______________________________________________________________________________

                          SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C.  20549
______________________________________________________________________________


                                      FORM 10-KSB

[X]  Annual  Report  Pursuant  to  Section  13  or  15(d) of the Securities
     Exchange Act of 1934

                     For the fiscal year ended June 30, 1995

[ ]  Transition  Report Pursuant to Section 13 or 15(d)  of  the  Securities
     Exchange Act of 1934
                                  ____________________
                                  
                            Commission File Number:  0-13976
                                  ____________________
                               
                                       AKORN, INC.
               (Name of small business issuer as specified in its charter)

          LOUISIANA                                  72-0717400
  (State or other jurisdiction of         (I.R.S. Employer Identification No.)
  incorporation or organization)

                    100 Akorn Drive, Abita Springs, Louisiana 70420
                (Address of principal executive offices and zip code)
                      Issuer's telephone number:  (504) 893-9300
                                   ____________________

           SECURITIES  REGISTERED  UNDER  SECTION  12(b) OF THE EXCHANGE ACT:

                                         None

           SECURITIES  REGISTERED UNDER SECTION 12(g)  OF  THE  EXCHANGE ACT:

                               Common Stock, No Par Value
                                    (Title of Class)
                                   ____________________

     Check whether the Issuer (1)  has filed all reports required to be filed by
     Section 13 or 15(d) of the Exchange  Act during the preceding 12 months (or
     for  such shorter period that the Registrant  was  required  to  file  such
     reports), and (2) has been subject to such filing requirements for the past
     90 days.  Yes  X     No

     Check  if  disclosure  of  delinquent  filers  in  response  to Item 405 of
     Regulation S-B is not contained in this form, and will not be contained, to
     the  best  of  issuer's  knowledge,  in  definitive  proxy  or  information
     statements incorporated by reference in Part III of this Form 10-KSB or any
     amendment to this Form 10-KSB. [ ]

     Issuer's revenues for its fiscal year ended June 30, 1995 were $32,863,000.

     The  aggregate  market  value  of  the  voting  stock held by nonaffiliates
     (affiliates being, for these purposes only, directors,  executive  officers
     and holders of more than 5% of the Issuer's common stock) of the Issuer  as
     of September 8, 1995 was approximately $25,500,000.

     The  number of shares of the Issuer's common stock, no par value per share,
     outstanding as of September 8, 1995 was 14,904,653.
                                   ____________________

                          DOCUMENTS INCORPORATED BY REFERENCE

     Portions  of  Issuer's  Proxy  Statement to be submitted to shareholders in
     connection with their 1995 Annual  Meeting  are  incorporated  by reference
     into Parts II and III of this Form 10-KSB.

     Transitional Small Buisness Disclosure Format (check one):  Yes   No   X
                                        
                                        
                                        
                                        PART I


          Item 1.      Description of Business.

          General Development of Business

             Akorn,  Inc.  (Akorn or the Company) manufactures, markets and
          distributes an extensive  line  of  therapeutic,  diagnostic  and
          surgical pharmaceutical and over-the-counter ophthalmic products.
          In   addition,   through   its   wholly  owned  subsidiary  Akorn
          Manufacturing, Inc. (AMI), the Company  provides sterile contract
          manufacturing services to several large pharmaceutical companies.
          Akorn, a Louisiana corporation founded in  1971, is headquartered
          in Abita Springs, Louisiana, a suburb of New Orleans.

             Prior to the fiscal year beginning July 1,  1989,  the Company
          purchased its entire ophthalmic product line on a contract  basis
          from  several  suppliers,  who  packaged and labeled the products
          under the Company's name.  In September  1989,  in  order to more
          vertically  integrate  its  operations,  the  Company acquired  a
          manufacturing  facility  in  Los  Angeles,  California  that  was
          capable    of   manufacturing   sterile   ophthalmic   solutions,
          suspensions, and human injectable products, among other products.
          Until July 1991,  the  Company manufactured a substantial part of
          its ophthalmic pharmaceutical  product  line  at  the Los Angeles
          facility while continuing to have the balance supplied by outside
          manufacturers.  In September 1991, the Company decided to abandon
          that facility due to the cost of bringing the facility  into full
          compliance with current "Good Manufacturing Practice" regulations
          of  the United States Food and Drug Administration (the FDA)  and
          to  restructure  its  manufacturing  operations  by  acquiring  a
          larger,  more  modern  facility.   Supply arrangements with other
          manufacturers were renewed in order  to  maximize availability of
          the Company's ophthalmic product line.

             In January 1992, the Company acquired AMI,  which at that time
          was  named  Taylor  Pharmacal  Company,   of  Decatur,   Illinois
          (formerly  Taylor  Pharmacal  Company)  and began the process  of
          transferring to AMI the operations formerly  conducted at the Los
          Angeles   facility   while   maintaining  the  sterile   contract
          manufacturing business conducted by AMI.

          Ophthalmic Distribution Business

             The  Company  distributes  a  complete  line  of  therapeutic,
          diagnostic   and   over-the-counter   ophthalmic   pharmaceutical
          products  as  well  as  other  surgical  and   office-based  non-
          pharmaceutical  products.   The Company's therapeutic  ophthalmic
          pharmaceutical   product   line   is   extensive   and   includes
          antibiotics,  anti-infectives,  steroids,  steroid  combinations,
          glaucoma  medications,  decongestants/antihistamines,  and  anti-
          edema medications.  Diagnostic  products,  primarily  for  use in
          doctors'  offices,  include  a  complete  line  of mydriatics and
          cycloplegics, anesthetics, topical stains, gonioscopic  solutions
          and  others.   Surgical  products  available  from  Akorn include
          surgical  knives  and  other surgical instruments, balanced  salt
          solution, post-operative kits, surgical tapes, eye shields, anti-
          ultraviolet goggles, facial  drape  supports, and other supplies.
          Ophthalmic over-the-counter products  include  various artificial
          tear  solutions,  preservative-free  lubricating  ointments,  lid
          cleansers, vitamin supplements and contact lens accessories.

          Contract Manufacturing Business

             AMI  manufactures sterile products, on a contract  basis,  for
          third parties.   The  majority of AMI contracts are short-term in
          nature  and  operate on the  basis  of  signed  purchase  orders.
          However,  AMI  is   in  the  process  of  developing  longer-term
          contracts  with  minimum   quantity   requirements  in  order  to
          strengthen the commitments from its contract  customers.  Because
          of   the   present   nature   of   AMI  contracts,  its  contract
          manufacturing is more volatile than  the  ophthalmic distribution
          segment, and given that sales to contract customers  are large in
          relations to the distribution segment sharp reduction in contract
          manufacturing  sales  can occur should customers discontinue  the
          contract for any reason.



          Sales and Marketing

             While the Company's  ophthalmic  product  line  includes  some
          unique  products, the majority are non-proprietary.  As a result,
          the Company  relies  on its expertise in marketing, distribution,
          and support for products in order to maintain and increase market
          share.

             The Company maintains  an  efficient  three-pronged ophthalmic
          distribution sales effort.  This effort includes 23 outside sales
          representatives  who, together with two district  managers,  make
          personal calls on  customers in the Northeast, Southeast, Midwest
          and  West regions of  the  country.   In  addition,  the  Company
          maintains  an in-house telemarketing and a customer service sales
          group of 25  persons  who  operate at the Company's facilities in
          Abita Springs.  And finally, the Company also maintains a direct-
          mail marketing effort.

             The  Company's  ophthalmic   distribution   customers  consist
          primarily    of   ophthalmologists,   optometrists,   independent
          pharmacies, and  full-service wholesalers whose customers include
          hospitals and other institutions.

             The Company's sales  and  marketing  efforts  in  the contract
          manufacturing business have been limited to personal contact with
          major   pharmaceutical   companies   and  limited  trade  journal
          advertisements.  Attendance at manufacturing  trade shows will be
          implemented  in  fiscal  1996.  The Company's contract  customers
          include several large pharmaceutical companies.

             The Company stresses its  service  and  support  as  means  to
          attract and keep customers.

          Research and Development

             The  acquisition of AMI provided the Company with resources to
          begin its  research  and  development program, which began in the
          last quarter of fiscal 1992  and  has since expanded.  As of June
          30, 1995 the Company had 4  new ANDAs  on  file  with the FDA for
          products which the Company has not previously manufactured.   See
          "Government Regulation."  These products have a current aggregate
          brand  market of approximately $200 million.  No assurance can be
          given as  to whether the Company will develop marketable products
          based on these  filings  or  as to the size of the market for any
          such products.

             The Company has plans to target  its  research and development
          efforts on 20 to 30 additional products the patents on which have
          expired  or  will  expire  in  the near future.   Production  and
          marketing of any products developed  as a result of these efforts
          are expected to take several years.

             The  Company  also maintains an aggressive  product  licensing
          effort.   This effort  has  had  the  most  immediate  effect  on
          operating results  because  it  allows  the  Company  to  use its
          strength  in  marketing  ophthalmic  products.   The Company also
          anticipates manufacturing many of the licensed products.

             At June 30, 1995, 21 full-time employees of the  Company  were
          involved  in research and development and product licensing.  The
          Company's research and development expenditures for 1995 and 1994
          were $844,000 and $843,000, respectively.

             The Company  expects its research and development expenditures
          to increase significantly in fiscal 1996.

          Employee Relations

             The Company has  331  full-time  employees,  of  whom  65  are
          employed  in  the  Abita  Springs  facility,  241 are employed in
          Decatur,  Illinois  and  25  are in outside sales.   The  Company
          enjoys  good  relations with its  employees,  none  of  whom  are
          represented by a collective bargaining agent.

          Competition

             The manufacture  and distribution of ophthalmic pharmaceutical
          products   is   highly   competitive,   with   many   established
          manufacturers, suppliers and distributors actively engaged in all
          phases of the business.  Most  of  the Company's competitors have
          substantially larger financial and other  resources,  including a
          larger   volume   of  sales,  more  sales  personnel  and  larger
          facilities than the  Company.  The competitors which are dominant
          in the ophthalmic distribution  industry  are Alcon Laboratories,
          Inc., Allergan Pharmaceutical, Inc. and Bausch  & Lomb, Inc.  The
          Company  competes  primarily on the basis of price  and  service.
          The Company's principal  supplier,  Bausch  &  Lomb,  Inc., is in
          direct competition with the Company in several markets.

             The manufacturing of sterile products must be performed  under
          the  most  rigorous  FDA-mandated  Good  Manufacturing Practices.
          Therefore the barriers to entry in the contract  manufacturing of
          sterile  products  are  very  high.   The  number  of independent
          contract manufacturers of sterile products continues  to  decline
          as  a  result of these barriers.  AMI's competitors in this area,
          generally,  are larger companies with greater financial and other
          resources.

          Product Supply

             Since the  acquisition  of  AMI  in 1992, the Company has been
          steadily  regaining  control  of  the supply  of  its  ophthalmic
          pharmaceutical products, which had  been  impacted by the closure
          of  the  Los Angeles facility in 1991.  During  the  fiscal  year
          ended June  30,  1995,  approximately   52%  of the Company's net
          ophthalmic  distribution  sales  were accounted for  by  products
          manufactured  at  AMI  and  approximately   48%  by  unaffiliated
          suppliers, the largest of which are Steris Laboratories, Inc. and
          Bausch & Lomb, Inc.  These companies supplied products accounting
          for   15.1%  and  14.2%,  respectively,   of  the  Company's  net
          ophthalmic  distribution  sales  during fiscal  1995.   No  other
          supplier supplied products accounting  for  more  than 10% of the
          Company's net ophthalmic distribution sales during fiscal 1995.

          Government Regulation

             All pharmaceutical manufacturers and distributors  are subject
          to extensive regulation by the federal government, principally by
          the  FDA  and,  to  a  lesser extent, by state governments.   The
          federal Food, Drug and Cosmetic Act (the FDA Act), the Controlled
          Substance Act, and other  federal statutes and regulations govern
          or  influence  the  development,  testing,  manufacture,  safety,
          labeling, storage, recordkeeping, approval, pricing, advertising,
          and promotion of products  by  the  Company and its subsidiaries.
          Included among the requirements of these  statutes  is  that  the
          manufacturer's  methods  conform  to  current  Good Manufacturing
          Practices  provided  for  in  FDA regulations.  Pursuant  to  its
          powers under the FDA Act, the FDA inspects drug manufacturers and
          storage  facilities  to  determine   compliance   with  its  Good
          Manufacturing Practice regulations, non-compliance with which can
          result in fines, recall and seizure of products, total or partial
          suspension  of production, refusal of the government  to  approve
          new drug applications,  and  criminal  prosecution.  The FDA also
          has authority to revoke approval of drug products.

             Except in the case of drugs in common usage before the FDA Act
          became  effective  and  in  some  other cases,  FDA  approval  is
          required before any drug can be manufactured  and  marketed.  New
          drugs require the filing of a New Drug Application (NDA) with the
          FDA, which requires clinical studies demonstrating the safety and
          efficacy  of  the drug and compliance with additional  regulatory
          requirements.

             Abbreviated   procedures   are  available  for  obtaining  FDA
          approval  for  those  generic  drugs  which  are  equivalents  of
          existing brand name drugs, such  as  certain  drugs that had been
          manufactured at the Los Angeles facility and are  expected  to be
          manufactured  by  AMI.   In  order  to  obtain  approval of a new
          generic   drug,  the  Company  files  an  Abbreviated  New   Drug
          Application  (ANDA)  with  the FDA.  An ANDA is similar to a NDA,
          except that the FDA waives the requirement of conducting clinical
          studies of safety and efficacy.  Instead, for drugs which contain
          the same ingredients as drugs  already  approved  for  use in the
          United States, the FDA ordinarily requires data showing  that the
          generic drug formulation is equivalent to the brand name drug and
          that the product is stable in its formulation.

             Over  the  past  several  years,  the  FDA  has  increased its
          scrutiny of the operations of generic drug manufacturers like the
          Company, and has increased the time required for its  approval of
          ANDAs  and  NDAs  submitted by such companies.  In addition,  the
          Office of Generic Drugs  of  the FDA, the division which monitors
          and  approves  ANDAs,  has  increased   its   scrutiny  regarding
          concentrations  of  inactive  ingredients  for generic  drugs  as
          compared to the innovator drug.  This change  has  resulted in an
          increase in the time spent on formulating ANDA products.



          Item 1A.  Executive Officers of the Registrant.

             Certain information concerning each of the executive  officers
          of  the  Company  is given below.  Each executive officer of  the
          Company is a full time  employee of the Company and serves in his
          capacity at the pleasure of the Board of Directors.

          Barry D. LeBlanc   Mr. LeBlanc, age 40, was elected President, 
          Chief Executive Officer of the Company in December 1991.  From 
          August 1987 to December 1991, Mr. LeBlanc served as a President 
          and Chief Operating Officer of the Company.  He has also been a
          director  and  member  of the Executive Committee of the  Company
          since August 1987.  Prior  to  1987,  Mr. LeBlanc was principally
          employed as a practicing certified public  accountant  and served
          as a financial consultant to the Company.

          Harold O. Koch     Mr. Koch, age 46, has  served  as Senior Vice
          President  since  January  1995.   From January 1993 to  December
          1994, he served as Vice President -  Business  Development.  From
          July   1991   to   December   1992   Mr.  Koch  coordinated   the
          reorganization of the Company's manufacturing  operations.   From
          November 1988 to June 1991, he acted as an independent consultant
          in    the   area   of   biotechnology   formulation,   ophthalmic
          manufacturing  processes and ophthalmic marketing.  From May 1987
          to  October  1988,   he   served  as  Vice  President  -  Product
          Development for The Cooper  Company.   Prior  to  this  Mr.  Koch
          served  as  Director  of  Product  Development  for Cooper Vision
          Ophthalmics.

          Tim J. Toney     Mr. Toney, age 53, has served as Vice President-
          Manufacturing   Operations   since   February  1993.   Since  the
          Company's acquisition of AMI in January  1992  he has also served
          as  President  of  AMI.   Prior thereto Mr. Toney had  served  as
          Treasurer and Director of Sales and Marketing for AMI.

          Eric  M. Wingerter   Mr. Wingerter, age 33, has served  as  Vice
          President  -  Finance  and  Administration since July 1993 and as
          Vice President - Finance from  January  1993  through  June 1993.
          Since  September 1988 Mr. Wingerter has been the Company's  Chief
          Financial  Officer.   From  January  1984  to  September 1988, he
          practiced   as  a  certified  public  accountant  in  the   audit
          department at Ernst & Young.

          Item 2.Description of Property.

             The   Company's   executive   offices,   sales   and   primary
          distribution center are based in two adjacent buildings totalling
          approximately  30,000 square feet located on ten acres of land in
          Abita Springs, Louisiana.   These buildings are believed adequate
          for  Akorn's present executive  offices  and  sales  and  primary
          warehousing  and  distribution activities.  The land owned by the
          Company  in  Abita Springs  can  accommodate  growth  in  Company
          executive and  ophthalmic  sales  adn distribution operations for
          the foreseeable future.

             Through AMI, the Company owns a  76,000  square-foot  facility
          located  on 15 acres of land in Decatur, Illinois.  This facility
          is currently  used  for  packaging, distribution, warehousing and
          office  space.   In  addition,  AMI  owns  a  55,000  square-foot
          manufacturing facility,  also  in  Decatur, Illinois.  During the
          fiscal   year   1995,   the   Company   substantially   completed
          construction   related  to  the  expansion  of   its   ophthalmic
          production facilities  at  AMI.  The total cost of the expansion,
          including  capital  equipment   acquisitions,   approximated   $6
          million.

          Item 3.  Legal Proceedings.

             From  time  to  time  the  Company  becomes  involved,  in the
          ordinary  course  of  its  business, in legal actions and claims.
          The amount, if any, of ultimate  liability  with  respect to such
          matters cannot be determined.  Management believes, however, that
          any  such  liability  will  not  have  a material effect  on  the
          Company's consolidated financial statements.

          Item 4.  Submission of Matters to a Vote of Security Holders.

             The annual meeting of the Company's shareholders  was  held on
          October  29,  1994  (the  "Meeting").  At the Meeting, all of the
          nominees  listed were elected,  by  the  votes  indicated  below.
          There were  no  broker non-votes with respect to any nominee.  No
          other directors have  terms  of  office  that continued after the
          Meeting.

               Nominee                           For            Withheld
          ______________________              _____________    _____________
          Daniel E. Bruhl, M.D.                12,778,433         22,462
          J. Ed Campbell, M.D.                 12,777,033         23,862
          George S. Ellis, M.D.                12,777,033         23,862
          Doyle S. Gaw                         12,773,633         27,262
          John N. Kapoor, Ph.D.                12,775,015         25,880
          Barry D. LeBlanc                     12,774,633         26,262
          David H. Turner, M.D.                12,779,033         21,862
          Lawrence A. Yannuzzi, M.D.           12,780,433         20,462


                                             PART II

          Item 5.Market for Common Equity and Related Stockholder Matters.

             The  Company's  Common  Stock is traded on the NASDAQ National
          Market System under the symbol  AKRN.  On September 15, 1995, the
          Company estimated that the number of holders  of its Common Stock
          was approximately 3,100, including record holders  and individual
          participants in security position listings.

             High and low prices for the last two years were:

1995 1994 _______________________________________________________________ Market Price Cash Market Price Cash ___________________ Dividends ________________ Dividends Low High Declared Low High Declared _______________________________________________________________ Declared 1st Quarter $2.38 $3.19 $ - $1.88 $2.75 $- 2nd Quarter 2.94 4.00 - 2.13 3.88 - 3rd Quarter 2.88 3.63 - 2.81 3.75 - 4th Quarter 2.25 3.31 - 2.63 3.38 - Per NASDAQ
The Company's Board of Directors decided to suspend the payment of dividends in the first fiscal quarter of 1992. Any such future payments will be, in part, contingent upon the level of the Company's research and development efforts and expansion of operations. The Company's loan agreement includes restrictions on the payment of dividends. Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations. The following table sets forth selected consolidated financial information for Akorn, Inc. for the five years ended June 30, 1995.
Years Ended June 30 1995 1994 1993 1992 1991 ________________________________________________________________________________ PER SHARE Equity $ 0.97 $ 0.81 $ 0.48 $ 0.36 $ 0.86 Net income (loss) $ 0.15 $ 0.18 $ 0.14 $ (0.55) $ (0.41) Dividends - - $ - - $ .06 Price: High $ 4.00 $ 3.88 $ 3.13 $ 4.13 $ 4.38 Low $ 2.25 $ 1.88 $ 1.50 $ 1.25 $ 1.13 P/E: High 27x 22x 22x NM NM Low 15x 10x 11x NM NM Dividend yield NM NM NM NM 2.18% INCOME DATA (000) Net sales 32,863 28,403 20,893 18,456 19,348 Gross profit 13,220 11,853 8,065 6,611 7,622 Operating income (loss) 3,672 2,934 1,665 (7,276) (7,741) Interest expense - (154) (271) (288) (374) Pretax income (loss) 3,512 2,887 1,502 (7,407) (7,841) Income taxes (benefit) 1,232 166 (259) (540) (2,739) Net income (loss) 2,280 2,721 1,761 (6,867) (5,102) Weighted average shares outstanding 15,399 15,311 13,555 12,589 12,305 BALANCE SHEET (000) Current assets 14,303 14,172 8,516 9,474 10,209 Net fixed assets 10,996 6,249 5,227 5,119 5,091 Total assets 26,256 21,221 14,218 15,122 18,335 Current liabilities 6,400 6,551 3,471 7,197 6,303 Long-term obligations 4,857 2,327 4,248 3,352 1,501 Shareholders' equity 14,998 12,343 6,499 4,573 10,531 FUNDS FLOW DATA (000) From operations 792 2,665 (685) (333) 1,797 Dividends paid - - - - (965) From investing (4,943) (3,710) (465) 2,239 (1,377) From financing 3,004 2,003 (17) (1,012) (1,215) Change in cash & equivalents (1,147) 958 (1,167) 894 (795) RATIO ANALYSIS Gross margin 40.2% 41.7% 38.6% 35.8% 39.4% Operating margin 11.2% 10.3% 8.0% (39.4)% (40.0)% Pretax margin 10.7% 10.2% 7.2% (40.1)% (40.5)% Effective tax rate 35.1% 5.8% (17.3)% NM NM Net margin 6.9% 9.6% 8.4% (37.2)% (26.4)% Asset turnover 1.38 1.60 1.42 1.10 0.96 Return on assets 9.6% 15.4% 12.0% (41.0)% (25.2)% Financial leverage 1.74 1.88 2.65 2.22 1.54 Return on equity 16.7% 28.9% 31.8% (90.9)% (38.9)% Retention rate 100.0% 100.0% 100.0% 100.0% 115.2% Implied growth rate 16.7% 28.9% 31.8% (90.9)% (44.8)% All of the information shown in the table above for periods 1992 and prior has been restated to reflect the combined operations of Akorn and Akorn Manufacturing, Inc. (AMI). Includes an unrealized loss on marketable equity securities ($.3 million) and the reduction in selling, general and administrative expenses ($.3 million) related to a change in accounting estimate for aged customer credits. Includes the reversal of the valuation allowance for deferred tax assets ($0.4 million). Includes the reversal of the provision for a litigation judgment ($0.7 million), the reduction of estimated costs of reorganizing manufacturing operations ($0.4 million), and income tax benefits ($0.3 million). Includes charges for the reorganization of manufacturing operations ($5.3 million), acquisition costs of AMI ($1.3 million), and provision for a litigation judgment ($0.8 million). Includes charges for the reorganization of manufacturing operations ($7.8 million) and other non-recurring expenses ($1.1 million).
Management's discussion and analysis of financial condition and results of operations should be read in conjunction with the accompanying financial statements. Results of Operations Net Sales The Company's consolidated net sales increased 16% to a record $32.9 million in 1995 compared to the prior year. This follows a 36% increase in the prior year as compared with 1993. The following table sets forth, for the periods indicated, net sales by segment, excluding intersegment sales: Years Ended June 30 In millions 1995 1994 1993 ________________________________ Ophthalmic distribution $ 23.8 $ 20.7 $ 14.9 Contract manufacturing 9.1 7.7 6.0 ________________________________ Total net sales $ 32.9 $ 28.4 $ 20.9 ================================ Ophthalmic distribution sales include a broad range of therapeutic, diagnostic, surgical and office-based products. Ophthalmic distribution sales increased 15% in 1995 as compared to 1994 and 39% in 1994 as compared to 1993. Sales in 1995 were enhanced by the introduction of several new surgical products including new surgical instruments and surgical packs. In addition, sales of the Company's therapeutic products increased as a result of the Company's "Save With Akorn Therapeutics" (S.W.A.T.) program, which focuses on educating doctors on the cost of ophthalmic medications. Sales growth in this segment declined in the second half of 1995 as a result of the loss of sales for AK-Con-A, Akorn's leading allergy product, in October 1994. As previously announced, this product was converted to over-the-counter status by the Food and Drug Administration (FDA), who required the filing of a NDA. The Company is presently awaiting approval of this NDA, which is presently anticipated for some time in fiscal 1996. Upon receiving approval of this NDA, the new OTC version will be marketed through a joint venture with Pfizer, Inc. (Pfizer), which should restore profits on the product to previous levels. Sales of AK-Con-A were approximately $2 million, $1.4 million, and $0.7 million for 1995, 1994 and 1993, respectively. Sales in 1994 versus 1993 were enhanced primarily by product licensing activities which accounted for approximately $4 million or nearly 70% of the growth in ophthalmic distribution sales. In addition, the Company's introduction of its S.W.A.T program contributed to sales growth in 1994. Contract manufacturing sales increased 18% in 1995 as compared to 1994 and 28% in 1994 as compared to 1993. Both 1995 and 1994 contract sales were enhanced by a new contract customer which increased sales significantly beginning in the second half of fiscal 1994. This customer, which accounted for 13% of consolidated net sales in 1995, has recently notified the Company that it will be transferring the production of certain products during fiscal 1996 and 1997 to its own facilities in Puerto Rico. Such products accounted for $1.4 million in contract manufacturing sales for 1995. In addition, this customer has notified the Company that it will be discontinuing the sale of two other products previously produced by AMI. These products accounted for approximately $2.9 million in sales for AMI in 1995. The Company is presently in discussions with this customer to acquire these injectable products. This would maintain current plant throughout and provide an entre into the injectable distribution business, which would be synergistic with the ophthalmic distribution business. It is antipated that these products would be marketed through the Company's current distribution system. Income and Expenses The following table sets forth the relationship to sales of various income statement items: Years Ended June 30 1995 1994 1993 _______________________________________ Net sales 100.0% 100.0% 100.0% Cost of goods sold 59.8 58.3 61.4 _______________________________________ Gross margin 40.2 41.7 38.6 Selling, general and administrative expenses 26.5 28.4 33.7 Research and development 2.5 3.0 2.2 Costs of reorganizing manufacturing operations (1.9) Provision for litigation judgment (3.4) _______________________________________ Operating income 11.2 10.3 8.0 Interest and other income (expense), net (.5) (1) (.8) _______________________________________ Income before income taxes 10.7 10.2 7.2 Income taxes (benefit) 3.8 .6 (1.2) _______________________________________ Net income 6.9% 9.6% 8.4% ======================================= Gross Margins The consolidated gross margin percentage declined by 1.5 percentage points from 41.7% in 1994 to 40.2% in 1995. The decline in gross margin percentage is primarily due to the effects of price increases from manufacturers (primarily in the second half of the fiscal year), which were not fully offset by price increases to customers. In addition, a shift in the mix of lower margin catalog products added to the decline in gross margin. The decline in gross margin has been more prevalent in the second half of the fiscal year as a result of the loss of sales from AK-Con-A discussed earlier. This was the Company's highest margin product at nearly 75%. The gross margin percentage increased 3.1 percentage points from 38.6% in 1993 to 41.7% in 1994. This increase was primarily associated with the shift in business to a larger percentage of sales to higher-margin wholesalers associated with the Company's S.W.A.T. program. In addition, sales of AK-Con-A were significantly greater in 1994 than 1993. Gross margins in 1995 and 1994 were also positively affected by better overhead absorption in contract manufacturing as a result of increased volumes at the Decatur facilities. The Company anticipates that gross margins in the short term will be relatively stable to slightly declining as compared with 1995 given the current mix of products in its portfolio and the loss of AK-Con-A sales. Selling, General and Administrative Expense Selling, general and administrative expense as a percentage of net sales declined 1.9 percentage points from 28.4% in 1994 to 26.5% in 1995. The decline in this percentage is primarily associated with the Company's leveraging of its sales force efforts and the low amount of general and administrative additions in 1995. In addition, during fiscal 1995, the Company, based on evaluations made by management, changed the estimated liability related to aged customer credits. This resulted in a reduction in selling, general and administrative expense of approximately $330,000. In response to a slowing in sales growth during the third quarter of fiscal 1995, the Company took steps to eliminate approximately $1 million to $1.5 million of selling, general and administrative expenses and other manufacturing operating expenses. The reductions, which were accomplished primarily through downsizing the work force, will be somewhat offset by increases in depreciation and interest expense associated with the Company's expanded manufacturing facilities. As a result of these reductions and the operating leverage of the Company, it is anticipated that selling, general and administrative expense as a percentage of sales will continue to decline. Selling, general and administrative expense as a percentage of net sales declined 5.3 percentage points from 33.7% in 1993 to 28.4% in 1994 primarily due to the Company's operating leverage and the significant increase in sales from 1993 to 1994. Research and Development Research and development expense remained stable from 1994 to 1995. These expenses increased significantly in 1994 versus the 1993 amounts as a result of expansion in this area in 1994. In 1995, the Company maintained a stable mix of new ophthalmic Abbreviated New Drug Applications (ANDAs) and site-transfers from its previous manufacturing facility in Los Angeles. In addition, throughout 1995, the Company continued to work on its NDA for the over-the-counter version of AK-Con-A in connection with the licensing arrangement with Pfizer. Costs associated with this NDA are being capitalized in connection with the long-term contract for manufacturing and royalty rights. The Company also began work in 1995 on an NDA for the ophthalmic non-steroidal anti-inflammatory drug Piroxicam licensed from Pfizer. The first $1 million of costs associated with this NDA are offset by funds obtained from Pfizer. Total cash expenditures for all research and development activities were approximately $1,456,000, $1,368,000 and $469,000 in 1995, 1994 and 1993, respectively. The Company anticipates that research and development expenditures will increase significantly in 1996 as it focuses on a broader mix of ANDA and NDA steril pharmaceutical products. The level of research and development expense will be dependent upon the relative mix of products in the R&D portfolio between products for which costs have been previously accrued (such as site transfer products) as compared to other new product approvals. Operating Income Operating income in 1995 of $3.7 million or 11.1% of sales was 25% greater than 1994 operating income of $2.9 million or 10.3% of sales. This increase in 1995 operating income was primarily the result of increased sales and operating leverage, coupled with stable research and development expenses. The sales increase was somewhat offset by the decline in gross margin resulting from cost increases of products distributed but not manufactured and continued price sensitivity in the generic ophthalmic pharmaceutical market. Operating income in 1994 was $2.9 million or 10.3% of sales compared to the 1993 amount of $1.7 million or 8.0% of sales. The increase in operating income in 1994 was due primarily to the significant increase in sales. In addition, the increase in gross margins associated with AK-Con-A sales and sales to wholesalers and reduction in the percentage of selling, general and administrative expenses as a percentage of sales enhanced the growth in operating income. The increase in operating income in 1994 was offset somewhat by the 1993 reversal of $400,000 in costs previously accrued for the reorganization of manufacturing operations and $700,000 in costs previously accrued for a litigation judgment from which the Company was vindicated. Interest and Other Income (Expense) Net interest and other expense increased $113,000 from 1994 to 1995 in spite of the capitalization of all interest expense in 1995 in connection with construction at the Company's facilities in Decatur, Illinois. The increase in 1995 is primarily due to a $308,000 decline in market value of an equity investment that was determined to be other than temporary. This determination was based on the significant deterioration in the value of the investment since June 30, 1994 and the evaluation that a price recovery was not imminent. From 1993 to 1994 net interest and other expense declined $115,000 as interest expense was reduced by the conversion to equity of $1.6 million of debt in November 1993 in connection with the exercise of certain warrants by the John N. Kapoor Trust, an affiliate of John N. Kapoor, the Company's Chairman of the Board. The Company anticipates that interest expense will increase significantly in 1996 as a result of the new long-term debt and capital leases associated with the Company's expansion. A portion of this interest will be capitalized during 1996 until full validation and approval from the FDA is obtained. Income Taxes (Benefit) The Company's consolidated effective income tax (benefit) rate was 35.1%, 5.8% and (17.3)% for 1995, 1994 and 1993, respectively. The effective rate for 1994 varies from the statutory rates primarily due to the effects of adoption of Statement of Financial Accounting Standards Board (SFAS) No. 109, "Accounting for Income Taxes," effective July 1, 1993. Under SFAS 109, the Company was able to recognize estimated future tax benefits attributable to expenses recorded for book purposes but not currently deductible for tax purposes. In July 1993, the Company recorded a net deferred tax asset in the amount of $896,000 along with a 100% valuation reserve to reflect the uncertainties surrounding the ultimate realization of the benefits. In the fourth quarter of fiscal 1994, the Company decided to reverse the entire remaining balance of the valuation reserve since uncertainties regarding the ultimate realization of the benefits were no longer material. This resulted in the recording of a $384,000 ($.03 cents per share) benefit in the fourth quarter. The effective rate varied from the statutory rate in 1993 due to the effects of recognized net operating losses. The Company has been in discussions with the Internal Revenue Service (IRS) regarding the examination of tax returns for the periods of 1988 through 1993. The IRS has proposed adjustments to such returns, some of which the Company has agreed to and some which the Company will appeal. These adjustments primarily relate to the timing of deductions taken for tax purposes in connection with the reorganization of its manufacturing operations in 1991 and 1992. The agreed upon proposed adjustments would result in additional interest and taxes currently due of approximately $600,000. The Company had previously accrued the financial statement effects of these proposed agreed upon adjustments; accordingly, no significant financial statement impact of these adjustments was recorded in 1995. Net Income Net income declined $.4 million or $.03 cents per share from $2.7 million or $.18 cents per share in 1994 to $2.3 million or $.15 cents per share in 1995. This decline, in spite of an increase in operating income in 1995, is due to the significantly lower effective tax rate incurred in 1994 as a result of the adoption of SFAS 109 and full realization of the benefit of deferred tax assets. Net income increased $.9 million or $.04 cents per from $1.8 million in 1993 or $.14 cents per share to $2.7 million or $.18 cents per share in 1994. The significant growth in sales was the primary contributing factor to this growth. The growth in earnings per share from 1993 to 1994 was somewhat offset by the increase of nearly 2 million weighted average shares in 1994 resulting from the exercise of warrants. Financial Condition and Liquidity Management assesses the Company's liquidity by its ability to generate cash to fund its operations. The significant components in managing liquidity are: funds generated by operations; levels of working capital items including accounts receivable, inventories and accounts payable; capital expenditure and debt repayment requirements; adequacy of available lines of credit; and availability of long-term capital at competitive prices. Exclusive of the payment of costs related to the reorganization of its manufacturing operations in 1991, the Company traditionally has generated cash from operations in excess of working capital requirements. The net cash provided by operating activities was $792,000 in 1995 compared to $2.7 million in 1994. The decline in cash provided from operating activities in 1995 is primarily related to the increase in inventory associated with new product additions coupled with a decrease in the average days outstanding for payables. The decline in average days outstanding for payables is due to more timely payments to vendors by the Company resulting from the availability of working capital credit lines. In 1996, the Company will continue to fund the payment of certain previously accrued research and development activities including the site transfer of ANDAs from the Company's Los Angeles facility and the development of the NDA for Piroxicam discussed previously. Management believes that cash flows from operations, funds received from Pfizer and the available working capital line of credit are sufficient to handle these short-term needs. In addition to these short-term needs, the Company anticipates the payment of additional interest and taxes in connection with the examination by the IRS of tax returns for the periods of 1988 through 1993. The proposed adjustments would result in additional interest and taxes currently due of approximately $1.5 million. The agreed issues, resulting in approximately $600,000 of current net taxes and interest due, are expected to be paid over the next 10 months under an agreement with the IRS or through arrangements with a commercial bank. Payment of the remaining unsettled issues will be based on the timing of the appeals process and the success of the Company in arguing its position with the IRS. Under a previously announced cross-licensing agreement with Pfizer, the Company is required to pay a performance penalty of $1,020,000 should it be unsuccessful in obtaining approval, by December 31, 1996, of the NDA on the OTC version of AK-Con A, licensed to Phizer. Given the current status of the product, management believes the likelihood that approval will not be obtained in this time frame is remote. Accordingly, no financial statement reserves related to the potential penalty have been accrued. Net cash utilized for investing activities in 1995 of $4.9 million includes $4.8 million of property plant and equipment additions associated with the expansion of the Company's Decatur facilities. In addition, 1995 net cash utilized for investing activities includes approximately $400,000 related to product licensing costs which were funded primarily through net sales of investments of approximately $300,000. The Company has plans for capital improvements of $2 million to $3 million in 1996. These improvements are for both requirements to meet current FDA regulations as well as enhancement and expansion of the injectable manufacturing capabilities at AMI. These improvements are expected to be funded by a draw of approximately $900,000 available under the bank credit facility discussed below, operating cash flows and possibly some leasing arrangements. Net cash provided by financing activities of $3.0 million in 1995 primarily consists of the net increase in long-term debt of approximately $3 million. On September 30, 1994, the Company entered into a $6.3 million credit facility with a commercial bank. The credit facility includes the following: -a $1.3 million Term loan for the payout of existing debt and reimbursement for the early payout of a capital lease on the AMI manufacturing facility. -a $3.5 million Revolver/Term construction loan to finance expansion of the AMI facilities. -a $1.5 million Line of Credit for working capital purposes. The entire Term loan was drawn in October 1994 and, as of June 30, 1995, $2.6 million has been drawn on the Revolver/Term construction loan. Of these proceeds, approximately $900,000 was used to pay down existing debt. As of June 30, 1995, no borrowings were outstanding under the Line of Credit. Fourth quarter 1995 Results Net income for the fourth quarter of 1995 was $660,000 or $.04 cents per share compared to net income of $1.5 million or $.10 cents per share in 1994. The 1994 net income figures include a one time tax benefit adjustment of $384,000 ($.03 cents per share) as well as an effective tax rate, excluding this adjustment, of 19% compared to 32% in 1995. The loss of AK-Con-A sales also had a negative impact on net income for the fourth quarter of 1995. Item 7. Financial Statements. The following financial statements are included in Part II, Item 7 of this Form 10-KSB. Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . 13 Consolidated Balance Sheets as of June 30, 1995 and 1994 . . . . . . . . 14 Consolidated Statements of Operations for the years ended June 30, 1995, 1994 and 1993. . . . . . . . . . . . . . . . . . . . . 15 Consolidated Statements of Shareholders' Equity for the years ended June 30, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . 16 Consolidated Statements of Cash Flows for the years ended June 30, 1995, 1994 and 1993. . . . . . . . . . . . . . . . . . . . . 17 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . 18 Report of Deloitte & Touche LLP Independent Auditors To the Board of Directors and Shareholders of Akorn, Inc. We have audited the accompanying consolidated balance sheets of Akorn, Inc. and subsidiaries as of June 30, 1995 and 1994, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material aspects, the financial position of Akorn, Inc. and subsidiaries at June 30, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1995 in conformity with generally accepted accounting principles. As discussed in Note L to the consolidated financial statements, the Company changed its method of accounting for income taxes in 1994. Also, as discussed in Note C to the consolidated financial statements, the Company changed its method of accounting for certain investments in debt and equity securities in 1995. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP New Orleans, Louisiana September 1, 1995 AKORN, INC. CONSOLIDATED BALANCE SHEETS June 30 1995 1994 ______________________________________ ASSETS CURRENT ASSETS Cash and cash equivalents $ 767,286 $ 1,914,735 Short-term investments 1,568,793 1,735,040 Trade accounts receivable (less allowances for uncollectibles of $266,329 and $247,296 in 1995 and 1994, respectively) 4,918,753 4,793,522 Inventory 5,979,707 4,721,637 Deferred income taxes 708,963 550,715 Prepaid expenses and other assets 359,375 455,873 ______________________________________ TOTAL CURRENT ASSETS 14,302,877 14,171,522 OTHER ASSETS Intangibles, net 728,565 400,658 Other 228,534 399,709 ______________________________________ TOTAL OTHER ASSETS 957,099 800,367 PROPERTY, PLANT AND EQUIPMENT, NET 10,995,945 6,249,322 ______________________________________ TOTAL ASSETS $ 26,255,921 $21,221,211 ====================================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current installments of long-term debt $ 492,640 $ 93,573 Current portion of capital lease obligations 149,354 25,429 Current portion of pre-funded development costs 667,000 100,000 Trade accounts payable 1,718,893 2,516,629 Income taxes payable 781,824 711,146 Accrued payroll and commissions 625,839 875,786 Accrued reorganization costs 727,423 933,836 Accrued royalties 339,247 332,592 Accrued expenses and other liabilities 897,985 961,723 TOTAL CURRENT LIABILITIES 6,400,205 6,550,714 LONG-TERM DEBT 3,320,688 746,764 CAPITAL LEASE OBLIGATIONS 579,701 52,132 PRE-FUNDED DEVELOPMENT COSTS 303,988 900,000 DEFERRED INCOME TAXES 327,218 166,417 OTHER LONG-TERM LIABILITIES 325,837 462,128 SHAREHOLDERS' EQUITY Common stock, no par value-- authorized 20,000,000 shares; issued 15,115,673 shares in 1995 and 1994; outstanding 14,904,653 shares in 1995 and 14,798,217 shares in 1994 13,701,845 13,701,845 Treasury stock, at cost-- 211,020 shares in 1995 and 317,456 shares in 1994 (291,067) (503,939) Retained earnings (deficit) 1,500,109 (822,806) Unrealized gain (loss) on marketable equity securities 87,397 (32,044) _____________________________________ TOTAL SHAREHOLDERS' EQUITY 14,998,284 12,343,056 ______________________________________ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 26,255,921 $ 21,221,211 ====================================== See notes to consolidated financial statements. AKORN, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended June 30 1995 1994 1993 ________________________________________________ Net sales $ 32,862,630 $ 28,403,464 $ 20,893,459 Cost of goods sold 19,642,837 16,550,158 12,828,425 ________________________________________________ GROSS PROFIT 13,219,793 11,853,306 8,065,034 Selling, general and administrative expenses 8,703,967 8,076,170 7,051,145 Research and development 843,590 842,695 453,011 Costs of reorganizing manufacturing operations - - (403,740) Provision for litigation judgment - - (700,000) ________________________________________________ 9,547,557 8,918,865 6,400,416 ________________________________________________ OPERATING INCOME 3,672,236 2,934,441 1,664,618 Interest and other income (expense): Interest income 94,941 73,558 39,543 Interest expense - (153,801) (271,377) Loss on marketable equity securities (307,705) - - Other income net 52,099 32,802 69,036 ________________________________________________ (160,665) (47,441) (162,798) ________________________________________________ INCOME BEFORE INCOME TAXES 3,511,571 2,887,000 1,501,820 Income taxes (benefit) 1,231,790 166,303 (259,581) ________________________________________________ NET INCOME $ 2,279,781 $ 2,720,697 $ 1,761,401 ================================================ NET INCOME PER SHARE $ .15 $ .18 $ .14 ================================================ Weighted average shares outstanding 15,399,350 15,310,885 13,554,865 ================================================ See notes to consolidated financial statements.
AKORN, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Common Stock Unrealized _________________________ Retained Gain (Loss) Shares Earnings Treasury on Marketable Outstanding Amount (Deficit) Stock Equity Securities Total ______________________________________________________________________________________________ Balances at July 1, 1992 12,697,863 $10,701,845 $(5,325,239) $(803,465) $ - $4,573,141 Net income for 1993 1,761,401 1,761,401 Shares issued as compensation 25,000 11,266 44,984 56,250 Exercise of stock options 25,000 50,000 50,000 Treasury stock reissued 33,454 (9,196) 66,908 57,712 _____________________________________________________________________________________________ Balances at June 30, 1993 12,781,317 10,701,845 (3,561,768) (641,573) - 6,498,504 Net income for 1994 2,720,697 2,720,697 Exercise of stock options and warrants 2,010,000 3,000,000 (700) 20,000 3,019,300 Cancellation of shares due to resolution of manufacturing pre-acquisition contingencies (51,917) - Unrealized loss on marketable equity securities (32,044) (32,044) Treasury stock reissued 58,817 18,965 117,634 136,599 _____________________________________________________________________________________________ Balances at June 30, 1994 14,798,217 13,701,845 (822,806) (503,939) (32,044) 12,343,056 Net income for 1995 2,279,781 2,279,781 Exercise of stock options 34,917 8,824 69,834 78,658 Unrealized loss on marketable equity securities (275,661) (275,661) Reversal of unrealized loss on marketable equity securities 307,705 307,705 Unrealized gain on marketable equity securities 87,397 87,397 Treasury stock reissued 71,519 34,310 143,038 177,348 ______________________________________________________________________________________________ Balances at June 30, 1995 14,904,653 $13,701,845 $1,500,109 $(291,067) $ 87,397 $14,998,284 ============================================================================================== See notes to consolidated financial statements.
AKORN, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30 1995 1994 1993 _______________________________________________ OPERATING ACTIVITIES Net income $2,279,781 $2,720,697 $1,761,401 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Costs of reorganizing manufacturing operations - - (403,740) Provision for litigation judgment - - (700,000) Depreciation and amortization 947,453 726,155 631,257 Loss on marketable equity securities 307,705 - - Provision for losses on accounts receivable and inventory 160,000 35,676 118,368 Deferred income taxes 2,553 (384,298) - Other (30,277) 11,178 29,089 Changes in operating assets and liabilities: Accounts receivable (185,231) (2,126,242) (474,395) Inventory, prepaid expenses and other assets (1,313,420) (702,898) (606,420) Refundable income taxes - 288,321 746,956 Trade accounts payable and accrued expenses (1,447,470) 1,385,336 (1,787,311) Income taxes payable 70,678 711,146 - _______________________________________________ NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 791,772 2,665,071 (684,795) INVESTING ACTIVITIES Purchases of property, plant and equipment (4,818,132) (1,635,643) (649,676) Product licensing costs (421,206) (432,358) - Purchases of investments (2,022,826) (2,624,573) - Sales of investments 2,318,765 982,606 184,947 _______________________________________________ NET CASH USED IN INVESTING ACTIVITIES (4,943,399) (3,709,968) (464,729) FINANCING ACTIVITIES Proceeds from sale of stock 256,006 1,555,899 107,712 Repayments of long-term debt (927,009) (89,857) (1,685,416) Proceeds from issuance of long-term debt 3,900,000 - 1,600,000 Pre-funded development costs - 1,000,000 - Principal payments under capital lease obligations (54,483) (463,518) (39,367) Debt acquisition costs (170,336) - - _______________________________________________ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 3,004,178 2,002,524 (17,071) _______________________________________________ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,147,449) 957,627 (1,166,595) Cash and cash equivalents at beginning of year 1,914,735 957,108 2,123,703 _______________________________________________ CASH AND CASH EQUIVALENTS AT END OF YEAR $ 767,286 $1,914,735 $957,108 =============================================== See notes to consolidated financial statements.
Notes to Consolidated Financial Statements Akorn, Inc. June 30, 1995 Note A - Summary of Significant Accounting Policies Consolidation: The accompanying consolidated financial statements include the accounts of Akorn, Inc. (the Company) and its wholly owned subsidiaries, Spectrum Scientific Pharmaceuticals, Inc. (Spectrum), Walnut Pharmaceuticals, Inc. (Walnut) and Akorn Manufacturing, Inc. (AMI, formerly Taylor Pharmacal Company). Intercompany transactions and balances have been eliminated in consolidation. Revenue Recognition: The Company recognizes sales upon the shipment of goods. Cash Equivalents: The Company considers all highly liquid investments with a maturity of three months or less, when purchased, to be cash equivalents. Investments: Effective July 1, 1994, the Company adopted Statement of Financial Standards No. 115 (SFAS 115), "Accounting for Certain Investments in Debt and Equity Securities." The Company records short-term and long-term investments under the provisions of this Statement (See Note C). Inventory: Inventory is stated at the lower of cost (average cost method) or market (see Note D). Provision is made for slow-moving, unsalable and obsolete items. Intangibles: Intangibles consist primarily of product licensing costs which are capitalized at cost and amortized on the straight- line method over the life of the license period. Amortization expense for the three years ended June 30, 1995 was $144,820, $82,143 and $67,862, respectively. Property, Plant and Equipment: Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is provided using the straight-line method in amounts considered sufficient to amortize the cost of the assets to operations over their estimated service lives. The average estimated service life of buildings and leasehold improvements, furniture and equipment, and automobiles are approximately 30, 8, and 5, respectively. Depreciation expense for the three years ended June 30, 1995 was $776,182, $644,012 and $563,395, respectively. Under an agreement with Pfizer, Inc. (See Note F) the Company has received reimbursement for the purchase of certain equipment. As of June 30, 1995, the total amount reimbursed was approximately $593,000. The Company has accounted for these reimbursements by reducing its carrying value of the associated equipment. Interest Capitalization: The Company capitalizes interest during periods of construction of qualifying assets. For the year ended June 30, 1995, the Company incurred interest costs of $282,007, all of which was capitalized. No interest was capitalized during 1994 or 1993. Stock Options: The Company records as an expense the difference, if any, between the value of stock options granted with an exercise price below the market value of the Company's stock and the then market value of the Company's stock on the date the options are granted. Income Taxes: Effective July 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." In prior fiscal years, provision was made in the consolidated financial statements for federal and state income taxes in accordance with the provisions of FASB Statement Number 96. Deferred taxes are provided for the differences in the accounting treatment for certain expense items for financial reporting and income tax purposes. Deferred taxes result primarily from the difference between depreciation methods used for book and tax purposes, provisions for bad debt and inventory reserves and accrued costs associated with the reorganization of manufacturing operations, recall of products and litigation. Note B - Acquisition of Manufacturing Operations On January 15, 1992, the Company acquired Akorn Manufacturing, Inc., formerly Taylor Pharmacal Company, in a business combination accounted for as a pooling of interests. AMI is a contract manufacturer of sterile pharmaceuticals, which it produces and delivers pursuant to contracts with third parties. Pursuant to the merger agreement, the Company delivered 926,753 shares of its Common Stock in exchange for all of the outstanding stock of AMI. Of the total shares issued in the merger agreement, 922,500 shares were held in escrow pending the settlement of a default judgment against AMI entered on November 8, 1991 (see Note R). During fiscal 1993, a settlement between AMI's insurer and the plaintiffs was reached. As a result, in 1993 the Company reduced its provision for the judgment to $100,000, the approximate amount of expenses incurred in defending the judgment. In accordance with the terms of the AMI acquisition agreement, 51,917 shares valued at $2 per share were forfeited and returned as treasury stock by the escrow agent during fiscal 1994 in order to cover these expenses and finally resolve this pre-acquisition contingency. The remaining shares held in escrow of 870,583 were distributed to the former AMI shareholders thereby terminating the escrow agreement. As part of the acquisition, the Company paid a finder's fee to an affiliate of Dr. John N. Kapoor, Chairman of the Board (the affiliate). This finder's fee was in the form of 250,000 shares of Company Common Stock valued at $3.50 per share. Of the total shares issued, 125,000 were subject to forfeiture if the market price of the Company's Common Stock does not reach at least $5.00 per share by January 15, 1996. In August 1995, the Company, the affiliate and Dr. Kapoor entered into an agreement under which (i) the forfeiture period was extended to January 15, 1998, (ii) forfeiture would not occur in the event that persons unaffiliated with Dr. Kapoor acquire beneficial ownership of more than 50% of the outstanding common stock of the Company and (iii) Dr. Kapoor waived his right to receive $40,000 otherwise payable to him by the Company for serving as Chairman of the Board in fiscal 1996. Note C - Investments Effective July 1, 1994, the Company adopted Statement of Financial Standards No. 115 (SFAS 115), "Accounting for Certain Investments in Debt and Equity Securities". This Statement requires certain securities to be classified into one of three reporting categories (held-to-maturity, available-for-sale or trading). The Company has completed a review of its securities relative to SFAS 115 and has classified its investments in debt securities (consisting primarily of U.S. Government securities and municipal bonds with a carrying value of $1,136,010 and $303,092, respectively, at June 30, 1995 and $1,718,483 and $0, respectively, at June 30, 1994) as held-to- maturity. Therefore, in accordance with SFAS 115, these investments, all of which have contractual maturities within one year, are being reported at amortized cost, which approximates fair market value. The Company has classified its investment in equity securities as available-for-sale, requiring that they be carried at fair value with any unrealized gain or loss reflected as a component of shareholders' equity. Such investments had a fair market value of approximately $130,000 at June 30, 1995. Prior to adopting SFAS 115, the Company recorded investments at the lower of cost or market. At June 30, 1994, the cost of the Company's noncurrent marketable equity securities exceeded the market value by $32,044. Therefore, a valuation allowance was established by a charge to shareholders' equity representing the net unrealized loss. During fiscal 1995, this allowance was increased by $275,661 due to the continuous decline in market value. At March 31, 1995, management determined the loss to be permanent given the significant decline in market value since June 30, 1994 and the unlikelihood of a recovery in value. Therefore, the $307,705 unrealized loss previously charged to shareholders' equity was accounted for as a realized loss in the 1995 statement of operations. At June 30, 1995, the market value of the marketable equity securities exceeded the adjusted cost, subsequent to the write-down noted above, by $87,397; therefore, an unrealized gain was recorded as a component of shareholders' equity to reflect this increase in value. Note D - Inventory The components of inventory are as follows: June 30 1995 1994 ______________________________ Finished goods $ 3,742,411 $ 2,553,051 Work in process 1,042,922 883,152 Raw materials and supplies 1,194,374 1,285,434 ______________________________ $ 5,979,707 $ 4,721,637 ============================== Inventory for 1995 and 1994 is reported net of reserves of $344,443 and $282,531, respectively, for slow-moving, unsalable and obsolete items. Note E - Property, Plant and Equipment Property, plant and equipment at June 30 consists of the following: June 30 1995 1994 ______________________________ Land $ 478,757 $ 478,757 Buildings and leasehold improvements 5,514,182 4,388,816 Furniture and equipment 7,736,891 6,794,435 Automobiles 90,305 90,305 ______________________________ 13,820,135 11,752,313 Accumulated depreciation (6,750,743) (5,982,874) ______________________________ 7,069,392 5,769,439 Construction in progress 3,926,553 479,883 ______________________________ $10,995,945 $ 6,249,322 ============================== The balance included in construction in progress consists of costs related to the expansion of ophthalmic production facilities at AMI, including capital equipment acquisitions. While construction was substantially completed in fiscal 1995, certain steps required to obtain FDA approval and allow for the commencement of production were not yet completed. As of June 30, 1995, there were no significant construction costs related to the expansion yet to be incurred. Note F - Pre-Funded Development Costs In April 1994, the Company entered into a series of agreements with Pfizer Inc. (Pfizer) regarding the cross-licensing of several ophthalmic pharmaceutical products. The arrangement involves Akorn granting a license to Pfizer on an Akorn product under development (the licensed product), along with providing manufacturing services and marketing assistance for the licensed product. In exchange, Akorn received (1) a royalty stream on sales of the licensed product, (2) an exclusive, royalty-free license to manufacture and market a Pfizer prescription ophthalmic non-steroidal anti-inflammatory drug (NSAID), and (3) non-exclusive rights to market an existing Pfizer ophthalmic antibiotic. As part of this agreement, in fiscal 1994 Pfizer paid the Company an advance of $1 million to be used to fund the costs of developing the NSAID, which are estimated at $1.8 million. The Company intends to recognize the pre-funded balance as an offset to development costs as these expenses are incurred. During fiscal 1995, the Company incurred $29,012 of development costs which were charged against the pre-funded balance. The Company's current projections indicate that these costs will be paid over the next 24 months. Accordingly, $667,000 of the pre-funded balance has been classified as a current liability at June 30, 1995. In addition, the agreement stipulates that Pfizer will reimburse Akorn for one-half of the costs to obtain FDA approval on the licensed product, including the cost of certain agreed upon equipment acquisitions required for the manufacturing of the licensed product. In the event that Akorn fails to obtain FDA approval on the licensed product by December 31, 1996, the Company is required to pay a performance penalty of $1,020,000 to Pfizer. A New Drug Application (NDA) was filed for the licensed product on June 8, 1994. Given the current status of the NDA, it is management's opinion that payment of the performance penalty is remote. Note G - Financing Arrangements Long-term debt at June 30 consists of:
1995 1994 ____________________________ Note payable to First National Bank of Commerce; due 1999; interest at 3/4% over the bank's prime rate (10.75% at June 30, 1995), payable in monthly installments of $45,329 commencing November 1995; secured by the Company's receivables, inventory and property, plant and equipment $2,600,000 $ - Note payable to First National Bank of Commerce; due 1999; interest at 10.25%, payable in monthly installments of $10,834 with a final installment of $649,960 due in 1999; secured by the Company's receivables, inventory and property, plant and equipment 1,213,328 - Note payable to the First National Bank of Decatur; due 1995; interest at 1% over prime rate (8% at June 30, 1994), payable in monthly installments of $9,800 including interest; secured by certain land, buildings and equipment of AMI - 749,965 Note payable to Decatur-Macon County Economic Development Foundation; due 1997; interest at 7%, payable in monthly installments of $3,019 including interest; secured by junior mortgage on building - 90,372 ____________________________ 3,813,328 840,337 Deduct: Current installments payable within one year (492,640) (93,573) ____________________________ Portion payable after one year $ 3,320,688 $ 746,764 ============================ Maturities of long-term debt are as follows: Years ending June 30: 1996 $ 492,640 1997 673,956 1998 673,956 1999 673,956 2000 1,298,820 ____________ Total $ 3,813,328 ============
In September 1992, the Company entered into an agreement to obtain up to $2.5 million of credit financing from the John N. Kapoor Trust (the Trust), an affiliate of John N. Kapoor, Chairman of the Board. Under the terms of the agreement, the Trust, which held warrants to purchase 2 million shares of stock at prices ranging from $1.50 to $2.00 through November 15, 1995, was required to exercise 1,666,667 of those warrants at $1.50 per share on or prior to November 15, 1993. On that date, the Trust exercised the entire two million warrants for a total of $3 million, of which $1.6 million was used to repay bedt to the Trust and the remaining $1.4 million was received in cash. Interest expense related to this indebtedness was $61,334 and $129,540 in 1994 and 1993, respectively. As part of the September 1992 arrangement, the Company granted a new warrant to the Trust to purchase an additional 1 million shares at $2.00 per share, exercisable for five years. Upon the issuance of this warrant, Dr. Kapoor because entitled to designate an additional individual as a Director of the Company. During fiscal 1995, the Company entered into a $6.3 million loan agreement with a commercial bank to obtain financing for the expansion of its manufacturing facilities in Decatur, Illinois and to refinance existing debt. This agreement made available to the Company financing under a three-part credit facility: (1) $3.5 million Revolver/Term loan, (2) $1.3 million Term loan, and (3) $1.5 million Line of Credit. As of June 30, 1995, $2.6 million had been drawn on the Revolver/Term loan. Borrowings outstanding under the Line of Credit bear interest at the bank's prime rate; there were no borrowings outstanding under the Line of Credit at year end. In addition, at June 30, 1995 approximately $1.2 million was outstanding under the $1.3 million Term loan. Borrowings under the loan agreement are collateralized by substantially all of the Company's receivables, inventory and property, plant and equipment. In addition, the Company is required to comply with specified loan covenants, including restrictions on the payment of dividends. Note H - Leasing Arrangements Akorn leases certain data processing and telephone equipment under capital leasing arrangements which expire during the next three years. In June 1995 AMI began leasing certain equipment under a capital lease agreement expiring during 2000. At fiscal year end, this equipment was in the process of being installed; therefore, the balance is included in construction in progress at June 30, 1995. During 1993, AMI leased a portion of its manufacturing facilities from the former president and majority shareholder of AMI under a capital lease arrangement expiring in January 2002. The Company paid out the balance of this capital lease during fiscal year 1994. Property, plant and equipment at June 30 includes the following amounts relating to such capital leases: June 30 1995 1994 _______________________________________ Furniture and equipment $ 100,002 $ 100,002 Less accumulated depreciation (52,996) (27,174) _______________________________________ 47,006 72,828 Construction in progress 705,977 - _______________________________________ $ 752,983 $ 72,828 ======================================= Depreciation expense provided on these assets was $25,822, $18,833, and $52,381 during 1995, 1994 and 1993, respectively. The following is a schedule by years of future minimum lease payments under these capital leases together with the present value of the net minimum lease payments. Years ending June 30: 1996 $ 203,271 1997 194,455 1998 177,271 1999 172,701 2000 129,526 ______________ Total Minimum Lease Payments 877,224 Less: Amount Representing Interest (148,169) Present Value of Net Minimum ______________ Lease Payments $ 729,055 ============== The Company leases real property in the normal course of business under various operating leases, including non-cancelable and month-to-month agreements. Payments under these leases were $112,553, $140,800 and $186,873 in 1995, 1994 and 1993, respectively. Future minimum lease payments under non-cancelable operating leases at June 30, 1995 are not material. During fiscal 1993, the Company entered into a sublease agreement for one of its leased facilities. Sublease rentals were $113,326, $111,164 and $68,552, respectively, for fiscal years ended June 30, 1995, 1994 and 1993. This agreement expired effective May 1995, in conjunction with the expiration of the primary lease. Note I - Stock Option and Stock Purchase Plans The Company has two stock option plans and one stock purchase plan. The first stock option plan is the 1988 Incentive Compensation Program (the Incentive Program). Under the Incentive Program any officer or key employee of the Company is eligible to receive options when designated by the Company's Board of Directors. The number of shares of the Company's Common Stock which may be issued under the Incentive Program upon the exercise of options may not exceed 2,000,000 shares. The exercise price of the options granted under the Incentive Program will be determined by the Board of Directors but may not be less than 50% of the fair market value of the shares subject to the option on the date of grant. All options granted under the Incentive Program during fiscal 1995, 1994 and 1993 have exercise prices equivalent to the market value of the Company's Common Stock on the date of grant. The second stock option plan is the Akorn, Inc. Stock Option Plan for Directors (the Directors' Plan). The Directors' Plan provides for the grant of nonqualified options to persons elected as directors of the Company at the fair market value of the shares subject to option on the date of grant. The total number of shares of the Company's Common Stock for which stock options may be granted under the Directors' Plan may not exceed 500,000 shares. All employees who have been employed by the Company for twelve continuous months are eligible to participate in the Akorn, Inc. Employee Stock Purchase Plan (the Purchase Plan). Participating employees may elect to contribute up to 15% of their gross compensation towards the purchase of Company's Common Stock. At the end of each quarter, the amount contributed is applied to acquire, on behalf of the participating employees, the Company's Common Stock at a purchase price equal to 85% of the current market price. A maximum of 1,000,000 shares of the Company's Common Stock may be acquired under the terms of the Purchase Plan. Purchases were issued from treasury stock under this plan and were insignificant in fiscal 1995, 1994 and 1993. Note J - Stock Options and Warrants The summary of activity in stock options and warrants for each of the three years ended June 30, 1995 is as follows: Outstanding at July 1, 1992 (at prices ranging from $1.50 to $3.88 per share) 3,351,386 Granted (at prices ranging from $2.00 to $2.25 per share) 1,215,000 Exercised (at $2.00 per share) (25,000) Expired (at $2.63 per share) (300,000) __________ Outstanding at June 30, 1993 (at prices ranging from $1.50 to to $3.88 per share) 4,241,386 Granted (at prices ranging from $2.00 to $3.50 per share) 228,000 Exercised (at prices ranging from $1.50 to $1.94 per share) (2,010,000) ___________ Outstanding at June 30, 1994 (at prices ranging from $1.50 to $3.88 per share) 2,459,386 Granted (at prices ranging from $2.81 to $3.50 per share) 238,000 Exercised (at prices ranging from $2.00 to $2.81 per share) (73,000) __________ Outstanding at June 30, 1995 (at prices ranging from $1.50 to $3.88 per share) 2,624,386 ========== The amount of options and warrants exercisable at year end was 2,368,843, 2,236,762 and 4,098,886 for 1995, 1994 and 1993, respectively. All of these options were exercisable at prices ranging from $1.50 to $3.88 per share. Note K - Earnings Per Share Earnings per share is based upon the weighted average number of common shares outstanding. The computation of the weighted average number of shares outstanding for fiscal 1995 and 1994 includes the effect of dilutive stock options and warrants using the treasury stock method. The computation for 1993 includes the effect of dilutive stock options and warrants using the modified treasury stock method. Net income for 1993 has been adjusted for interest expense (net of tax) paid on debt assumed to be paid down by the proceeds received upon the exercise of options in excess of 20% of shares outstanding on June 30, 1993. The weighted average number of shares outstanding used in the per share computations was 15,399,350 shares in 1995, 15,310,885 shares in 1994 and 13,554,865 shares in 1993. Note L - Income Taxes Effective July 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." This standard requires recognition of future tax benefits, attributable to deductible temporary differences between the financial statement and income tax bases of assets and liabilities, to the extent that realization of such benefits is more likely than not. Financial statements of prior years have not been restated and the cumulative effect of the accounting change was not material due to the uncertainties that existed at July 1, 1993 concerning the ultimate realization of future tax benefits. As indicated at Note T, uncertainties regarding the ultimate realization of future tax benefits were reduced to a relatively low level by the fourth quarter of fiscal 1994, thereby justifying removal of the valuation allowance applicable to the deferred tax asset. The components of income tax expense (benefit) are as follows: 1995 1994 1993 _________________________________________________ Current: Federal $1,049,834 $489,051 $ (253,937) State 37,537 61,550 (5,644) _________________________________________________ 1,087,371 550,601 (259,581) _________________________________________________ Deferred: Federal 128,806 (342,752) - State 15,613 (41,546) - _________________________________________________ 144,419 (384,298) - _________________________________________________ $1,231,790 $166,303 $ (259,581) ================================================= The following represents the composition of deferred tax expense as a result of temporary differences arising in 1993: 1993 ____________ Excess tax depreciation over book $ 46,665 Reorganization and other costs paid (accrued) 753,902 Excess book bad debt deduction over tax 38,774 Operating loss carryforward utilized (815,182) Other, net (24,159) ____________ Deferred tax expense, net $ - ============ A reconciliation of income tax expense (benefit) at the federal statutory rate to income tax expense (benefit) at the Company's effective rate is as follows:
1995 1994 1993 __________________________________________________ Computed tax expense (benefit) at expected statutory rate $ 1,187,134 $ 981,580 $ 510,619 State income tax expense (benefit), net of federal tax benefits 31,879 40,623 (3,725) Change in valuation allowance applicable to deferred tax assets - (896,000) - Recognition of net operating loss - - (769,894) Other 12,777 40,100 3,419 __________________________________________________ Income tax expense (benefit) $1,231,790 $ 166,303 $ (259,581) __________________________________________________ Effective tax (benefit) rate 35.1% 5.8% (17.3)% ==================================================
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of June 30, 1995 and 1994 are as follows: 1995 1994 ________________________________ Deferred Tax Assets: Reserves for reorganization costs not currently deductible $ 375,746 $ 648,855 Other reserves not currently deductible 379,901 185,703 Difference between book and taxes bases of intangible assets 43,119 - Other 103,121 61,720 ________________________________ Total 901,887 896,278 Deferred Tax Liabilities: Difference between book and tax bases of property, plant and equipment 367,542 473,515 Other 152,600 38,465 ________________________________ Total 520,142 511,980 ________________________________ Net deferred tax asset $ 381,745 $ 384,298 ================================ The net deferred tax asset is classified in the accompanying balance sheet as follows: Deferred income tax asset-current $ 708,963 $ 550,715 Deferred income tax liability non-current (327,218) (166,417) ________________________________ $ 381,745 $ 384,298 ================================ Income taxes refunded during 1994 and 1993 were $282,641, and $1,003,090, respectively. The Company is currently in discussions with the Internal Revenue Service (IRS) regarding the examination of tax returns for years 1988 through 1993. The IRS has proposed adjustments to such returns which would result in additional taxes and interest due of approximately $1.5 million. Although the Company does agree with approximately $600,000 of the proposed adjustments, the Company does intend to appeal the remainder of the assessment. The Company does not currently anticipate any adverse financial statement effect from this proposed assessment as accruals for the financial statement effects of these proposed adjustments have been previously recorded. Note M - Change in Accounting Estimate During the quarter ended March 31, 1995, an evaluation by the Company resulted in a change in the estimated liability related to aged customer credits. This change resulted in a reduction of selling, general and administrative expenses of approximately $330,000 ($.02 cent per share, net of tax). Note N - Supplemental Disclosures of Cash Flow Information The following is a summary of supplemental cash flow and noncash investing and financing information for the years ended June 30: 1995 1994 1993 _____________________________________ Cash paid for: Interest, net of amount capitalized $ - $ 148,649 $ 267,448 Income taxes 1,149,750 91,000 - Noncash investing and financing activities: Conversion of debt to common stock - 1,600,000 - Issuance of capital lease obligation 705,977 - - Note O - Industry Segment Information The Company classifies its operations into two core business segments: (1) ophthalmic distribution and (2) contract manufacturing. The ophthalmic distribution segment includes the market and distribution of an extensive line of ophthalmic products, including diagnostic and therapeutic pharmaceuticals, over-the- counter products and surgical instruments and supplies. The contract manufacturing segment consists of the manufacture of sterile pharmaceuticals, including human injectable products and ophthalmic solutions. Selected financial information by industry segment for fiscal years ended June 30 is presented as follows:
1995 1994 1993 _________________________________________________________ NET SALES Ophthalmic distribution $23,791,120 $20,694,134 $14,916,510 Contract manufacturing: Sales to unaffiliated customers 9,071,510 7,709,330 5,976,949 Sales to affiliated customer 2,521,392 1,666,263 885,132 _________________________________________________________ 35,384,022 30,069,727 21,778,591 Eliminations (2,521,392) (1,666,263) (885,132) _________________________________________________________ Total net sales $32,862,630 $28,403,464 $20,893,459 ========================================================= OPERATING INCOME Ophthalmic distribution $ 3,775,332 $ 3,009,815 $ 1,349,672 Contract manufacturing 1,228,127 1,155,308 1,369,513 General corporate (1,331,223) (1,230,682) (1,054,567) _________________________________________________________ Total operating income 3,672,236 2,934,441 1,664,618 Interest and other income (expense), net (160,665) (47,441) (162,798) _________________________________________________________ Income before income taxes $ 3,511,571 $ 2,887,000 $1,501,820 ========================================================= 1995 1994 1993 _________________________________________________________ IDENTIFIABLE ASSETS Ophthalmic distribution $12,881,150 $12,816,638 $ 7,686,291 Contract manufacturing 13,085,202 8,296,048 6,441,516 General corporate 127,428 108,525 89,882 _________________________________________________________ Total identifiable assets $26,093,780 $21,221,211 $14,217,689 ========================================================= DEPRECIATION AND AMORTIZATION Ophthalmic distribution $ 338,698 $ 286,575 $ 219,764 Contract manufacturing 552,083 432,635 406,911 General corporate 56,672 6,945 4,582 _________________________________________________________ Total depreciation and amortization $947,453 $ 726,155 $ 631,257 ========================================================== CAPITAL ADDITIONS Ophthalmic distribution $ 354,262 $ 465,341 $ 516,802 Contract manufacturing 5,162,177 1,215,633 175,540 General corporate 7,670 4,115 7,890 _________________________________________________________ Total capital additions $ 5,524,109 $ 1,685,089 $ 700,232 =========================================================
Fiscal 1995 operating income for the ophthalmic distribution segment includes a reduction in selling, general and administrative expense of approximately $330,000 related to a change in accounting estimate for aged customer credits. Operating income for 1993 includes a reduction in costs of reorganizing manufacturing operations of approximately $400,000 in the ophthalmic distribution segment and a $700,000 reversal of the provision for litigation judgment in the contract manufacturing segment. During fiscal 1995, the Company reported sales to one customer which accounted for approximately 13% of consolidated net sales. The net sales attributable to this customer were accounted for in the contract manufacturing segment. This customer has notified the Company that it will be transferring the production of certain products to its own facilities in Puerto Rico during fiscal 1996 and 1997. Such products accounted for $1.4 million in contract manufacturing sales for 1995. In addition, this customer has notified the Company that it will be discontinuing the sale of two other products previously produced by the contract manufacturing segment. These products accounted for approximately $2.9 million in sales during 1995. The Company is presently in discussions with this customer to obtain a license to distribute these two injectable products. During 1994 and 1993, the Company did not derive ten percent or more of its revenues from any single customer. The Company records sales between the segments at fully absorbed cost. Note P - Concentration of Credit Risk The Company specializes in the manufacturing, marketing and distribution of ophthalmic products to companies and doctors in the healthcare industry. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Receivables are generally due within 60 days. Credit losses have consistently been within management's expectations. Note Q - Defined Contribution Plan The Company sponsors a qualified defined contribution plan which was established under the provisions of Internal Revenue Code Section 401(k). The plan covers all employees with six months of employment and who are 21 years of age or older. The employees can defer a portion of their compensation up to the maximum allowed by the Internal Revenue Code regulations. The plan provides for discretionary contributions by the Company on behalf of the employees. Beginning January 1994, the Company has made a discretionary matching contribution on a quarterly basis. During fiscal years 1995, 1994 and 1993, the Company recorded expenses related to the plan of $86,296, $12,274 and $63,366, respectively. Note R - Litigation On November 8, 1991, prior to the effective date of the acquisition by Akorn, a default judgment was entered against AMI in El Paso County, Colorado for approximately $1.8 million, including accrued interest of $685,000, in a product liability suit that had been pending since October 1985. This default judgment was the result of AMI being improperly defended in the lawsuit. AMI received notice of this default judgment in February 1992 and recorded a reserve for this judgment of $1.8 million as of December 31, 1991. The reserve was increased to $2.1 million as of March 31, 1992 for additional accrued interest and accrued litigation costs. AMI's insurer subsequently acknowledged coverage in the amount of $1 million, plus post-judgment interest and reasonable attorneys' fees. As a result, during the fourth quarter of fiscal 1992, the Company recorded a change in estimate of approximately $1.3 million ($0.10 per share, net of tax), reducing its estimated liability for the judgment to $800,000. During fiscal 1993, AMI's insurer and the plaintiffs agreed to a settlement within the limits of insurance coverage. Accordingly, during the quarter ended March 31, 1993, the Company reduced the provision for the judgment by $700,000 ($.05 per share, net of tax) to $100,000, the approximate amount of actual expenses incurred by AMI in defending the judgment. The Company is a party in legal proceedings and potential claims arising in the ordinary course of its business. Management does not believe these matters will materially effect the Company's financial statements. Note S - Reorganization of Manufacturing Operations For the fiscal year ended June 30, 1991, the Company had recorded $7.8 million in expenses associated with the reorganization of its manufacturing operations, including the costs of discontinuing operations at Walnut, then the Company's then only manufacturing subsidiary, and estimated costs of product recalls then in progress. Thereafter, the Company continued discussions with the United States Food and Drug Administration (FDA) regarding the closure of the facility and continued its review of manufacturing practices which existed at the facility during its operations. As a result of further reviews by Company personnel, consultants and the FDA, the Company revised its estimate of costs of closure of the facility and costs of potential product recalls in the third fiscal quarter of 1992. In addition, following the AMI acquisition in January 1992, the Company began the process of transferring the manufacture of its product line to the AMI facility. At that time, the Company determined the cost of completing the FDA approval process at AMI for products previously manufactured at Walnut. The total of these transfer costs, along with the revised estimates for closure costs at Walnut and product recalls, was $5.3 million ($.38 per share, net of tax) and was recorded as costs of reorganizing manufacturing operations during the third quarter of fiscal 1992. As a result of additional historical experience and further evaluation, the Company reduced its estimated liability for remaining reorganization costs during fiscal 1993. This change in estimate totalled approximately $404,000 ($.03 per share, net of tax) and is included as a reduction to reorganization costs. As of June 30, 1995 and 1994, the balance remaining in accrued reorganization costs consists primarily of amounts necessary to complete the transfer of product approvals for products previously manufactured at the Walnut facility. It is anticipated that the filing of all such product approvals will be completed by fiscal 1997. Note T - Fourth Quarter Adjustments As a consequence of sustained growth in sales and profitability, in particular during the latter part of the year, the Company recorded a reduction of $384,298 ($.03 per share, net of tax) to its valuation allowance for deferred tax assets in the fourth quarter of fiscal 1994. Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. There was no change in the principal independent accountant of the Company or any significant subsidiary of the Company during the Company's fiscal years ended June 30, 1995 or June 30, 1994. PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act. The information called for by Item 9 will be included in the Company's definitive Proxy Statement for its 1995 Annual Meeting of Shareholders under the caption "Election of Directors" and is incorporated herein by reference. In addition, certain information concerning the Company's executive officers is included in Item 1A (Executive Officers of the Registrant) of Part I hereof. Item 10. Executive Compensation. The information called for by Item 10 will be included in the Company's definitive Proxy Statement for its 1995 Annual Meeting of Shareholders under the caption "Executive Compensation" and is incorporated herein by reference. Item 11. Security Ownership of Certain Beneficial Owners and Management. The information called for by Item 11 will be included in the Company's definitive Proxy Statement for its 1995 Annual Meeting of Shareholders under the captions "Principal Shareholder" and "Election of Directors" and is incorporated herein by reference. Item 12. Certain Relationships and Related Transactions. The information called for by Item 12 will be included in the Company's definitive Proxy Statement for its 1995 Annual Meeting of Shareholders under the caption "Transactions with Shareholders and Directors" and is incorporated herein by reference. Item 13. Exhibits and Reports on Form 8-K. (a) Exhibits. Those exhibits marked with an asterisk (*) refer to exhibits filed herewith and listed in the Exhibit Index which appears immediately before the first such exhibit; the other exhibits are incorporated herein by reference, as indicated in the following list. (2.0) Agreement and Plan of Merger dated December 17, 1991, by and among the Company, Aksub, Inc., Taylor Pharmacal Company ("Taylor," an Illinois corporation and wholly-owned subsidiary of the Company), and certain shareholders of Taylor Pharmacal Company, incorporated by reference to the Company's report on Form 8-K dated January 15, 1992. (3.1) Restated Articles of Incorporation of the Company dated September 6, 1991, incorporated by reference to Exhibit 3.1 to the Company's report on Form 10-K for the fiscal year ended June 30, 1991. (3.2) By-laws of the Company as amended and restated through July 23, 1993, incorporated herein by reference to Exhibit 3.2 to the Company's report on Form 10-KSB for the fiscal year ended June 30, 1993. (4.1) Specimen Common Stock Certificate, incorporated by reference to Exhibit 4.1 to the Company's report on Form 10-K for the fiscal year ended June 30, 1988. (10.1) Akorn, Inc. Savings and Retirement Plan effective July 1, 1984, incorporated by reference to Form 10-K for the fiscal year ended June 30, 1987. (10.2) Stock Purchase Agreement dated November 15, 1990 by and between the John N. Kapoor Trust dated September 20, 1989, and the Company, incorporated by reference to Exhibit 10.21 to the Company's report on Form 10-K for the fiscal year ended June 30, 1991. (10.3) Common Stock Purchase Warrant dated November 15, 1990 between the John N. Kapoor Trust dated September 20, 1989 and the Company, incorporated by reference to Exhibit 10.22 to the Company's report on Form 10-K for the fiscal year ended June 30, 1991. (10.4) Consulting Agreement dated November 15, 1990 by and between E. J. Financial Enterprises, Inc., a Delaware corporation, and the Company, incorporated by reference to Exhibit 10.23 to the Company's report on Form 10-K for the fiscal year ended June 30, 1991. (10.5) Stock Registration Rights Agreement dated November 15, 1990 by and between the John N. Kapoor Trust dated September 20, 1989 and the Company, incorporated by reference to Exhibit 10.24 to the Company's report on Form 10-K for the fiscal year ended June 30, 1991. (10.6) Agreement dated February 15, 1991 amending Stock Purchase Agreement dated November 15, 1990 by and between the John N. Kapoor Trust dated September 20, 1989, and the Company, incorporated by reference to Exhibit 10.25 to the Company's report on Form 10-K for the fiscal year ended June 30, 1991. (10.7) Akorn, Inc. Stock Option Plan for Directors, incorporated by reference to Exhibit 4.4 to the Company's registration statement on Form S-8, registration number 33-24970. (10.8) Form of Akorn, Inc. Letter Agreement between the Company and its directors under the Stock Option Plan for Directors, incorporated by reference to Exhibit 4.5 to the Company's registration statement on Form S-8, registration number 33-24970. (10.9) Akorn, Inc. 1988 Incentive Compensation Program, incorporated by reference to Exhibit 4.6 to the Company's registration statement on Form S-8, registration number 33-24970. (10.10) Form of Akorn, Inc., Letter Agreement between the Company and its key employees and executives under the 1988 Incentive Compensation Program, incorporated by reference to Exhibit 4.7 to the Company's registration statement on Form S-8, registration number 33- 24970. (10.11) Amended and Restated Akorn, Inc. 1988 Incentive Compensation Program, incorporated by reference to Exhibit 10.32 to the Company's report on Form 10-K for the fiscal year ended June 30, 1992. (10.12) Amendment No. 1 to the Amended and Restated Akorn, Inc. 1988 Incentive Compensation Program, incorporated by reference to Exhibit 10.33 to the Company's report on Form 10-K for the fiscal year ended June 30, 1992. (10.13) Form of Stock Option Agreement under Amendment No. 1 to Amended and Restated Incentive Compensation Program, incorporated herein by reference to the Company's registration statement on Form S-8, registration number 33-70686. (10.14) 1991 Akorn, Inc. Stock Option Plan for Directors, incorporated by reference to Exhibit 4.3 to the Company's registration statement on Form S-8, registration number 33-44785. (10.15) Form of Pledge Agreement between the Company and each shareholder of Taylor, incorporated by reference to Exhibit 10.1 of the Company's report on Form 8-K dated January 15, 1992. (10.16) Form of Employment Agreement between Taylor and five key employees, incorporated by reference to Exhibit 10.2 of the Company's report on Form 8-K dated January 15, 1992. (10.17) Agreement dated January 15, 1992 among the Company, the John N. Kapoor Trust dated September 20, 1989, John N. Kapoor and EJ Financial Enterprises, Inc., incorporated by reference to Exhibit 10.37 of the Company's report on Form 10-K for the fiscal year ended June 30, 1992. (10.18) Business Promissory Note of Taylor payable to First National Bank of Decatur and Loan Modification Agreement dated January 15, 1992 by and between Taylor and First National Bank of Decatur, incorporated by reference to Exhibit 10.4 of the Company's report on Form 8-K dated January 15, 1992. (10.19) Amendment and Restated Lease Agreement dated January 15, 1991 between Taylor Building Corporation as Landlord and Taylor as tenant, incorporated by reference to Exhibit 10.5 of the Company's report on Form 8-K dated January 15, 1992. (10.20) Loan Agreement dated September 3, 1992, between the Company and the John N. Kapoor Trust dated September 20, 1989, incorporated by reference to Exhibit No. 6 to Amendment No. 3 to Schedule 13D filed by John N. Kapoor and the John N. Kapoor Trust dated September 20, 1989, dated September 10, 1992. (10.21) Common Stock Purchase Warrant dated September 3, 1992, issued by the Company to the John N. Kapoor Trust dated September 20, 1989, incorporated by reference to Exhibit No. 7 to Amendment No. 3 to Schedule 13D, dated September 10, 1992, filed by John N. Kapoor and the John N. Kapoor Trust dated September 20, 1989. (10.22) Agreement, Waiver and Release, dated September 3, 1992, between the Company and the John N. Kapoor Trust dated September 20, 1989, incorporated by reference to Exhibit 10.44 of the Company's report on Form 10-K for the fiscal year ended June 30, 1992. (10.23)* Amendment No. 1 to Agreement dated January 15, 1992 among the Company, the John N. Kapoor Trust dated September 20, 1989, John N. Kapoor and EJ Financial Enterprises, Inc. (11.1)* Computation of Earnings Per Share. (21.1)* Subsidiaries of the Company. (23.1)* Consent of Deloitte & Touche LLP (24.1)* Power of Attorney of Daniel E. Bruhl, M.D. (24.2)* Power of Attorney of J. Ed Campbell, M.D. (24.3)* Power of Attorney of George S. Ellis, M.D. (24.4)* Power of Attorney of Doyle S. Gaw. (24.5)* Power of Attorney of John N. Kapoor, Ph.D. (24.6)* Power of Attorney of David H. Turner, M.D. (24.7)* Power of Attorney of Lawrence A. Yannuzzi, M.D. (b) Reports on Form 8-K. None SIGNATURES In accordance with Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AKORN, INC. By: /s/ Barry D. LeBlanc ____________________________ Barry D. LeBlanc President and Chief Executive Officer Date: September 15, 1995 In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant, and in the capacities and on the dates indicated. Signature Title Date _________________________ ________________________ ______________________ /s/ Barry D. LeBlanc President, Chief September 15, 1995 ________________________ Executive Officer and Barry D. LeBlanc Director (Principal Executive Officer) /s/ Eric M. Wingerter Vice President - September 15, 1995 ________________________ Finance and Administration Eric M. Wingerter (Principal Financial Officer and Prinicpal Acounting Officer * ________________________ Director September 15, 1995 Daniel E. Bruhl, M.D. * ________________________ Director September 15, 1995 J. Ed Campbell, M.D. * ________________________ Director September 15, 1995 George S. Ellis, M.D. * ________________________ Director September 15, 1995 Doyle S. Gaw * _________________________ Director September 15, 1995 John N. Kapoor, M.D. * _________________________ Director September 15, 1995 David H. Turner, M.D. * _________________________ Director September 15, 1995 Lawrence A. Yannuzzi, M.D. *By: /s/ Barry D. LeBlanc _______________________ Barry D. LeBlanc Attorney-in-fact
                    AMENDMENT NO. 1 TO JANUARY 15, 1992 AGREEMENT


               This  Agreement  dated  as  of  August 2,  1995 (this
          "Agreement")  is  entered  into  by  and  among  Akorn,  Inc.,  a
          Louisiana  corporation  ("Akorn"), the John N. Kapoor Trust dated
          September 20, 1989, as amended,  (the  "Trust"),  John  N. Kapoor
          ("Dr.  Kapoor"),  and  EJ Financial Enterprises, Inc., a Delaware
          corporation ("EJ Financial").


                                  W I T N E S S T H:


               WHEREAS, the parties  to  this Agreement are parties to that
          certain  Agreement  dated  as  of January  15,  1992  (the  "1992
          Agreement") and desire to amend  such Agreement to the extent set
          forth herein.

               NOW,  THEREFORE,  in  consideration  of  the  covenants  and
          agreements contained herein, the parties hereto agree as follows:

          Section 1.Definitions

               The  capitalized  terms  used   in  this  Agreement,  unless
          otherwise defined herein, have the meanings  assigned  to them in
          the 1992 Agreement.

          Section 2.  Amendment to Section 2(a)(ii) of 1992 Agreement

               Section  2(a)(ii) of the 1992 Agreement, which provides  for
          the forfeiture  by  EJ of 125,000 shares of Akorn common stock on
          the fourth anniversary  of  the Possible Transaction (January 15,
          1996) unless on or before such  date  the closing price per share
          of  the  common stock of Akorn on any business  day  during  such
          period is  $5.00 or greater, is hereby amended (a) to extend such
          forfeiture period  to  the close of business on January 15, 1998,
          the  sixth  anniversary  of  the  consummation  of  the  Possible
          Transaction, and (b) to provide  that  such  forfeiture shall not
          occur if prior to the end of the forfeiture period  (i)  a person
          or group of persons acting in concert, other than Dr. Kapoor or a
          person or persons with whom Dr. Kapoor is acting in concert, as a
          result of action taken by or on behalf of such person or persons,
          becomes  the beneficial owner of securities having more than  50%
          of the voting  power  of all of the outstanding voting securities
          of Akorn and (ii) no transaction  has  been approved by the Akorn
          Board  of  Directors  prior to or in anticipation  of  the  event
          described in clause (i)  as  a  result  of  which the outstanding
          shares  of  Akorn common stock have been or are  proposed  to  be
          converted into  or  exchanged for cash or other property having a
          value, in the reasonable judgment of the Akorn Board of Directors
          at the time of its approval  of such transaction, of less than $5
          per  share.   As  used  in  the  preceding   sentence   the  term
          "beneficial owner" has the meaning set forth in Rule 13d-3  under
          the   Securities   Exchange   Act   of   1934,  as  amended.   In
          consideration  of  such amendment Dr. Kapoor  does  hereby  waive
          payments in the aggregate  amount of $40,000 otherwise payable to
          him  by  Akorn  for  serving as  Chairman  of  Akorn's  Board  of
          Directors.

          Section 3.Survival of 1992 Agreement

               Except as set forth  expressly  in  this Agreement, the 1992
          Agreement remains in full force and effect and shall be deemed to
          include this Agreement as though set forth in full therein.

               IN WITNESS WHEREOF, each party has executed  or  has  caused
          this  Agreement  to  be  executed  by  its  respective officer or
          trustee,  thereunto duly authorized, as of the  day  first  above
          written.


                                             AKORN, INC.


                                             By: /s/ Barry D. LeBlanc
                                                __________________________
                                                Barry D. LeBlanc, President


                                             JOHN  N.  KAPOOR  TRUST, dated
                                             September 20, 1989



                                             By: /s/ John N. Kapoor
                                                ___________________________
                                                John N. Kapoor, not
                                                individually, but solely as
                                                trustee


                                             EJ FINANCIAL ENTERPRISES, INC.



                                             By: /s/ John N. Kapoor
                                                __________________________
                                                John N. Kapoor, President



                                              /s/ John N. Kapoor
                                             ____________________________
                                             John N. Kapoor


                                                               Exhibit 11.1

                               COMPUTATION OF NET INCOME PER SHARE

                              (In Thousands, Except Per Share Data)


                                                       Year Ended June 30,

                                                       1995           1994
                                                  ____________________________
 Earnings
   Income applicable to common stock              $     2,280        $  2,721
                                                  ============================
 Shares
   Weighted average number of shares outstanding       14,836          14,785
   Additional shares assuming conversion of options
   and warrants up to 20% of shares outstanding           563             526
                                                  ____________________________
            Pro forma shares                            15,399         15,311
                                                  ============================
          Net income per share                    $        .15       $    .18
                                                  ============================



                                                         Exhibit   21.1

                             SUBSIDIARIES OF AKORN, INC.



                      Name                           State of Incorporation
                  ______________                    ________________________

    1.    Akorn Manufacturing, Inc.                       Illinois

    2.    Spectrum Scientific Pharmaceuticals, Inc.      Louisiana

    3.    Walnut Pharmaceuticals, Inc.                   Louisiana

    4.    Compass Vision, Inc.                            Louisiana


                                                    Exhibit 23.1

INDEPENDENT AUDITORS CONSENT

We consent to the incorporation by refrence in Registration Statement Nos.
33-44785, 33-24970 and 33-70686 of Akorn, Inc. on Form S-8 of our report
dated September 1, 1995 (which expresses an unqualified opinion and includes
an explanatory paragraph relating to the Company's change in its method of
accounting for income taxes in 1994 and the Company's  change in its method
of accounting for certain investments in debt and equity securities in 1995),
appearing in this Annual Report on Form 10-KSB of Akorn, Inc. for the year
ended June 30, 1995.



/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP

New Orleans, Louisiana
September 22, 1995








                                                       EXHIBIT 25.1




                                  POWER OF ATTORNEY

                              (Form 10-KSB, FYE 6/30/95)

               KNOW  ALL  MEN  BY  THESE  PRESENTS,  that  the  undersigned
          director  of  Akorn,  Inc. (the "Company") does hereby constitute
          and appoint Barry D. LeBlanc,  and  Eric M. Wingerter, and anyone
          of them acting in the absence of the  others, his true and lawful
          attorney-in-fact and agent, with full power  of substitution, for
          him and in his name, place and stead, in any and  all capacities,
          to sign the Company's Annual Report on Form 10-KSB for the fiscal
          year ended June 30, 1995, to sign any and all amendments thereto,
          and  to  file  the  same  with  all  exhibits thereto, and  other
          documents  in  connection  therewith,  with  the  Securities  and
          Exchange  Commission,  granting  unto said  attorney-in-fact  and
          agent full power and authority to  do  and perform each and every
          act and thing requisite and necessary to be done, as fully to all
          intents and purposes as he might or could  do  in  person, hereby
          ratifying and confirming all that said attorney-in-fact and agent
          or his substitutes may lawfully do or cause to be done  by virtue
          hereof.

               This  instrument is executed by the undersigned on the  date
          indicated below.



                                         /s/ Daniel E. Bruhl, M.D.
                                        ____________________________
                                        Daniel E. Bruhl, M.D.


                                              July 26, 1995
                                        _____________________________
                                                 (Date)



                                                       EXHIBIT 25.2




                                  POWER OF ATTORNEY

                              (Form 10-KSB, FYE 6/30/95)

               KNOW  ALL  MEN  BY  THESE  PRESENTS,  that  the  undersigned
          director of  Akorn,  Inc.  (the "Company") does hereby constitute
          and appoint Barry D. LeBlanc,  and  Eric M. Wingerter, and anyone
          of them acting in the absence of the  others, his true and lawful
          attorney-in-fact and agent, with full power  of substitution, for
          him and in his name, place and stead, in any and  all capacities,
          to sign the Company's Annual Report on Form 10-KSB for the fiscal
          year ended June 30, 1995, to sign any and all amendments thereto,
          and  to  file  the  same  with  all  exhibits thereto, and  other
          documents  in  connection  therewith,  with  the  Securities  and
          Exchange  Commission,  granting  unto said  attorney-in-fact  and
          agent full power and authority to  do  and perform each and every
          act and thing requisite and necessary to be done, as fully to all
          intents and purposes as he might or could  do  in  person, hereby
          ratifying and confirming all that said attorney-in-fact and agent
          or his substitutes may lawfully do or cause to be done  by virtue
          hereof.

               This  instrument is executed by the undersigned on the  date
          indicated below.



                                        /s/ J. Ed Campbell, M.D.
                                        _____________________________
                                         J. Ed Campbell, M.D.

                                             July 26, 1995
                                        _____________________________
                                                 (Date)

                                                       EXHIBIT 25.3




                                  POWER OF ATTORNEY

                              (Form 10-KSB, FYE 6/30/95)

               KNOW  ALL  MEN  BY  THESE  PRESENTS,  that  the  undersigned
          director of  Akorn,  Inc.  (the "Company") does hereby constitute
          and appoint Barry D. LeBlanc,  and  Eric M. Wingerter, and anyone
          of them acting in the absence of the  others, his true and lawful
          attorney-in-fact and agent, with full power  of substitution, for
          him and in his name, place and stead, in any and  all capacities,
          to sign the Company's Annual Report on Form 10-KSB for the fiscal
          year ended June 30, 1995, to sign any and all amendments thereto,
          and  to  file  the  same  with  all  exhibits thereto, and  other
          documents  in  connection  therewith,  with  the  Securities  and
          Exchange  Commission,  granting  unto said  attorney-in-fact  and
          agent full power and authority to  do  and perform each and every
          act and thing requisite and necessary to be done, as fully to all
          intents and purposes as he might or could  do  in  person, hereby
          ratifying and confirming all that said attorney-in-fact and agent
          or his substitutes may lawfully do or cause to be done  by virtue
          hereof.

               This  instrument is executed by the undersigned on the  date
          indicated below.



                                        /s/ George S. Ellis, M.D.
                                        _____________________________
                                        George S. Ellis, M.D.


                                              July 25, 1995
                                        _____________________________
                                                (Date)




                                                       EXHIBIT 25.4




                                  POWER OF ATTORNEY

                              (Form 10-KSB, FYE 6/30/95)

               KNOW  ALL  MEN  BY  THESE  PRESENTS,  that  the  undersigned
          director of  Akorn,  Inc.  (the "Company") does hereby constitute
          and appoint Barry D. LeBlanc,  and  Eric M. Wingerter, and anyone
          of them acting in the absence of the  others, his true and lawful
          attorney-in-fact and agent, with full power  of substitution, for
          him and in his name, place and stead, in any and  all capacities,
          to sign the Company's Annual Report on Form 10-KSB for the fiscal
          year ended June 30, 1995, to sign any and all amendments thereto,
          and  to  file  the  same  with  all  exhibits thereto, and  other
          documents  in  connection  therewith,  with  the  Securities  and
          Exchange  Commission,  granting  unto said  attorney-in-fact  and
          agent full power and authority to  do  and perform each and every
          act and thing requisite and necessary to be done, as fully to all
          intents and purposes as he might or could  do  in  person, hereby
          ratifying and confirming all that said attorney-in-fact and agent
          or his substitutes may lawfully do or cause to be done  by virtue
          hereof.

               This  instrument is executed by the undersigned on the  date
          indicated below.



                                        /s/ Doyle S. Gaw
                                        __________________________
                                        Doyle S. Gaw

                                              July 25, 1995
                                        __________________________
                                               (Date)



                                                       EXHIBIT 25.5




                                  POWER OF ATTORNEY

                              (Form 10-KSB, FYE 6/30/95)

               KNOW  ALL  MEN  BY  THESE  PRESENTS,  that  the  undersigned
          director of  Akorn,  Inc.  (the "Company") does hereby constitute
          and appoint Barry D. LeBlanc,  and  Eric M. Wingerter, and anyone
          of them acting in the absence of the  others, his true and lawful
          attorney-in-fact and agent, with full power  of substitution, for
          him and in his name, place and stead, in any and  all capacities,
          to sign the Company's Annual Report on Form 10-KSB for the fiscal
          year ended June 30, 1995, to sign any and all amendments thereto,
          and  to  file  the  same  with  all  exhibits thereto, and  other
          documents  in  connection  therewith,  with  the  Securities  and
          Exchange  Commission,  granting  unto said  attorney-in-fact  and
          agent full power and authority to  do  and perform each and every
          act and thing requisite and necessary to be done, as fully to all
          intents and purposes as he might or could  do  in  person, hereby
          ratifying and confirming all that said attorney-in-fact and agent
          or his substitutes may lawfully do or cause to be done  by virtue
          hereof.

               This  instrument is executed by the undersigned on the  date
          indicated below.



                                        /s/ John N. Kapoor, Ph.D.
                                        _______________________________
                                        John N. Kapoor, Ph.D.

                                              August 3, 1995
                                        _______________________________
                                                  (Date)




                                                       EXHIBIT 25.6




                                  POWER OF ATTORNEY

                              (Form 10-KSB, FYE 6/30/95)

               KNOW  ALL  MEN  BY  THESE  PRESENTS,  that  the  undersigned
          director of  Akorn,  Inc.  (the "Company") does hereby constitute
          and appoint Barry D. LeBlanc,  and  Eric M. Wingerter, and anyone
          of them acting in the absence of the  others, his true and lawful
          attorney-in-fact and agent, with full power  of substitution, for
          him and in his name, place and stead, in any and  all capacities,
          to sign the Company's Annual Report on Form 10-KSB for the fiscal
          year ended June 30, 1995, to sign any and all amendments thereto,
          and  to  file  the  same  with  all  exhibits thereto, and  other
          documents  in  connection  therewith,  with  the  Securities  and
          Exchange  Commission,  granting  unto said  attorney-in-fact  and
          agent full power and authority to  do  and perform each and every
          act and thing requisite and necessary to be done, as fully to all
          intents and purposes as he might or could  do  in  person, hereby
          ratifying and confirming all that said attorney-in-fact and agent
          or his substitutes may lawfully do or cause to be done  by virtue
          hereof.

               This  instrument is executed by the undersigned on the  date
          indicated below.



                                        /s/ David H. Turner, M.D.
                                        ____________________________
                                        David H. Turner, M.D.

                                           July 25, 1995
                                        _____________________________
                                                (Date)


                                                       EXHIBIT 25.7




                                  POWER OF ATTORNEY

                              (Form 10-KSB, FYE 6/30/95)

               KNOW  ALL  MEN  BY  THESE  PRESENTS,  that  the  undersigned
          director of  Akorn,  Inc.  (the "Company") does hereby constitute
          and appoint Barry D. LeBlanc,  and  Eric M. Wingerter, and anyone
          of them acting in the absence of the  others, his true and lawful
          attorney-in-fact and agent, with full power  of substitution, for
          him and in his name, place and stead, in any and  all capacities,
          to sign the Company's Annual Report on Form 10-KSB for the fiscal
          year ended June 30, 1995, to sign any and all amendments thereto,
          and  to  file  the  same  with  all  exhibits thereto, and  other
          documents  in  connection  therewith,  with  the  Securities  and
          Exchange  Commission,  granting  unto said  attorney-in-fact  and
          agent full power and authority to  do  and perform each and every
          act and thing requisite and necessary to be done, as fully to all
          intents and purposes as he might or could  do  in  person, hereby
          ratifying and confirming all that said attorney-in-fact and agent
          or his substitutes may lawfully do or cause to be done  by virtue
          hereof.

               This  instrument is executed by the undersigned on the  date
          indicated below.



                                        /s/ Lawrence A. Yannuzzi, M.D.
                                        ________________________________
                                        Lawrence A. Yannuzzi, M.D.

                                               July 26, 1995
                                        _________________________________
                                                    (Date)




 

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR JUN-30-1995 JUN-30-1995 767,286 1,568,793 5,185,082 (266,329) 5,979,707 14,302,877 17,746,688 (6,750,743) 26,255,921 6,400,205 3,900,389 13,701,845 0 0 1,296,439 26,255,921 32,862,630 32,862,630 19,642,837 19,642,837 9,547,557 60,000 0 3,511,571 1,231,790 2,279,781 0 0 0 2,279,781 .15 0