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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 DECEMBER 31, 1995.
[ ] 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 February 5 1996, there were 5,206,128 shares of the issuer's common
stock, $.001 par value, outstanding.
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Page 1 of 15 pages
Exhibit Index on Page 14
<PAGE>
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
December 31, 1995 (unaudited) and
June 30, 1995.................................................3
Consolidated Statements of Earnings
for the three months and six months ended December 31, 1995
and 1994 (unaudited)..........................................4
Consolidated Statements of Cash Flows
for the six months ended December 31, 1995
and 1994 (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 12/31/95 06/30/95
------ -------- --------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash $ 18,637 $ 38,975
Trade accounts receivable 690,902 609,708
Inventories 462,718 420,907
Prepaid expenses 35,446 43,376
----------- -----------
Total current assets 1,207,703 1,112,966
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Land 33,414 33,414
Building and improvements 1,346,474 1,340,414
Machinery and equipment 1,352,783 1,231,649
Furniture and fixtures 64,510 64,511
----------- -----------
2,797,181 2,669,988
Less accumulated depreciation (884,604) (784,684)
----------- -----------
Net 1,912,577 1,885,304
----------- -----------
OTHER ASSETS 9,682 10,824
----------- -----------
Total assets $ 3,129,962 $ 3,009,094
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES
Line of credit $ 460,880 $ 307,000
Current maturities of long-term debt 42,665 52,665
Accounts payable 75,317 227,861
Accrued interest payable -- shareholder 209,545 370,432
Accrued liabilities 44,775 135,604
Line of credit and accrued interest -- shareholder 3,762,696 --
----------- -----------
Total current liabilities 4,595,878 1,093,562
----------- -----------
LONG-TERM DEBT, LESS CURRENT MATURITIES 380,556 397,222
----------- -----------
NOTE PAYABLE AND ACCRUED INTEREST -- SHAREHOLDER 2,050,190 2,045,500
----------- -----------
LINE OF CREDIT AND ACCRUED INTEREST -- SHAREHOLDER -- 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 (4,222,443) (4,366,566)
----------- -----------
Total shareholders' deficiency (3,896,662) (4,040,785)
----------- -----------
Total liabilities and shareholders' deficiency $ 3,129,962 $ 3,009,094
=========== ===========
</TABLE>
3
<PAGE>
LANNETT COMPANY, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
-------------------------- ------------------------
12/31/95 12/31/94 12/31/95 12/31/94
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $ 924,907 $ 945,819 $ 1,858,689 $ 2,559,121
COST OF SALES 471,271 467,570 900,708 1,154,723
------------ ------------ ------------ ------------
Gross profit 453,636 478,249 957,981 1,404,398
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 274,974 194,092 539,493 550,542
------------ ------------ ------------ ------------
Operating profit 178,662 284,157 418,488 853,856
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSES), NET
Other 25,219 -- 30,655 (8,677)
Interest expense (151,646) (139,814) (305,020) (289,252)
------------ ------------ ------------ ------------
(126,427) (139,814) (274,365) (297,929)
------------ ------------ ------------ ------------
NET INCOME BEFORE INCOME TAXES 52,235 144,343 144,123 555,927
STATE INCOME TAXES -- CURRENT -- 17,000 -- 67,000
------------ ------------ ------------ ------------
NET INCOME $ 52,235 $ 127,343 $ 144,123 $ 488,927
============ ============ ============ ============
PRIMARY INCOME PER SHARE $ 0.01 $ 0.02 $ 0.03 $ 0.09
FULLY DILUTED INCOME PER SHARE $ 0.01 $ 0.01 $ 0.02 $ 0.04
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>
LANNETT COMPANY, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED
------------------------
12/31/95 12/31/94
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 144,123 $ 488,927
Adjustments to reconcile net income to net cash
(used in) provided by operating activities
Depreciation and amortization 101,062 94,288
Loss on sale of property, plant and equipment -- 9,000
Increase in trade accounts receivable (81,194) (282,329)
Increase in inventories (41,811) (10,116)
Decrease in prepaid expenses 7,930 9,365
(Decrease) increase in accounts payable (152,544) 3,690
(Decrease) increase in accrued liabilities (90,829) 650
Increase (decrease) in accrued interest 92,904 (83,981)
--------- ---------
Net cash (used in) provided by operating activities (20,359) 229,494
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (127,193) (149,616)
Proceeds from sale of property, plant and equipment -- 4,000
--------- ---------
Net cash used in investing activities (127,193) (145,616)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings under lines of credit 153,880 (25,000)
Repayments of debt (26,666) (28,667)
Collection of shareholder note receivable -- 67,500
--------- ---------
Net cash provided from financing activities 127,214 13,833
--------- ---------
NET (DECREASE)/INCREASE IN CASH (20,338) 97,711
CASH AT BEGINNING OF PERIOD 38,975 133,626
--------- ---------
CASH AT END OF PERIOD $ 18,637 $ 231,337
========= =========
</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 six months ended December 31, 1995 and
1994 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 December 31, 1995
and 1994. 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>
December 31, June 30,
1995 1995
------------ --------
(unaudited)
<S> <C> <C>
Raw materials $124,634 $115,875
Work-in-process 128,542 236,345
Finished goods 153,772 24,945
Packaging supplies 55,770 43,742
-------- --------
$462,718 $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>
<CAPTION>
<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.
In August 1991, the Company temporarily suspended manufacturing operations
in order to upgrade its facilities and operations and to systematically
review its abbreviated new drug applications, systems and procedures. The
Company completed the modernization of its facilities and operations,
instituted inventory and quality control programs, and implemented a
multi-pronged remedial action plan to assure compliance with applicable
governmental regulations and industry standards. The Company resumed
manufacturing and distribution on a limited product basis in October 1992.
Three months ended December 31, 1995 compared with three months ended
December 31, 1994.
Net sales for the three months ended December 31, 1995 (Second Quarter
1996) were $924,907 and were constant compared to sales of $945,818 for the
three months ended December 31, 1994 (Second Quarter 1995). The Company's
net sales for both Second Quarter 1996 and Second 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 $471,271 in Second Quarter 1996 compared to $467,570 in
Second Quarter 1995, a minimal increase. Gross profit margins for Second
Quarter 1996 and Second Quarter 1995 were 49.1% and 50.6%, respectively.
Selling, general and administrative expenses increased by 41.7% to $274,974
in Second Quarter 1996 from $194,092 in Second Quarter 1995. This increase
is primarily due to an increase in research and development expenses during
Second Quarter 1996 and the recovery of a bad debt during Second Quarter
1995.
The Company reported an operating profit of $178,662 for Second Quarter
1996 compared to an operating profit of $284,157 for Second Quarter 1995.
The Company's interest expense increased to $151,646 in Second Quarter 1996
from $139,814 in Second Quarter 1995 due to increases in interest rates and
increased borrowings on the Company's lines of credit.
During Second 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 Second Quarter 1996.
The Company reported net income of $52,235 for Second Quarter 1996, or $.01
per share, $.01 on a fully diluted basis, compared to net income of
$127,343, or $.02 per share, $.01 on a fully diluted basis, for Second
Quarter 1995.
8
<PAGE>
Six months ended December 31, 1995 compared with six months ended December 31,
1994.
Net sales for the six months ended December 31, 1995 were $1,858,689
compared to net sales of $2,559,121 for the six months ended December 31,
1994. The Company's net sales for both the six months ended December 31,
1995 and 1994 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 six months ended December
31, 1994, the Company performed a limited amount of contract repackaging
for other manufacturing companies. The contract repackaging performed, and
the introduction of Dicyclomine in July 1994, caused sales during the six
month period ended December 31, 1994 to be high as customers began filling
their distribution channels with this new product.
Cost of sales decreased by 22.0% to $900,708 in the six months ended
December 31, 1995 from $1,154,723 in the six months ended December 31,
1994. The large decrease in cost of sales is due to lower raw material and
production costs in the six months ended December 31, 1995 as a result of
lower sales. In addition no contract repackaging costs were incurred during
the six months ended December 31, 1995. Gross profit margins for the six
months ended December 31, 1995 and 1994 were 51.5% and 54.9%, respectively.
The decrease in the gross profit percentage is primarily due to the
decrease in sales during the six months ended December 31, 1995 and less
fixed costs being absorbed during this period.
Selling, general and administrative expenses were $539,493 in the six
months ended December 31, 1995, which remained constant compared to similar
expenses of $550,542 during the six months ended December 31, 1994.
As a result of the foregoing, the Company reported an operating profit of
$418,488 for the six months ended December 31, 1995 as compared to an
operating profit of $853,856 for the six months ended December 31, 1994.
The Company's interest expense increased to $305,020 in the six months
ended December 31, 1995 from $289,252 in the six months ended December 31,
1994 due to increases in interest rates and increased borrowings on the
Company's lines of credit.
During the six months ended December 31, 1994, 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 six months ended December 31, 1995.
The Company reported net income of $144,123 for the six months ended
December 31, 1995, or $.03 per share, $.02 on a fully diluted basis,
compared to net income of $488,927, or $.09 per share, $.04 on a fully
diluted basis, for the six months ended December 31, 1995.
Liquidity and Capital Resources.
The Company used $20,359 and generated $229,494 of cash in operations
during the six months ended December 31, 1995 and 1994, respectively. Net
cash used in operations increased as a result of lower sales during the six
months ended December 31, 1995. As a result the increase in accounts
receivable was less during the six months ended December 31, 1995 as
compared to the six months ended December 31, 1994. Accounts payable
decreased as a result of lower production costs during the six months ended
December 31, 1995. Accrued liabilities decreased due to no state tax
liability during the six months ended December 31, 1995. Accrued interest
increased during the six months ended December 31, 1995 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 $127,193 for property, plant and equipment during the
six months ended December 31, 1995 compared to $149,616 expended during the
six months ended December 31, 1994. 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 $127,214 during the
six months ended December 31, 1995 from $13,833 during the six months ended
December 31, 1994. This increase in cash provided by financing activities
was primarily used to finance equipment and working capital needs.
As a result of the foregoing, the Company experienced a $20,338 decrease in
cash available from the beginning to the end of the six months ended
December 31, 1995, resulting in $18,637 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. For the six months
ended December 31, 1995 the Company reported an operating profit of
$418,488. For the six months ended December 31, 1994 the Company reported
an operating profit of $853,856.
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 principal is due in full on December
31, 1996. 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 December
1996. At December 31, 1995, accrued interest was approximately $336,000.
The entire principal balance and accrued interest have been classified as a
current liability. The Company anticipates refinancing the loan prior to
the maturity date.
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 December
31, 1995, accrued interest was approximately $260,000, of which
approximately $50,000 is included in the long-term outstanding balance. At
December 31, 1995, approximately $210,000 was classified as currently due.
10
<PAGE>
At December 31, 1995, $73,071 was available under the shareholder revolving
line of credit. 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. At December 31, 1995,
$133,000 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 December 31, 1995
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 December 31, 1995, 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. Management hopes to receive the requisite
FDA approval for one or more products by the end of Fiscal 1996.
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: February 12, 1996 By: /S/ Jeffrey M. Moshal
---------------------
Jeffrey M. Moshal
Director of Financial
Operations
<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 Company and Annual Report on Form 10-K f/y/e
William Farber June 30, 1991
10(b) Amendment #1 to Loan Agreement Incorporated by reference to
dated March 15, 1993 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 to
dated August 1, 1994 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) 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(f) 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(g) 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
10(h) Third Amendment to Loan Agreement Incorporated by reference to
dated as of June 9, 1994 Exhibit 10(g) to 1994 Form 10-K
14
<PAGE>
EXHIBIT
NO. DESCRIPTION METHOD OF FILING
- -------- ----------- ----------------
10(i) 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(j) 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(k) 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(l) 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(m) Line of Credit Note dated July 31, Incorporated by reference to
1995 Exhibit 10(m) to the 1995
Form 10-K
10(n) 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
27 Financial Data Schedule
15
<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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> $ 18,637
<SECURITIES> 0
<RECEIVABLES> 690,902
<ALLOWANCES> 0
<INVENTORY> 462,718
<CURRENT-ASSETS> 1,207,703
<PP&E> 2,797,181
<DEPRECIATION> 884,604
<TOTAL-ASSETS> 3,129,962
<CURRENT-LIABILITIES> 4,595,878
<BONDS> 2,473,411
<COMMON> 5,206
0
0
<OTHER-SE> (3,901,868)
<TOTAL-LIABILITY-AND-EQUITY> 3,129,962
<SALES> 1,858,689
<TOTAL-REVENUES> 1,858,689
<CGS> 900,708
<TOTAL-COSTS> 1,440,201
<OTHER-EXPENSES> (30,655)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 305,020
<INCOME-PRETAX> 144,123
<INCOME-TAX> 0
<INCOME-CONTINUING> 144,123
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144,123
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.02
</TABLE>
