The Business and Nature of Operations	9 Months Ended
Mar. 31, 2023
The Business and Nature of Operations
The Business and Nature of Operations	Note 2. The Business and Nature of Operations Lannett Company, Inc., a Delaware corporation, (“LCI,” and as it may be reorganized pursuant to the Prepackaged Plan (as defined below), “Reorganized LCI”) and its subsidiaries (collectively, the “Company,” “Lannett, ” “we” or “us” and as it may be reorganized pursuant to the Prepackaged Plan, the “Reorganized Company” ) primarily develop, manufacture, package, market and distribute solid oral and extended release (tablets and capsules), topical, nasal and oral solution finished dosage forms of drugs that address a wide range of therapeutic areas. Certain of these products are manufactured by others and distributed by the Company. The Company operates a pharmaceutical manufacturing plant in Seymour, Indiana. During Fiscal 2022, the Company completed the sale of its Silarx Pharmaceuticals, Inc. (“Silarx”) facility in Carmel, New York. In connection with the sale, the buyer will continue to produce certain products on behalf of the Company at the Carmel facility while the Company completes the transfer of such products to its Seymour, Indiana plant. The Company’s customers include generic pharmaceutical distributors, drug wholesalers, chain drug stores, private label distributors, mail-order pharmacies, other pharmaceutical manufacturers, managed care organizations, hospital buying groups, governmental entities and health maintenance organizations. Going Concern Our interim unaudited consolidated financial statements included herein have been prepared using the going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the normal course of business. In accordance with ASC 205, Going Concern, the Company evaluated whether there are any conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year beyond the filing of this Quarterly Report on Form 10-Q. As a result of our evaluation, we concluded that substantial doubt exists regarding our ability to continue as a going concern primarily as a result of the risks and uncertainties related to the Prepackaged Plan and Chapter 11 Cases, which are both defined and discussed further in this Quarterly Report on Form 10-Q. On April 4, 2023 and April 17, 2023, the Company elected to defer interest payments on the Company’s 4.50% Convertible Senior Notes (the “Convertible Notes”) and the Company’s 7.750% Senior Secured Notes due 2026 (the “Secured Notes” and, together with the Convertible Notes, the “Notes”), respectively, and, in each case, enter a 30-day grace period. Failure to make an interest payment within the 30-day grace period constitutes an event of default under the Indenture, dated as of September 27, 2019 (the “Convertible Notes Indenture”), between the Company and Wilmington Trust, National Association, as trustee, and the Indenture, dated April 22, 2021, as supplemented by the first supplemental indenture, dated April 22, 2021(the “Secured Notes Indenture”), among the Company, the subsidiary guarantors party thereto and Wilmington Trust, National Association, as trustee and note collateral agent. Because the 30-day grace period has elapsed, an event of default occurred with respect to the Convertible Notes. As such, the trustee or the holders of at least 25% in aggregate principal amount of the outstanding Convertible Notes may declare 100% of the principal of, and accrued and unpaid interest on, all the Convertible Notes to be due and payable immediately. With respect to the Secured Notes, as a result of the event of default, the trustee or the holders of not less than 30% in aggregate principal amount of the outstanding Secured Notes may declare 100% of the principal of, and accrued and unpaid interest on, the Secured Notes to be due and payable immediately. Additionally, on April 24, 2023, the Company elected to defer an interest payment (together with the missed interest payments on the Notes, the “Missed Interest Payments”) in respect of its second lien credit and guaranty agreement, dated April 22, 2021 (the “Second Lien Credit Agreement”), by and among the Company, the other credit parties party thereto, the lenders party thereto and Alter Domus (US) LLC, as administrative agent and collateral agent, pursuant to which lenders party thereto made available to the Company a second lien term loan credit facility (the “Second Lien Credit Facility”). The Company did not make the interest payment within the ten-business day grace period (such grace period having been extended pursuant to the Restructuring Support Agreement, as defined below), which constituted an event of default under the Second Lien Credit Facility. Upon an event of default, the administrative agent, itself or at the request of requisite lenders, may declare the Second Lien Credit Facility and interest thereon due and payable and exercise all rights and remedies under the Second Lien Credit Facility and related agreements. The Company’s failure to pay the interest on the Second Lien Credit Facility by the end of the grace period also constituted an event of default under the Convertible Notes Indenture, the Secured Notes Indenture and the Company’s Credit and Guaranty Agreement, dated as of December 7, 2020 (as amended, the “Amended ABL Credit Agreement”), among the Company, certain of its wholly-owned domestic subsidiaries party thereto, as borrowers or as guarantors, Wells Fargo Bank, National Association, as administrative agent and as collateral agent and the other lenders party thereto. On April 19, 2023, the Company received written notice from the New York Stock Exchange (the “NYSE”) notifying the Company that the NYSE had commenced proceedings to delist the Company’s common stock. The NYSE reached this determination pursuant to Section 802.01(B) of the NYSE’s Listed Company Manual because the Company had fallen below the NYSE’s continued listing standard requiring listed companies to maintain an average global market capitalization of at least $15.0 million over a consecutive 30 trading-day period. The NYSE suspended trading in the Company’s common stock immediately after market close on April 19, 2023, and on April 20, 2023, the Company’s common stock began trading in the over-the-counter markets under the symbol “LCIN.” After the filing of the Chapter 11 Cases (as defined below), on May 3, 2023, our common stock began trading in the over-the-counter markets under the symbol “LCINQ.” On May 4, 2023, the NYSE filed a Form 25 with the Securities and Exchange Commission (the “SEC”) to delist our common stock from trading on the NYSE and to remove it from registration under Section 12(b) of the Exchange Act. The delisting of the Company’s common stock (the “Delisting”) became effective 10 days after the filing of the Form 25. In accordance with Rule 12d2-2 of the Exchange Act, the de-registration of our common stock under Section 12(b) of the Exchange Act will become effective 90 days, or such shorter period as the SEC may determine, after the date of the Form 25 filing. Pursuant to the Convertible Notes Indenture, the Delisting constituted a Fundamental Change (as defined therein). Upon the occurrence of a Fundamental Change, the Company must provide all holders of Convertible Notes and the trustee a notice (the “Fundamental Change Company Notice”) of the occurrence of the Fundamental Change and of the holder’s option to require the Company to repurchase for cash all of such holder’s notes at 100% of the principal amount, plus accrued and unpaid interest. Failure by the Company to issue a Fundamental Change Company Notice within 20 days following the fundamental change constitutes an event of default and, if the trustee or holders of at least 25% in aggregate principal amount of the Convertible Notes declared 100% of the principal of, and accrued and unpaid interest on, all the Notes to be due and payable immediately, the Convertible Notes would become immediately due and payable. If holders were to exercise their option to accelerate the maturity of either series of the Notes, it would also constitute an event of default under the other series of Notes, as well as the Second Lien Credit Facility and the Amended ABL Credit Agreement. Similarly, if the Second Lien Credit Facility administrative agent, itself or at the request of requisite lenders, exercises its option to accelerate the maturity of the Second Lien Credit Facility, it would also constitute an event of default under the Notes and the Amended ABL Credit Agreement. On April 30, 2023, Lannett Company, Inc., Kremers Urban Pharmaceuticals, Inc., Cody Laboratories, Inc. and Silarx Pharmaceuticals, Inc. (collectively, the “Company Parties”) and certain of the Company’s debtholders (the “Consenting Stakeholders”) entered into the restructuring support agreement (the “Restructuring Support Agreement”) to facilitate the financial restructuring (the “Restructuring”) of the existing debt of, existing equity interests in and certain other obligations of the Company Parties. In connection therewith, on May 2, 2023 (the “Petition Date”), the Company Parties commenced cases (the “Chapter 11 Cases”) under chapter 11 (“Chapter 11”) of title 11 of the United States Code (the “Bankruptcy Code”) in the Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). On May 2, 2023, the Company Parties filed the Joint Prepackaged Chapter 11 Plan of Reorganization of Lannett Company, Inc. and Its Debtor Affiliates (the “Prepackaged Plan”). Each Company Party will continue to operate its business as a “debtor in possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. The Chapter 11 Cases are being jointly administered under the caption In re Lannett Company, Inc., et al., Case No. 23-10559 (JKS). The filing of the Chapter 11 Cases constituted an event of default that accelerated all of our debt obligations under the Convertible Notes Indenture, the Secured Notes Indenture, the Second Lien Credit Agreement and the Amended ABL Credit Agreement. As such, we have reclassified all debt obligations to debt due within a year on our Consolidated Balance Sheet as of March 31, 2023. Our consolidated interim unaudited financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. For additional discussion related to the impact of the Chapter 11 Cases on our debt obligations, see Note 10 “Debt.” For additional information related to the effect of the automatic stay on actions to collect indebtedness incurred prior to the Petition Date or to exercise control over the Company Parties’ property, see Note 11 “Legal, Regulatory Matters and Contingencies” and Note 20 “Subsequent Events.” Our ability to continue as a going concern is contingent upon, among other things, our ability to, subject to the Bankruptcy Court’s approval, implement the Prepackaged Plan, successfully emerge from the Chapter 11 Cases and establish a sustainable capital structure through the Restructuring. As a result of risks and uncertainties related to the Missed Interest Payments, the Delisting and the effects of disruption from the Chapter 11 Cases making it more difficult to maintain business, financing and operational relationships, together with the Company’s recurring losses from operations and accumulated deficit, substantial doubt exists regarding our ability to continue as a going concern. For detailed discussion about the Restructuring Support Agreement and the Prepackaged Plan, see Note 20 “Subsequent Events.”

The Business and Nature of Operations

9 Months Ended

Mar. 31, 2023

The Business and Nature of Operations

Note 2. The Business and Nature of Operations

Lannett Company, Inc., a Delaware corporation, (“LCI,” and as it may be reorganized pursuant to the Prepackaged Plan (as defined below), “Reorganized LCI”) and its subsidiaries (collectively, the “Company,” “Lannett, ” “we” or “us” and as it may be reorganized pursuant to the Prepackaged Plan, the “Reorganized Company” ) primarily develop, manufacture, package, market and distribute solid oral and extended release (tablets and capsules), topical, nasal and oral solution finished dosage forms of drugs that address a wide range of therapeutic areas. Certain of these products are manufactured by others and distributed by the Company.

The Company operates a pharmaceutical manufacturing plant in Seymour, Indiana. During Fiscal 2022, the Company completed the sale of its Silarx Pharmaceuticals, Inc. (“Silarx”) facility in Carmel, New York. In connection with the sale, the buyer will continue to produce certain products on behalf of the Company at the Carmel facility while the Company completes the transfer of such products to its Seymour, Indiana plant.

The Company’s customers include generic pharmaceutical distributors, drug wholesalers, chain drug stores, private label distributors, mail-order pharmacies, other pharmaceutical manufacturers, managed care organizations, hospital buying groups, governmental entities and health maintenance organizations.

Going Concern

Our interim unaudited consolidated financial statements included herein have been prepared using the going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the normal course of business. In accordance with ASC 205, Going Concern, the Company evaluated whether there are any conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year beyond the filing of this Quarterly Report on Form 10-Q. As a result of our evaluation, we concluded that substantial doubt exists regarding our ability to continue as a going concern primarily as a result of the risks and uncertainties related to the Prepackaged Plan and Chapter 11 Cases, which are both defined and discussed further in this Quarterly Report on Form 10-Q.

On April 4, 2023 and April 17, 2023, the Company elected to defer interest payments on the Company’s 4.50% Convertible Senior Notes (the “Convertible Notes”) and the Company’s 7.750% Senior Secured Notes due 2026 (the “Secured Notes” and, together with the Convertible Notes, the “Notes”), respectively, and, in each case, enter a 30-day grace period. Failure to make an interest payment within the 30-day grace period constitutes an event of default under the Indenture, dated as of September 27, 2019 (the “Convertible Notes Indenture”), between the Company and Wilmington Trust, National Association, as trustee, and the Indenture, dated April 22, 2021, as supplemented by the first supplemental indenture, dated April 22, 2021(the “Secured Notes Indenture”), among the Company, the subsidiary guarantors party thereto and Wilmington Trust, National Association, as trustee and note collateral agent. Because the 30-day grace period has elapsed, an event of default occurred with respect to the Convertible Notes. As such, the trustee or the holders of at least 25% in aggregate principal amount of the outstanding Convertible Notes may declare 100% of the principal of, and accrued and unpaid interest on, all the Convertible Notes to be due and payable immediately. With respect to the Secured Notes, as a result of the event of default, the trustee or the holders of not less than 30% in aggregate principal amount of the outstanding Secured Notes may declare 100% of the principal of, and accrued and unpaid interest on, the Secured Notes to be due and payable immediately.

Additionally, on April 24, 2023, the Company elected to defer an interest payment (together with the missed interest payments on the Notes, the “Missed Interest Payments”) in respect of its second lien credit and guaranty agreement, dated April 22, 2021 (the “Second Lien Credit Agreement”), by and among the Company, the other credit parties party thereto, the lenders party thereto and Alter Domus (US) LLC, as administrative agent and collateral agent, pursuant to which lenders party thereto made available to the Company a second lien term loan credit facility (the “Second Lien Credit Facility”). The Company did not make the interest payment within the ten-business day grace period (such grace period having been extended pursuant to the Restructuring Support Agreement, as defined below), which constituted an event of default under the Second Lien Credit Facility. Upon an event of default, the administrative agent, itself or at the request of requisite lenders, may declare the Second Lien Credit Facility and interest thereon due and payable and exercise all rights and remedies under the Second Lien Credit Facility and related agreements. The Company’s failure to pay the interest on the Second Lien Credit Facility by the end of the grace period also constituted an event of default under the Convertible Notes Indenture, the Secured Notes Indenture and the Company’s Credit and Guaranty Agreement, dated as of December 7, 2020 (as amended, the “Amended ABL Credit Agreement”), among the Company, certain of its wholly-owned domestic subsidiaries party thereto, as borrowers or as guarantors, Wells Fargo Bank, National Association, as administrative agent and as collateral agent and the other lenders party thereto.

On April 19, 2023, the Company received written notice from the New York Stock Exchange (the “NYSE”) notifying the Company that the NYSE had commenced proceedings to delist the Company’s common stock. The NYSE reached this determination pursuant to Section 802.01(B) of the NYSE’s Listed Company Manual because the Company had fallen below the NYSE’s continued listing standard requiring listed companies to maintain an average global market capitalization of at least $15.0 million over a consecutive 30 trading-day period. The NYSE suspended trading in the Company’s common stock immediately after market close on April 19, 2023, and on April 20, 2023, the Company’s common stock began trading in the over-the-counter markets under the symbol “LCIN.” After the filing of the Chapter 11 Cases (as defined below), on May 3, 2023, our common stock began trading in the over-the-counter markets under the symbol “LCINQ.” On May 4, 2023, the NYSE filed a Form 25 with the Securities and Exchange Commission (the “SEC”) to delist our common stock from trading on the NYSE and to remove it from registration under Section 12(b) of the Exchange Act. The delisting of the Company’s common stock (the “Delisting”) became effective 10 days after the filing of the Form 25. In accordance with Rule 12d2-2 of the Exchange Act, the de-registration of our common stock under Section 12(b) of the Exchange Act will become effective 90 days, or such shorter period as the SEC may determine, after the date of the Form 25 filing.

Pursuant to the Convertible Notes Indenture, the Delisting constituted a Fundamental Change (as defined therein). Upon the occurrence of a Fundamental Change, the Company must provide all holders of Convertible Notes and the trustee a notice (the “Fundamental Change Company Notice”) of the occurrence of the Fundamental Change and of the holder’s option to require the Company to repurchase for cash all of such holder’s notes at 100% of the principal amount, plus accrued and unpaid interest. Failure by the Company to issue a Fundamental Change Company Notice within 20 days following the fundamental change constitutes an event of default and, if the trustee or holders of at least 25% in aggregate principal amount of the Convertible Notes declared 100% of the principal of, and accrued and unpaid interest on, all the Notes to be due and payable immediately, the Convertible Notes would become immediately due and payable.

If holders were to exercise their option to accelerate the maturity of either series of the Notes, it would also constitute an event of default under the other series of Notes, as well as the Second Lien Credit Facility and the Amended ABL Credit Agreement. Similarly, if the Second Lien Credit Facility administrative agent, itself or at the request of requisite lenders, exercises its option to accelerate the maturity of the Second Lien Credit Facility, it would also constitute an event of default under the Notes and the Amended ABL Credit Agreement.

On April 30, 2023, Lannett Company, Inc., Kremers Urban Pharmaceuticals, Inc., Cody Laboratories, Inc. and Silarx Pharmaceuticals, Inc. (collectively, the “Company Parties”) and certain of the Company’s debtholders (the “Consenting Stakeholders”) entered into the restructuring support agreement (the “Restructuring Support Agreement”) to facilitate the financial restructuring (the “Restructuring”) of the existing debt of, existing equity interests in and certain other obligations of the Company Parties. In connection therewith, on May 2, 2023 (the “Petition Date”), the Company Parties commenced cases (the “Chapter 11 Cases”) under chapter 11 (“Chapter 11”) of title 11 of the United States Code (the “Bankruptcy Code”) in the Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). On May 2, 2023, the Company Parties filed the Joint Prepackaged Chapter 11 Plan of Reorganization of Lannett Company, Inc. and Its Debtor Affiliates (the “Prepackaged Plan”). Each Company Party will continue to operate its business as a “debtor in possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. The Chapter 11 Cases are being jointly administered under the caption In re Lannett Company, Inc., et al., Case No. 23-10559 (JKS).

The filing of the Chapter 11 Cases constituted an event of default that accelerated all of our debt obligations under the Convertible Notes Indenture, the Secured Notes Indenture, the Second Lien Credit Agreement and the Amended ABL Credit Agreement. As such, we have reclassified all debt obligations to debt due within a year on our Consolidated Balance Sheet as of March 31, 2023. Our consolidated interim unaudited financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. For additional discussion related to the impact of the Chapter 11 Cases on our debt obligations, see Note 10 “Debt.” For additional information related to the effect of the automatic stay on actions to collect indebtedness incurred prior to the Petition Date or to exercise control over the Company Parties’ property, see Note 11 “Legal, Regulatory Matters and Contingencies” and Note 20 “Subsequent Events.”

Our ability to continue as a going concern is contingent upon, among other things, our ability to, subject to the Bankruptcy Court’s approval, implement the Prepackaged Plan, successfully emerge from the Chapter 11 Cases and establish a sustainable capital structure through the Restructuring. As a result of risks and uncertainties related to the Missed Interest Payments, the Delisting and the effects of disruption from the Chapter 11 Cases making it more difficult to maintain business, financing and operational relationships, together with the Company’s recurring losses from operations and accumulated deficit, substantial doubt exists regarding our ability to continue as a going concern. For detailed discussion about the Restructuring Support Agreement and the Prepackaged Plan, see Note 20 “Subsequent Events.”