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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996.
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM ____________ TO ____________.
Commission File No. 0-9036
LANNETT COMPANY, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
State of Delaware 23-0787-699
(State of Incorporation) (I.R.S. Employer I.D. No.)
9000 State Road
Philadelphia, PA 19136
(215) 333-9000
(Address of principal executive offices and telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 May 10 1996, there were 5,206,128 shares of the issuer's common stock,
$.001 par value, outstanding.
Page 1 of 17 pages
Exhibit Index on Page 14
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<PAGE>
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1996 (unaudited) and
June 30, 1995............................................. 3
Consolidated Statements of Earnings
for the three months and nine months
ended March 31, 1996
and 1995 (unaudited)....................................... 4
Consolidated Statements of Cash Flows
for the nine months ended March 31, 1996
and 1995 (unaudited)...................................... 5
Notes to Consolidated Financial
Statements (unaudited).................................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................................... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................... 12
Item 5. Other Information......................................... 12
Item 6. Exhibits and Reports on Form 8-K.......................... 12
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS 03/31/96 06/30/95
------ -------- --------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash $ 74,843 $ 38,975
Trade accounts receivable 760,050 609,708
Inventories 719,642 420,907
Prepaid expenses 41,084 43,376
----------- -----------
Total current assets 1,595,619 1,112,966
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Land 33,414 33,414
Building and improvements 1,351,740 1,340,414
Machinery and equipment 1,384,239 1,231,649
Furniture and fixtures 64,510 64,511
----------- -----------
2,833,903 2,669,988
Less accumulated depreciation (923,294) (784,684)
----------- -----------
Net 1,910,609 1,885,304
----------- -----------
OTHER ASSETS 24,049 10,824
----------- -----------
Total assets $ 3,530,277 $ 3,009,094
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Line of credit $ 548,880 $ 307,000
Current maturities of long-term debt 35,329 52,665
Accounts payable 265,463 227,861
Accrued interest payable - shareholder 288,768 370,432
Accrued liabilities 23,143 135,604
----------- -----------
Total current liabilities 1,161,583 1,093,562
----------- -----------
LONG-TERM DEBT, LESS CURRENT MATURITIES 372,222 397,222
----------- -----------
NOTE PAYABLE AND ACCRUED INTEREST - SHAREHOLDER 2,121,667 2,045,500
----------- -----------
LINE OF CREDIT AND ACCRUED INTEREST - SHAREHOLDER 3,730,151 3,513,595
----------- -----------
SHAREHOLDERS' DEFICIENCY
Common stock
Authorized: 50,000,000 shares, par value $.001; 5,206,128 shares
issued and outstanding 5,206 5,206
Additional paid-in capital 320,575 320,575
Accumulated deficit (4,181,127) (4,366,566)
----------- -----------
Total shareholders' deficiency (3,855,346) (4,040,785)
----------- -----------
Total liabilities and shareholders' deficiency $ 3,530,277 $ 3,009,094
=========== ===========
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED ENDED
-------------------- -------------------
03/31/96 03/31/95 03/31/96 03/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $ 879,508 $ 896,968 $ 2,738,197 $ 3,456,089
COST OF SALES 419,275 423,195 1,319,983 1,577,918
------------ ------------ ------------ ------------
Gross profit 460,233 473,773 1,418,214 1,878,171
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 269,541 286,450 809,034 836,992
------------ ------------ ------------ ------------
Operating profit 190,692 187,323 609,180 1,041,179
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSES), NET
Other 1,998 854 32,653 (7,823)
Interest expense (151,374) (138,025) (456,394) (427,277)
------------ ------------ ------------ ------------
(149,376) (137,171) (423,741) (435,100)
------------ ------------ ------------ ------------
NET INCOME BEFORE INCOME TAXES 41,316 50,152 185,439 606,079
STATE INCOME TAXES - CURRENT -- 2,420 -- 69,420
------------ ------------ ------------ ------------
NET INCOME $ 41,316 $ 47,732 $ 185,439 $ 536,659
============ ============ ============ ============
PRIMARY INCOME PER SHARE $ 0.01 $ 0.01 $ 0.04 $ 0.10
FULLY DILUTED INCOME PER SHARE $ 0.01 $ 0.01 $ 0.02 $ 0.05
PRIMARY WEIGHTED AVERAGE
NUMBER OF SHARES 5,206,128 5,206,128 5,206,128 5,206,128
FULLY DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES 13,206,128 13,206,128 13,206,128 13,206,128
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED
-------------------------
03/31/96 03/31/95
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 185,439 $ 536,659
Adjustments to reconcile net income to net cash
(used in) provided by operating activities
Depreciation and amortization 141,227 141,613
Loss on sale of property, plant and equipment -- 9,000
Increase in trade accounts receivable (150,342) (324,927)
Increase in inventories (298,735) (86,472)
(Increase) decrease in prepaid expenses and other assets (13,550) 2,024
Increase in accounts payable 37,602 62,284
(Decrease) in accrued liabilities (112,461) (72,660)
Increase (decrease) in accrued interest 138,028 (169,465)
--------- ---------
Net cash (used in) provided by operating activities (72,792) 98,056
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (163,915) (198,597)
Proceeds from sale of property, plant and equipment -- 4,000
--------- ---------
Net cash used in investing activities (163,915) (194,597)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings under lines of credit 314,911 (25,000)
Repayments of debt (42,336) (43,001)
Collection of shareholder note receivable -- 67,500
--------- ---------
Net cash provided by (used in) financing activities 272,575 (501)
--------- ---------
NET INCREASE (DECREASE) IN CASH 35,868 (97,042)
CASH AT BEGINNING OF PERIOD 38,975 133,626
--------- ---------
CASH AT END OF PERIOD $ 74,843 $ 36,584
========= =========
</TABLE>
5
<PAGE>
LANNETT COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position
and the results of operations and cash flows.
The results of operations for the nine months ended March 31, 1996 and 1995
are not necessarily indicative of results for the full year.
While the Company believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that these
consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes included in the Company's
Annual Report on Form 10-KSB for the year ended June 30, 1995.
Note 2.
Primary per share data is based on the weighted average number of common
shares outstanding of 5,206,128 for the periods ending March 31, 1996 and
1995. Fully diluted per share data includes shares issuable pursuant to
currently exercisable options and a convertible debenture.
Note 3.
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
--------- --------
(unaudited)
<S> <C> <C>
Raw materials $ 276,899 $ 115,875
Work-in-process 168,955 236,345
Finished goods 223,407 24,945
Packaging supplies 50,381 43,742
----------- -----------
$ 719,642 $ 420,907
=========== ===========
</TABLE>
Note 4.
The Company uses the liability method specified by SFAS No. 109,
"Accounting for Income Taxes." Deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax
basis of assets and liabilities as measured by the enacted tax rates which
will be in effect when these differences reverse. Deferred tax expense is
the result of changes in deferred tax assets and liabilities. The principal
types of differences between assets and liabilities for financial statement
and tax return purposes are net operating loss carryforwards and
accumulated depreciation. A deferred tax asset is recorded for net
operating losses being carried forward for tax purposes. At June 30, 1995,
the net deferred tax asset has been reduced to zero by a valuation
allowance.
6
<PAGE>
The Company's deferred tax asset as of June 30, 1995 consists of the
following:
<TABLE>
<S> <C>
Net operating loss carryforwards $ 2,134,140
Tax depreciation over book depreciation (123,192)
Vacation payable 4,696
Other 1,260
------------
2,016,904
Valuation allowance (2,016,904)
------------
$ --
============
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations.
Three months ended March 31, 1996 compared with three months ended March 31,
1995.
Net sales for the three months ended March 31, 1996 (Third Quarter
1996) were $879,508 and were constant compared to sales of $896,968 for the
three months ended March 31, 1995 (Third Quarter 1995). The Company's net
sales for both Third Quarter 1996 and Third Quarter 1995 were derived
primarily from the sale of Primidone, a generic version of Wyeth Ayerst's
Mysoline(R), an anti-convulsant; Butalbital Compound Capsules ("BCC"), a
generic version of Sandoz's Fiorinal(R); and Dicyclomine Hydrochloride USP,
10mg Capsules ("Dicyclomine"), a generic version of Marion Merrell Dow's
Bentyl(R), an antispasmodic and anticholinergic agent, which the Company
began manufacturing and distributing in July 1994.
Cost of sales were $419,275 in Third Quarter 1996 and were constant
compared to cost of sales of $423,195 in Third Quarter 1995. Gross profit
margins for Third Quarter 1996 and Third Quarter 1995 were 52.3% and 52.8%,
respectively.
Selling, general and administrative expenses were $269,541 in Third
Quarter 1996 and remained relatively constant compared to $286,450 in Third
Quarter 1995.
The Company reported an operating profit of $190,692 for Third Quarter
1996 compared to an operating profit of $187,323 for Third Quarter 1995.
The Company's interest expense increased to $151,374 in Third Quarter
1996 from $138,025 in Third Quarter 1995 due to increases in interest rates
and increased borrowings on the Company's lines of credit.
During Third Quarter 1995, the Company had provided for Pennsylvania
corporate income tax of approximately 11% of taxable income. Due to tax law
changes, the Company could not utilize its net operating loss carryforward
deduction for Pennsylvania corporate income tax during Fiscal 1995. The
1993 Pennsylvania Tax Act reactivated the net operating loss carryforward
deduction for taxable fiscal years after 1995; therefore, no provision for
Pennsylvania corporate income tax was made during Third Quarter 1996.
The Company reported net income of $41,316 for Third Quarter 1996, or
$.01 per share, $.01 on a fully diluted basis, compared to net income of
$47,732, or $.01 per share, $.01 on a fully diluted basis, for Third
Quarter 1995.
8
<PAGE>
Nine months ended March 31, 1996 compared with nine months ended March 31,
1995.
Net sales for the nine months ended March 31, 1996 decreased by 20.8%
to $2,738,197 from net sales of $3,456,089 for the nine months ended March
31, 1995. The Company's net sales for both the nine months ended March 31,
1996 and 1995 were derived primarily from the sale of Primidone, a generic
version of Wyeth Ayerst's Mysoline(R), an anti-convulsant; Butalbital
Compound Capsules ("BCC"), a generic version of Sandoz's Fiorinal(R); and
Dicyclomine Hydrochloride USP, 10mg Capsules ("Dicyclomine"), a generic
version of Marion Merrell Dow's Bentyl(R), an antispasmodic and
anticholinergic agent, which the Company began manufacturing and
distributing in July 1994. In addition during the nine months ended March
31, 1995, the Company performed a limited amount of contract packaging
for other manufacturing companies. The decrease in contract packaging
performed during the nine months ended March 31, 1996 and increased
competition for one of the company's products caused sales to decrease
during the nine months ended March 31, 1996 as compared to the nine months
ended March 31, 1995.
Cost of sales decreased by 16.3% to $1,319,983 in the nine months
ended March 31, 1996 from $1,577,918 in the nine months ended March 31,
1995. The decrease in cost of sales is due to lower production costs in the
nine months ended March 31, 1996 as a result of lower sales. In addition no
contract packaging costs were incurred during the nine months ended March
31, 1996. Gross profit margins for the nine months ended March 31, 1996 and
1995 were 51.9% and 54.3%, respectively. The decrease in the gross profit
percentage is primarily due to the decrease in sales during the nine months
ended March 31, 1996 and fewer fixed costs being absorbed during this
period.
Selling, general and administrative expenses were $809,034 in the nine
months ended March 31, 1996 which remained relatively constant compared to
similar expenses of $836,992 during the nine months ended March 31, 1995.
As a result of the foregoing, the Company reported an operating profit
of $609,180 for the nine months ended March 31, 1996 as compared to an
operating profit of $1,041,179 for the nine months ended March 31, 1995.
The Company's interest expense increased to $456,394 in the nine
months ended March 31, 1996 from $427,277 in the nine months ended March
31, 1995 due to increases in interest rates and increased borrowings on
the Company's lines of credit.
During the nine months ended March 31, 1995, the Company had provided
for Pennsylvania corporate income tax of approximately 11% of taxable
income. Due to tax law changes, the Company could not utilize its net
operating loss carryforward deduction for Pennsylvania corporate income tax
during Fiscal 1995. The 1993 Pennsylvania Tax Act reactivated the net
operating loss carryforward deduction for taxable fiscal years after 1995;
therefore, no provision for Pennsylvania corporate income tax was made
during the nine months ended March 31, 1996.
The Company reported net income of $185,439 for the nine months ended
March 31, 1996, or $.04 per share, $.02 on a fully diluted basis, compared
to net income of $536,659, or $.10 per share, $.05 on a fully diluted
basis, for the nine months ended March 31, 1995.
Liquidity and Capital Resources.
The Company used $72,792 and generated $98,056 of cash in operations
during the nine months ended March 31, 1996 and 1995, respectively. Net
cash used in operations increased as a result of lower sales during the
nine months ended March 31, 1996. As a result the increase in accounts
receivable was less during the nine months ended March 31, 1996 as compared
to the nine months ended March 31, 1995. Inventories increased during the
nine months ended March 31, 1996 due to the Company building up raw
material supplies in the anticipation of the introduction of a new product.
In addition the Company increased finished goods inventories to make
production time available for research and development. Accrued liabilities
decreased due to no state tax liability during the nine months ended March
31, 1996 and due to decreases in legal fees during Third Quarter 1996.
Accrued interest increased during the nine months ended March 31, 1996 as a
result of the Company deferring accrued interest from April 1, 1995 to June
30, 1996, which is payable in twenty-four equal monthly installments,
commencing August 15, 1996.
9
<PAGE>
The Company expended $163,195 for property, plant and equipment during
the nine months ended March 31, 1996 compared to $198,597 expended during
the nine months ended March 31, 1995. The Company has not made any material
commitments for capital expenditures and does not expect to incur any
material capital expenditures during the remainder of Fiscal 1996.
Net cash provided by financing activities increased to $272,575 during
the nine months ended March 31, 1996 from $501 used in financing activities
during the nine moths ended March 31, 1995. This increase in cash provided
by financing activities was primarily used to finance inventory and working
capital needs.
As a result of the foregoing, the Company experienced a $35,868
increase in cash available from the beginning to the end of the nine months
ended March 31, 1996, resulting in $74,843 of cash available at the end of
the period.
Except as set forth in this report, the Company is not aware of any
known trends, events or uncertainties that have or are reasonably likely to
have a material impact on the Company's net sales or income from continuing
operations. The Company is unable to anticipate what effect, if any, any
health care reform legislation may have on the Company's business.
From Fiscal 1987 through Fiscal 1994, the Company incurred operating
losses and suffered cash flow restraints. The Company suspended
manufacturing operations from August 1991 through October 1992. In August
1991, the Company obtained the needed capital to renovate its manufacturing
facility, to acquire new equipment, to remove hazardous waste materials, to
retain new management and to provide working capital primarily from a
financing facility made available to the Company by William Farber, a
principal shareholder and Chairman of the Board of Directors.
This financing facility originally consisted of a $2,000,000 revolving
line of credit and a $2,000,000, 9% convertible debenture. The revolving
line of credit and the debenture are secured by substantially all of the
Company's assets and are subordinated to the bank lines of credit and
mortgage term loan payable. In March 1993, at the Company's request,
William Farber increased the aggregate credit available under the revolving
line of credit to $3,500,000. The Company requested the additional
financing to provide working capital while the Company reformulated
products and obtained supplemental approvals from the Food and Drug
Administration ("FDA").
The line of credit bears interest at the prime rate published
by Michigan National Bank plus 1% per annum. The maturity date of
this line has been extended from December 31, 1996 through
July 1, 1997. Accrued interest through June 30, 1994 is payable
in twenty-four equal monthly installments, commencing August 15,
1994 and continuing on the fifteenth day of each month thereafter until
paid in full. Accrued interest from April 1, 1995 to June 30, 1996 is
payable in twenty-four equal monthly installments, commencing August 15,
1996 and continuing on the fifteenth day of each month thereafter, with the
balance due July 1, 1997. At March 31, 1996, accrued interest was
approximately $389,000. of which approximately $230,000 is included in the
long-term outstanding balance. At March 31, 1996, approximately $159,000
was classified as currently due.
The debenture bears interest at 9% per annum. The debenture is due
December 23, 1998 and is convertible at any time prior to payment in full
at the conversion rate of 4,000 shares of common stock for each $1,000 of
outstanding indebtedness (adjusted for the Company's 4 for 1 stock splits
in April 1992 and March 1993). Accrued interest through June 30, 1994 is
payable in twenty-four equal monthly installments, commencing August 15,
1994 and continuing on the fifteenth day of each month thereafter. Accrued
interest from April 1, 1995 to June 30, 1996 is payable in twenty-four
equal monthly installments, commencing August 15, 1996 and continuing on
the fifteenth day of each month thereafter until paid in full. At March 31,
1996, accrued interest was approximately $252,000, of which approximately
$122,000 is included in the long-term outstanding balance. At March 31,
1996, approximately $130,000 was classified as currently due.
10
<PAGE>
Management expects to have sufficient operating income during Fiscal
1996 to make the required monthly interest payments.
In May 1993, the Company obtained a $500,000 mortgage term loan from
Meridian Bank which provides for monthly principal installments of
approximately $2,800 plus interest at 9.25% per annum. A final balloon
payment of $302,778 is due May 2000. The Company also obtained a $500,000
line of credit form Meridian Bank which bears interest at a rate of 1.5%
per annum over Meridian's National Commercial Rate. The line of credit is
limited to 80% of qualified accounts receivable and 50% of finished goods
inventory. At March 31, 1996, $45,000 was available under the line of
credit. Both loans are secured by substantially all of the Company's assets
and the mortgage term loan is guarantied by Mr. Farber, who has
subordinated his loans to the Company to those of Meridian. Meridian's lien
against the Company's realty is to be released on payment in full of the
mortgage term loan.
In July 1995, the Company obtained a $300,000 revolving line of credit
for equipment financing from Meridian Bank. This line of credit bears
interest at a rate of prime plus 1.5% per annum. The line is
cross-collateralized with the bank mortgage term loan and line of credit.
At March 31, 1996 approximately $206,000 was available under the equipment
line of credit.
Management currently believes the balances available under the
Company's existing lines of credit will be adequate to fund the Company's
working capital requirements under current sales conditions. The current
development of new products with high raw material costs may result in the
Company having to increase its lines of credit to provide the working
capital necessary to produce those products and support the increased
levels of sales for these new products.
Except as set forth herein, the Company is not aware of any known
trends, events or uncertainties that have or are reasonably likely to have
a material impact on the Company's short-term or long-term liquidity or
financial condition.
Prospects for the Future.
As of March 31, 1996, the Company was manufacturing and marketing three
products: BCC, Primidone and Dicyclomine. In addition to the three products
marketed by the Company, sixteen additional products are under development
at this time; four of these products have been redeveloped and submitted to
the FDA for supplemental approval, ten others are currently in various
stages of development, revalidation or preparation for submission to the
agency, and two represent new product introductions as part of the
Company's commitment to a research and development program. Since the
Company has no control over the FDA review process, management is unable to
anticipate when it will commence production and begin shipping of
additional products. Subsequent to the Third Quarter ended March 31, 1996
the Company received from the FDA an "AB" rating for Dicyclomine
Hydrochloride USP, 10-mg capsules, making it fully interchangeable with
Marion Merrell Dow's Bentyl(R), and fully reimbursable under Federal
Government programs.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Regulatory Proceedings.
The Company is engaged in an industry which is subject to considerable
government regulation relating to developing, manufacturing and marketing
of pharmaceutical products. Accordingly, incidental to its business, the
Company periodically responds to inquiries or engages in administrative and
judicial proceedings involving regulatory authorities, particularly the FDA
and the Drug Enforcement Agency.
DES Cases.
The Company is currently engaged in several civil actions as a co-defendant
with many other manufacturers of Diethylstilbestrol ("DES"), a synthetic
hormone. For a discussion of these cases, see the Company's Annual Report
on Form 10-KSB for the Fiscal Year Ended June 30, 1995.
ITEM 5. OTHER INFORMATION
Effective January 1, 1996, Barry Weisberg resigned as President and a
director of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) A list of the exhibits required by Item 601 of Regulation S-B to be
filed as a part of this Form 10-QSB is shown on the Exhibit Index
filed herewith.
(b) The Company did not file any reports on Form 8-K during the last
quarter of the fiscal year covered by this report.
12
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
LANNETT COMPANY, INC.
Dated: May 10, 1996 By: / s / Jeffrey M. Moshal
-----------------------
Jeffrey M. Moshal
Vice President - Finance and Treasurer
13
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------
3(a) Articles of Incorporation Incorporated by reference to the
Proxy Statement filed with
respect to the Annual Meeting of
Shareholders held on December 6,
1991 (the "1991 Proxy
Statement")
3(b) Bylaws, as amended Incorporated by reference to the
1991 Proxy Statement
4(a) Specimen Certificate for Common Incorporated by reference to
Stock Exhibit 4(a) to Form 8 dated
April 23, 1993 (Amendment No. 3
to Form 10-K f/y/e June 30,
1992) ("Form 8")
10(a) Loan Agreement dated August 30, Incorporated by reference to the
1991 between the Annual Report on Form 10-K
Company and William Farber f/y/e June 30, 1991
10(b) Amendment #1 to Loan Agreement Incorporated by reference
dated March 15, 1993 to Exhibit 10(b) to the Annual
Report on Form 10-KSB f/y/e
June 30, 1993 ("1993 Form 10-K")
10(c) Amendment #2 to Loan Agreement Incorporated by reference
dated August 1, 1994 to Exhibit 10(c) to the Annual
Report on Form 10-KSB f/y/e
June 30, 1994 ("1994 Form 10-K")
10 (d) Amendment #3 to Loan Agreement Incorporated by reference to
dated May 15, 1995 Exhibit 10(d) to the Annual
Report on Form 10-KSB f/y/e
June 30, 1995 ("1995 Form 10-K")
10 (e) Amendment #4 to Loan Agreement Filed herewith
dated December 31, 1995
10 (f) Loan Agreement dated May 4, 1993 Incorporated by reference to
between the Company and Meridian Exhibit 10(c) to the 1993
Bank Form 10-K
10(g) Amendment to Loan Documents Incorporated by reference to
between the Company and Meridian Exhibit 10(e) to the 1994
Bank dated as of December 8, 1993 Form 10-K
10(h) Letter Agreement between the Incorporated by reference to
Company and Meridian Bank dated Exhibit 10(f) to the 1994
December 21, 1993 Form 10-K
14
<PAGE>
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------
10(i) Third Amendment to Loan Agreement Incorporated by reference to
dated as of June 9, 1994 Exhibit 10(g) to 1994 Form 10-K
10(j) Fourth Amendment to Loan Documents Incorporated by reference to
between the Company and Meridian Exhibit 10(i) to the Annual
Bank as of October 27, 1994 Report on Form 10-KSB f/y/e
June 30, 1995 ("1995 Form 10-K")
10(k) Letter Agreement between the Incorporated by reference to
Company and Meridian Bank dated Exhibit 10(j) to the 1995
October 27, 1994 Form 10-K
10(l) Letter Agreement between the Incorporated by reference to
Company and Meridian Bank dated Exhibit 10(k) to the 1995
July 10, 1995 Form 10-K
10(m) Amendment to Security Agreement Incorporated by reference to
between the Company and Meridian Exhibit 10(l) to the 1995
Bank dated July 31, 1995 Form 10-K
10(n) Line of Credit Note dated July 31, Incorporated by reference to
1995 Exhibit 10(m) to the 1995
Form 10-K
10(o) Fifth Amendment to Loan Agreement Incorporated by reference to
dated July 31, 1995 Exhibit 10(n) to the 1995
Form 10-K
10(p) Employment Agreement between the Incorporated by reference to
Company and Vlad Mikijanic Exhibit 10(i) to the 1994
Form 10-K
11 Computation of Per Share Earnings Incorporated by reference to
Exhibit 11 to the 1995 Form 10-K
22 Subsidiaries of the Company Incorporated by reference to the
Annual Report on Form 10-K f/y/e
June 30, 1994
23 Consent of Grant Thornton Incorporated by reference to
Exhibit 23 to the 1995 Form 10-K
15
<PAGE>
Exhibit 10 (e)
Amendment #4 to Loan Agreement
dated December 31, 1995
16
<PAGE>
William Farber
32640 Whatley
Franklin, Michigan 48025
December 31, 1995
Mr. Jeffrey Moshal
Lannett Company, Inc.
9000 State Road
Philadelphia, Pennsylvania 19136
Re: Loan Agreement between William Farber ("Lender") and Lannett
Company, Inc., a Delaware corporation ("Borrower") dated August 30, 1991, as
amended by Amendment #1 to Loan Agreement dated as of march 15, 1993, and by
letter agreements dated August 1, 1994 and May 15, 1995 (the "Loan Agreement")
Dear Jeffrey:
This letter confirms that the Maturity Date (as defined in the Loan
Agreement) for the Revolving Credit Loan is extended to July 1, 1997.
Very truly yours,
/ s / William Farber
--------------------
William Farber
AGREED TO AND ACCEPTED:
LANNETT COMPANY, INC.
By: / s / Jeffrey M. Moshal
------------------------------------------------
Jeffrey Moshal, Director of Financial Operations
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEETS AND STATEMENTS OF EARNINGS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> $ 74,843
<SECURITIES> 0
<RECEIVABLES> 760,050
<ALLOWANCES> 0
<INVENTORY> 719,642
<CURRENT-ASSETS> 1,595,619
<PP&E> 2,833,903
<DEPRECIATION> 923,294
<TOTAL-ASSETS> 3,530,277
<CURRENT-LIABILITIES> 1,161,583
<BONDS> 6,224,040
<COMMON> 5,206
0
0
<OTHER-SE> (3,860,552)
<TOTAL-LIABILITY-AND-EQUITY> 3,530,277
<SALES> 879,508
<TOTAL-REVENUES> 879,508
<CGS> 419,275
<TOTAL-COSTS> 688,816
<OTHER-EXPENSES> (1,998)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151,374
<INCOME-PRETAX> 41,316
<INCOME-TAX> 0
<INCOME-CONTINUING> 41,316
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,316
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
