SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934 (Amendment No. _________)
Check the appropriate box:
[ ] Preliminary information [ ] Confidential, for use of the Commission
statement only (as permitted by Rule 14c-5(d)(2))
[x] Definitive information
statement
LANNETT COMPANY, INC.
(Name of Registrant as Specified in Its Charter)
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(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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LANNETT COMPANY, INC.
9000 STATE ROAD
PHILADELPHIA, PA 19136
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held February 23, 2000
TO THE STOCKHOLDERS OF LANNETT COMPANY, INC.
The annual meeting (the "Annual Meeting") of the Stockholders of Lannett
Company, Inc., a Delaware Corporation, (the "Company") will be held on
Wednesday, February 23, 2000 at 11:00 a.m., local time, at 9000 State Road,
Philadelphia, PA 19136, for the following purposes:
1. To elect two (2) members of the Board of Directors to serve until
the next Annual Meeting of Stockholders and until their respective
successors have been duly elected and qualified; and
2. To ratify the appointment of Grant Thornton, LLP as the Company's
independent certified public accountants for the fiscal year ending
June 30, 2000.
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
THESE MATTERS ARE MORE FULLY DESCRIBED IN THE INFORMATION STATEMENT
ACCOMPANYING THIS NOTICE.
The Board of Directors of the Company has fixed the close of business on
January 10, 2000 as the record date for the determination of Stockholders
entitled to notice of and to vote at the Annual Meeting.
You are cordially invited to attend the Annual Meeting in person and we
encourage you to attend and take the opportunity to ask questions.
By Order of the Board of Directors
/s/ Audrey Farber
January 21, 2000 Audrey Farber
Philadelphia, Pennsylvania Secretary
LANNETT COMPANY, INC.
9000 State Road
Philadelphia, PA 19136
January 21, 2000
INFORMATION STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
DATE, TIME, AND PLACE OF MEETING
This Information Statement is provided to you by the Board of
Directors of Lannett Company, Inc. (the "Company" or "Lannett") in connection
with our Annual Meeting. The Annual Meeting will be held at 11:00 a.m. on
Wednesday, February 23, 2000 at the principal executive offices of the
Company, 9000 State Road, Philadelphia, PA 19136, or at any adjournments or
postponements of the Annual Meeting for the purposes set forth in the
accompanying Notice of Annual Meeting. We intend to mail this Information
Statement and the accompanying Notice of Annual Meeting on or about January
21, 2000, to all stockholders entitled to vote at the Annual Meeting.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
PURPOSE OF MEETING
The proposals that will be considered and acted on at the Annual
Meeting are (i) the election of two members of the Board of Directors to
serve until the next Annual Meeting of Stockholders and until their
respective successors have been duly elected and qualified; and (ii) the
ratification of Grant Thornton, LLP as the Company's independent certified
public accountants for the fiscal year ending June 30, 2000. There are no
other matters that the Board of Directors is aware will be presented for
consideration at the Annual Meeting. Each proposal is described in more
detail in this Information Statement.
VOTING SECURITIES AND CHANGE IN CONTROL
Only holders of record of Lannett's common stock at the close of
business on January 10, 2000 will be entitled to notice of and to vote at the
Annual Meeting. At the close of business on January 10, 2000, Lannett had
outstanding and entitled to vote 13,206,128 shares of common stock, .001 par
value per share ("Common Stock"). Our Common Stock is the only class of
voting stock. We have no preferred stock issued or outstanding as of January
10, 2000. Each stockholder of record on January 10, 2000 is entitled to one
vote for each share held on all matters to be voted on at the Annual Meeting,
and there is no cumulative voting. A majority of the outstanding shares of
Common Stock must be present or represented at the Annual Meeting to have a
quorum. Directors will be elected by a plurality of the votes of the
stockholders cast at the Annual Meeting. A majority of the outstanding votes
of
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stockholders entitled to vote are required for the ratification of the
appointment of the independent public accountants.
On December 22, 1999, William Farber, the President, Chief
Executive Officer, and Chairman of the Board of the Company, exercised his
right to convert a convertible debenture dated December 22, 1991. The
convertible debenture related to a term loan dated August 30, 1991. The
principal balance on the loan was $2,000,000 and the conversion rate of the
loan was four (4) shares of Common Stock for every $1.00 of indebtedness. The
interest on the loan was paid to date; therefore, the transaction converted
the $2,000,000 of indebtedness to 8,000,000 shares of Common Stock, thereby
giving William Farber beneficial ownership of 9,174,986 shares of Common
Stock, which constitutes 69.5% of the Common Stock outstanding. Although
William Farber had effective ownership control of the Company prior to this
conversion transaction, this transaction gave him actual majority ownership
control.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
The Company's Bylaws provide that the number of directors of the
Company may be determined by the stockholders, or in the absence of such
determination, by the Board of Directors. Roy English resigned as a director
of the Company on December 23, 1999 and has declined nomination as a
director. Prior to Roy English's resignation as a director, there were three
directors of the Company. However, the Board of Directors has determined that
the functions of the Board can be adequately served by two directors,
although the current directors of the Company will have the right to fill the
vacancy on the Board at any time. The Board of Directors nominates the two
persons named below for election to the Board of Directors. As of the date of
this Information Statement, the Board of Directors is not aware that either
nominee is unable or will decline to serve as a director. The two nominees
receiving the highest number of affirmative votes of the shares entitled to
vote at the Annual Meeting will be elected directors of the Company until the
next Annual Meeting and until their successors have been elected and
qualified or until their earlier resignation or removal.
The following list identifies the nominees for election to the
Board of Directors and sets forth certain information regarding each nominee.
Both nominees are currently serving as a director of the Company.
David Farber, 40, was elected a Director of the Company in 1991.
David Farber is the owner and President of TVO, Inc. David Farber was the
President and owner of Vital Foods, Inc., an eight-store chain of health food
stores in the Detroit, Michigan area from October to November 1994, when he
sold it. Prior to that, David Farber was employed by Michigan Pharmacal
Corporation for 13 years, the most recent six years as Executive Vice
President and, prior to that, as Production Manager. David Farber is the son
of William Farber.
William Farber, 68, was elected as Chairman of the Board of
Directors in August 1991.
2
From April 1993 to the end of 1993, William Farber was the President and a
director of Auburn Pharmaceutical Company. In 1980, William Farber formed
Major Pharmaceutical Corporation, a generic pharmaceutical buying group, and
served as its Director of Purchasing from 1990 through March 1993. William
Farber founded Michigan Pharmacal Corporation, and, from 1965 through 1990,
served as its Chief Executive Officer. William Farber is a registered
pharmacist in the State of Michigan. William Farber is the father of David
Farber and the husband of Audrey Farber, Secretary of the Company.
To the best of the Company's knowledge, there are no material
proceedings to which either nominee is a party, or has a material interest
adverse to the Company. To the best of the Company's knowledge, there have
been no events under any bankruptcy act, no criminal proceedings and no
judgments or injunctions that are material to the evaluation of the ability
or integrity of either nominee during the past five years.
Board Meetings and Committees
The Board met once during the fiscal year ended June 30, 1999
("Fiscal 1999"). Roy English and William Farber attended the Board meeting in
Fiscal 1999, but David Farber was absent from the meeting. Based on the
number of directors on the Board, the directors have agreed that separate
audit, nominating, compensation or other committees of the Board of Directors
would not be useful.
Compensation of Directors
Directors received compensation of $300 per meeting attended, for
services provided as directors of the Company during Fiscal 1999. Directors
are reimbursed for expenses incurred in attending Board meetings.
Employment Contracts
There were no employment contracts in existence at the end of
Fiscal 1999.
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PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
On December 10, 1999, the Company's independent accountants who
previously audited the Company's financial statements for the fiscal years
ended June 30, 1999 and prior year, Deloitte & Touche LLP, were notified that
the Company had elected not to use their services in connection with the
audit of the Company's 2000 financial statements. Deloitte & Touche LLP's
reports on the Company's financial statements for the fiscal years ended June
30, 1999 and June 30, 1998 did not contain an adverse opinion or a disclaimer
of opinion; nor were such reports qualified or modified as to uncertainty,
audit scope or accounting principles. During the Company's two most recent
fiscal years ended June 30, 1999 and June 30, 1998 and the subsequent interim
period preceding December 10, 1999, there were no disagreements between the
Company and Deloitte & Touche LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which disagreement, if not resolved to the satisfaction of Deloitte & Touche
LLP would have caused it to make reference to the subject matter of the
disagreement in connection with its report. The Company did not experience
any of the events listed in Item 304 of regulation S-B as defined as
"reportable events" within the Company's two most recent fiscal years ended
June 30, 1999 and June 30, 1998 and the subsequent interim period preceding
December 10, 1999. A Form 8-K was filed on December 17, 1999 and an amendment
to it was filed on December 22, 1999.
On December 29, 1999 the Company filed on Form 8-K notification
of engagement of Grant Thornton, LLP as the Company's new independent
accountants to audit the Company's financial statements. Representatives of
Grant Thornton, LLP expect to be present at the Meeting and will have the
opportunity to prepare a statement if they desire to do so and respond to
appropriate questions.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of January 1, 2000, information
regarding the security ownership of the directors and certain executive
officers of the Company and persons known to the Company to be beneficial
owners of more than five (5%) percent of the Common Stock:
<TABLE>
<CAPTION>
Excluding Options Options
and Debentures(1) and Debentures(2)
----------------- -----------------
Name and Address of Number Percent Number Percent
Beneficial Owner Office of Shares of Class of Shares of Class
- ------------------- ------- ----------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Directors/Executive Officers:
Roy English(3) Director 34,000(4) .26% 0 0%
9000 State Road
Philadelphia, PA 19136
David Farber(5) Director 71,872(6) .54% 0 0%
9000 State Road
Philadelphia, PA 19136
4
<PAGE>
William Farber(5) Chairman of 9,174,986(7) 69.50% 0 0%
9000 State Road the Board
Philadelphia, PA 19136
Jeffrey Moshal(8) Chief Operating 200 0% 100,000(9) 55.56%
9000 State Road Officer
Philadelphia, PA 19136
Larry Dalesandro Chief Operating 0 0% 10,000(10) 55.56%
9000 State Road Officer
Philadelphia, PA 19136
Alan Saidel Vice President 0 0% 50,000(9) 27.78%
9000 State Road Manufacturing
Philadelphia, PA 19136 and Operations
Eugene Livshits Vice President 0 0% 12,000(10) 27.78%
9000 State Road Analytical
Philadelphia, PA 19136 Services
All directors and 9,281,058 70.28% 172,000(11) 83.33%
executive officers as
a group (5 persons)
Other 5% Shareholders:
Samuel Gratz 906,567(10) 6.86% 0 0%
1139 Kerper Street
Philadelphia, PA 19111
<FN>
==============================================================================
(1) Based upon 13,206,128 shares of common stock outstanding as of
January 1, 2000.
(2) Assumes that all options and debentures exercisable within sixty
days have been exercised, resulting in 180,000 shares outstanding as
of January 1, 2000.
(3) Roy English resigned as a director of the Company effective December
23, 1999.
(4) Includes 3,500 shares owned by the spouse of Roy English.
(5) William Farber is the father of David Farber and the husband of
Audrey Farber, the Secretary of the Company.
(6) Includes 4,992 shares held by David Farber's minor child, 10,580
shares held in an individual retirement account, and 1,900 shares
held by David Farber's wife.
(7) On December 22, 1999, William Farber exercised his right to convert
a convertible debenture dated December 22, 1991, thereby converting
$2,000,000 of indebtedness into 8,000,000 shares of Common Stock.
(8) Jeffrey Moshal resigned as Chief Operating Officer of the Company on
November 23, 1999.
(9) The options represent 100,000 and 50,000 incentive stock options
which were granted to Mr. Moshal and Mr. Saidel on October 13, 1997
pursuant to the Company's 1993 Long Term Incentive Stock Plan. The
options are exercisable one-third on or after October 13, 1998,
one-third on or after October 13, 1999, and one-third on or after
October 13, 2000
(10) The options represent 10,000 and 12,000 incentive stock options
which were granted to Mr. Dalesandro and Mr. Livshits on November 2,
1999 pursuant to the Company's 1993 Long Term Incentive Stock Plan.
The options are exercisable one-third on or after November 2, 2000,
one-third on or after November 2, 2001, and one-third on or after
November 2, 2002
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(11) Includes 4,000 shares of common stock subject to currently
exercisable options to purchase shares at an exercise price of
$4.375 per share, and 4,000 shares of common stock subject to
currently exercisable options to purchase shares at an exercise
price of $3.78125 per share.
(12) Includes 496 shares which are held by the spouse of Samuel Gratz.
</TABLE>
Section 16 (a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3, 4 and 5 and amendments
thereto and certain written representations furnished to the Company during
Fiscal 1999, the Company believes that the following directors, officers or
beneficial owners of more than ten percent of the Company's common stock
failed to file on a timely basis the following reports required by Section
16(a) of the Securities Exchange Act of 1934: Alan Saidel did not file a
report reporting a grant of options on October 13, 1998.
MANAGEMENT AND COMPENSATION
The directors and executive officers of the Company are set forth
below:
Age Position
--- --------
David Farber 40 Director
William Farber 68 President, Chief Executive
Officer, and Chairman of the Board
Audrey Farber 64 Secretary
Larry Dalesandro 28 Chief Operating Officer
Alan Saidel 40 Vice President - Operations &
Manufacturing
Eugene Livshits 47 Vice President - Analytical Services
David Farber - see "Proposal No. 1 - Election of Directors" for
matters pertaining to David Farber.
William Farber - see "Proposal No. 1 - Election of Directors" for
matters pertaining to William Farber.
Audrey Farber was elected Secretary in August 1991. Audrey Farber is
the wife of William Farber.
Larry Dalesandro was elected Chief Operating Officer in November
1999. Mr. Dalesandro
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joined the Company in January 1999 as Controller. Mr. Dalesandro was
previously employed as Director of Financial Operations at Criterion
Communications, Inc. Mr. Dalesandro was also employed as Certified Public
Accountant at an international accounting, auditing and consulting firm,
where he specialized in manufacturing clients.
Alan Saidel was elected Vice President Operations & Manufacturing in
July 1998. Mr. Saidel joined the Company in February 1996 as Director of
Operations & Manufacturing. Mr. Saidel has 16 years of experience in the
pharmaceutical industry. Mr. Saidel was previously employed at Barr
Laboratories Inc., Mutual Pharmaceuticals Inc. and Pal-Pak Inc., where he
held the position of Director of Operations.
Eugene Livshits was elected Vice President of Analytical Services in
November 1999. Mr. Livshits joined the Company in February 1997 as Director
of Quality Control. Mr. Livshits has 25 years of experience in the
pharmaceutical and medical-related industries. Mr. Livshits was previously
employed as Director of Quality Control and Analytical Research at
Glenwood-Palisades.
Executive Compensation
Summary Compensation Table
The following table summarizes all compensation paid to or earned by
the executive officers of the Company for Fiscal 1999, Fiscal 1998 and Fiscal
1997. There are no other executive officers whose total annual salary and
bonus from the Company exceeded $100,000 during Fiscal 1999.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
- -----------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Other Restricted LTIP All Other(4)
Principal Fiscal Annual(2) Stock Option/(3) Payouts Compensation
Position Year Salary(1) Bonus Compensation Award(s) SARs Amount Amount
--------- ------ -------- ------ ------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William Farber 1999 0 0 0 0 0 0 0
Chief Executive
Officer, President, 1998 0 0 0 0 0 0 0
and Chairman of
the Board 1997 0 0 0 0 0 0 0
Vlad Mikijanic 1999 121,528 2,000 7,200 0 0 0 0
Vice President/
Technical Affairs(5) 1998 113,980 1,500 7,200 0 0 0 0
1997 110,643 1,400 7,200 0 0 0 0
7
<PAGE>
Jeffrey M 1999 122,768 2,000 7,200 0 100,000 0 0
Moshal(6)
Chief Operating
Officer 1998 108,150 1,500 7,200 0 100,000 0 0
Alan Saidel(7) 1999 106,326 2,000 7,200 0 50,000 0 0
Vice President/
Manufacturing
and Operations 1998 105,175 1,500 7,200 0 50,000 13,000
<FN>
(1) Includes payments to the Company's 401(k) Plan for Mr. Mikijanic, Mr.
Moshal and Mr. Saidel (3% of Mr. Mikijanic's, Mr. Moshal's and Mr.
Saidel's salary).
(2) $7,200 paid to Mr. Mikijanic, Mr. Moshal and Mr. Saidel for automobile
leasing and expenses for all periods presented.
(3) The options represent 100,000 and 50,000 incentive stock options which
were granted to Mr. Moshal and Mr. Saidel on October 13, 1997 pursuant
to the Company's 1993 Long Term Incentive Stock Plan. The options are
exercisable one-third on or after October 13, 1998, one-third on or
after October 13, 1999, and one-third on or after October 13, 2000. At
June 30, 1999, the aggregate market value of these restricted stock
holdings was $201,563 (computed by reference to the average closing bid
and ask prices of such stock as quoted by the NQB.)
(4) $13,000 paid to Mr. Saidel for living expenses.
(5) Mr. Mikijanic's employment with the Company was terminated on May 14,
1999.
(6) Mr. Moshal resigned as Chief Operating Officer on November 23, 1999.
(7) Mr. Saidel was elected as an officer of the Company on July 13, 1998.
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values
The following table sets forth information concerning options
granted during the fiscal year ended June 30, 1999 to those persons named in
the preceding Summary Compensation Table:
(a) (b) (c) (d) (e)
Number of Value of
Securities Unexercised
Underlying In-the-Money
Shares Unexercised Options at
Acquired Options at FY-End FY-End
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
---- -------- -------- ----------------- -------------
Jeffrey M. Moshal(1) -- -- 33,333(2)
Chief Operating 66,667
Officer
Alan Saidel -- -- 16,667(3)
Vice President/ 33,333
Manufacturing
and Operations
William Farber -- -- -- --
Chief Executive Officer
President, and Chairman
of the Board
Vlad Mikijanic -- -- -- --
Vice President/
Technical Affairs
(1) Mr. Moshal's employment with the Company was terminated on November 23,
1999.
(2) The options represent 100,000 incentive stock options which were
granted to Mr. Moshal on October 13, 1997 pursuant to the Company's
1993 Long Term Incentive Stock Plan. The options are exercisable
one-third on or after October 13, 1998, one-third on or after October
13, 1999, and one-third on or after October 13, 2000
(3) The options represent 50,000 incentive stock options which were granted
to Mr. Saidel on October 13, 1997 pursuant to the Company's 1993 Long
Term Incentive Stock Plan. The options are exercisable one-third on or
after October 13, 1998, one-third on or after October 13, 1999, and
one-third on or after October 13, 2000.
8
NO DISSENTERS' RIGHTS
The corporate action described in this Information Statement will
not afford to stockholders the opportunity to dissent from the actions
described herein or to receive an agreed or judicially appraised value for
their shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
William Farber, the President, Chief Executive Officer and
Chairman of the Board of the Company, provided the Company with a financing
package aggregating $6,250,000, which the Company used to renovate its
manufacturing facility, to acquire new equipment, to remove hazardous waste
materials, to retain new management and to provide working capital. The
financing package was the Company's primary source of funds with which it
operated during Fiscal 1993. The package consisted of a $4,250,000 revolving
line of credit bearing interest at the prime rate published by Michigan
National Bank at 1% per annum, and a $2,000,000 convertible debenture due
December 23, 1999 ("Convertible Debenture"). On December 22, 1999, William
Farber exercised his right to convert the Convertible Debenture. The
principal balance on the loan was $2,000,000 and the conversion rate of the
loan was four (4) shares of Common Stock for every $1.00 of indebtedness. The
interest on the loan was paid to date; therefore, the transaction converted
the $2,000,000 of indebtedness to 8,000,000 shares of Common Stock, thereby
giving Mr. Farber beneficial ownership of 9,174,986 shares of Common Stock,
which constitutes 69.5% of the Common Stock outstanding (based upon
13,206,128 shares of Common Stock outstanding). Although William Farber had
effective ownership control of the Company prior to this conversion
transaction, this transaction gave him actual majority ownership control.
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1999 ANNUAL REPORT TO STOCKHOLDERS
The Company's 1999 Annual Report to Stockholders has been
delivered with this Information Statement or previously delivered to
Stockholders.
SIGNATURE
Pursuant to the requirement of the Securities Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto authorized.
Date: January 21, 2000 LANNETT COMPANY, INC.
By: /s/ Audrey Farber
---------------------------------------
Audrey Farber, Secretary
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