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,
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 February 7, 1997, there were 5,206,128 shares of the issuer's
common stock, $.001 par value, outstanding.
Page 1 of 18 pages
Exhibit Index on Page 14
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<CAPTION>
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of
December 31, 1996 (unaudited) and
June 30, 1996...........................................................3
Consolidated Statements of Operations
for the three months and six months ended
December 31, 1996 and 1995 (unaudited)..................................4
Consolidated Statements of Cash Flows
for the six months ended December 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 6. Exhibits and Reports on Form 8-K......................................12
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2
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS 12/31/96 06/30/96
------ -------- --------
(UNAUDITED)
CURRENT ASSETS
<S> <C> <C>
Cash $ 0 $ 25,258
Trade accounts receivable 790,207 892,081
Inventories 1,098,483 874,219
Prepaid expenses 44,490 46,395
------------ ------------
Total current assets 1,933,180 1,837,953
------------ ------------
PROPERTY, PLANT AND EQUIPMENT
Land 33,414 33,414
Building and improvements 1,406,627 1,406,627
Machinery and equipment 1,499,673 1,317,458
Furniture and fixtures 64,511 64,511
------------ ------------
3,004,225 2,822,010
Less accumulated depreciation (1,061,211) (961,738)
------------ ------------
Net 1,943,014 1,860,272
------------ ------------
OTHER ASSETS 6,691 7,958
------------ ------------
Total assets $ 3,882,885 $ 3,706,183
============ ============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES
<S> <C> <C>
Line of credit $ 661,620 $ 548,092
Current maturities of long-term debt 54,009 61,356
Accounts payable 275,824 260,591
Accrued interest payable - shareholder 324,363 325,827
Accrued liabilities 49,810 136,357
------------ ------------
Total current liabilities 1,365,626 1,332,223
------------ -----------
LONG-TERM DEBT, LESS CURRENT MATURITIES 406,786 426,285
------------ ------------
NOTE PAYABLE AND ACCRUED INTEREST - SHAREHOLDER 2,206,000 2,123,500
------------ ------------
LINE OF CREDIT AND ACCRUED INTEREST -
SHAREHOLDER 4,033,247 3,727,894
------------ ------------
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 (4,454,555) (4,229,500)
------------ ------------
Total shareholders'
deficiency (4,128,774) (3,903,719)
------------ ------------
Total liabilities
and shareholders'deficiency $ 3,882,885 $ 3,706,183
============ ============
</TABLE>
3
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<TABLE>
<CAPTION>
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
-------------------------- ------------------------
12/31/96 12/31/95 12/31/96 12/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $ 997,754 $ 924,907 $ 1,649,115 $ 1,858,689
COST OF SALES 596,005 471,271 1,017,832 900,708
----------- ----------- ----------- -----------
Gross profit 401,749 453,636 631,283 957,981
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 220,660 274,974 535,140 539,493
----------- ----------- ----------- -----------
Operating profit 181,089 178,662 96,143 418,488
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSES), NET
Other 1,289 25,219 (1,899) 30,655
Interest expense (163,063) (151,646) (319,299) (305,020)
----------- ----------- ----------- -----------
(161,774) (126,427) (321,198) (274,365)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 19,315 $ 52,235 $ (225,055) $ 144,123
============ =========== ============ ===========
PRIMARY INCOME (LOSS) PER SHARE $ -- $ 0.01 $ (0.04) $ 0.03
FULLY DILUTED INCOME PER SHARE $ -- $ 0.01 $ -- $ 0.02
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
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<TABLE>
<CAPTION>
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED
------------------------
12/31/96 12/31/95
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net (loss) income $ (225,055) $ 144,123
Adjustments to reconcile net (loss) income to net cash
(used in) operating activities
Depreciation and amortization 100,740 101,062
(Decrease) increase in trade accounts receivable 101,874 (81,194)
Increase in inventories (224,264) (41,811)
Decrease in prepaid expenses 1,905 7,930
Increase (decrease) in accounts payable 15,233 (152,544)
(Decrease) in accrued liabilities (86,547) (90,829)
Increase in accrued interest 236,390 92,904
------------ ----------
Net cash (used in) operating activities (79,724) (20,359)
--------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (182,215) (127,193)
------------ ----------
Net cash used in investing activities (182,215) (127,193)
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings under lines of credit 263,527 153,880
Repayments of debt (26,846) (26,666)
------------ ----------
Net cash provided from financing activities 236,681 127,214
------------ ----------
NET (DECREASE) IN CASH (25,258) (20,338)
CASH AT BEGINNING OF PERIOD 25,258 38,975
------------ ----------
CASH AT END OF PERIOD $ 0 $ 18,637
============ ===========
</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, 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, 1996.
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, 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>
December 31, June 30,
1996 1996
------------ --------
(unaudited)
<S> <C> <C>
Raw materials $ 383,652 $309,051
Work-in-process 295,203 253,887
Finished goods 359,868 260,816
Packaging supplies 59,760 50,465
----------- --------
$ 1,098,483 $874,219
=========== ========
</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, 1996 and December 31, 1996, 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, 1996 consists of the
following:
<TABLE>
<S> <C>
Net operating loss carryforwards $ 2,083,750
Tax depreciation over book depreciation (137,058)
Vacation payable 7,509
Other 2,520
------------
1,956,721
Valuation allowance (1,956,721)
------------
$ --
============
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Results of Operations.
Three months ended December 31, 1996 compared with three months ended
December 31, 1995
Net sales for the three months ended December 31, 1996 (Second
Quarter 1997) increased by 7.9% to $997,754 from net sales of $924,907 for
the three months ended December 31, 1995 (Second Quarter 1996). Sales
increased during Second Quarter 1997 due to increased sales of one of the
Company's products and due to contract packaging performed during Second
Quarter 1997.
Cost of sales increased by 26.5%, to $596,005 in Second Quarter 1997
from $471,271 in Second Quarter 1996. Cost of sales increased due to higher
sales volumes, new products with higher raw material and labor costs, and the
hiring of additional employees to work on new product introductions and new
product approvals. Gross profit margins for Second Quarter 1997 and Second
Quarter 1996 were 40.3% and 49.0%, respectively. The decrease in the gross
profit percentage is primarily due to more competitive pricing for one of the
Company's products resulting in decreasing margins. In addition the Company
introduced Prednisone 5mg and Prednisone 20mg during the quarter ended June
30, 1996, which have lower gross profit margins than the Company's other
products.
Selling, general and administrative expenses decreased by 19.8%, to
$220,660 in Second Quarter 1997 from $274,974 in Second Quarter 1996. The
decrease is primarily due to decreased legal expenses and a decrease in
administrative payroll costs.
As a result of the foregoing, the Company reported an operating
profit of $181,089 for Second Quarter 1997, as compared to an operating
profit of $178,662 for Second Quarter 1996.
The Company's interest expense increased to $163,063 in Second
Quarter 1997 from $151,646 in Second Quarter 1996 primarily due to increased
borrowings on the Company's lines of credit. See Liquidity and Capital
Resources below.
The Company reported net income of $19,315 for Second Quarter 1997,
compared to net income of $52,235 or $0.01 per share, $.01 on a fully diluted
basis, for Second Quarter 1996. Net income decreased from Second Quarter 1997
as compared to Second Quarter 1996, largely due to an increase in interest
costs during Second Quarter 1997 and due to insurance proceeds being received
during Second Quarter 1996.
Six months ended December 31, 1996 compared with six months ended
December 31, 1995.
Net sales for the six months ended December 31, 1996 decreased by
11.3% to $1,649,115 from net sales of $1,858,689 for the six months ended
December 31, 1995 . Sales decreased during the six months ended December 31,
1996 due to increased competition and due to more competitive pricing.
Cost of sales increased by 13.0%, to $1,017,832 in the six months
ended December 31, 1996 from $900,708 in the six months ended December 31,
1995. Cost of sales increased due to new products with higher raw material
and labor costs, and the hiring of additional employees to work on new
product introductions and new product approvals. Gross profit margins for the
six months ended December 31, 1996 and December 31, 1995 were 38.2% and 51.5%,
respectively. The decrease in the gross profit percentage is primarily due to
more competitive pricing for one of the Company's products resulting in
decreasing margins. In addition the Company introduced Prednisone 5mg and
Prednisone 20mg during the quarter ended June 30, 1996, which have lower
gross profit margins than the Company's other products.
Selling, general and administrative expenses were $535,140 in the six
months ended December 31, 1996, which
8
<PAGE>
remained constant compared to similar expenses of $539,493 during the six
months ended December 31, 1995.
As a result of the foregoing, the Company reported an operating
profit of $96,143 for the six months ended December 31, 1996 as compared to
an operating profit of $418,488 for the six months ended December 31, 1995.
The Company's interest expense increased to $319,299 in the six
months ended December 31, 1996 from $305,020 in the six months ended December
31, 1995 due to increased borrowings on the Company's lines of credit.
The Company reported a net loss of $225,055 for the six months ended
December 31, 1996, or ($.04) per share, compared to net income of $144,123,
or $.03 per share, $.02 on a fully diluted basis, for the six months ended
December 31, 1995.
Liquidity and Capital Resources
The Company used $79,724 and $20,359 of cash in operations during the
six months ended December 31, 1996 and 1995, respectively. Net cash used in
operations increased during the six months ended December 31, 1996 due to
lower net income and an increase in inventory as a result of new product
introductions and due to the Company maintaining higher inventory levels of
its current products in order to allow for increased research and development
activities. Accounts receivable decreased as a result of the lower sales
levels in the six months ended December 31, 1996. Accrued liabilities
decreased due to the costs of a biostudy accrued at June 30, 1996 being paid
during the six months ended December 31, 1996 and as a result of lower legal
fees being incurred. Accrued interest increased due to the Company deferring
interest payments for Fiscal 1997 on the shareholder line of credit and note.
The Company expended $182,215 for property, plant and equipment during the
six months ended December 31, 1996 compared to $127,193 expended during the six
months ended December 31, 1995. The Company has budgeted up to $500,000, for
capital expenditures in Fiscal 1997 and expects to obtain the necessary
financing.
Net cash provided from financing activities increased to $236,681
during the six months ended December 31, 1996 from $127,214 provided by
financing activities during the six months ended December 31, 1995 due to
increased borrowings under both the shareholder and equipment lines, to
finance working capital and equipment needs.
As a result of the foregoing, the Company experienced a $25,258
decrease in cash available from the beginning to the end of the six months
ended December 31, 1996, resulting in a zero cash balance at the end of the
period.
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 net sales or income from continuing
operations.
From Fiscal 1987 through Fiscal 1994, the Company incurred operating
losses and suffered cash flow restraints. 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, in August 1991. This investment has resulted in an operating
profit for the Company for the Fiscal years 1996 and 1995.
9
<PAGE>
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 FDA. On November 1, 1996 at the Company's
request, William Farber increased the aggregate credit available under the
revolving line of credit to $3,750,000. The Company requested the additional
financing to provide working capital and to support new product development.
The line of credit bears interest at the prime rate published by
Michigan National Bank plus 1% per annum. Accrued interest from April 1, 1995
to June 30, 1996 is payable in two equal installments, on June 30, 1997 and
June 30, 1998. Accrued interest from July 1, 1996 to June 30, 1997 is
payable in twenty-four equal installments, commencing August 15, 1997
and continuing on the fifteenth day of each month thereafter, until paid
in full. Interest accrued on the outstanding principal balance from and
after July 1, 1997 is due and payable quarterly, in arrears, commencing
October 1, 1997 and continuing on the first day of each January,
April, July and October thereafter until paid in full. The outstanding
principle balance of the Revolving Credit Loan, together with accrued
interest, is due and payable in full on December 31, 1998. At
December 31, 1996 accrued interest was approximately $593,000 of which
$383,000 is included in the long-term outstanding balance. At December 31,
1996, $210,000 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 from April 1, 1995 to
June 30, 1996 is payable in two equal installments, on June 30, 1997 and
June 30, 1998. Accrued interest from July 1, 1996 to June 30, 1997 is
payable in twenty-four equal monthly installments, commencing August 15,
1997 and continuing on the fifteenth day of each month thereafter, until
paid in full. Interest accrued on the outstanding principal balance
from and after July 1, 1997 is due and payable quarterly, in arrears,
commencing October 1, 1997 and continuing on the first day of
each January, April, July and October thereafter until paid in full.
The outstanding principal balance of this Debenture, together with accrued
interest, is due and payable in full on December 23, 1998. At December 31,
1996 accrued interest was approximately $320,000, of which $206,000 is
included in the long-term outstanding balance. At December 31, 1996 $114,000
was classified as currently due.
At December 31, 1996, there was no additional borrowing capacity
available under the revolving line of credit. Management expects to have
sufficient operating income during Fiscal 1997 to make the required monthly
interest payments.
In May 1993, the Company obtained from a bank a $500,000 mortgage
term loan 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 in May 2000. The Company also obtained from the bank a $500,000 line
of credit which bears interest at prime plus 1.5% per annum. The line of
credit is limited to 80% of qualified accounts receivable. At December 31,
1996, no funds were available under the line of credit. Both loans are
secured by substantially all of the Company's assets and the mortgage term
loan is guaranteed by Mr. Farber, who has subordinated his loans to the
Company to those of the bank. The bank's lien against the Company's realty is
to be released on payment in full of the mortgage term loan.
On July 31, 1995, the Company secured a $300,000 bank revolving line
of credit for equipment financing, expiring October 31, 1996. Advances are
limited to 80% of equipment costs. On April 1, 1996, $93,881 of borrowings
under this line was converted into a secured term loan payable in forty-eight
equal monthly installments. This line of credit bears interest at prime plus
1.5%. At December 31, 1996, approximately $45,000 was available to the Company
under the revolving line of credit for equipment financing. The line of credit
is collateralized by all of the Company's present and future equipment. It is
also cross-collateralized with the bank mortgage term loan payable and the
line of credit. The Company is currently negotiating to increase its
borrowing capacity under the equipment line of credit.
10
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Management currently believes the balances available under the
Company's existing lines of credit, and working capital generated by sales
activity, will be adequate to fund the Company's working capital requirements
under current sales conditions. The Company anticipates increasing its lines
of credit in order to introduce new products and to support increased
research and development activities.
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, 1996, the Company was manufacturing and marketing
five products, BCC, Primidone, Dicyclomine, Prednisone 5mg and Prednisone
20mg. Ten additional products are under development at this time; of which
six are former Lannett products being prepared for reintroduction. One of
these products has been redeveloped and submitted to the FDA for supplemental
approval; five others are currently in various stages of development,
revalidation or preparation for submission to the FDA; and the remaining four
represent new product introductions, of which one has completed a bio-study
and has recently been submitted to the FDA for review. The Company recently
received approval from the FDA for Acetazolamide USP 250mg tablets, a
carbonic anhydrase inhibitor, the generic version of American Home Product's,
Diamox(R), used in the treatment of some types of convulsive disorders
(epilepsy), certain types of glaucoma, and in the treatment of cardiac edema.
The Company also recently received approval from the FDA to market
Isoniazid USP 300 mg tablets, Isoniazid, is an antibacterial and, in
combination with other antituberculars, is indicated in the treatment
of, and in certain persons, as a preventative therapy for, tuberculosis.
Since the Company has no control over the FDA review process, management is
unable to anticipate with certainty when it will commence production and
begin shipping of additional products. Lannett is also pursuing key strategic
alliances to jointly market its current product base. In addition, the
Company is actively pursuing contract manufacturing and contract packaging,
resulting in the recent signing of a "supply" agreement, sales from this
agreement are expected to exceed one million dollars in its first year.
11
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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, 1996.
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 period covered by this report.
12
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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, 1997 By: /s/ Jeffrey M. Moshal
-----------------------
Jeffrey M. Moshal
Vice President - Finance and Treasurer
13
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<TABLE>
<CAPTION>
Exhibit Index
Exhibit
Number Description Method of Filing Page
------ ----------- ---------------- ----
<S> <C> <C> <C>
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) By-Laws, as amended Incorporated by reference to the 1991 -
Proxy Statement.
4(a) Specimen Certificate for Incorporated by reference to Exhibit -
Common Stock 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 Incorporated by reference to the -
August 30, 1991 between Annual Report on Form 10-K f/y/e June
the Company and William 30, 1991
Farber
10(b) Amendment #1 to Loan Incorporated by reference to Exhibit -
Agreement dated March 15, 10(b) to the Annual Report on Form
1993 10-KSB f/y/e June 30, 1993 ("1993 Form
10-K")
10(c) Amendment #2 to Loan Incorporated by reference to Exhibit -
Agreement dated August 1, 10(c) to the Annual Report on Form
1994 10-KSB f/y/e June 30, 1994 ("1994 Form
10-K")
10(d) Amendment #3 to Loan Incorporated by reference to Exhibit -
Agreement dated May 15, 10(d) to the Annual Report on Form
1995 10-KSB f/y/e June 30, 1995 ("1995 Form
10-K")
10(e) Amendment #4 to Loan Incorporated by reference to Exhibit -
Agreement dated December 10(e) to the Annual Report on Form
31, 1995 10-KSB f/y/e June 30, 1996 ("1996 Form
10-K")
10(f) Amendment #5 to Loan Incorporated by reference to Exhibit -
Agreement dated June 30, 10(f) to the Annual Report on Form
1996 10-KSB f/y/e June 30, 1996 ("1996 Form
10-K")
10(g) Amendment #6 to Loan Filed Herewith 17
Agreement dated November
1, 1996
10(h) Loan Agreement dated May Incorporated by reference to Exhibit -
4, 1993 between the 10(c) to the 1993 Form 10-K
Company and Meridian Bank
10(i) Amendment to Loan Incorporated by reference to Exhibit -
Documents between the 10(e) to the Annual Report on Form
Company and Meridian Bank 10-KSB f/y/e June 30, 1994 ("1994 Form
dated as of December 8, 10-K")
1993
14
<PAGE>
Exhibit
Number Description Method of Filing Page
------ ----------- ---------------- ----
<S> <C> <C> <C>
10(j) Letter Agreement between Incorporated by reference to Exhibit -
the Company and Meridian 10(f) to the Annual Report on Form
Bank dated December 21, 10-KSB f/y/e June 30, 1994 ("1994 Form
1993 10-K")
10(k) Third Amendment to Loan Incorporated by reference to Exhibit -
Agreement dated as of June 10(g) to the Annual Report on Form
9, 1994 10-KSB f/y/e June 30, 1994 ("1994 Form
10-K")
10(l) Fourth Amendment to Loan Incorporated by reference to Exhibit -
Documents between the 10(i) to the Annual Report on Form
Company and Meridian Bank 10-KSB f/y/e June 30, 1995 ("1995 Form
as of October 27, 1994 10-K")
10(m) Letter Agreement between Incorporated by reference to Exhibit -
the Company and Meridian 10(j) to the Annual Report on Form
Bank dated October 27, 1994 10-KSB f/y/e June 30, 1995 ("1995 Form
10-K")
10(n) Letter Agreement between Incorporated by reference to Exhibit -
the Company and Meridian 10(k) to the Annual Report on Form
Bank dated July 10, 1995 10-KSB f/y/e June 30, 1995 ("1995 Form
10-K")
10(o) Amendment to Security Incorporated by reference to Exhibit -
Agreement between the 10(l) to the Annual Report on Form
Company and Meridian Bank 10-KSB f/y/e June 30, 1995 ("1995 Form
dated as of July 31, 1995 10-K")
10(p) Line of Credit Note dated Incorporated by reference to Exhibit -
July 31, 1995 10(m) to the Annual Report on Form
10-KSB f/y/e June 30, 1995 ("1995 Form
10-K")
10(q) Fifth Amendment to Loan Incorporated by reference to Exhibit -
Agreement dated July 31, 10(n) to the Annual Report on Form
1995 10-KSB f/y/e June 30, 1995 ("1995 Form
10-K")
10(r) Amendment to Loan Incorporated by reference to Exhibit -
agreement between the 10(q) to the Annual Report on Form
Company and Meridian Bank, 10-KSB f/y/e June 30, 1996 ("1996 Form
dated March 5, 1996. 10-K")
10(s) Employment agreement Incorporated by reference to Exhibit
between the Company and 10(i) to the Annual Report on Form
Vlad Mikijanic 10-KSB f/y/e June 30, 1994 ("1994 Form
10-K")
11 Computation of Per Share Incorporated by reference to Exhibit -
Earnings 11 to the Annual Report on Form 10-KSB
f/y/e June 30, 1996 ("1996 Form 10-K")
15
<PAGE>
Exhibit
Number Description Method of Filing Page
------ ----------- ---------------- ----
<S> <C> <C> <C>
22 Subsidiaries of the Company Incorporated by reference to the -
Annual Report on Form 10-K f/y/e June
30, 1990
23 Consent of Grant Thornton Incorporated by reference to Exhibit -
23 to the Annual Report on Form 10-KSB
f/y/e June 30, 1996 ("1996 Form 10-K")
</TABLE>
16
<PAGE>
Exhibit 10 (g)
Amendment #6 to Loan Agreement
dated November 1, 1996
17
<PAGE>
William Farber
32640 Whatley
Franklin, Michigan 48025
November 1, 1996
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, May 15, 1995, December 31, 1995, June
30, 1996 and November 1, 1996.
Dear Jeffrey:
This letter confirms that the Maturity Date (as defined in the Loan
Agreement) for the Revolving Credit Loan is extended to December 31, 1998.
This letter also confirms that the Lender will not declare an Event of
Default under the Loan Agreement or any promissory note or other document
executed and delivered in connection with the Loan Agreement if Borrower
fails to pay interest accrued from April 1, 1995 to June 30, 1996 on the
Revolving Credit Loan (as defined in the Loan Agreement) or the Term Loan (as
defined in the Loan Agreement) in monthly installments as currently provided
in the Loan Agreement; provided that (i) Borrower pays such accrued interest
in two equal monthly installments, on June 30, 1997, and June 30, 1998.
Very Truly Yours,
By: /s/ William Farber
-------------------
William Farber
AGREED TO AND ACCEPTED:
LANNETT COMPANY, INC.
By: /s/ Jeffrey M. Moshal
----------------------
Jeffrey M Moshal, Vice President - Finance and Treasurer
18
<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-30-1997
<PERIOD-END> Dec-31-1996
<CASH> $ 0
<SECURITIES> 0
<RECEIVABLES> 790,207
<ALLOWANCES> 0
<INVENTORY> 1,098,483
<CURRENT-ASSETS> 1,933,180
<PP&E> 3,004,225
<DEPRECIATION> 1,061,211
<TOTAL-ASSETS> 3,882,885
<CURRENT-LIABILITIES> 1,365,626
<BONDS> 6,646,033
<COMMON> 5,206
0
0
<OTHER-SE> (4,133,980)
<TOTAL-LIABILITY-AND-EQUITY> 3,882,885
<SALES> 1,649,115
<TOTAL-REVENUES> 1,649,115
<CGS> 1,017,832
<TOTAL-COSTS> 1,552,972
<OTHER-EXPENSES> 1,899
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 319,299
<INCOME-PRETAX> (225,055)
<INCOME-TAX> 0
<INCOME-CONTINUING> (225,055)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (225,055)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
