**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-QSB**

 
| **ý**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**  |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **For  the quarterly period ended June 30, 2003**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **OR**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **o**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **For  the transition period from                                                      to                                                    ** |

 

 

**Commissionfile number 1 - 7335**

 

**LEE PHARMACEUTICALS**

(Exact name of smallbusiness issuer as specified in its charter)

 

| **California**                                                                      |   | **95  - 2680312**                     |
|-------------------------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of incorporation  or organization)                    |   | (I.R.S. Employer  Identification No.) |
|                                                                                |
| **1444  Santa Anita Avenue, South El Monte, California 91733**                      |
| (Address of  principal executive offices)                                           |
| (Zip Code)                                                                          |
|                                                                                |
| **(626)  442 - 3141**                                                               |
| (Registrant’s  telephone number, including area code)                          |
|                                                                                |
| **N/A**                                                                             |
| (Former name,  former address and former fiscal year, if changed since last report) |

 

As of June 30, 2003 there were outstanding 4,135,162shares of common stock of the registrant.

 

Transitional Small Business Disclosure Format (checkone):  Yes o              No ý

 

 

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**LEEPHARMACEUTICALS****BALANCESHEET****JUNE 30,2003****(Dollarsin thousands)****(Unaudited)**

 
| **ASSETS**                                                                              |   |    |      |      |       |
|-----------------------------------------------------------------------------------------|--------|---------|-----------|-----------|------------|
| Cash                                                                                    |   |    |      | **$**     | **28**     | ** ** |
|                                                                                    |   |    |      |      |       |
| Accounts  and notes receivable (net of allowances: $190)                                |   |    |      | **982**   | ** ** |
|                                                                                    |   |    |      |      |       |
| Inventories  (net of reserves: $330)                                                    |   |    |      |      |       |
| Raw  materials                                                                          |   | **$**   | **1,960** |      |       | ** ** |
| Work  in process                                                                        |   | **200** |      |      | ** ** |
| Finished  goods                                                                         |   | **411** |      |      | ** ** |
|                                                                                    |   |    |      |      |       |
| Total  inventories                                                                      |   |    |      | **2,571** | ** ** |
|                                                                                    |   |    |      |      |       |
| Other  current assets                                                                   |   |    |      | **447**   | ** ** |
|                                                                                    |   |    |      |      |       |
| Total  current assets                                                                   |   |    |      | **4,028** | ** ** |
|                                                                                    |   |    |      |      |       |
| Property,  plant and equipment (less accumulated depreciation and amortization: $5,413) |   |    |      | **667**   | ** ** |
|                                                                                    |   |    |      |      |       |
| Investment                                                                              |   |    |      | **400**   | ** ** |
|                                                                                    |   |    |      |      |       |
| Intangibles  and other assets (net of accumulated amortization: $956)                   |   |    |      | **2,188** | ** ** |
|                                                                                    |   |    |      |      |       |
| **TOTAL**                                                                               |   |    |      | **$**     | **7,283**  | ** ** |
|                                                                                         |        |         |           |           |            |  |  |

 

See Accompanying SelectedInformation to Unaudited Condensed Financial Statements.

 

2

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**LEEPHARMACEUTICALS****BALANCESHEET****JUNE 30,2003****(Dollarsin thousands)****(Unaudited)**

 
| **LIABILITIES**                                                                                       |   |       |       |
|-------------------------------------------------------------------------------------------------------|--------|------------|------------|
|                                                                                                  |   |       |       |
| Bank  overdraft                                                                                       |   | **$**      | **225**    | ** ** |
| Notes  payable - bank                                                                                 |   | **978**    | ** ** |
| Current  portion - notes payable, other                                                               |   | **1,023**  | ** ** |
| Current  portion - note payable related party                                                         |   | **880**    | ** ** |
| Due  on investment acquisition                                                                        |   | **185**    | ** ** |
| Accounts  payable                                                                                     |   | **1,741**  | ** ** |
| Other  accrued liabilities                                                                            |   | **427**    | ** ** |
| Environmental  cleanup liability                                                                      |   | **366**    | ** ** |
| Due  to related parties                                                                               |   | **923**    | ** ** |
| Deferred  income                                                                                      |   | **137**    | ** ** |
|                                                                                                  |   |       |       |
| Total  current liabilities                                                                            |   | **6,885**  | ** ** |
|                                                                                                  |   |       |       |
| Long-term  notes payable to related parties                                                           |   | **1,803**  | ** ** |
| Long-term  notes payable, other                                                                       |   | **1,908**  | ** ** |
| Environmental  cleanup liability - Casmalia Site                                                      |   | **374**    | ** ** |
| Deferred  income                                                                                      |   | **76**     | ** ** |
|                                                                                                  |   |       |       |
| Total  long-term liabilities                                                                          |   | **4,161**  | ** ** |
|                                                                                                  |   |       |       |
| Total  liabilities                                                                                    |   | **11,046** | ** ** |
|                                                                                                  |   |       |       |
| **COMMITMENTS  AND CONTINGENCIES**                                                                    |   |       |       |
|                                                                                                  |   |       |       |
| **STOCKHOLDERS’  (DEFICIT)**                                                                     |   |       |       |
|                                                                                                  |   |       |       |
| Common  stock, $.10 par value; authorized, 7,500,00 shares;  issued and outstanding, 4,135,162 shares |   | **413**    |       |
|                                                                                                  |   |       |       |
| Additional  paid-in capital                                                                           |   | **4,222**  |       |
|                                                                                                  |   |       |       |
| Accumulated  (deficit)                                                                                |   | **(8,398** | **)**      |
|                                                                                                  |   |       |       |
| Total  stockholders’ (deficit)                                                                   |   | **(3,763** | **)**      |
|                                                                                                  |   |       |       |
| **TOTAL**                                                                                             |   | **$**      | **7,283**  |   |

 

See Accompanying SelectedInformation to Unaudited Condensed Financial Statements.

 

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**LEEPHARMACEUTICALS****STATEMENTS OF OPERATIONS****(Dollars in thousands, except per shareamounts)****(Unaudited)**

 
|                                |                       | **For the  Three Months  Ended June 30,** |       | **For the  Nine Months  Ended June 30,** |   |
|-------------------------------------|----------------------------|-------------------------------------------|------------|------------------------------------------|--------|
|                                |                       | **2003**                                  |       | **2002**                                 |   | **2003** |   | **2002** |   |
|                                |                       |                                      |       |                                     |   |   |   |   |   |
| Gross  revenues                     |                       | **$**                                     | **2,430**  | ** **                               | $      | 2,440 |   | **$** | **7,946** | ** ** | $ | 7,620 |   |
| Less:                               | Sales  returns             |                                      | **(159**   | **)**                                    | (202   | ) | **(708** | **)** | (648 | ) |
|                                | Cash  discounts and others |                                      | **(22**    | **)**                                    | (29    | ) | **(85** | **)** | (70 | ) |
|                                |                       |                                      | ** ** |                                     |   |   | ** ** |   |   |
| Net  revenues                       |                       | **2,249**                                 | ** ** | 2,209                                    |   | **7,153** | ** ** | 6,902 |   |
|                                |                       |                                      | ** ** |                                     |   |   | ** ** |   |   |
| Costs  and expenses:                |                       |                                      | ** ** |                                     |   |   | ** ** |   |   |
|                                |                       |                                      | ** ** |                                     |   |   | ** ** |   |   |
| Cost  of sales                      |                       | **1,348**                                 | ** ** | 1,136                                    |   | **3,931** | ** ** | 3,499 |   |
| Selling  and advertising expense    |                       | **666**                                   | ** ** | 805                                      |   | **2,133** | ** ** | 2,205 |   |
| General  and administrative expense |                       | **309**                                   | ** ** | 281                                      |   | **970** | ** ** | 896 |   |
| Interest  expense                   |                       | **221**                                   | ** ** | 193                                      |   | **664** | ** ** | 559 |   |
|                                |                       |                                      | ** ** |                                     |   |   | ** ** |   |   |
| Total  costs and expenses           |                       | **2,544**                                 | ** ** | 2,415                                    |   | **7,698** | ** ** | 7,159 |   |
|                                |                       |                                      | ** ** |                                     |   |   | ** ** |   |   |
| Loss  from operations               |                       | **(295**                                  | **)**      | (206                                     | )      | **(545** | **)** | (257 | ) |
|                                |                       |                                      | ** ** |                                     |   |   | ** ** |   |   |
| Other  income                       |                       | **74**                                    | ** ** | 39                                       |   | **270** | ** ** | 92 |   |
|                                |                       |                                      | ** ** |                                     |   |   | ** ** |   |   |
| Net  (loss)                         |                       | **$**                                     | **(221**   | **)**                                    | $      | (167 | ) | **$** | **(275** | **)** | $ | (165 | ) |
|                                |                       |                                      | ** ** |                                     |   |   | ** ** |   |   |
| Per  share:                         |                       |                                      | ** ** |                                     |   |   | ** ** |   |   |
|                                |                       |                                      | ** ** |                                     |   |   | ** ** |   |   |
| Basic  and diluted (loss) per share |                       | **$**                                     | **(.05**   | **)**                                    | $      | (.04 | ) | **$** | **(.07** | **)** | $ | (.04 | ) |

 

See Accompanying SelectedInformation to Unaudited Condensed Financial Statements.

 

4

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**LEE PHARMACEUTICALS****STATEMENTSOF CASH FLOWS****(Dollarsin thousands)****(Unaudited)**

 
|                                                                                      |   | **For the  Nine Months  Ended June 30,** |       |
|-------------------------------------------------------------------------------------------|--------|------------------------------------------|------------|
|                                                                                      |   | **2003**                                 |       | **2002** |   |
|                                                                                      |   |                                     | ** ** |   |   |
| Cash  flows provided (used) by operating activities:                                      |   |                                     | ** ** |   |   |
| Net  income (loss)                                                                        |   | **$**                                    | **(275**   | **)** | $ | (165 | ) |
| Adjustments  to reconcile net income to net cash provided (used) by operating activities: |   |                                     | ** ** |   |   |
| Depreciation  and amortization                                                            |   | **123**                                  | ** ** | 130 |   |
| Amortization  of intangibles                                                              |   | **149**                                  | ** ** | 356 |   |
| (Decrease)  in deferred income                                                            |   | **—**                               | ** ** | (82 | ) |
| Other  (Income)                                                                           |   | **(113**                                 | **)**      | (1 | ) |
| Decrease  in accounts receivable                                                          |   | **113**                                  | ** ** | 222 |   |
| (Decrease)  in allowance for doubtful accounts                                            |   | **(9**                                   | **)**      | (142 | ) |
| (Increase)  in inventories                                                                |   | **(107**                                 | **)**      | **—** | ** ** |
| (Decrease)  in inventory reserve                                                          |   | **(46**                                  | **)**      | (331 | ) |
| Decrease  in deposits                                                                     |   | **35**                                   | ** ** | 53 |   |
| Decrease  (increase) in other current assets                                              |   | **22**                                   | ** ** | (67 | ) |
| Increase  in accounts payable and accrued liabilities                                     |   | **494**                                  | ** ** | 351 |   |
| Increase  in due to related parties                                                       |   | **21**                                   | ** ** | 45 |   |
| Net  cash flows provided (used) by operating activities                                   |   | **407**                                  | ** ** | 369 |   |
|                                                                                      |   |                                     | ** ** |   |   |
| Cash  flows provided (used) by investing activities:                                      |   |                                     | ** ** |   |   |
| Acquisition  of property and equipment                                                    |   | **(273**                                 | **)**      | (101 | ) |
| Proceeds  from sale of equipment                                                          |   | **—**                               | ** ** | 1 |   |
| Proceeds  from sale of product brand                                                      |   | **—**                               | ** ** | 265 |   |
| Acquisition  of product brand                                                             |   | **—**                               | ** ** | (660 | ) |
| Investment  in Tronolane® brand                                                      |   | **(430**                                 | **)**      | — |   |
| Proceeds  from sale of interest in Tronolane® brand                                  |   | **215**                                  | ** ** | — |   |
| Net  cash flows provided (used) by investing activities                                   |   | **(488**                                 | **)**      | (495 | ) |
|                                                                                      |   |                                     | ** ** |   |   |
| Cash  flows provided (used) by financing activities:                                      |   |                                     | ** ** |   |   |
| Proceeds  from notes payable to related party                                             |   | **93**                                   | ** ** | 53 |   |
| Payments  of notes payable to related party                                               |   | **(89**                                  | **)**      | (133 | ) |
| Payments  of notes payable to bank                                                        |   | **(256**                                 | **)**      | (283 | ) |
| Proceeds  from notes payable, other                                                       |   | **800**                                  | ** ** | 1,365 |   |
| Payments  of notes payable, other                                                         |   | **(617**                                 | **)**      | (830 | ) |
| Increase  (decrease) in bank overdraft                                                    |   | **152**                                  | ** ** | (35 | ) |
| Net  cash flows provided (used) by financing activities                                   |   | **83**                                   | ** ** | 137 |   |
|                                                                                      |   |                                     | ** ** |   |   |
| Net  increase in cash                                                                     |   | **2**                                    | ** ** | 11 |   |
| Cash  at the beginning of the year                                                        |   | **26**                                   | ** ** | 5 |   |
| Cash  at the end of the year                                                              |   | **$**                                    | **28**     | ** ** | $ | 16 |   |
|                                                                                      |   |                                     | ** ** |   |   |
| **Supplemental  disclosures of cash flow information:**                                   |   |                                     | ** ** |   |   |
|                                                                                      |   |                                     | ** ** |   |   |
| Cash  paid during the year for:                                                           |   |                                     | ** ** |   |   |
| Interest                                                                                  |   | **$**                                    | **593**    | ** ** | $ | 497 |   |
| Taxes                                                                                     |   | **$**                                    | **1**      | ** ** | $ | 1 |   |

 

See AccompanyingSelected Information to Unaudited Condensed Financial Statements.

 

5

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SELECTED FINANCIALINFORMATION

Substantially AllDisclosures Required By Generally Accepted Accounting Principals Are NotIncluded

 

**Notes to Financial Information**

 

1.               Basis ofpresentation:

 

The condensed interimfinancial statements included herein have been prepared by Lee Pharmaceuticalswithout audit, pursuant to the rules and regulations of the Securities andExchange Commission.  Certain informationand footnote disclosures normally included in financial statements prepared inaccordance with generally accepted accounting principles have been condensed oromitted pursuant to such rules and regulations, although the Company believesthat the disclosures are adequate to make the information presented notmisleading.

 

These statements reflectall adjustments, consisting of normal recurring adjustments which, in theopinion of management, are necessary for fair presentation of the informationcontained herein.  It is suggested thatthese condensed financial statements be read in conjunction with the financialstatements and notes thereto included in the Company’s Annual Report on Form10-KSB for the year ended September 30, 2002. The Company follows the same accounting policies in preparation ofinterim reports.

 

Results of operations forthe interim periods may not be indicative of annual results.

 

The Company is involvedin various matters involving environmental cleanup issues.  See “Item 2. Management’s Discussionand Analysis or Plan of Operations” and Note 12 of Notes to FinancialStatements included in the Company’s Form 10-KSB for the fiscal year endedSeptember 30, 2002.  The ultimateoutcome of these matters cannot presently be determined.  Environmental expenditures that relate to anexisting condition caused by past operations, and which do not contribute tocurrent or future revenue generation, are expensed.  The Company’s proportionate share of the liabilities are recordedwhen environmental remediation and/or cleanups are probable, and the costs canbe reasonably estimated.  As of June 30,2003, no settlements have been reached.

 

2.               Continuedexistence:

 

The financial statementshave been prepared assuming that the Company will continue as a goingconcern.  The Company has an accumulateddeficit of $8,398,000.  The Company’srecurring losses from operations and inability to generate sufficient cash flowfrom normal operations to meet its obligations as they come due raise substantialdoubt about the Company’s ability to continue as a going concern.  The Company’s ability to continue inexistence is dependent upon future developments, including retaining currentfinancing and achieving a level of profitable operations sufficient to enableit to meet its obligations as they become due. Management’s plans in regard to these matters are to increaseprofitability by increasing sales, control expenses and seek additionalfinancing from outside lenders.  Thefinancial statements do not include any adjustments to reflect the possiblefuture effects of the recoverability and classification of assets or theamounts and classification of liabilities that may result from the possibleinability of the Company to continue as a going concern.

 

3.               Use of estimates:

 

The preparation offinancial statements in conformity with generally accepted accountingprincipals requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosures of contingentassets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

 

6

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4.               Reclassification:

 

Certain reclassificationshave been made to the prior year financial statements to be consistent with the2003 presentation.

 

7

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5.               Impairment ofintangible assets:

 

At June 30, 2003, theCompany had $5.1 million of product line and certain identifiableintangibles.  In assessing therecoverability of these intangibles, the Company must make assumptionsregarding estimated future cash flows and other factors to determine the fairvalue of the respective assets.  If theestimates or their related assumptions change in the future, the Company may berequired to record impairment charges for these assets not previouslyrecorded.  In connection with theadoption of SFAS 142 issued in July 2001, the Company performed an impairment assessmentfor nine months ended June 30, 2003, and deemed that no impairment chargeis necessary.

 

6.               Earnings per share:

 

The Company has a simplecapital structure, and there were no changes under the SFAS 128 methodology tothe previously reported earnings (loss) per share amounts for any of the fiscalyears.  Basic earnings per share underSFAS 128 were computed using the weighted average number of shares outstandingof 4,135,162 for the three and nine months ended June 30, 2003 and5,265,162 for the three and nine months ended June 30 2002.  Differences in the weighted average numberof shares outstanding for purposes of computing diluted earnings per share weredue to the inclusion of the dilutive effect of stock options previouslygranted.  These differences in theweighted average number of shares outstanding for the calculation of basic anddiluted earnings per share resulted in no differences in the earnings pershare.

 

7.               Acquisition:

 

In December 2002, theCompany signed an agreement with The Monticello Companies, Inc. relating to theacquisition of a product line in conjunction with a large pharmaceuticalcompany.  The original agreement calledfor Lee Pharmaceuticals to have a 40% ownership interest in the product lineand to receive 40% of the net product profits as a monthly royalty.  This investment was recorded on the booksfor $800,800.  The Company paid $430,000and recorded a current liability of $370,800. As part of the agreement, after July 31, 2003, the Company will takeover the sales, marketing, warehousing, shipping, invoicing and collection ofthe brand for a 6% fee.  This agreementwas revised in April 2003, so that Lee Pharmaceuticals’ ownership interest andmonthly royalty were reduced to 20%. The Monticello Companies, Inc. repaid $215,000 of the original amountpaid by the Company, and the Company has reduced the current liability ‘Due onInvestment Acquisition’ to $185,400. The Company reduced the original investment on the balance sheet to$400,400.

 

8.               Other income:

 

For the nine months endedJune 30, 2003, the Company realized gains of approximately $31,000 related tothe sale of the Astring-o-Sol® product line and approximately $81,000 relatedto the sale of the Klutch® product line. The realized gains pertain to the recognition of the earned portion ofthe deferred income of the consulting agreements arising from the sale of theAstring-o-Sol® and Klutch® brands. These amounts are included in other income on the statements of operations.  Also included in other income is $15,000 inproperty tax refunds paid in prior years and approximately $143,000, which isthe Company’s portion of the net profits from their new investment with TheMonticello Companies, Inc.

 

9.               Subsequent events:

 

During the quarter endedJune 30, 2003, Lee Pharmaceuticals agreed orally, later confirmed in writingvia contract, with The Monticello Companies, Inc. to sell back their remaining20% interest in the product brand acquisition. In conjunction with this, Lee Pharmaceuticals’ monthly royalties will bereduced accordingly.  At June 30, 2003,the amounts recorded by the Company as an investment of $400,400 and a relatedliability of $185,400, result in a net of $215,000.  This amount ($215,000) was received from The MonticelloCompanies, Inc. in July 2003.  As ofJuly 31, 2003, Lee Pharmaceuticals will no longer have an investment interestor royalty interest in the product brand.

 

At the close of businesson July 18, 2003, the Company sold one of its product brands for $665,000.  The Company received $365,000 in cash.  In addition, the principal balance of anexisting note payable, to the buyer, was reduced from $600,000 to$300,000.  Also, the Company willreceive approximately $25,000 as a cash deposit related to certain inventoryitems.

 

8

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**Item 2.****                                    Management’sDiscussion and Analysis or Plan of Operations.**

 

**Material Changes in Results ofOperations****ThreeMonths Ended June 30, 2003, and June 30, 2002**

 

Gross revenues for thethree months ended June 30, 2003, were $2,430,000, a decrease of approximately$10,000, from the comparable three months ended June 30, 2002.  The Company reported decreases in salesvolume associated with depilatories ($119,000), numerous over-the-counter (OTC)products ($192,000), and the private label segment ($20,000).  The decrease in gross revenues was partiallyoffset by the added sales volume of Lee® Lip-Ex® ($226,000), Lee Nails®category ($54,000), as well as other OTC brands ($45,000).

 

Net revenues increasedapproximately $40,000, or 2%, for the three months ended June 30, 2003, ascompared to the three months ended June 30, 2002.  The change in net revenues was due to the sales volumeexplanations discussed above and a decrease of $43,000, or 21%, in salesreturns when comparing the three months ended June 30, 2003 and 2002.  The decrease in sales returns related tofewer prior product recalls.

 

Cost of sales as apercentage of gross revenues was 56% for the three months ended June 30, 2003,compared to 47% for the three months ended June 30, 2002.  The increased cost of sales percentage wasdue to the continued change in the product mix and lower priced commodity-typegoods with an accompanying higher cost of goods attached to them, therebygenerating lower gross margins on sales of these related products.  In addition, the Company incurred additionalbuilding rental expense ($10,500) since the facility was previously subleasedon a month-to-month basis, and now the Company needs the facility formanufacturing.  The Company alsoincurred additional manufacturing overhead expenses due to the expandedanalytical testing requirements of the various production batches of theCompany products ($28,600) along with increased consulting services associatedwith the Quality Control Department ($19,500).

 

Selling and advertisingexpenses decreased $139,000, or 17%, when comparing the three months ended June30, 2003 with the three months ended June 30, 2002.  The decrease in expenses was due to the following factors.  There was a reduction in amortizationexpense ($93,000) as a result of the Financial Accounting Standards Boardissuance of Statement of Financial Accounting Standards No. 142 (FAS-142),Goodwill and Other Intangible Assets. In connection with the adoption of this standard, the Company’sunamortized goodwill balance (product line) will no longer be amortized overits estimated useful life.  Also, theCompany experienced increased bad debt reserve ($74,000) during June 2002 andno comparable adjustment during the comparative quarter of 2003, and lowersales force commissions/bonuses along with salary and related fringe benefitsresulting from the resignation of a sales person who was not replaced($30,000).  The above decreases were partiallyoffset by (1) increased convention expense, the result of more shows andconventions attended ($22,000), (2) additional cooperative advertising expense($28,000), and (3) higher insurance expense due to increased premiums forproduct liability coverage ($23,000).

 

General and administrativeexpenses increased $28,000, or 10%, when comparing the three months ended June30, 2003, with the three months ended June 30, 2002.  This increase was principally due to higher MIS (ManagementInformation Systems) expenses for consulting services ($12,500), increasedaccounting and auditing accrual ($13,000), and higher building rental expensedue to a reduction in the number of buildings with sublease rental income($23,800).  These expenses werepartially offset by lower salary and related fringe benefits due to employeeterminations ($23,000).

 

Interest expenseincreased $28,000, or 15%, when comparing the three months ended June 30, 2003,with the three months ended June 30, 2002. The increase was due to higher overall borrowings (principal) by theCompany.

 

9

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The Company realizedother income of approximately $74,000 for the three months ended June 30, 2003,as compared to $39,000 for the comparable three months ended June 30,2002.  The income pertains to realizedgains related to the sale of the Astring-o-Sol® product line ($11,000) andapproximately $26,000 related to the sale of the Klutch® product line.  The realized gains pertain to therecognition of the earned portion of the deferred income of the consultingagreements arising from the sale of the Astring-o-Sol® and Klutch® brands.  Also included in other income isapproximately $39,000 which is the Company’s portion of the net profits fromits new investment with The Monticello Companies, Inc.  For the three months ended June 30, 2002,the Company realized other income ($27,000) related to the sale of the Klutch®product line and $11,000 of property tax refunds.

 

**Material Changes in Results ofOperations****NineMonths Ended June 30, 2003, and June 30, 2002**

 

Gross revenues for thenine months ended June 30, 2003, were $7,946,000, an increase of approximately$326,000, or 4%, from the comparable nine months ended June 30, 2002.  The increased sales volume was due to newlyacquired brands ($655,000) plus the added sales from the private label segment($411,000).  In addition, the Companyreported volume increases from several OTC products.  The above increased gross revenues were somewhat offset by lowersales volume of existing brands, namely Lee® Lip-Ex® ($64,000), depilatories($128,000), as well as other OTC brands and prescription drug products($522,000).

 

Net revenues increased$251,000, or 4%, for the nine months ended June 30, 2003, as compared to thenine months ended June 30, 2002. The change in net revenues was due to the sales volume explanationsdiscussed above.  The Company’s salesreturns increased $60,000, or 9%, when comparing the nine months ended June 30,2003 and 2002.  The higher amount ofsales returns is related to prior product recalls and a reduction adjustment ofthe sales returns allowance during fiscal 2002.

 

Cost of sales as apercentage of gross revenues was 50% for the nine months ended June 30, 2003,compared to 46% for the nine months ended June 30, 2002.  The increase in the cost of sales percentagewas due to the continued change in the product mix along with lower pricedcommodity-type goods with an accompanying higher cost of goods attached tothem, thereby generating lower gross margins on sales of these related products.  The Company also incurred increasedmanufacturing overhead expenses due to the expanded analytical testingrequirements of the various production batches of its products ($108,000) alongwith increased consulting services associated with the Quality ControlDepartment ($30,000).  Furthermore, theCompany incurred additional building rental expense ($49,000) since thebuildings, previously subleased, are now needed by the Company formanufacturing and shipping.

 

Selling and advertisingexpenses decreased $72,000, or 3%, when comparing the nine months ended June30, 2003 with the nine months ended June 30, 2002.  The decrease in expenses was due to a reduction in amortizationexpense ($207,000), the result of the Financial Accounting Standards Board issuanceof Statement of Financial Accounting Standards No. 142 (FAS-142), Goodwill andOther Intangible Assets.  In connectionwith the adoption of this standard, the Company’s unamortized goodwill balance(product line) will no longer be amortized over its estimated useful life.  In addition, the Company experienced lowersales force commissions/bonuses along with salary and related fringe benefitsresulting from the resignation of a sales person who was not replaced ($55,000)and an increase to the bad debt reserve ($74,000) during June 2002 and nocomparable adjustment during comparative quarter of 2003.  The above decreases were somewhat offset bythe following factors: (1) added royalty expense from new acquisitions($98,000), (2) higher insurance expense because of increased premiums forproduct liability coverage ($51,000), (3) added cooperative advertising($86,000), and (4) higher freight costs ($19,000).

 

General andadministrative expenses increased $74,000, or 8%, when comparing the ninemonths ended June 30, 2003, with the nine months ended June 30, 2002.  The increase was principally due to higherMIS expenses for consulting services ($48,000), higher building rental expensebecause the facility is currently occupied by manufacturing and shipping($10,000), and higher legal fees ($42,000). These expenses were principally offset by lower salary and relatedfringe benefits, the result of employee terminations ($41,000).

 

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Interest expense increased$105,000, or 19%, when comparing the nine months ended June 30, 2003, with thenine months ended June 30, 2002.  Thiswas due to increased borrowings at a rate higher than the prime rate.

 

For the nine months endedJune 30, 2003, the Company realized other income in the amount of $270,000 ascompared to $92,000 for the nine months ended June 30, 2002.  This increase was due to the sameexplanations discussed earlier, namely gains related to the sale of theAstring-o-Sol® product line ($32,000) and the Company’s portion of the netprofits from its new investment with The Monticello Companies, Inc. ($143,000).

 

**Liquidity and Capital Resources**

 

At June 30, 2003, workingcapital was a negative $2,857,000 compared with a negative $1,883,000 as ofSeptember 30, 2002.  The ratio ofcurrent assets to current liabilities was .6 to 1 at June 30, 2003, and .7 to 1at September 30, 2002.  The increase inthe Company’s negative working capital was primarily due to a decrease inaccounts receivable, an increase in payables and acquisition investment debt,and a portion of previous long term debt becoming short term.

 

The Company has anaccumulated deficit of $8,398,000. Although the Company experienced nominal net income in fiscal years 2000and 2001, and the three months ended December 31, 2002, past recurring lossesand inability to generate sufficient cash flow from normal operations to meetits obligations as they become due, raises substantial doubt about theCompany’s ability to continue as a going concern.  The Company’s ability to continue in existence is dependent uponfuture developments, including retaining current financing and achieving alevel of profitable operations sufficient to enable it to meet its obligationsas they become due.

 

**Environmental Matters**

 

The Company owns amanufacturing facility located in South El Monte, California.  The California Regional Water QualityControl Board (The “RWQCB”) ordered the Company in 1988 and 1989 to investigatethe contamination on its property (relating to soil and groundwatercontamination).  The Company engaged aconsultant who performed tests and reported to the then Chairman of theCompany.  The Company resisted furtherwork on its property until the property upgradient was tested in greater detailsince two “apparent source” lots had not been tested.  On August 12, 1991, the RWQCB issued a “Cleanup and AbatementOrder” directing the Company to conduct further testing and cleanup thesite.  In October 1991, the Companyreceived from an environmental consulting firm an estimate of $465,200 forinvestigation and cleanup costs.  TheCompany believed that this estimate was inconclusive and overstated thecontamination levels.  The Company believesthat subsequent investigations will support the Company’s conclusions aboutthat estimate.  The Company did notcomplete the testing for the reasons listed above as well as “financialconstraints”.  In June 1992, the RWQCBrequested that the EPA evaluate the contamination and take appropriateaction.  At the EPA’s request, Ecology& Environment, Inc. conducted an investigation of soil and groundwater onthe Company’s property.  Ecology &Environment Inc.’s Final Site Assessment Report, which was submitted to the EPAin June 1994, did not rule out the possibility that some of the contaminationoriginated on-site, and resulted from either past or current operations on theproperty.

 

On April 24, 2002, theRWQCB notified the Company that the detection of emergent chemicals ingroundwater, above State and Federal maximum containment levels or actionlevels, has caused the RWQCB and the EPA to reassess the threat posed togroundwater resources used for domestic supply.  The RWQCB directed the Company to test for the presence ofemergent chemicals in its groundwater monitoring wells.  The groundwater monitoring analyticalresults were due by July 15, 2002.  OnMay 24, 2002, the Company informed RWQCB that it could not comply with therequirement to conduct groundwater sampling due to ongoing financialdifficulties.

 

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On July 8, 2002, theRWQCB sent a “Second Notice of Violation” to the Company directing the Companyto comply with the requirement to prepare a groundwater remedial action plan(RAP).  The Company previously notifiedthe RWQCB that it could not comply with the requirement to submit a RAP becauseof ongoing financial difficulties.  TheRWQCB requested that the Company submit certain financial information by July29, 2002 to “substantiate any alleged financial losses and determine whetherany suspension of implementing the...(Cleanup and Abatement Order) iswarranted.”  The Company has received anextension to submit the required financial information to August 19, 2002.  The Company submitted the requestedfinancial information on August 16, 2002. As of the date of the financial statements, no response has beenreceived regarding the Company’s request for relief due to financialhardship.  However, in April 2003, theCompany received a letter from the RWQCB directing the Company to conduct therequired testing and submit the technical report immediately.  The letter noted that failure to submit thereport may result in administrative civil penalties not to exceed $1,000 perday since July 15, 2002, the date the report was originally due.  The Company also may be liable for all orpart of the costs of remediating the contamination on its property and could besubject to enforcement action by the RWQCB, including injunctive remedies.  As of the date of the financial statements,the Company’s share of the costs have not been determined.

 

The Company and nearbyproperty owners, in consort with their comprehensive general liability (CGL)carriers, engaged a consultant to perform a site investigation with respect tosoil and shallow groundwater contamination over the entire city block.  The CGL carriers provided $290,000 infunding which paid for the $220,000 study, $20,000 in legal fees for projectoversight, and a $50,000 balance in the operating fund.  Earlier the Company had accrued $87,500 asits proportionate share of the earlier quote of $175,000.  Since that time, the overall scope of theproject was increased to $205,000 plus $15,000 for waste water disposal,bringing the total to the above listed $220,000.  The $87,500 accrual was not spent on this project (as the entirecost was borne by the CGL carriers), but remains on the books as an accrualagainst the cost of remediation of the same site that was included in thestudy.

 

The tenants of nearbyproperties upgradient have sued the Company alleging that hazardous materialsfrom the Company’s property caused contamination on the properties leased bythe tenants.  The case name is DelRay Industrial Enterprises, Inc. v. Robert Malone, et al., LosAngeles County Superior Court, Northwest District, commenced August 21,1991.  In this action, the plaintiffalleges environmental contamination by defendants of its property, and seeks acourt order preventing further contamination and monetary damages.  The Company does not believe there is anybasis for the allegations and is vigorously defending the lawsuit.

 

The Company’s South ElMonte manufacturing facility is also located over a large area of possiblycontaminated regional groundwater which is part of the San Gabriel ValleySuperfund Site.  The Company has beennotified that it is a potentially responsible party  (“PRP”) for the contamination. In 1995, the Company was informed that the EPA estimated the cleanupcosts for the South El Monte’s portion of the San Gabriel Valley Superfund Siteto be $30 million.  The Company’spotential share of such amount has not been determined.  Superfund PRPs are jointly and severallyliable for superfund site costs, and are responsible for negotiating amongthemselves the allocation of the costs based on, among other things, theoutcome of environmental investigation.

 

In August 1995, theCompany was informed that the EPA entered into an Administrative Order ofConsent with Cardinal Industrial Finishes (“Cardinal”) for a PRP lead remedialinvestigation and feasibility study (the “Study”) which, the EPA states, willboth characterize the extent of groundwater contamination in South El Monte andanalyze alternatives to control the spread of contamination.  The Company and others entered into theSouth El Monte Operable Unit Site Participation Agreement with Cardinalpursuant to which, among other things, Cardinal contracted with anenvironmental firm to conduct the Study. The Study has been completed. The Company’s share of the cost of the Study

 

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was $15,000 and wasaccrued for in the financial statements as of September 30, 1995.  The South El Monte Operable Unit (SEMOU)participants developed four remedial alternatives.  The capital cost of the four alternatives range from $0 (noaction) up to $3.49 million.  Theestimated annual operating cost for the four alternatives range from $0 (noaction) to $770,300.  Over a 30-yearperiod, the total cost of the four alternatives range from $0 (no action) up to$13.05 million.  The EPA prefers analternative which estimates the capital cost up to $3.08 million, the annualoperating cost at $.48 million, and the 30-year period total cost up toapproximately $9.09 million.  Theselection of the actual alternative implemented is subject to publiccomment.  At the present time, theCompany does not know what its share of the cost may be, if any.  Therefore, no additional accrual has beenrecognized as a liability on the Company’s books.  The Company requested that the EPA conduct an “ability-to-payevaluation” to determine whether the Company is entitled to an early settlementof this matter based upon a limited ability to pay costs associated with siteinvestigation and remediation.  InAugust 2000, the EPA informed the Company that it does not qualify for an earlysettlement at this time.

 

The EPA has informed theCompany that it has learned that the intermediate zone groundwatercontamination in the western portion of the SEMOU has migrated further west andhas now impacted the City of Monterey Park and Southern California WaterCompany production wells.  The EPAstated that the City of Monterey Park Water Department, San Gabriel ValleyWater Company and Southern California Water Company are planning to build treatmentfacilities for their wells.  The EPAstated that these three water purveyors contacted some of the SEMOU PRPs, otherthan the Company, to seek funding to develop groundwater treatment facilitiesfor the contaminated wells.  A group ofthese PRPs calling themselves the “South El Monte Cooperative Group” has beenformed and purportedly has reached a general agreement with the water purveyorsto fund the development of treatment facilities and use the water purveyors’wells in an attempt to contain the groundwater contamination to meet EPA’sgoals.  At this time, the EPA has notreviewed or approved any specific plan to address contamination at the purveyorwells, nor has the EPA compromised its right to recover response costs from anyperson who is legally responsible for contamination within the SEMOU.  As of the date of this report, the Companyhas not been contacted by the South El Monte Cooperative Group in respect toits participation in any proposed cleanup activity.  As a result, the Company is not able to determine whatcontribution, if any, it may be assessed in connection with this cleanupactivity.

 

By letter dated November13, 2000, the Company was notified that the City of Monterey Park, San GabrielValley Water Company and Southern California Water Company intend to bring suitunder the Safe Drinking Water and Toxic Enforcement Act of 1986 alleging thatthe Company has knowingly released volatile organic compounds in the soil andshallow groundwater beneath the Company’s property between at least on orbefore November 8, 1996 and the present and has failed to promptly clean up allof the contamination.  As of the date ofthis report, the Company has not been served with this lawsuit.

 

The City of South ElMonte, the city in which the Company has its manufacturing facility, is locatedin the San Gabriel Valley.  The SanGabriel Valley has been declared a Superfund site.  The 1995 Water Quality Control Plan issued by the CaliforniaRegional Water Quality Control Board states that the primary groundwater basinpollutants in the San Gabriel Valley are volatile organic compounds fromindustry, nitrates from subsurface sewage disposal and past agriculturalactivities.  In addition, the Plan notedthat hundreds of underground storage tanks leaking gasoline and other toxicchemicals have existed in the San Gabriel Valley.  The California Department of Toxic Substance Control has declaredlarge areas of the San Gabriel Valley to be environmentally hazardous and subjectto cleanup work.

 

The Company believes theCity of South El Monte does not appear to be located over any of the majorplumes.  However, the EPA has announcedit is studying the possibility that, although the vadose soil and groundwater,while presenting cleanup problems, there may be a contamination by DNAPs (densenon-aqueous phase liquids), i.e., “sinkers”, usually chlorinated organiccleaning solvents.  The EPA has proposedto drill six “deep wells” throughout the City of South El Monte at an estimatedcost of $1,400,000.  The EPA is conferringwith SEMPOA (South El Monte Property Owners Association) as to cost sharing onthis project.  SEMPOA has obtained muchlower preliminary cost estimates.  Theoutcome cost and exact scope of this are unclear at this time.

 

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The Company and otherproperty owners engaged Geomatrix Consultants, Inc., to do a survey of vadosesoil and shallow groundwater in the “hot spots” detected in the previousstudies.  Geomatrix issued a reportdated December 1, 1997 (the “Report”), on the impact of volatile organiccompounds on the soil and groundwater at the Lidcombe and Santa Anita Avenuesite located in South El Monte, California (which includes the Company’sfacilities).  The Report indicatedgenerally low concentrations of tetrachloroethene, trichloaethene andtrichloroethane in the groundwater of the upgradient neighbor.  The Report was submitted to the RWQCB forits comments and response.  A meetingwith the parties and RWQCB was held on February 10, 1998.  The RWQCB had advised companies that vadosesoil contamination is minimal and requires no further action.  However, there is an area of shallowgroundwater which has a higher than desired level of chlorinated solvents, andthe RWQCB requested a proposed work plan be submitted by Geomatrix.  Geomatrix has submitted a “FocusedFeasibility Study” which concludes that there are five possible methods forcleanup.  The most expensive are for apump and sewer remediation which would cost between $1,406,000 and $1,687,000.  The Company is actively exploring the lessexpensive alternative remediation methods, of which the two proposedalternatives range in cost between $985,000 and $1,284,000.  Since there are four economic entitiesinvolved, the Company’s best estimate at this time, in their judgment, would bethat their forecasted share would be $287,000 less the liability alreadyrecognized on the books of $165,000 thereby requiring an additional $122,000liability.  Accordingly, the Companyrecorded an additional accrual of $122,000 in the third quarter of fiscal1998.  The $122,000 accrual is inaddition to the $79,000 accrual for the Monterey Site as will be explained inthe following paragraph.  The $79,000accrual, in the third quarter of fiscal 1998, related to the Monterey Site isnot included in the $287,000 figure above. In April 2000, the Company received a Notice of Violation from theRWQCB.  The Notice of Violation statesthat the Company and other property owners were required to submit agroundwater remedial action plan by November 1, 1999, and that the RWQCB hasbeen advised that the Company and the other property owners were unable tosubmit the required remedial action plan because the Company and the otherproperty owners could not agree on the allocation of financial responsibilityto prepare the action plan.  The RWQCBstated that it will no longer encourage the cooperative approach among theCompany and the other property owners in completing the cleanup requirementsand will pursue appropriate measures, including when necessary, enforcementactions.  The RWQCB states that it mayimpose civil liability penalties of up to $1,000 per day from November 1, 1999for failure to file the action plan.  Inlight of these events, no assurances can be given that the cleanup costs andpossible penalties will not exceed the amount of the Company’s current accrualsof $287,000 (which includes the $122,000 charge to income in the third quarterof fiscal 1998).

 

In July 2000, theproperty owners formed the Lidcombe & Santa Anita Avenue Work Group (LSAAW)in response to the RWQCB request for the preparation of an action plan.  The LSAAW submitted a Focused FeasibilityStudy to the RWQCB for their review and approval of the selected remedialaction method for the site.  Afterreceiving RWQCB approval, LSAAW obtained three cost proposals to implement theRWQCB approved pump and treat remedial method. According to these cost proposals, the lowest estimated costs for anassumed five (5) years of pump and treat remediation is $600,000.  This cost is lower than the previous costproposed work plan, discussed above, from Geomatrix Consultants, Inc.  The capital costs including contingenciesare approximately $300,000.

 

The LSAAW is hopeful theWater Quality Authority (WQA) is willing and able to reauthorize its grant forone-half (1/2) of the capital costs of its remediation system construction notto exceed $150,000.  It is estimated atthis time that the reserves for the Company’s share of this cost proposal areadequate since its prior accrual was based on the higher cost estimate fromGeomatrix.

 

Without any priorcorrespondence or inkling of the Company’s potential liability, the EPAinformed the Company that the Company may have potential liability for theongoing remediation of Operating Industries, Inc. (as they have gone out ofbusiness) Landfill Superfund Site in Monterey Park, California (the “MontereySite”).  The Monterey Site is a 190 acrelandfill that operated from 1948 to 1984, in which the Company disposed of non toxicpH balanced waste water on six occasions between 1974 and 1978.  Over 4,000 companies have been identified ashaving contributed waste to the Monterey Site. The EPA has offered to settle the Company’s potential liability withrespect to the Monterey Site for a cost to the Company of $79,233.  The Company accrued a $79,000 charge in thethird quarter of fiscal 1998 with respect to this possible liability.  The Company has elected to file for relieffrom these obligations under the financial hardship option in the EPA’sresponse form.  On June 30, 2000, theEPA informed the Company that the EPA believed the Company is able to pay thefull settlement cost, but offered to reduce the amount of the settlement to$75,271.

 

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The Company was notifiedby the EPA that the Company may have potential liability for waste material itdisposed of at the Casmalia Disposal Site (“Site”) located on a 252 acre parcelin Santa Barbara County, California. The Site was operational from 1973 to 1989, and over 10,000 separateparties disposed of waste there.  TheEPA stated that federal, state and local governmental agencies along with thenumerous private entities that used the Site for waste disposal will beexpected to pay their share as part of this settlement.  The U.S. EPA is also pursuing theowner(s)/operator(s) of the Site to pay for Site remediation.  The EPA has a settlement offer to theCompany with respect to the Site for a cost of $373,950.  The Company accrued a $374,000 charge in thefirst quarter of fiscal 1999 with respect to this possible liability.  The Company has elected to file for relieffrom these obligations under the financial hardships option in the EPA’s responseform.  The Company, the EPA and certainPRPs have entered into an agreement tolling the applicable statutes oflimitation.  The Company has beennotified by the EPA that their request for a waiver, due to financial hardship,was “partially granted.”  Improvementsin the bidding process has lowered the Company’s estimated share down to$245,000 (from $374,000) and of that, the EPA was requesting that the Companypay $113,000, as a result of their findings on the application for waiver dueto financial hardship.  The Company isconsidering the EPA’s request.

 

The total amount ofenvironmental investigation and cleanup costs that the Company may incur withrespect to the foregoing is not known at this time.  However, based upon information available to the Company at thistime, the Company has expensed since 1988 a total of $860,000, of which $89,000were legal fees, exclusive of legal fees expended in connection with the SECenvironmental investigation.  The actualcosts could differ materially from the amounts expensed for environmentalinvestigation and cleanup costs to date.

 

As of June 30, 2003, nosettlements have been reached.  Thetotal amount expensed in prior years relating to this environmental issue is$860,000.  As of June 30, 2003, no additionalamounts have been expensed or accrued.  The Company has an accrued liability on the books at June 30, 2003of $740,000 for the environmental cleanup.

 

**Item 3.****                                    Controlsand Procedures**

 

The chief executiveofficer and chief financial officer of the Company (the “certifying officer”)evaluated the effectiveness of the Company’s disclosure controls and proceduresas of the end of the period covered by this report.  These disclosure controls and procedures are designed to ensurethat the information required to be disclosed by the Company in its periodicreports filed with the Securities and Exchange Commission (the “Commission”) isrecorded, processed, summarized and reported, within the time periods specifiedby the Commission’s rules and forms, and that the information is communicatedto the certifying officer on a timely basis.

 

The certifying officerconcluded, based on his evaluation, that the Company’s disclosure controls andprocedures are effective for the Company.

 

There were no changes inthe Company’s internal control over financial reporting that occurred duringthe Company’s most recent fiscal quarter that has materially affected, or isreasonably likely to materially affect, the Company’s internal control overfinancial reporting.

 

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**PARTII - OTHER INFORMATION**

 

**Item 1.****                                    LegalProceedings**

 

The information set forthunder Part I, Item 2, “Management’s Discussion and Analysis or Plan ofOperations - Environmental Matters” is incorporated herein by reference.  See also “Legal Proceedings” in theCompany’s Form 10-KSB for the fiscal year ended September 30, 2002.

 

**Item 6.****                                    Exhibitsand Reports on Form 8-K:**

 
| The following exhibits  are filed herewith:                        |
|--------------------------------------------------------------------|
|                                                               |
| 10.1                                                               |   | - | Promissory note  evidencing advance made to Registrant |
|                                                               |
| 31.1                                                               |   | - | Certification by Chief  Executive Officer and Chief Financial Officer |
|                                                               |
| 32.1                                                               |   | - | Section 1350  Certification |
|                                                               |
| The following exhibits  have previously been filed by the Company: |
|                                                               |
| 3.1                                                                |   | - | Articles of  Incorporation, as amended (1) |
|                                                               |
| 3.4                                                                |   | - | By-laws, as amended  December 20, 1997 (2) |
|                                                               |
| 3.5                                                                |   | - | Amendment of By-laws  effective March 14, 1978 (2) |
|                                                               |
| 3.6                                                                |   | - | Amendment to By-laws  effective November 1, 1980 (3) |
|                                                               |

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| (1)    |   | Filed as an Exhibit of  the same number with the Company’s Form S-1 Registration Statement filed with  the Securities and Exchange Commission on February 5, 1973, (Registrant No.  2-47005), and incorporated herein by reference. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |
| (2)    |   | Filed as Exhibits 3.4  and 3.5 with the Company’s Form 10-K Annual Report for the fiscal year ended  September 30, 1978, filed with the Securities and Exchange Commission  and incorporated herein by reference.         |
|   |
| (3)    |   | Filed as an Exhibit of  the same number with the Company’s Form 10-K Annual Report for the fiscal  year ended September 30, 1979, filed with the Securities and Exchange  Commission and incorporated herein by reference.          |

 

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SIGNATURES

 

In accordance with the requirements of the Securities Exchange Acts of1934, the registrant has caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 

 
|   | LEE  PHARMACEUTICALS                                                          |   |
|--------|-------------------------------------------------------------------------------|--------|
|   | (Registrant)                                                                  |   |
|   |
|   |
| Date:  | AUGUST 8, 2003                                                                |   | RONALD G. LEE |
|   | Ronald G. Lee                                                                 |
|   | Chairman of the  Board, President and  Chief Financial and Accounting Officer |
|        |                                                                               |        |  |  |  |

 

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