<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 May 31, 1997
                       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.
 
Indicate by check whether the registrant (1) has filed all reports required 
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 
during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days. Yes X No__.                    
                    _
 
As of July 8, 1997, 250 shares of the Company's common stock, without par 
value, were outstanding.

                                 Page 1 of 10


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                       SIGNAL INVESTMENT & MANAGEMENT CO.
 
                                     INDEX
 
                                                                 PAGE NO.
                                                               -----------

 
PART I.  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
  Balance Sheets as of May 31, 1997 and November 30, 1996....       3
 
  Statements of Income for the Three and Six
    Months Ended May 31, 1997 and 1996.......................       4
 
  Statements of Cash Flows for the Six Months
    Ended May 31, 1997 and 1996..............................       5
 
  Notes to Financial Statements..............................       6
 
 Item 2. Management's Discussion and Analysis of Financial
  Condition and Results of Operations........................       8
 
PART II. OTHER INFORMATION
 
 Item 6. Reports on Form 8-K.................................       9
 
SIGNATURES...................................................      10

                                      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>

                                                                                MAY 31,     NOVEMBER 30,
                                                                                  1997         1996
                                                                              -----------   ------------
                                                                              (UNAUDITED)
<S>                                                                           <C>           <C>
 
ASSETS:

  Cash and cash equivalents...........................................       $     223      $    2,911
 
  Royalties receivable from Chattem, Inc..............................           1,692           1,287
                                                                              -----------   ------------ 
 
    Total current assets..............................................           1,915           4,198
 
  Trademarks and other purchased product rights, net..................          72,957          74,086
                                                                              -----------  ------------  
 
    Total assets......................................................       $  74,872      $   78,284
                                                                              -----------  ------------  
 
LIABILITIES AND SHAREHOLDER'S EQUITY:
 
  Liabilities:
 
    Payable to Chattem, Inc...........................................       $  73,603      $   75,713
 
    Deferred income taxes.............................................           1,556           1,556
                                                                              -----------  ------------  
 
      Total liabilities...............................................          75,159          77,269
                                                                              -----------  ------------  
 
  Shareholder's equity:
 
    Common shares, without par value, 500 shares authorized, 250
      shares issued and outstanding...................................               2              2
 
    Retained earnings (deficit).......................................            (289)         1,013
                                                                              -----------  ------------ 
 
      Total shareholder's equity (deficit)............................            (287)         1,015
                                                                              -----------  ------------ 
 
      Total liabilities and shareholder's equity......................       $  74,872     $   78,284
                                                                              -----------  ------------ 
</TABLE>
 
                   See accompanying notes to financial statements.
 
                                       3


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                       SIGNAL INVESTMENT & MANAGEMENT CO.
 
                              STATEMENTS OF INCOME
 
                  (Unaudited and in Thousands, Except Share Data)
 
<TABLE>
<CAPTION>
                                                                             FOR THE THREE            FOR THE SIX
                                                                          MONTHS ENDED MAY 31,    MONTHS ENDED MAY 31,
                                                                        ------------------------  --------------------
                                                                          1997         1996         1997       1996
                                                                        ---------  -------------  ---------  ---------
<S>                                                                     <C>        <C>            <C>        <C>
 
REVENUES:
 
  Royalties from Chattem, Inc.........................................  $   1,692    $   1,272    $   2,955  $   2,075
 
  Other income........................................................          3          896           22      1,219
 
  Interest from Chattem, Inc..........................................     --               46       --             91
                                                                        ---------       ------    ---------  ---------
 
    Total revenues....................................................      1,695        2,214        2,977      3,385
                                                                        ---------       ------    ---------  ---------
 
EXPENSES:
 
  Amortization of trademarks and other purchased product rights.......        578          367        1,149        655
 
  General and administrative..........................................          9            8           10         10
                                                                        ---------       ------    ---------  ---------
 
    Total expenses....................................................        587          375        1,159        665
                                                                        ---------       ------    ---------  ---------
 
INCOME BEFORE PROVISION FOR INCOME TAXES..............................      1,108        1,839        1,818      2,720
 
PROVISION FOR INCOME TAXES............................................        380          625          620        925
                                                                        ---------       ------    ---------  ---------

NET INCOME............................................................  $     728    $   1,214    $   1,198  $   1,795
                                                                        ---------       ------    ---------  ---------
 
NET INCOME PER COMMON SHARE...........................................  $   2,912    $   4,856    $   4,792  $   7,180
                                                                        ---------       ------    ---------  ---------
 
OUTSTANDING COMMON SHARES.............................................        250          250          250        250
                                                                        ---------       ------    ---------  ---------
</TABLE>
 
                  See accompanying notes to financial statements.
 
                                       4


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                       SIGNAL INVESTMENT & MANAGEMENT CO.
 
                            STATEMENTS OF CASH FLOWS
 
                          (Unaudited and in Thousands)
 
 
<TABLE>
<CAPTION>

                                                                 FOR THE SIX MONTHS ENDED MAY 31,
                                                                --------------------------------
                                                                    1997               1996
                                                                  ---------         ---------
<S>                                                               <C>                <C>
 
OPERATING ACTIVITIES:

  Net income.................................................     $   1,198          $   1,795
 
  Adjustments to reconcile net income to net cash provided by
    operating activities:
 
      Amortization...........................................         1,149                655
 
      Gain on sale of investment.............................            --               (323)
 
      Gain on sale of trademarks and other product rights....            --               (875)

      Other..................................................            --                 10

      Changes in operating assets and liabilities:

        Income taxes.........................................           620                925
 
        Increase in royalties receivable from Chattem, Inc...          (405)              (252)
                                                                   ---------           ---------  
 
          Net cash provided by operating activities..........         2,562              1,935
                                                                   ---------           ---------
                                                                                                   

INVESTING ACTIVITIES:

  Increase in note receivable from Chattem, Inc..............            --               (90)
 
  Payments on note receivable from Chattem, Inc..............            --                45
 
  Proceeds from sale of investment...........................            --               323

    Other....................................................            --                --
                                                                                                                            -
                                                                    ---------          ---------  
 
        Net cash provided by investing activities............            --               278
                                                                                                                            -
                                                                    ---------          ---------
 
FINANCING ACTIVITIES:
 
  Decrease in payable to Chattem, Inc.......................         (2,750)               --

  Dividends paid to Chattem, Inc. ($10 and $12 per share,
     respectively)...........................................        (2,500)           (3,053) 
                                                                    ---------         --------- 
 
       Net cash used in financing activities.................        (5,250)           (3,053)  
                                                                    ---------         --------- 
 
CASH AND CASH EQUIVALENTS:
 
  Decrease for the period....................................        (2,688)             (840)
 
  At beginning of period.....................................         2,911               851   
                                                                    ---------         --------- 
 
  At end of period...........................................     $     223          $     11  
                                                                  ---------           ---------
 
SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS:
 
      Decrease in payable to Chattem, Inc. in connection with the
        sale of trademarks and other rights...................     $     --           $    875 

      Increase in payable to Chattem, Inc. in connection with 
        purchases of trademarks and other product rights......     $     --           $ 37,500

      Increase in payable to Chattem, Inc. for certain items paid 
        by Chattem, Inc. on behalf of the Company.............     $     20           $     --
</TABLE>
 
                See accompanying notes to financial statements.

                                      5


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                        SIGNAL INVESTMENT & MANAGEMENT CO.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)
                
 
               
 
1.  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, 1996. 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.
 
2.  The results of operations for the interim periods presented are not 
    necessarily indicative of the results to be expected for the respective 
    full years.
 
3.  On May 23, 1997, the Company and Chattem, Inc. announced the signing of 
    an agreement to purchase certain assets of Sunsource International, Inc. 
    and an affiliated company ("Sunsource") including the exclusive worldwide 
    rights to five leading branded dietary supplement products. The products 
    being acquired are GARLIQUE, REJUVEX, MELATONEX, ECHINEX and PROPALMEX. 
    The purchase price for the trademarks, inventory and receivables was 
    approximately $32,000,000. Additional payments may be earned by the 
    seller over a six year period from the date of closing if sales exceed 
    certain levels as defined in the purchase agreement, but such additional 
    payments are not to exceed $15,750,000 in the aggregate. Financing of the 
    Sunsource acquisition was provided by an expansion of Chattem, Inc.'s 
    senior bank credit agreement and the issuance of 300,000 shares of 
    Chattem, Inc. common stock to the seller. The trademarks were acquired by 
    the Company and licensed to Chattem, Inc. Receivables and inventory were 
    acquired by Chattem, Inc. The transaction was completed on June 26, 1997.
 
4.  In connection with the bank credit agreement entered into by Chattem, 
    Inc. on April 29, 1996, amended June 6, 1996 and amended and restated as 
    of June 26, 1997, the Company is a guarantor on Chattem's bank debt. The 
    bank debt consists of term loans and working capital revolving loans. The 
    Company is a guarantor on Chattem, Inc.'s expanded bank debt used to 
    finance the Sunsource acquisition. 
 
                                      6


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5.  On June 17, 1994, the Company acquired a license to the PHISODERM 
    trademark in the United States, Canada and Puerto Rico (the "Territory") 
    from Sterling Winthrop Inc. ("Sterling"). If net sales of PHISODERM 
    products in the United States by Chattem, Inc. exceed $11,000,000 for the 
    12-month period beginning July 1, 1996 and ending June 30, 1997, then 
    within 45 days after the end of the applicable 12-month period with 
    respect to which the applicable net sales threshold specified above have 
    been exceeded, the Company will pay Sterling an additional $1,000,000. As 
    of June 30, 1997, annual net sales of PHISODERM exceeded the $11,000,000 
    threshold. 
 
6.  Certain amounts in the prior period's financial information have been 
    reclassified to conform to the current presentation. 
 
7.  The Company is a wholly-owned subsidiary of Chattem, Inc. and is included 
    in the parent company's consolidated tax returns. 

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

9.  A summary analysis of the activity between the Company and Chattem Inc. 
    is as follows:

       Balance - November 30, 1996...........................     $   75,713
                 Repayments..................................         (2,750)
                 Additions...................................            640
                                                                  ----------
       Balance - May 31, 1997................................     $   73,603
                                                                  ----------
                                                                  ----------

    The weighted average balance due Chattem, Inc. during the six-months ended 
    May 31, 1997, was $74,338.

                                       7


<PAGE>

 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS
 
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:
 
Royalty income increased $880, or 42.4% in the six months ended May 31, 1997, 
from the corresponding period of the prior year. The increase was primarily 
due to higher sales on the brands upon which royalties are calculated. The 
prior year period did not include sales for the entire six months of GOLD 
BOND, HERPECIN-L or PHISODERM Antibacterial Hand Cleanser. These products 
were acquired or introduced to the market in the second and third quarters of 
fiscal 1996. 
 
Other income decreased by $1,197 or 98.2% in the six months ended May 31, 
1997. The decrease over the prior year period was primarily due to the sale 
of the trademarks of the SOLTICE and BLIS-TO-SOL brands during the second 
quarter of fiscal 1996 and the sale of an investment.

Interest income from the Chattem, Inc. note receivable decreased $91 in the 
six months ended May 31, 1997 from the corresponding period of the prior 
year. The note was repaid in full by Chattem in the fourth quarter of fiscal 
1996.
 
Amortization expense increased $494, or 75.4% in the six months ended May 31, 
1997, from the corresponding period of the prior year. The increase was 
primarily due to the full six month period amortization in fiscal 1997 of 
GOLD BOND and HERPECIN-L. GOLD BOND and HERPECIN-L were acquired in the 
second and third quarters of fiscal 1996.

                                      8


<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 May 31, 1997.

                                      9


<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: JULY 15, 1997            /S/ STEPHEN M. POWELL
       --------------           --------------------------------
                                STEPHEN M. POWELL
                                VICE-PRESIDENT AND TREASURER
                                (DULY AUTHORIZED SIGNATORY AND
                                 PRINCIPAL ACCOUNTING OFFICER)
 
                                     10