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
SEPTEMBER 30, 1997.
/ / 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 November 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
<PAGE>
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 1997 (unaudited) and
June 30, 1997....................................... 3
Consolidated Statements of Operations
for the three months ended September 30, 1997
and 1996 (unaudited)................................ 4
Consolidated Statements of Cash Flows
for the three months ended September 30, 1997
and 1996 (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...................................... 13
Item 6. Exhibits and Reports on Form 8-K....................... 13
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS 09/30/97 06/30/97
------ -------- --------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash $ 20,855 $ 15,509
Trade accounts receivable 1,474,608 1,007,902
Inventories 1,447,509 1,418,440
Prepaid expenses 37,015 46,523
----------- -----------
Total current assets 2,979,987 2,488,374
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Land 33,414 33,414
Building and improvements 1,597,213 1,491,515
Machinery and equipment 2,594,952 2,193,109
Furniture and fixtures 64,286 64,286
----------- -----------
4,289,865 3,782,324
Less accumulated depreciation (1,229,876) (1,165,891)
----------- -----------
Net 3,059,989 2,616,433
----------- -----------
OTHER ASSETS 4,791 5,425
----------- -----------
Total assets $ 6,044,767 $ 5,110,232
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES
Line of credit $ 1,323,688 $ 1,323,688
Current maturities of long-term debt 188,238 107,238
Accounts payable 572,463 549,069
Accrued interest payable - shareholder 383,535 162,181
Accrued liabilities 228,062 251,524
----------- -----------
Total current liabilities 2,695,986 2,393,700
----------- -----------
LONG-TERM DEBT, LESS CURRENT MATURITIES 814,540 522,421
----------- -----------
NOTE PAYABLE AND ACCRUED INTEREST - SHAREHOLDER 2,324,875 2,353,500
----------- -----------
LINE OF CREDIT AND ACCRUED INTEREST - SHAREHOLDER 4,535,715 4,533,670
----------- -----------
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 (4,652,130) (5,018,840)
----------- -----------
Total shareholders' deficiency (4,326,349) (4,693,059)
----------- -----------
Total liabilities and shareholders' deficiency $ 6,044,767 $ 5,110,232
=========== ===========
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
--------------------------
9/30/97 9/30/96
------- -------
<S> <C> <C>
NET SALES $ 2,437,864 $ 651,361
COST OF SALES 1,520,641 421,827
------------ ------------
Gross profit 917,223 229,534
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 362,755 314,480
------------ ------------
Operating profit (loss) 554,468 (84,946)
------------ ------------
OTHER INCOME (EXPENSES), NET
Other Income (expenses) 5,397 (3,188)
Interest expense (193,155) (156,236)
------------ ------------
(187,758) (159,424)
------------ ------------
------------ ------------
NET INCOME (LOSS) $ 366,710 $ (244,370)
============ ============
PRIMARY INCOME (LOSS) PER SHARE $ 0.07 $ (0.05)
FULLY DILUTED INCOME PER SHARE $ 0.03 $ --
PRIMARY WEIGHTED AVERAGE NUMBER OF SHARES 5,206,128 5,206,128
FULLY DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES 15,030,128 --
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
--------------------------
09/30/97 09/30/96
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 366,710 $(244,370)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization 64,619 49,530
(Increase) / decrease in trade accounts receivable (466,706) 372,409
(Increase) in inventories (29,069) (124,393)
Decrease / (increase) in prepaid expenses and other assets 9,508 (19,276)
Increase / (decrease) in accounts payable 23,394 (16,758)
(Decrease) in accrued liabilities (23,462) (68,157)
Increase in accrued interest 144,774 46,181
--------- ---------
Net cash provided by (used in) operating activities 89,768 (4,834)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (507,541) (7,091)
--------- ---------
Net cash used in investing activities (507,541) (7,091)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under lines of credit - shareholder 50,000 0
Repayments of debt (26,881) (13,333)
Proceeds from debt 400,000 0
--------- ---------
Net cash provided by (used in) financing activities 423,119 (13,333)
--------- ---------
NET INCREASE / (DECREASE) IN CASH 5,346 (25,258)
CASH AT BEGINNING OF PERIOD 15,509 25,258
--------- ---------
CASH AT END OF PERIOD $ 20,855 $ 0
========= =========
</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 three months ended September 30, 1997
and 1996 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, 1997.
Note 2.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings Per Share, which is
effective for financial statements issued after December 15, 1997. Early
adoption of the new standard is not permitted. The new standard
eliminates primary and fully diluted earnings per share and requires
presentation of basic and diluted earnings per share together with
disclosure of how the per share amounts were computed. The adoption of
this new standard is not expected to have a material impact on the
disclosure of earnings per share in the financial statements.
Note 3.
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
------------- --------
(unaudited)
<S> <C> <C>
Raw materials $ 604,604 $ 515,279
Work-in-process 575,717 505,563
Finished goods 92,949 281,315
Packaging supplies 174,239 116,283
----------- -----------
$ 1,447,509 $ 1,418,440
=========== ===========
</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 September 30, 1997, 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, 1997 consists of the
following:
<TABLE>
<S> <C>
Net operating loss carryforward $ 2,380,000
Tax depreciation over book depreciation (158,060)
Vacation payable 14,880
Other 8,400
-----------
2,245,220
Valuation allowance (2,245,220)
-----------
$ --
===========
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations.
The following is management's discussion and analysis of the
significant changes in the results of operations, capital resources and
liquidity presented in its accompanying consolidated financial statements.
This discussion should be read in conjunction with the 1997 Annual report.
Current performance does not guarantee, assure, or may not be indicative of
similar performance in the future.
In addition to historical information, this form 10-Q contains
forward-looking statements. The forward-looking statements contained herein
are subject to certain risks and uncertainties that could cause actual
results to differ materially from those projected in the forward-looking
statements. Important factors that might cause such a difference include, but
are not limited to, those discussed in the section entitled "Management's
Discussion and Analysis of Results of Operations and Financial Condition."
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date hereof.
The Corporation undertakes no obligation to publicly revise or update these
forward-looking statements to reflect events or circumstances that arise
after the date hereof. Readers should carefully review the risk factors
described in other documents the Corporation files from time to time with the
Securities and Exchange Commission, including the Quarterly reports on Form
10-Q to be filed by the Corporation in 1997 and 1998, and any Current Reports
on Form 8-K filed by the Corporation.
Three months ended September 30, 1997 compared with three months
ended September 30, 1996
Net sales for the three months ended September 30, 1997 (First
Quarter 1998) increased by 274% to $2,437,864 from net sales of $651,361 for
the three months ended September 30, 1996 (First Quarter 1997). The Company's
net sales during First Quarter 1998 were derived from the sale of Primidone,
a generic version of American Home Product's Mysoline(R), an anti-convulsant;
Butalbital Compound Capsules ("BCC"), a generic version of Novartis
Pharmaceuticals Corporation's Fiorinal(R) an analgesic; Dicyclomine
Hydrochloride USP, 10mg Capsules ("Dicyclomine"), a generic version of
Hoechst Marion Roussel's Bentyl(R), an antispasmodic and anticholinergic
agent and contract manufacturing. Sales increased during First Quarter 1998
due to the recent signing of two significant contract manufacturing supply
agreements and increased sales of the Company's products through additional
private label supply agreements. The Company's net sales during First Quarter
1997 were derived from the sale of BCC, Primidone, Dicyclomine, Prednisone
5mg and Prednisone 20mg.
Cost of sales increased by 260%, to $1,520,641 in First Quarter 1998
from $421,827 in First Quarter 1997. The cost of sales increase is in line
with the increase in net sales during the same period. Gross profit margins
for First Quarter 1998 and First Quarter 1997 were 37.6% and 35.2%,
respectively. The increase in the gross profit percentage is primarily due to
the increase in sales during First Quarter 1998 and as a result of greater
absorption of fixed costs during this period.
Selling, general and administrative expenses increased by 15.3%, to
$362,755 in First Quarter 1998 from $314,480 in First Quarter 1997. The
increase is primarily due to increased employment service fees as a result of
increased personnel hired to support the Company's growth and increased
commission expense as result of the contract manufacturing agreements.
The Company reported an operating profit of $554,468 for First
Quarter 1998, as compared to
8
<PAGE>
an operating loss of $84,946 for First Quarter 1997.
The Company's interest expense increased to $193,155 in First
Quarter 1998 from $156,236 in First Quarter 1997 primarily due to increased
borrowings on the Company's lines of credit and additional borrowings under
term loans. See Liquidity and Capital Resources below.
The Company reported net income of $366,710 for First Quarter 1998,
or $.07 per share, $0.03 on a fully diluted basis compared to a net loss of
($244,370) or ($0.05 ) per share, for First Quarter 1997.
Liquidity and Capital Resources
The Company generated $89,768 and utilized $4,834 of cash in
operations during First Quarter 1998 and First Quarter 1997, respectively.
Net cash generated from operations increased from First Quarter 1997 to
First Quarter 1998 as a result of higher net income in First Quarter 1998.
Accounts receivable increased as a result of increased sales levels during
First Quarter Fiscal 1998. Accrued interest increased as a result of
payments on the Shareholder deferred interest becoming due.
The Company expended $507,541 for property, plant and equipment
during First Quarter 1998 compared to $7,091 expended during First Quarter
1997. The Company has budgeted for an additional $1,400,000 in capital
expenditures in Fiscal 1998 and is currently negotiating to obtain the
necessary financing. The increase in capital expenditures and anticipated
additional capital expenditure requirements are necessary to support the
growth anticipated to result from the contract manufacturing and private
label supply agreements, and to support new product introductions.
Net cash provided by financing activities increased to $423,119
during First Quarter 1998 from $13,333 used in financing activities during
First Quarter 1997. The cash provided by financing activities was utilized
to purchase equipment and to finance construction.
As a result of the foregoing, the Company experienced a $5,346
increase in cash available from the beginning to the end of First Quarter
1998, resulting in $20,855 cash available at the end of First Quarter 1998.
Except as set forth, 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, 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.
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. During First Quarter 1998, the Company
increased the aggregate credit available under the revolving line of credit
to $4,250,000. The Company requested the additional financing to finance
equipment purchases and to provide working capital to support anticipated
growth.
The line of credit bears interest at the prime rate published by
Michigan National Bank plus 1% per annum. The principal is due October 1,
1999. Accrued interest from April 1, 1995 to June 30, 1996 is payable in
twenty-four equal monthly installments, commencing January 15, 1998 and
continuing on the fifteenth day of each month thereafter with the balance due
October 1, 1999. Accrued interest from July 1, 1996 to June 30, 1997 is
payable in twenty-four equal monthly installments, commencing July 15, 1998
and continuing on the fifteenth day of each month thereafter, with the
balance due October 1, 1999. Interest accrued on the outstanding principal
balance from and after July 1, 1997 is payable in twenty-four equal
installments, commencing July 15, 1998 and continuing on the fifteenth day of
each month thereafter. At September 30, 1997 accrued interest was
approximately $863,000 of which approximately $610,000 is included in the
long-term outstanding balance. At September 30, 1997 approximately $253,000
was classified as a current liability. At September 30, 1997 there was
$325,000 available under the line of credit.
The debenture bears interest at 9% per annum. The debenture is due
December 23, 1998. The debenture and accrued interest 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 twenty-four equal
monthly installments, commencing January 15, 1998 and continuing on the
fifteenth day of each month thereafter with the balance due December 23,
1998. Accrued interest from July 1, 1996 to June 30, 1997 is payable in
twenty-four equal monthly installments, commencing July 15, 1998 and
continuing on the fifteenth day of each month thereafter, with the balance
due December 23, 1998. Interest accrued on the outstanding principal balance
from and after July 1, 1997 is payable in twenty-four equal installments,
commencing July 15, 1998 and continuing on the fifteenth day of each month
thereafter. At September 30, 1997 accrued interest was $456,000, of which
approximately $326,000 is included in the long-term outstanding balance. At
September 30, 1997 approximately $130,000 was classified as a current
liability.
Management expects to have sufficient operating income during Fiscal
1998 to make the required monthly interest payments.
In May 1993, the Company obtained a $500,000 mortgage term loan from
a Bank that 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 has a $1,000,000 line of credit from the Bank
that bears interest at prime plus 1.25% per annum. The line of credit is
limited to 80% of qualified accounts receivable and 20% of finished goods
inventory. At September 30, 1997, 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.
10
<PAGE>
On July 31, 1995, the Company secured a $300,000 bank revolving line
of credit for equipment financing. 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 term loan bears interest at 8.85% per annum. On April 1, 1997, $206,119
of borrowings under this line of credit and an additional $3,101 advance was
converted into a secured term loan payable in forty-eight even monthly
installments. This term loan of $209,220 bears interest at prime plus 1.5%.
At September 30, 1997, there was no availability 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.
On March 20, 1997, the Company secured a $350,000 bank revolving
line of credit for equipment financing. Advances are limited to 80% of
equipment costs. The line of credit bears interest at prime plus 1.5%. At
September 30, 1997, $26,312 was available under this 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.
On September 24, 1997, the Company secured a $400,000 term loan to
be used to purchase certain specified equipment. The term loan is payable in
59 even monthly installments of principal and interest with a final payment
of all outstanding principal and interest in the 60th month. This term loan
bears interest at 8.9% and is collateralized by all equipment purchased under
the facility and cross-collateralized by all of the Company's present and
future equipment.
Management currently believes the balances available under the
Company's existing lines of credit, and working capital generated by
increased sales activity, will be adequate to fund the Company's working
capital requirements under current sales conditions. The introduction of new
products, increased research and development activities, increased sales
from contract manufacturing and anticipated capital expenditures, will
result in the Company having to increase its lines of credit to provide
the necessary working capital and capital financing to support the
Company's growth. The Company is currently negotiating to increase its
borrowing capacity under the lines of credit.
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 short-term or long-term liquidity or
financial condition.
Prospects for the Future
As of September 30, 1997, the Company was manufacturing and
marketing three products, BCC, Primidone, and Dicyclomine. Nine additional
products are under development at this time. Six of these products are being
developed and manufactured for other companies, while the other three
products are being developed as part of the Lannett product line. One of the
Lannett products has been redeveloped and submitted to the FDA for
supplemental approval. The remaining two Lannett products represent new
product introductions as part of the Company's commitment to a research and
development program, of which one has completed a bio-study and has recently
been submitted to the FDA for review. Since the Company has no control over
the FDA review process, management is unable to anticipate when it will
commence production and begin shipping other new products.
During Fiscal 1997, the Company signed two major contract
manufacturing supply agreements. In addition the Company signed a number of
private label supply agreements with larger generic pharmaceutical companies
to increase market share of its current product line by utilizing the sales
and
11
<PAGE>
marketing strengths of these larger companies.
With a modern manufacturing facility, a highly qualified and
motivated work force and management team, and quality control programs
in place, management believes the Company is positioned to regain a
competitive position in the market as it reintroduces additional products,
meets contract manufacturing goals and further penetrates the market with its
existing products.
12
<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, 1997.
Employee Claim.
A claim has been filed by a former employee with the Pennsylvania Human
Relations Commission. the Company has denied liability in this matter;
management believes that the outcome will not have a material adverse impact
on the financial position 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.
13
<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: November 11, 1997 By: /s/ Jeffrey M. Moshal
---------------------
Jeffrey M. Moshal
Vice President - Finance and Treasurer
14
<PAGE>
<TABLE>
<CAPTION>
Exhibit Index
Exhibit
Number Description Method of Filing
------- ----------- ----------------
<S> <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 Common Incorporated by reference to Exhibit 4(a) to
Stock 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 Annual Report
1991 between the Company and on Form 10-K f/y/e June 30, 1991
William Farber
10(b) Amendment #1 to Loan Agreement Incorporated by reference to Exhibit 10(b) to
dated March 15, 1993 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 Exhibit 10(c) to
dated August 1, 1994 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 Exhibit 10(d) to
dated May 15, 1995 the Annual Report on Form 10-KSB f/y/e June 30,
1995 ("1995 Form 10-K")
10(e) Amendment #4 to Loan Agreement Incorporated by reference to Exhibit 10(e) to the
dated December 31, 1995 Annual Report on Form 10-KSB f/y/e June 30, 1996
("1996 Form 10-K")
10(f) Amendment #5 to Loan Agreement Incorporated by reference to Exhibit 10(f) to the
dated June 30, 1996 Annual Report on Form 10-KSB f/y/e June 30, 1996
("1996 Form 10-K")
10(g) Amendment #6 to Loan Agreement Incorporated by reference to Exhibit 10(g) to the
dated November 1, 1996 Annual Report on Form 10-KSB f/y/e June 30, 1997
("1997 Form 10-K")
15
<PAGE>
<CAPTION>
Exhibit
Number Description Method of Filing
------- ----------- ----------------
<S> <C> <C>
10(h) Amendment #7 to Loan Agreement Incorporated by reference to Exhibit 10(h) to
September 9, 1997 dated the Annual Report on Form 10-KSB f/y/e June
30, 1997 ("1997 Form 10-K")
10(i) Loan Agreement dated May 4, 1993 Incorporated by reference to Exhibit 10(c) to
between the Company and Meridian the 1993 Form 10-K
Bank
10(j) Amendment to Loan Documents Incorporated by reference to Exhibit 10(e) to
between the Company and Meridian the Annual Report on Form 10-KSB f/y/e June 30,
Bank dated as of December 8, 1993 1994 ("1994 Form 10-K")
10(k) Letter Agreement between the Incorporated by reference to Exhibit 10(f) to
Company and Meridian Bank dated the Annual Report on Form 10-KSB f/y/e June 30,
December 21, 1993 1994 ("1994 Form 10-K")
10(l) Third Amendment to Loan Incorporated by reference to Exhibit 10(g) to
Agreement dated as of June 9, the Annual Report on Form 10-KSB f/y/e June 30,
1994 1994 ("1994 Form 10-K")
10(m) Fourth Amendment to Loan Incorporated by reference to Exhibit 10(i) to
Documents between the Company the Annual Report on Form 10-KSB f/y/e June 30,
and Meridian Bank as of October 1995 ("1995 Form 10-K")
27, 1994
10(n) Letter Agreement between the Incorporated by reference to Exhibit 10(j) to
Company and Meridian Bank dated the Annual Report on Form 10-KSB f/y/e June 30,
October 27, 1994 1995 ("1995 Form 10-K")
10(o) Letter Agreement between the Incorporated by reference to Exhibit 10(k) to
Company and Meridian Bank dated the Annual Report on Form 10-KSB f/y/e June 30,
July 10, 1995 1995 ("1995 Form 10-K")
16
<PAGE>
<CAPTION>
Exhibit
Number Description Method of Filing
------- ----------- ----------------
<S> <C> <C>
10(p) Amendment to Security Agreement Incorporated by reference to Exhibit 10(l) to
between the Company and Meridian the Annual Report on Form 10-KSB f/y/e June 30,
Bank dated as of July 31, 1995 1995 ("1995 Form 10-K")
10(q) Line of Credit Note dated July Incorporated by reference to Exhibit 10(m) to
31, 1995 the Annual Report on Form 10-KSB f/y/e June 30,
1995 ("1995 Form 10-K")
10(r) Fifth Amendment to Loan Incorporated by reference to Exhibit 10(n) to
Agreement dated July 31, 1995 the Annual Report on Form 10-KSB f/y/e June 30,
1995 ("1995 Form 10-K")
10(s) Amendment to Loan agreement Incorporated by reference to Exhibit 10(q) to
between the Company and Meridian the Annual Report on Form 10-KSB f/y/e June 30,
Bank, dated March 5, 1996. 1996 ("1996 Form 10-K")
10(t) Amendment to Loan agreement Incorporated by reference to Exhibit 10(t) to
between the Company and the Annual Report on Form 10-KSB f/y/e June 30,
Corestates Bank, dated March 20, 1997 ("1997 Form 10-K")
1997.
10(u) Amendment to Loan agreement Incorporated by reference to Exhibit 10(u) to
between the Company and the Annual Report on Form 10-KSB f/y/e June 30,
Corestates Bank, dated March 20, 1997 ("1997 Form 10-K")
1997.
10(v) Amendment to Loan agreement Incorporated by reference to Exhibit 10(v) to
between the Company and the Annual Report on Form 10-KSB f/y/e June 30,
Corestates Bank, dated May 23, 1997 ("1997 Form 10-K")
1997.
10(w) Amendment to Loan agreement Incorporated by reference to Exhibit 10(w) to
between the Company and the Annual Report on Form 10-KSB f/y/e June 30,
Corestates Bank, dated September 1997 ("1997 Form 10-K")
24, 1997.
17
<PAGE>
<CAPTION>
Exhibit
Number Description Method of Filing
------- ----------- ----------------
<S> <C> <C>
10(x) Employment agreement between the Incorporated by reference to Exhibit 10(i) to the
Company and Vlad Mikijanic Annual Report on Form 10-KSB f/y/e June 30, 1994
("1994 Form 10-K")
11 Computation of Per Share Earnings Incorporated by reference to Exhibit 11 to the
Annual Report on Form 10-KSB f/y/e June 30, 1997
("1997 Form 10-K")
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, 1997
("1997 Form 10-K")
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEETS AND STATEMENTS OF
OPERATIONS 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-30-1998
<PERIOD-END> SEP-30-1997
<CASH> $ 20,855
<SECURITIES> 0
<RECEIVABLES> 1,549,608
<ALLOWANCES> (75,000)
<INVENTORY> 1,447,509
<CURRENT-ASSETS> 2,979,987
<PP&E> 4,289,865
<DEPRECIATION> (1,229,876)
<TOTAL-ASSETS> 6,044,767
<CURRENT-LIABILITIES> 2,695,986
<BONDS> 6,927,778
<COMMON> 5,206
0
0
<OTHER-SE> 320,575
<TOTAL-LIABILITY-AND-EQUITY> 6,044,767
<SALES> 2,437,864
<TOTAL-REVENUES> 2,437,864
<CGS> 1,520,641
<TOTAL-COSTS> 1,883,396
<OTHER-EXPENSES> (5,397)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 193,155
<INCOME-PRETAX> 366,710
<INCOME-TAX> 0
<INCOME-CONTINUING> 366,710
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 366,710
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.03
</TABLE>
