SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1996
OR
|_| TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________to________________________
COMMISSION FILE NUMBER 1-10113
HALSEY DRUG CO., INC.
----------------------
(Exact name of registrant as specified in its charter)
New York 11-0853640
- -------------------------------------------------------------------------
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1827 Pacific Street
Brooklyn, New York 11233
- -------------------------------------------------------------------------
(Address of Principal executive officer) (Zip Code)
(718) 467-7500
- -------------------------------------------------------------------------
(Registrants telephone number, including area code)
Not Applicable
- -------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 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 50 days.
YES X NO
--- ---
As of November 12,1996, the registrant had 11,191,403 shares of Common
Stock,$.01 par value, outstanding.
<PAGE>
HALSEY DRUG CO., & SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page #
------
Condensed Consolidated Balance Sheets- 3
September 30, 1996 and December 31, 1995
Condensed Consolidated Statements of 5
Operations - Three and nine months ended
September 30, 1996 and September 30, 1995
Consolidated Statements of Cash 6
Flows - Nine months ended September 30, 1996
and September 30, 1995
Consolidated Statements of Stockholders' 7
Equity - Nine months ended September 30, 1996
Notes to Condensed Consolidated Financial 8
Statements
Item 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
Special Note Regarding Forward-Looking Statements 16
SIGNATURES
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HALSEY DRUG CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(UNAUDITED)
September 30, DECEMBER 31,
1996 1995
- --------------------------------------------------------------------------------
CURRENT ASSETS
Cash $ 507 $ 353
Accounts Receivable - trade, net
of allowances for doubtful
accounts of $ 183 and $280 at September 30
1996 and December 31,1995, respectively 1,155 1,689
Inventories 5,978 7,716
Prepaid insurance and other current assets 530 656
------- -------
Total current assets 8,170 10,414
PROPERTY PLANT & EQUIPMENT, NET 6,518 7,394
OTHER ASSETS 1,350 1,054
------- -------
$16,038 $18,862
======= =======
The accompanying notes are an integral part of these statements
3
<PAGE>
HALSEY DRUG CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(UNAUDITED)
September 30, DECEMBER 31,
1996 1995
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 780 $ 213
Due to banks 3,195 3,395
Current maturities of long-term debt 200 200
Convertible subordinated debentures 5,645 7,347
Department of Justice settlement 2.129 2,000
Accounts payable 2,814 2,546
Accrued expenses and other liabilities 2,654 1,867
Advances from minority stockholders 206 206
Income taxes payable 33 33
-------- --------
Total current liabilities 17,656 17,807
LONG-TERM DEBT 2,674 2,595
CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock - $.0l par value; authorized
20,000,000 shares; issued and outstanding
11,141,403 shares at September 30, 1996 and
8,973,459 shares at December 31, 1995 116 90
Additional paid-in capital 19,958 14,459
Accumulated deficit (23,322) (14,989)
-------- --------
(3,248) (440)
Less: Treasury stock - at cost (474,603 shares)
at September 30, 1996 and 500,000 shares at
December 31, 1995 (1,044) (1,100)
-------- --------
Total stockholders' equity (4,292) (1,540)
-------- --------
$ 16,038 $ 18,862
======== ========
The accompanying notes are an integral part of these statements
4
<PAGE>
HALSEY DRUG CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Amounts in thousands except per share data For the nine months ended For the three months ended
September 30, September 30,
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 10,580 $ 16,104 $ 2,937 $ 4,347
Cost of goods sold 12,094 12,868 4,354 4,049
----------- ----------- ----------- -----------
Gross(loss) profit (1,514) 3,236 (1,417) 298
Research & Development 820 489 191 182
Selling, general and administrative expenses 4,678 4,487 1,534 1,506
----------- ----------- ----------- -----------
Loss from operations (7,012) (1,740) (3,142) (1,390)
Gain on the sale of assets 2,288
Other income 5 7 1 1
Interest expense 1,326 862 443 422
----------- ----------- ----------- -----------
(Loss) before income taxes (8,333) (307) (3,584) (1,811)
Provision for income taxes 296
----------- ----------- ----------- -----------
NET(LOSS) ($ 8,333) ($ 603) ($ 3,584) ($ 1,811)
=========== =========== =========== ===========
Net(loss)per common share ($ 0.89) ($ 0.08) ($ 0.37) ($ 0.23)
=========== =========== =========== ===========
Weighted average number of outstanding shares 9,390,613 7,819,214 9,650,652 7,717,882
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
5
<PAGE>
HALSEY DRUG CO., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Amounts in thousands NINE MONTHS ENDED
September 30
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(8,333) $ (603)
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation and amortization 1,722 1,547
Gain on sale of assets (2,288)
Accrued Department of Justice interest 129 56
Deferred income taxes 296
Changes in assets and liabilities
Accounts receivable 534 563
Inventories 1,738 (909)
Prepaid insurance and other current assets 126 55
Accounts payable 268 (919)
Accrued expenses 787 328
Income taxes payable (183)
------- -------
Total adjustments 5,304 (1,454)
------- -------
Net cash used in operating activities (3,029) (2,057)
------- -------
Cash flows from investing activities
Capital expenditures (405) (403)
Increase in other assets (594) (320)
Proceeds from sale of assets 2,000
------- -------
Net cash (used in)provided by investing activities (999) 1,277
------- -------
Cash flows from financing activities
Decrease in notes payable (4,111) (1,563)
Proceeds from issuance of convertible debentures 2,145 3,707
Issuance of common stock from conversion of debentures 3,613
Exercise of warrants 1,514
Exercise of stock-options 136
Issuance of common stock 318
Acquisition of treasury stock (1,100)
Payment to Department of Justice (100)
Bank overdraft 567 89
Advances from former minority stockholder (212)
------- -------
Net cash provided by financing activities 4,182 821
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 154 41
Cash and cash equivalents at beginning of period 353 28
------- -------
Cash and cash equivalents at end of period $ 507 $ 69
======= =======
6
<PAGE>
HALSEY DRUG CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30,1996
Amounts in thousands except per share data
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Common Stock Additional Accumulated
------------ ---------- -----------
$.01 par Shares Amount Paid-in Capital Deficit
--------------- ------ --------------- -------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 8,973,459 $ 90 $14,459 ($14,989)
Net loss for the nine months ended September (8,333)
30, 1996
Issuance of common stock-conversion of 2,040,000 21 3,592
debentures
Issuance of shares as settlement 49,166 228
Issuance of warrants of convertible 355
debentures
Exercise of stock warrants 524,400 5 1,154
Issuance of shares as settlement of liability 10,384 34
Exercise of stock options 43,994 136
----------- ------- ------- --------
Balance at September 30, 1996 11,641,403 $ 116 $19,958 ($23,322)
=========== ======= ======= ========
</TABLE>
Treasury Stock At Cost
----------------------
Shares Amount Total
------ ------ -----
Balance at December 31, 1995 (500,000) ($ 1,100) ($1,540)
Net loss for the nine months ended September (8,333)
30, 1996
Issuance of common stock-conversion of 3,613
debentures
Issuance of shares as settlement 25,397 56 284
Issuance of warrants of convertible 355
debentures
Exercise of stock warrants 1,159
Issuance of shares as settlement of liability 34
Exercise of stock options 136
-------- --------- -------
Balance at September 30, 1996 (474,603) ($1,044) ($4,292)
======== ========= =======
The accompanying notes are an integral part of these statements.
7
<PAGE>
HALSEY DRUG CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Halsey Drug Co., Inc. and subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments, which consist of
normal recurring adjustments, considered necessary for the three month and nine
month periods ended September 30, 1996 have been made, but the financial results
for the nine month and three month periods ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the full year
ended December 31, 1996. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and footnotes thereto for the year ended December 31, 1995 included
in the Company's Annual Report on Form 10-K/A.
Note 2 - INVENTORIES
(Amounts in thousands)
Inventories consists of the following:
September 30,1996 December 31,1995
----------------- ----------------
Finished Goods $1,630 $2,491
Work in Process 1,805 1,398
Raw Materials 2,543 3,827
------ ------
$5,978 $7,716
====== ======
NOTE 3 -DEBT
Borrowings under lines of credit and long-term debt consist of the following at
September 30, 1996 and December 31, 1995.
(Amounts in thousands)
September 30,1996 December 31,1995
----------------- ----------------
Convertible subordinated
promissory note $ 1,474 $ 1,395
Subordinated promissory note 1,400 1,400
------- -------
2,874 2,795
Less current maturities 200 200
------- -------
$ 2,674 $ 2,595
======= =======
8
<PAGE>
NOTE 4 -SUBSEQUENT EVENTS
On October 23, 1996, the Company withdrew four of its ANDAs, including its
ANDA (the "Capsule ANDA") for acetaminophen/oxycodone capsules, and halted sales
of the affected products. Net sales pursuant to the withdrawn Capsule ANDA were
approximately $2.15 million and $8.00 million for the six months and the year
ended June 30, 1996 and December 31, 1995, respectively, and accounted for
approximately 28% and 40% of the Company's total net sales during such six and
twelve month periods. The Company instituted the withdrawal in anticipation of
its release from the FDA's Application Integrity Policy list and its
restrictions (collectively, the "AIP"). The FDA had placed the Company on the
AIP in connection with its investigation of the Company's operations which
culminated in the 1993 consent decree. Under the AIP, the FDA suspended all of
the parent company's (i.e., Halsey Drug Co.'s) applications for new drug
approvals, including ANDAs and supplements to ANDAs. At the FDA's suggestion,
the Company retained outside consultants to perform validity assessments of its
drug applications. Thereafter, the FDA recommended that several applications,
including the Capsule ANDA, be withdrawn. As a basis for its decision, the FDA
cited questionable and incomplete data submitted in connection with the
applications. The FDA indicated that withdrawal of the four ANDAs was necessary
for the release of the Company from the AIP.
It is the Company's understanding that it will be removed from the AIP in
the very near future. Accordingly, the Company has submitted a new ANDA with
respect to the Capsules, which the Company anticipates will be reviewed on an
expedited basis. However, there can be no assurance that the new Capsule ANDA
will be approved or that the Company will in fact be removed from the AIP. The
Company will not be able to market the capsules unless and until the FDA
approves the new Capsule ANDA. Failure to obtain FDA approval for the new
Capsule ANDA, or a significant delay in obtaining such approval, would
materially adversely affect the Company's business operations and financial
condition.
9
<PAGE>
HALSEY DRUG CO., INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Percentage Percentage
Change Change
Year-to Year-to
Year Year
Increase Increase
Percentage of net sales (Decrease) Percentage of net sales (Decrease)
Nine months ended September 30 Three Months ended September 30
------------------------------ -------------------------------
1996 as 1996 as
1996 1995 Compared to 1996 1995 Compared to
% % 1995 % % 1995
<S> <C> <C> <C> <C> <C> <C>
Net Sales 100.0 100.0 (34.3) 100.0 100.0 (32.4)
Cost of Goods 114.3 79.9 (6.3) 148.2 93.1 7.5
----- ---- ------ -----
Gross Profit(Loss) (14.3) 20.09 (146.8) (48.2) 6.9 (575.5)
Research & Development 7.8 3.0 67.7 6.5 4.2 4.9
Selling, general and administrative 44.2 27.9 4.3 52.3 34.6 1.8
expenses
Loss from operations (66.3) (10.8) (303.0) (107.0) (32.0) (125.9)
Gain on the sale of assets 14.2 (100.0)
Other income
Interest expense 12.4 5.4 53.8 15.1 9.7 5.0
----- ---- ------ -----
Loss before income taxes (78.8) (1.9) (2614.3) (122.0) (41.7) (97.9)
Provision for income taxes 1.8 (100.0)
----
Net Loss (78.8) (3.7) (1281.9) (122.0) (41.7) (97.9)
===== ==== ====== =====
</TABLE>
10
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 VS NINE MONTHS ENDED SEPTEMBER 30, 1995
NET SALES
The Company's net sales for the nine months ended September 30, 1996 of
$10,580,000 represents a decrease of $5,524,000 (34.3%) as compared to net sales
for the nine months ended September 30, 1995 of $16,104,000. The decrease in
1996 is attributable to the reduction in shipments of tablet and capsule
products due to the sale at the end of the first quarter of 1995 by the Company
of its abbreviated new drug application for 5mg Oxycondone HCL/325mg
Acetaminophen tablets (the "Tablet ANDA") to an affiliate of Mallinckrodt
Chemical, Inc.("Malllinkrodt") which is partially offset by manufacturing
revenue that the Company is receiving as part of its agreement with
Mallinckrodt. In addition, increased competition during the current year
resulted of price reductions which contributed to the decrease.
COST OF GOODS SOLD
For the nine months ended September 30, 1996, cost of goods sold of
$12,094,000 represents a decrease of approximately $774,000 as compared to
$12,868,000 for the nine months ended September 30, 1995. The decrease for 1996
is attributable to the reduction in shipments of tablet products due to the sale
at the end of the first quarter of 1995 by the Company of the Tablets ANDA
combined with significant reductions in manufacturing costs of personnel and
other expenses. In addition during the current year, the Company effected price
reductions as a result of increased market competition which directly impacted
gross margin. The Company's gross margin (loss) as a percentage of sales for the
nine months ended September 30, 1996 was (14.3%) as compared to 20.9% for the
nine months ended September 30, 1995.
RESEARCH AND DEVELOPMENT EXPENSES
For the nine months ended September 30, 1996, research and development
expenses of $820,000 increased by $331,000 as compared to research and
development expenses in 1995 of $ 489,000. The Company has engaged in a research
and development plan which includes the reintroduction of products suspended
from shipment and the submission of several new products to the Food and Drug
Administration (the "FDA") for its review as soon the Company is removed from
the FDA's Application Integrity program (the "AIP"), of which there can be no
assurance.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses as a percentage of sales for
the nine months ended September 30, 1996 and 1995 were 44.2% and 27.9%,
respectively. These expenses increased by approximately $191,000 as compared to
1995. This increase in expenses is attributable to increased legal expenses,
professional fees and rent.
GAIN ON SALE OF ASSETS
On March 21, 1995, the Company sold the tablets ANDA and certain equipment
used in the production of the Tablets for up to $5.4 million to Mallinckrodt.
The Company received $500,000 of the proceeds in July 1994. Mallinckrodt also
paid the Company $2,000,000 on March 21,1995 and the remainder will be payable
as follows: (i) $1,000,000 upon the Company receiving general clearance from the
FDA for unrestricted operations at its Brooklyn facility and written notice from
the FDA that it is in compliance with certain provisions of the consent decree
dated September 29, 1993 and (ii) $1,900,000 at the earlier of (a) Mallinckrodt
receiving certain authorizations from the FDA or (b) September 21, 1997 (the "
Deferred Payments"). Mallinckrodt also agreed to defer $1,200,000 of the
Company's trade debt due to an affiliate of Mallinckrodt. For the nine months
ended September 30, 1995, the Company recorded a gain of $2,288,000 for the sale
of the ANDA and related equipment net of expenses related to the sale. If prior
to the time it is possible for Mallinckrodt to commence production under the
Tablets ANDA or any new Tablets ANDA at its own facility, and the Company ceases
or is forced to cease or substantially curtail production under the Tablet ANDA,
as a consequence of (i) any action or communication by the FDA or any other
regulatory or governmental authority or (ii) any financial or other
11
<PAGE>
business difficulty, then Mallinckrodt has the right to cancel payment of any
yet unpaid portion of the Deferred Payment($1.9 million) and shall further have
the right to a full refund of any portion of the Deferred Payment already made
to the Company.
The Company has revised the gain recorded on the sale of assets to Mallinckrodt
and will not recognize the Deferred Payment until the earlier of (a)
Mallinckrodt receiving certain authorizations from the FDA or (b) March 31,
1998. The effect of the adjustments on the accompanying financial statements is
as follows(In thousands, except for per share amounts):
As of September 30, 1995:
In thousands except for per share amounts As Previously As
reported restated
-------- --------
Net earnings(loss) $ 1,297 ($ 603)
Net earnings per common share .16 .15
Long-term receivable 1,900 --
Accumulated deficit ($9,589) ($11,489)
INTEREST EXPENSE
Interest expense for 1996 increased by $464,000 as compared to 1995 as a
result of the private placements of convertible subordinated debentures
consummated in July 1995, November 1995 and August 1996 combined with the note
from Mallinkrodt.
PROVISION FOR INCOME TAXES
In 1995, the Company had a tax provision of $296,000 as a result of
available net operating loss carryforwards. In 1996, the Company has no tax
benefit since the available loss carryback to prior years was utilized by the
net operating loss for 1993 carryback to the prior years.
NET (LOSS) EARNINGS
For the nine months ended September 30, 1996, the Company had a net loss of
$8,333,000 as compared to a net loss of $603,000 for the nine months ended
September 30, 1995. The increase in net loss is attributable to the gain on the
sale of assets of $ 4,188,000, net of the tax provision of $ 296,000, or
$3,892,000. This increaase is attributable to price reductions and discounts
during the current year in an effort to meet increased competition combined with
unabsorbed manufacturing costs and increases in expenses and legal fees incurred
for certain subsidiary operations without any revenue being generated at the
current time.
12
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 1996 Vs THREE MONTHS ENDED SEPTEMBER 30, 1995
NET SALES
The Company's net sales for the three months ended September 30, 1996 of
$2,937,000 represents a decrease of $1,410,000 (32.4%) as compared to net sales
for the three months ended September 30,1995 of $4,347,000. The decrease in 1996
is attributable to reductions in prices and increases in discounts due to
intensely increased market competition.
COST OF GOODS SOLD
For the three months ended September 30, 1996, cost of goods sold of
$4,354,000 representing an increase of approximately $305,000 as compared to the
three months ended September 30, 1995. The increase for 1996 is attributable to
increases in unabsorbed manufacturing costs which include costs of certain
subsidiary operations which are not generating revenues at the current time as
originally anticipated.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses as a percentage of sales for
the three months ended September 30, 1996 and 1995 were 52.3% and 34.6%,
respectively. These expenses increased by approximately $28,000 or 1.8% as
compared to 1995. This increase in expenses is attributable to increased legal
expenses, professional fees and rent.
INTEREST EXPENSE
Interest expense for 1996 increased by $464,000 as compared to 1995 as a
result of the private placements of convertible subordinated debentures
consummated in July 1995, November 1995 and August 1996.
NET (LOSS)
For the three months ended September 30, 1996, the Company had a net loss
of $3,584,000 as compared to a net loss of $1,811,000 for the three months ended
September 30, 1995. This increase is attributable to price reductions and
discounts during the current year in an effort to meet increased competition
combined with unabsorbed manufacturing costs and increases in expenses and legal
fees incurred for certain subsidiary operations without any revenue being
generated at the current time.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had cash and cash equivalents of
$507,000 as compared to $353,000 at December 31, 1995. The Company had a working
capital deficiency at September 30, 1996 of $9,486,000 and $7,393,000 at
December 31, 1995. In August of 1996, the Company signed an agreement with its
banks which granted waivers for the outstanding defaults and extended the bank
agreement termination date to December 31, 1996.
As a result of the decline in shipments of solid dosage products from the
Company's Brooklyn plant following the entry of the consent decree, and as a
result of the lack of available borrowing under the Company's credit agreement,
the Company's liquidity position has been materially adversely affected since
September 30, 1993 and the Company's capital resources have been severely
limited. The Company has actively sought to reduce its operating costs at the
Brooklyn plant, where it has made significant reductions in personnel. In
addition, the Company's liquidity position has been affected since the second
half of 1994 by the discontinuance of shipments of liquid products from its
California subsidiary as a result of a review completed by the Company of this
liquid operation. In an effort to reduce the loss from lower revenues at this
subsidiary, the Company has reduced its operating costs at the California
subsidiary through significant reductions of personnel and other expenses
however, the Company is still incurring operating costs which are not being
offset by revenues at this time.
The Company has insufficient resources to meet both its current obligations
at September 30, 1996 and it long-term obligations. As previously indicated, the
Company has continued to actively pursue financing as indicated by the
completion of a third private placement of convertible debentures with warrants
during the third quarter of 1996. However, there can be no assurance that the
Company will be able to obtain any such additional financing on commercially
acceptable terms to replace its existing bank debt.
The consummation of a private offering during the third quarter of 1996
resulted in net proceeds of approximately $ 2,160,000. The Company was required
to use $391,000 of such net proceeds to repay a portion of its bank debt,
accrued interest and legal fees as discussed in Note 3. The Company used the
balance of the net proceeds of the Offering for: working capital; registration
of the Underlying Shares under the Securities Act; purchase of equipment; and
for research and development expenses.
14
<PAGE>
PART II OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Financial Data Schedule
(b) Reports on Form 8-K
Current report on Form 8-k dated as of August 22, 1996:
Item 1 - Changes in Control of Registrant
Item 6 - Resignation of Registrant's Directors
Item 7 - Financial Statements and Exhibits
15
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this report under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations and
elsewhere in this report constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: changes in general economic and business conditions; loss of market
share through competition; introduction of competing services by other
companies; changes in industry capacity; pressure on prices from competition or
from purchasers of the Company's products; regulatory changes in the generic
pharmaceutical manufacturing industry; regulatory obstacles to the introduction
of new services that are important to the Company's growth; availability of
qualified personnel; the loss of any significant customers; and other factors
both reference and not referenced in this report. When used in this report, the
words "estimate", "project", "anticipate", "expect", "intend", "believe", and
similar expressions are intended to identify forward-looking statements.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HALSEY DRUG CO., INC.
Date: November 14, 1996 By: /s/ Rosendo Ferran
-----------------------
Rosendo Ferran
President and Chief
Executive Officer
Date: November 14, 1996 By: /s/ Robert J. Mellage
-----------------------
Robert J. Mellage
Corporate Controller
End of Document
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AT SEPTEMBER 30, 1996
(UNAUDITED) AND THE CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 507
<SECURITIES> 0
<RECEIVABLES> 1,338
<ALLOWANCES> 183
<INVENTORY> 5,978
<CURRENT-ASSETS> 8,170
<PP&E> 18,890
<DEPRECIATION> 12,372
<TOTAL-ASSETS> 16,038
<CURRENT-LIABILITIES> 17,656
<BONDS> 0
0
0
<COMMON> 116
<OTHER-SE> 19,958
<TOTAL-LIABILITY-AND-EQUITY> 16,038
<SALES> 10,580
<TOTAL-REVENUES> 0
<CGS> 12,094
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</TABLE>
