-80770-01




                       SIGNAL INVESTMENT & MANAGEMENT CO.
                             A DELAWARE CORPORATION
                  I.R.S. EMPLOYER IDENTIFICATION NO. 62-1290284
                      1105 NORTH MARKET STREET, SUITE 1300
                           WILMINGTON, DELAWARE 19890
                             TELEPHONE: 302-656-3950







This registrant meets the conditions set forth in General Instruction H(1) (a)
and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.

Registrant has filed all reports to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months, and has been
subject to such filing requirements for the past 90 days.

As of October 15, 1998, 250 shares of the Company's common stock, without par
value, were outstanding.




                                       1
<PAGE>


                       SIGNAL INVESTMENT & MANAGEMENT CO.

                                      INDEX


<TABLE>
<CAPTION>

                                                                                      PAGE NO.
<S>                                                                                  <C>
PART I.  FINANCIAL INFORMATION

  Item 1.  Financial Statements

    Balance Sheets as of August 31, 1998 and November 30, 1997 ................           3

    Statements of Income for the Three and Nine Months Ended
      August 31, 1998 and 1997 ................................................           4

    Statements of Cash Flows for the Nine Months Ended August 31, 1998
      and 1997 ................................................................           5

    Notes to Financial Statements .............................................           6

  Item 2.  Management's Discussion and Analysis of Financial Condition
    and Results of Operations .................................................           9

PART II.  OTHER INFORMATION

  Item 6.  Reports on Form 8-K ................................................          11

SIGNATURES ....................................................................          12


</TABLE>














                                       2
<PAGE>


                          PART 1. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


                       SIGNAL INVESTMENT & MANAGEMENT CO.

                                 BALANCE SHEETS

                   (In Thousands, Except for Number of Shares)
<TABLE>
<CAPTION>

                                                               AUGUST 31,   NOVEMBER 30,
                                                                 1998           1997
                                                                 ----           ----
                                                              (Unaudited)
<S>                                                            <C>          <C>
ASSETS

  Current Assets:
    Cash and cash equivalents ..............................   $     222    $      55
    Available-for-sale security - at market value ..........         304         --
    Royalties receivable from Chattem, Inc. ................       2,984        1,588
                                                               ---------    ---------
         Total current assets ..............................       3,510        1,643

  Trademarks and other purchased product rights, net .......     269,161      101,426
                                                               ---------    ---------

         TOTAL ASSETS.......................................   $ 272,671    $ 103,069
                                                               ---------    ---------
                                                               ---------    ---------
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)

  Liabilities:
    Payable to Chattem, Inc. ...............................   $ 266,601    $ 102,573
    Deferred income taxes ..................................       2,628        2,628
                                                               ---------    ---------
         Total liabilities .................................     269,229      105,201
                                                               ---------    ---------
  Shareholder's equity (deficit):
    Common shares, without par value, 500 shares authorized,
     250 shares issued and outstanding .....................           2            2
    Retained earnings (deficit) ............................       3,531       (2,134)
    Unrealized holding loss on investment ..................         (91)        --
                                                               ---------    ---------
         Total shareholder's equity (deficit) ..............       3,442       (2,132)
                                                               ---------    ---------
         TOTAL LIABILITIES AND SHAREHOLDER'S
           EQUITY (DEFICIT).................................   $ 272,671    $ 103,069
                                                               ---------    ---------
                                                               ---------    ---------

</TABLE>



                 See accompanying notes to financial statements.

                                       3
<PAGE>


                       SIGNAL INVESTMENT & MANAGEMENT CO.

                              STATEMENTS OF INCOME

                 (Unaudited and in Thousands, Except Share Data)
<TABLE>
<CAPTION>

                                                      FOR THE THREE             FOR THE NINE
                                                   MONTHS ENDED AUGUST 31,   MONTHS ENDED AUGUST 31,
                                                      1998       1997            1998   1997
                                                      ----       ----            ----   ----
<S>                                                  <C>        <C>           <C>       <C>
REVENUES AND GAINS:
  Royalties from Chattem, Inc. ...................   $ 2,932    $ 1,638       $ 7,222   $ 4,593
  Investment income...............................         1          3             2        26
  Gain on sale of
    trademarks and other
    product rights................................       (75)      --          10,328        --
                                                     -------    -------        ------   -------
       Total revenues and
       gains                                           2,858      1,641        17,552     4,619
                                                       -----      -----        ------     -----
EXPENSES:
  Amortization of trademarks
   and other purchased product
   rights ........................................     1,813        708         3,989     1,857
  General and administrative .....................         5          3            18        15
                                                     -------    -------        ------   -------
       Total expenses ............................     1,818        711         4,007     1,872
                                                     -------    -------        ------   -------
INCOME BEFORE 
 PROVISION FOR INCOME
 TAXES ...........................................     1,040        930        13,545     2,747

PROVISION FOR INCOME
 TAXES ...........................................       380        310         4,880       930
                                                     -------    -------        ------   -------
NET INCOME .......................................   $   660    $   620       $ 8,665   $ 1,817
                                                     -------    -------        ------   -------
                                                     -------    -------        ------   -------
OUSTANDING COMMON
 SHARES ..........................................       250        250           250       250
                                                     -------    -------        ------   -------
NET INCOME PER 
 COMMON SHARE ....................................   $ 2,640    $ 2,480       $34,660   $ 7,268
                                                     -------    -------        ------   -------
                                                     -------    -------        ------   -------

</TABLE>


                 See accompanying notes to financial statements.


                                       4
<PAGE>



                       SIGNAL INVESTMENT & MANAGEMENT CO.

                            STATEMENTS OF CASH FLOWS

                          (Unaudited and in Thousands)
<TABLE>
<CAPTION>

                                                                       FOR THE NINE MONTHS ENDED
                                                                                AUGUST 31,
                                                                       -------------------------
                                                                           1998         1997
                                                                          -------      ------
<S>                                                                       <C>          <C>
OPERATING ACTIVITIES:
  Net income ..........................................................   $  8,665     $ 1,817
  Adjustments to reconcile net income to net cash provided 
   by operating activities:
      Amortization ....................................................      3,989       1,857
      Gain on sale of trademarks and other product rights .............    (10,328)       --
      Income taxes ....................................................      4,880         930
      Other ...........................................................         --           2
      Changes in operating assets and liabilities:
        Increase in royalties receivable from Chattem, Inc. ...........     (1,396)       (351)
                                                                             -----       -----
            Net cash provided by operating activities .................      5,810       4,255
                                                                             -----       -----
INVESTING ACTIVITIES -
  Purchase of available-for-sale securities ...........................       (395)       --
                                                                             -----       -----
FINANCING ACTIVITIES:
  Payments to Chattem, Inc. ...........................................     (2,248)     (3,250)
  Dividends paid to Chattem, Inc. .....................................     (3,000)     (3,750)
                                                                            ------      ------ 
            Net cash used in financing activities .....................     (5,248)     (7,000)
                                                                            ------      ------ 
CASH AND CASH EQUIVALENTS:
  Increase (decrease) for the period ..................................        167      (2,745)
  At beginning of period ..............................................         55       2,911
                                                                             -----       -----
  At end of period ....................................................   $    222     $   166
                                                                           -------     -------
                                                                           -------     -------
SUPPLEMENTAL SCHEDULE OF NON-CASH
  TRANSACTIONS - Increase (decrease) in payable to
   Chattem, Inc. in connection with:
      Gain on sale of trademarks and other product rights .............   $(10,328)    $   --
      Purchase of trademarks and other product rights .................    171,724      29,870
      Provision for income taxes ......................................      4,880         930
      Payment of certain items on behalf of the Company ...............       --             2
DIVIDENDS PER SHARE ...................................................   $     12     $    15


</TABLE>


                 See accompanying notes to financial statements.


                                       5

<PAGE>


                       SIGNAL INVESTMENT & MANAGEMENT CO.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE: All monetary amounts are expressed in thousands of dollars unless
      contrarily evident.

 1.  The Company is a wholly-owned subsidiary of Chattem, Inc. and is included
     in the parent company's consolidated financial statements and tax returns.

 2.  The accompanying unaudited financial statements have been prepared in
     accordance with generally accepted accounting principles for interim
     financial information and the instructions to Form 10-Q and Rule 10-01 of
     Regulation S-X. Accordingly, they do not include all of the information and
     footnotes required by generally accepted accounting principles for complete
     financial statements. These financial statements should be read in
     conjunction with the audited financial statements and related notes thereto
     included in the Company's Form 10-K for the year ended November 30, 1997
     and with the audited consolidated financial statements and related notes
     thereto included in Chattem, Inc.'s Annual Report to Shareholders for the
     year ended November 30, 1997. The accompanying unaudited financial
     statements, in the opinion of management, include all adjustments necessary
     for a fair presentation. All such adjustments are of a normal recurring
     nature.

 3.  The results of operations for the interim periods presented are not
     necessarily indicative of the results to be expected for the respective
     full years.

 4.  The Company had no outstanding debt as of the periods presented and
     therefore incurred no interest expense.

 5.  Certain amounts in the prior periods' financial information have been
     reclassified to conform to the current presentation.

 6.  A summary of the changes in the payable to Chattem, Inc. for the year to
     date is as follows:
<TABLE>

            <S>                                                            <C>
             Balance - November 30, 1997 ....................                $  102,573
                       Repayments ...........................                    (2,248)
                       Income tax provision .................                     4,880
                       Gain on sale of trademarks and
                        other product rights  ...............                   (10,328)
                       Purchase of trademarks and other
                        product rights ......................                   171,724
                                                                             ----------
             Balance - August 31, 1998 ......................                $  266,601
                                                                             ----------
                                                                             ----------
</TABLE>



                                       6
<PAGE>



     The weighted average balance due Chattem, Inc. during the nine months ended
     August 31, 1998, was $180,737.

 7.  On March 24, 1998, Chattem, Inc. and the Company acquired the BAN line of
     deodorant and antiperspirant products from Bristol-Myers Squibb Company for
     a purchase price of $167,718. The Company acquired the BAN trademarks,
     formulae, certain patents pertaining to antiperspirant/deodorant technology
     and technical information. Chattem, Inc. purchased the inventory,
     manufacturing equipment and packaging related assets used in the
     manufacture of BAN, but not the right to sell BAN in Japan.

 8.  Also on March 24, 1998, Chattem, Inc., with the Company as guarantor,
     issued $200,000 of 8 7/8% Senior Subordinated Notes due 2008 (the "Notes")
     to NationsBanc Montgomery Securities LLC (the "Initial Purchaser") and
     entered into an amended and restated senior secured bank credit agreement.
     The proceeds of the note offering were used to fund the BAN purchase and
     related fees and expenses, repay revolving bank indebtedness and provide
     additional working capital.

     The Notes mature on April 1, 2008 and interest is payable semi-annually on
     April 1 and October 1 of each year, commencing October 1, 1998. The Notes
     are senior subordinated obligations of Chattem, Inc. and are subordinated
     in right of payment to all existing and future senior debt of that company.
     The Notes may not be redeemed until April 1, 2003, after which they may be
     redeemed at the option of Chattem, Inc. Upon the occurrence of certain
     events constituting a change of control, the holders of the Notes may
     require Chattem, Inc. to repurchase the Notes at a purchase price equal to
     101% of the principal amount thereof, plus accrued and unpaid interest.

     The Notes are issued under an indenture with SouthTrust Bank, National
     Association, as indenture trustee, which restricts, among other things, the
     ability of Chattem, Inc. and its subsidiaries to (i) incur additional
     indebtedness and issue preferred stock, (ii) incur liens, (iii) pay
     dividends or make certain other restricted payments, (iv) apply net
     proceeds from certain asset sales, (v) enter into certain transactions with
     affiliates, (vi) merge or consolidate with any other person, (vii) sell
     stock of its subsidiaries, or (viii) assign, transfer, lease, convey or
     otherwise dispose of substantially all of the assets of that company.

     The Notes were issued by Chattem, Inc. to the Initial Purchaser in a
     transaction not registered under the Securities Act of 1933 ("Securities
     Act") in reliance upon the exemption provided in Section 4(2) of the
     Securities Act. The Initial Purchaser subsequently placed the Notes with
     qualified institutional buyers and certain accredited investors in reliance
     upon Rule 144A under the Securities Act.


                                       7
<PAGE>


     Pursuant to a Registration Rights Agreement between Chattem, Inc. and the
     Initial Purchaser, Chattem, Inc. filed with the Securities and Exchange
     Commission on May 26, 1998 a Registration Statement on Form S-4, which
     became effective on June 8, 1998, with respect to its Series B Notes that
     are identical in all material respects to the original Notes. Chattem, Inc.
     offered the holders of the original Notes the opportunity to exchange their
     Notes for a like amount of Series B Notes on or before July 23, 1998.

     Chattem's credit agreements, of which the Company is guarantor, include
     term loans of $27,500 and $34,800 and a working capital facility of $30,000
     (the "Credit Agreements"). The working capital facility and the $27,500
     term loan mature on June 26, 2002 and the $34,800 term loan matures on June
     14, 2004. Chattem, Inc. may elect either the greater of the prime rate or
     federal funds plus 1/2% or a floating rate or Eurodollar interest rate
     option applicable to loans under the Credit Agreements. The floating rate
     and Eurodollar interest rate options are based on a base rate plus a
     floating rate margin that fluctuates on the basis of Chattem, Inc.'s
     leverage ratio. In addition to the foregoing, the Credit Agreements contain
     covenants, representations and other agreements by Chattem, Inc. that are
     customary in loan agreements and security instruments relating to
     financings of this type. The Company is also a guarantor of Chattem, Inc.'s
     12.75% Senior Subordinated Notes due 2004. Bank loans of $49,331, 12 3/4%
     Senior Subordinated Notes due 2004 of $49,657 and 8 7/8% Senior
     Subordinated Notes due 2008 of $200,000 were outstanding at August 31,
     1998.

 9.  On May 12, 1998, Chattem, Inc. and the Company sold the CORNSILK oil
     control makeup brand to Del Laboratories, Inc. for $10,750 plus inventories
     and the assumption of certain liabilities. The Company sold the CORNSILK
     trademarks, formulae and technical information. Chattem, Inc. sold the
     inventory and other related assets but will continue to operate the
     CORNSILK business in the United Kingdom pursuant to a license agreement.
     Chattem, Inc. used the net proceeds from the sale to reduce bank
     indebtedness.


                                       8
<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
        CONDITION AND RESULTS OF OPERATIONS

Note: All monetary amounts are expressed in thousands of dollars unless
      contrarily evident.

The following narrative represents management's comparative analysis of the
material changes in the year-to-date results of operations of the Company
pursuant to General Instruction H(2)(a) of Form 10-Q:

General

On March 24, 1998, Chattem, Inc. and the Company, acquired the BAN line of
deodorant and antiperspirant products from Bristol-Myers Squibb Company for a
purchase price of $167,718. The Company acquired the BAN trademarks, formulae,
certain patents pertaining to antiperspirant/deodorant technology and technical
information. Chattem, Inc. purchased the inventory, manufacturing equipment and
packaging related assets used in the manufacture of BAN, but not the right to
sell BAN in Japan.

Also on March 24, 1998, Chattem, Inc., with the Company as guarantor, issued
$200,000 of 8 7/8% Senior Subordinated Notes due 2008 (the "Notes") to
NationsBanc Montgomery Securities LLC and entered into an amended and restated
senior secured bank credit agreement. The proceeds of the note offering were
used to fund the BAN purchase and related fees and expenses, repay revolving
bank indebtedness and provide additional working capital.

See Notes 8 and 9 of the accompanying Notes to Financial Statements for
additional information relating to the Notes and the amended and restated senior
secured bank credit agreement.

On May 12, 1998, Chattem, Inc. and the Company sold the CORNSILK oil control
makeup brand to Del Laboratories, Inc. for $10,750, plus inventories and the
assumption of certain liabilities. The Company sold the CORNSILK trademarks,
formulae and technical information for which a gain of $10,328 was recognized.
Chattem, Inc. sold the inventory and other related assets but will continue to
operate the CORNSILK business in the United Kingdom pursuant to a license
agreement. Chattem, Inc. used the net proceeds from the sale to reduce bank
indebtedness.


                                       9
<PAGE>



RESULTS OF OPERATIONS - COMPARISON OF NINE MONTHS ENDED
AUGUST 31, 1998 AND 1997


Royalty income increased $2,629, or 57.2%, in the nine months ended August 31,
1998, from the corresponding period of the prior year. Royalty income is
computed on the sales of the various brands on which the Company owns
trademarks. The increase was primarily due to sales of the SUNSOURCE products
acquired in the third quarter of fiscal 1997, and of the BAN
antiperspirant/deodorant brand purchased in the second quarter of fiscal 1998.

Investment income decreased by $24, or 92.3%, in the nine months ended August
31, 1998 from the corresponding prior year period. The decrease was primarily
due to a reduced amount of income producing cash equivalents.

The gain of $10,328 on the sale of trademarks and other product rights is
associated exclusively with the CORNSILK product line divestiture in the second
quarter of fiscal 1998.

Amortization expense increased $2,132, or 114.8%, in the nine months ended
August 31, 1998, from the corresponding period of the prior year. The increase
was primarily due to the acquisitions of the trademarks and other product rights
of the SUNSOURCE products in the third quarter of fiscal 1997 and of the BAN
antiperspirant/deodorant brand in the second quarter of fiscal 1998.

Year 2000

The Company is a wholly-owned subsidiary of Chattem, Inc. which provides the
Company with the use of all of its information technology (IT) systems. Chattem,
Inc. is currently replacing its IT systems with ones that will be year 2000
compliant. See Chattem, Inc.'s discussion of its year 2000 compliance progress
to date as reported in its Report on Form 10-Q for the quarter ended August 31,
1998.



                                       10
<PAGE>




                           PART II. OTHER INFORMATION


ITEM 6.  REPORTS ON FORM 8-K

         No reports on Form 8-K were filed with the Securities and Exchange
Commission during the three months ended August 31, 1998.




                                       11
<PAGE>


                       SIGNAL INVESTMENT & MANAGEMENT CO.
                                   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 thereunto duly authorized.

                                  SIGNAL INVESTMENT & MANAGEMENT CO.
                                            (Registrant)



Dated:    October 15, 1998                  /s/ Stephen M. Powell
        ---------------------               ----------------------
                                            Stephen M. Powell
                                            Vice-President and Treasurer
                                            (duly authorized signatory and
                                             principal accounting officer)


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