UNITED STATES SECURITIES AND EXCHANGE COMMISSIO
Washington, D.C. 20549
FORM 10-QSB
_X_ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997.
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________
TO ____________.
Commission File No. 0-9036
LANNETT COMPANY, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
State of Delaware 23-0787-699
(State of Incorporation) (I.R.S. Employer I.D. No.)
9000 State Road
Philadelphia, PA 19136
(215) 333-9000
(Address of principal executive offices and telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes__X__ No ____
As of May 12, 1997, there were 5,206,128 shares of the issuer's common stock,
$.001 par value, outstanding.
Page 1 of 16 pages
Exhibit Index on Page 14
<PAGE>
<TABLE>
<CAPTION>
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1997 (unaudited) and
June 30, 1996.........................................3
Consolidated Statements of Operations
for the three months and nine months ended
March 31, 1997 and 1996 (unaudited)...................4
Consolidated Statements of Cash Flows
for the nine months ended March 31, 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.....................................12
Item 6. Exhibits and Reports on Form 8-K......................12
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
03/31/97 06/30/96
-------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 59,026 $ 25,258
Trade accounts receivable 997,845 892,081
Inventories 1,221,996 874,219
Prepaid expenses 43,777 46,395
---------- ----------
Total current assets 2,322,644 1,837,953
---------- ----------
PROPERTY, PLANT AND EQUIPMENT
Land 33,414 33,414
Building and improvements 1,408,578 1,406,627
Machinery and equipment 1,680,340 1,317,458
Furniture and fixtures 64,511 64,511
---------- ----------
3,186,843 2,822,010
Less accumulated depreciation (1,111,858) (961,738)
---------- ----------
Net 2,074,985 1,860,272
---------- ----------
OTHER ASSETS 21,058 7,958
---------- ----------
Total assets $4,418,687 $3,706,183
========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Line of credit $ 669,246 $ 548,092
Current maturities of long-term debt 106,781 61,356
Accounts payable 326,238 260,591
Accrued interest payable - shareholder 422,787 325,827
Accrued liabilities 67,490 136,357
---------- ----------
Total current liabilities 1,592,542 1,332,223
---------- ----------
LONG-TERM DEBT, LESS CURRENT MATURITIES 549,636 426,285
---------- ----------
NOTE PAYABLE AND ACCRUED INTEREST - SHAREHOLDER 2,213,727 2,123,500
---------- ----------
LINE OF CREDIT AND ACCRUED INTEREST - SHAREHOLDER 4,166,255 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 (4,429,254) (4,229,500)
---------- ----------
Total shareholders' deficiency (4,103,473) (3,903,719)
---------- ----------
Total liabilities and shareholders'
deficiency $4,418,687 $3,706,183
========== ==========
</TABLE>
3
<PAGE>
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
-------------------------- -------------------------
03/31/97 03/31/96 03/31/97 03/31/96
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $1,139,634 $ 879,508 $2,788,749 $2,738,197
COST OF SALES 628,755 419,275 1,646,587 1,319,983
---------- --------- ---------- ----------
Gross profit 510,879 460,233 1,142,162 1,418,214
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 324,117 269,541 859,257 809,034
---------- --------- ---------- ----------
Operating profit 186,762 190,692 282,905 609,180
---------- --------- ---------- ----------
OTHER INCOME (EXPENSES), NET
Other -- 1,998 (1,899) 32,653
---------- --------- ---------- ----------
Interest expense (161,461) (151,374) (480,760) (456,394)
---------- --------- ---------- ----------
(161,461) (149,376) (482,659) (423,741)
---------- --------- ---------- ----------
NET INCOME (LOSS) $ 25,301 $ 41,316 $ (199,754) $ 185,439
========== ========= ========== =========
PRIMARY INCOME (LOSS) PER SHARE $ -- $ 0.01 $ (0.04) $ 0.04
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
<PAGE>
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
-------------------------
03/31/97 03/31/96
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(199,754) $185,439
Adjustments to reconcile net (loss) income
to net cash (used in) operating activities
Depreciation and amortization 152,020 141,227
Increase in trade accounts receivable (105,764) (150,342)
Increase in inventories (347,777) (298,735)
Increase in prepaid expenses and other assets (12,382) (13,550)
Increase in accounts payable 65,647 37,602
(Decrease) in accrued liabilities (68,867) (112,461)
Increase in accrued interest 375,548 138,028
-------- --------
Net cash (used in) operating activities (141,329) (72,792)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (364,833) (163,915)
-------- --------
Net cash used in investing activities (364,833) (163,915)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under lines of credit and term loans 580,301 314,911
Repayments of debt (40,371) (42,336)
-------- --------
Net cash provided from financing activities 539,930 272,575
-------- --------
NET INCREASE IN CASH 33,768 35,868
CASH AT BEGINNING OF PERIOD 25,258 38,975
-------- --------
CASH AT END OF PERIOD $ 59,026 $74,843
========= ========
</TABLE>
5
<PAGE>
LANNETT COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position
and the results of operations and cash flows.
The results of operations for the nine months ended March 31, 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, 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 March 31, 1997 and
1996. Fully diluted per share data includes shares issuable pursuant to
currently exercisable options and a convertible debenture.
Note 3.
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
--------- --------
(unaudited)
<S> <C> <C>
Raw materials $ 440,964 $309,051
Work-in-process 385,695 253,887
Finished goods 312,193 260,816
Packaging supplies 83,144 50,465
---------- --------
$1,221,996 $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 March 31, 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, 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 March 31, 1997 compared with
three months ended March 31, 1996
------------------------------------------------
Net sales for the three months ended March 31, 1997 (Third Quarter
1997) increased by 29.6% to $1,139,634 from net sales of $879,508 for the
three months ended March 31, 1996 (Third Quarter 1996). Sales increased
during Third Quarter 1997 due to increased sales of one of the Company's
products due to increased penetration in the market place.
Cost of sales increased by 49.9%, to $628,755 in Third Quarter 1997
from $419,275 in Third Quarter 1996. Cost of sales increased due to higher
sales volumes, and the hiring of additional employees to support the increase
in production volumes. Gross profit margins for Third Quarter 1997 and Third
Quarter 1996 were 44.8% and 52.3%, 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.
Selling, general and administrative expenses increased by 20.2%, to
$324,117 in Third Quarter 1997 from $269,541 in Third Quarter 1996. This
increase is due to the timing of the occurrence of certain general
administration expenses. In addition promotional expenses increased
as a result of promoting new product approvals and promoting contract
manufacturing.
As a result of the foregoing, the Company reported an operating
profit of $ 186,762 for Third Quarter 1997, as compared to an operating
profit of $190,692 for Third Quarter 1996.
The Company's interest expense increased to $161,461 in Third
Quarter 1997 from $151,374 in Third 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 $25,301 for Third Quarter 1997,
compared to net income of $41,316 or $0.01 per share, $.01 on a fully diluted
basis, for Third Quarter 1996.
Nine months ended March 31, 1997 compared with
nine months ended March 31, 1996.
----------------------------------------------
Net sales for the nine months ended March 31, 1997 were $2,788,749 and
remained constant as compared to net sales of $2,738,197 for the nine months
ended March 31, 1996.
Cost of sales increased by 24.7%, to $1,646,587 in the nine months
ended March 31, 1997 from $1,319,983 in the nine months ended March 31, 1996.
Cost of sales increased due to new products with higher raw material and
labor costs, increased sales and production volumes, and the hiring of
additional employees to work on new product introductions and new product
approvals. Gross profit margins for the nine months ended March 31, 1997 and
March 31, 1996 were 40.9% and 51.8%, 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, and increased payroll
expenses to support increased production volumes. 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 $859,257 in the nine
months ended March 31, 1997, which remained constant compared to similar
expenses of $809,034 during the nine months ended March 31, 1996.
As a result of the foregoing, the Company reported an operating profit of
$282,905 for the nine months ended March 31, 1997 as compared to an operating
profit of $609,180 for the nine months ended March 31, 1996.
8
<PAGE>
The Company's interest expense increased to $480,760 in the nine months
ended March 31, 1997 from $456,394 in the nine months ended March 31, 1996
due to increased borrowings on the Company's lines of credit.
The Company reported a net loss of $199,754 for the nine months ended
March 31, 1997, or ($.04) per share, compared to net income of $185,439, or
$.04 per share, $.02 on a fully diluted basis, for the nine months ended
March 31, 1996.
Liquidity and Capital Resources
-------------------------------
The Company used $141,329 and $72,792 of cash in operations during
the nine months ended March 31, 1997 and 1996, respectively. Net cash used in
operations increased during the nine months ended March 31, 1997 due to a net
loss for the nine months ended March 31, 1997 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 production volumes and to allow for research and development
activities. Accrued liabilities decreased due to the costs of a biostudy
accrued at June 30, 1996 being paid during the nine months ended March 31,
1997 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 $364,833 for property, plant and equipment
during the nine months ended March 31, 1997 compared to $163,915 expended
during the nine months ended March 31, 1996. The Company has budgeted for
an additional $500,000, for capital expenditures in Fiscal 1997 and expects
to obtain the necessary financing. The increase in capital expenditures and
anticipated additional capital expenditure requirements are necessary to
support new product introductions, increased production volumes and
additional contract manufacturing, results of which are expected to be
realized in Fiscal 1998.
Net cash provided from financing activities increased to $539,930
during the nine months ended March 31, 1997 from $272,575 provided by
financing activities during the nine months ended March 31, 1996, 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 $33,768
increase in cash available from the beginning to the end of the nine months
ended March 31, 1997, resulting in $59,026 of cash available 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 nine months ended March 31, 1997 and for
Fiscal years 1996 and 1995.
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.
9
<PAGE>
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 Company
anticipates deferring the interest due on June 30, 1997. The outstanding
principal balance of the Revolving Credit Loan, together with accrued
interest, is due and payable in full on December 31, 1998. At March 31, 1997
accrued interest was approximately $688,000 of which $416,000 is included in
the long-term outstanding balance. At March 31, 1997, $272,000 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 Company anticipates deferring the interest
due on June 30, 1997. The outstanding principal balance of this Debenture,
together with accrued interest, is due and payable in full on December 23,
1998. At March 31, 1997 accrued interest was approximately $365,000, of which
$214,000 is included in the long-term outstanding balance. At March 31, 1997
$151,000 was classified as currently due.
At March 31, 1997, there was no additional borrowing capacity
available under the revolving line of credit. Management does not expect to
have sufficient operating income to make the required monthly interest
payments during calendar year 1997 and expects to negotiate the deferral of
interest payments due through calendar year 1997.
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 for working capital financing which bears interest at prime plus
1.5% per annum. The line of credit is limited to 80% of qualified accounts
receivable. At March 31, 1997, no funds were available under the line of
credit. The Company is currently negotiating to increase its borrowing
capacity under the working capital 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 term loan bears interest at prime plus 1.5%.
On March 20, 1997, an additional $209,220 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 prime plus 1.5%. At March 31,
1997 there was no availability under this line of credit. The term loans are
collateralized by all of the Company's present and future equipment. They are
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. This line of credit bears interest at prime plus 1.5%. At
March 31, 1997, approximately $181,000 was available under the revolving line
of credit for equipment financing. The equipment 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.
Management currently believes the balances available under the
Company's existing lines of credit, and
10
<PAGE>
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 and obtaining additional
financing in order to introduce new products, and to support increased sales
and 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 March 31, 1997, the Company was manufacturing and marketing
three products, BCC, Primidone, Dicyclomine. Due to low profit margins and
high raw material costs, the Company decided to discontinue marketing
Prednisone 5mg and Prednisone 20mg tablets. Nine additional products are
under development at this time; of which five are former Lannett products
being prepared for reintroduction. One of these products has been redeveloped
and submitted to the FDA for supplemental approval; four 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
<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, 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
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
LANNETT COMPANY, INC.
Dated: May 14, 1997 By: /s/ Jeffrey M. Moshal
-----------------------
Jeffrey M. Moshal
Vice President - Finance and Treasurer
13
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
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 tothe 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 4(a) to -
Common 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 Incorporated by reference to the Annual Report -
30, 1991 between the Company on Form 10-K f/y/e June 30, 1991
and William Farber
10(b) Amendment #1 to Loan Incorporated by reference to Exhibit 10(b) to -
Agreement dated March 15, the Annual Report on Form 10-KSB f/y/e June
1993 30, 1993 ("1993 Form 10-K")
10(c) Amendment #2 to Loan Incorporated by reference to Exhibit 10(c) to -
Agreement dated August 1, the Annual Report on Form 10-KSB f/y/e June
1994 30, 1994 ("1994 Form 10-K")
10(d) Amendment #3 to Loan Incorporated by reference to Exhibit 10(d) to -
Agreement 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 Incorporated by reference to Exhibit 10(e) to -
Agreement dated December 31, the Annual Report on Form 10-KSB f/y/e June
1995 30, 1996 ("1996 Form 10-K")
10(f) Amendment #5 to Loan Incorporated by reference to Exhibit 10(f) to -
Agreement dated June 30, 1996 the Annual Report on Form 10-KSB f/y/e June
30, 1996 ("1996 Form 10-K")
10(g) Amendment #6 to Loan Incorporated by reference to Exhibit 10(g) to -
Agreement dated November 1, the Form 10-QSB for the period ended
1996 December 31, 1996.
10(h) Loan Agreement dated May 4, Incorporated by reference to Exhibit 10(c) to -
1993 between the Company the 1993 Form 10-K
and Meridian Bank
10(i) Amendment to Loan Incorporated by reference to Exhibit 10(e) to -
Documents between the the Annual Report on Form 10-KSB f/y/e
14
<PAGE>
<CAPTION>
Exhibit
Number Description Method of Filing Page
- ------ ----------- ---------------- ----
<S> <C> <C> <C>
Company and Meridian Bank June 30, 1994 ("1994 Form 10-K")
dated as of December 8, 1993
10(j) Letter Agreement between the Incorporated by reference to Exhibit 10(f) to -
Company and Meridian Bank the Annual Report on Form 10-KSB f/y/e June
dated December 21, 1993 30, 1994 ("1994 Form 10-K")
10(k) 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
1994 30, 1994 ("1994 Form 10-K")
10(l) Fourth Amendment to Loan Incorporated by reference to Exhibit 10(i) to -
Documents between the the Annual Report on Form 10-KSB f/y/e June
Company and Meridian Bank 30, 1995 ("1995 Form 10-K")
as of October 27, 1994
10(m) Letter Agreement between the Incorporated by reference to Exhibit 10(j) to -
Company and Meridian Bank the Annual Report on Form 10-KSB f/y/e June
dated October 27, 1994 30, 1995 ("1995 Form 10-K")
10(n) Letter Agreement between the Incorporated by reference to Exhibit 10(k) to -
Company and Meridian Bank the Annual Report on Form 10-KSB f/y/e June
dated July 10, 1995 30, 1995 ("1995 Form 10-K")
10(o) Amendment to Security Incorporated by reference to Exhibit 10(l) to -
Agreement between the the Annual Report on Form 10-KSB f/y/e June
Company and Meridian Bank 30, 1995 ("1995 Form 10-K")
dated as of July 31, 1995
10(p) 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(q) 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(r) Amendment to Loan agreement Incorporated by reference to Exhibit 10(q) to -
between the Company and the Annual Report on Form 10-KSB f/y/e June
Meridian Bank, dated March 5, 30, 1996 ("1996 Form 10-K")
1996.
10(s) Employment agreement Incorporated by reference to Exhibit 10(i) to
between the Company and Vlad the Annual Report on Form 10-KSB f/y/e June
Mikijanic 30, 1994 ("1994 Form 10-K")
11 Computation of Per Share Incorporated by reference to Exhibit 11 to the -
Earnings Annual Report on Form 10-KSB f/y/e June 30,
1996 ("1996 Form 10-K")
15
<PAGE>
<CAPTION>
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")
16
</TABLE>
<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-30-1997
<PERIOD-END> MAR-31-1997
<CASH> $ 59,026
<SECURITIES> 0
<RECEIVABLES> 997,845
<ALLOWANCES> 0
<INVENTORY> 1,221,996
<CURRENT-ASSETS> 2,322,644
<PP&E> 3,186,843
<DEPRECIATION> 1,111,858
<TOTAL-ASSETS> 4,418,687
<CURRENT-LIABILITIES> 1,592,542
<BONDS> 7,036,399
<COMMON> 5,206
0
0
<OTHER-SE> (4,108,679)
<TOTAL-LIABILITY-AND-EQUITY> 4,418,687
<SALES> 1,139,634
<TOTAL-REVENUES> 1,139,634
<CGS> 628,755
<TOTAL-COSTS> 952,872
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 161,461
<INCOME-PRETAX> 25,301
<INCOME-TAX> 0
<INCOME-CONTINUING> 25,301
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,301
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
