U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended to
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Commission File Number: 333-45241
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ELITE PHARMACEUTICALS, INC.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-3542636
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
165 Ludlow Avenue, Northvale, New Jersey 07647
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(Address of principal executive offices) (Zip Code)
(201)750-2646
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(Registrant's telephone number, including area code)
230 W. Passaic Street, Maywood, New Jersey, 07607
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(Former name, former address and former fiscal year, if changed since last report)
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 past 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 No X
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the issuer has filed all documents and reports required to be filed by Sections 12, 13 or 15 (d) of the Exchange
Act after the distribution of securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the issuer's common stock as of
September 30, 1998 is 7,237,613.
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
INDEX
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Page No.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 1998 and
September 30, 1997 (unaudited) 3
Consolidated Statements of Operations for the three months
ended September 30, 1998 and September 30, 1997 (unaudited) 4
Consolidated Statements of Cash Flows for the three months
ended September 30, 1998 and September 30, 1997 (unaudited) 5
Notes to Form 10-QSB 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II - OTHER INFORMATION 10
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security-Holders
Item 5 Other Information
Item 6 Exhibits and Reports or Form 8-K
SIGNATURES 11
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2
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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September 30,
1998 1997
---- ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $2,594,338 $ 69,145
Consulting and test fees receivable --- 8,000
Prepaid expenses and other current assets 42,891 6,021
------------- -------------
Total current assets 2,637,229 83,166
PROPERTY AND EQUIPMENT - net of
accumulated depreciation and amortization 1,211,093 17,300
INTANGIBLE ASSETS - net of
accumulated amortization 18,518 18,251
OTHER ASSETS:
Deposits and other assets 9,000 18,250
-------------- -------------
$ 3,875,840 $ 136,967
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capitalized lease obligation $ 42,331 $ ---
Accounts payable and accrued expenses 15,104 ---
Related party notes payable -- 250,000
--------------- ------------
Total current liabilities 57,435 250,000
------------ ------------
CAPITALIZED LEASE OBLIGATION - net of
current portion 26,411 ---
Total liabilities 83,846 250,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value;
Authorized - 25,000,000 shares
Issued and outstanding - 7,237,613 shares 72,376 47,876
Additional paid-in capital 6,821,405 1,660,772
Accumulated deficit (3,101,787) (1,821,681)
----------- -----------
Total stockholders' equity 3,791,994 (113,033)
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$ 3,875,840 $ 136,967
=========== =============
The accompanying notes are an integral part of the consolidated financial
statements.
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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SEPTEMBER 30, SEPTEMBER 30, _
1998 1997 1998 1997
REVENUES:
Licensing fees $ --- $ 100,000 $ --- $ 100,000
Contract research and development -- -- -- --
Consulting and test fees --- (2,988) 4,222 1,731
------------- ----------- ---------- -----------
Total revenues 0 97,012 4,222 101,731
------------- ----------- ---------- ---------
OPERATING EXPENSES:
Research and development 273,436 75,446 481,674 183,562
General and administrative 169,804 68,939 299,120 113,993
Depreciation and amortization 6,324 8,925 12,648 17,850
---------- ---------- ---------- ---------
449,564 153,310 793,442 315,405
--------- --------- --------- ---------
LOSS FROM OPERATIONS (449,564) (56,298) (789,220) (213,674)
--------- ---------- --------- ---------
OTHER INCOME (EXPENSES):
Interest income 36,745 142 88,785 160
Interest expense (4,472) --- (4,593) --
------------ -------------- ------------ -------------
32,273 142 84,192 160
------------ ------------ ------------ -----------
LOSS BEFORE PROVISION FOR
INCOME TAXES (417,291) (56,156) (705,028) (213,514)
------------ ----------- ------------ ----------
PROVISION FOR INCOME TAXES -- -- -- --
---------------- -------------- ---------------- --------------
NET LOSS $ (417,291) $ (56,156) $ (705,028) $ (213,514)
=========== ============ =========== ============
NET LOSS PER COMMON SHARE $ (0.06) $ (0.01) $ (0.10) $ (0.04)
============= ============= ============= ==============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,237,613 4,787,613 7,237,613 4,787,613
=========== =========== =========== ===========
The accompanying notes are an integral part of the
consolidated financial statements.
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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SIX MONTHS ENDED
SEPTEMBER 30,
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (705,028) $ (213,514)
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation 12,000 17,320
Amortization of intangibles 648 530
Changes in assets and liabilities:
Consulting and test fees receivable 25,000 4,208
Prepaid expenses and other current assets (30,924) 1,684
Accounts payable (25,390) (8,457)
Accrued expenses and other current liabilities -- --
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NET CASH USED IN OPERATING ACTIVITIES (723,694) (198,229)
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (992,555) ---
Payments for Patent Filings (950) (1,388)
----------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES (993,505) (1,388)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from of notes payable - related parties --- 150,000
Proceeds from issuance of common stock and warrants --- 28,000
Payments of offering costs in connection
with private placement (15,000) ---
Principal Payments on Capital Lease Obligation (20,610) ---
---------------- -----------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (35,610) 178,000
---------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,752,809) (21,617)
CASH AND CASH EQUIVALENTS - beginning 4,347,147 90,762
--------------- --------------
CASH AND CASH EQUIVALENTS - ending $ 2,594,338 $ 69,145
============== =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 4,593 $ ---
Cash paid for income taxes 200 200
The accompanying notes are an integral part of the
consolidated financial statements.
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO FORM 10-QSB
SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION
The information in this Form 10-QSB includes the results of operations of Elite
Pharmaceuticals, Inc. ("the Company") and its wholly-owned subsidiary, Elite
Laboratories, Inc. ("Elite"), for the six months ended September 30, 1998 and
1997. The data is unaudited, but includes all adjustments including the
elimination of intercompany accounts and transactions which are, in the opinion
of management, necessary for a fair presentation of the interim periods
presented.
The accounting policies utilized in the preparation of this Form 10-QSB are the
same as those set forth in the Company's SB-2 registration statement at March
31, 1998 and should be read in conjunction with the disclosures presented
therein.
Certain prior period balances have been reclassified to conform to the current
period classification.
All information in this Form 10-QSB has been adjusted to reflect a two-for-one
stock split on August 21, 1997 and a one-for-two reverse stock split on March
30, 1998.
The Company does not anticipate being profitable for fiscal year 1999, therefore
a provision for income tax was not established for the six months ended
September 30, 1998.
This quarterly report may contain forward-looking statements which involve
certain risks and uncertainties. Important factors could arise which could cause
the Company's operating results to differ materially from those contained in any
forward looking statement.
NOTE 2 EARNINGS PER SHARE
Earnings per share are based on the weighted average number of shares
outstanding during each period presented. The Company has adopted FAS 128,
"Earnings Per Share" and has restated prior periods to comply with the
provisions of this pronouncement. Common stock equivalents have not been
included as their effect would be antidilutive.
NOTE 3 PURCHASE OF BUILDING
In May 1998, the Company closed on a contract to purchase a 15,000 square foot
building to house its new office, laboratory and manufacturing facility in
Northvale, New Jersey. The purchase price was $1,050,000 plus closing costs of
$22,123.
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO FORM 10-QSB
SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
NOTE 4 CHANGES IN AUTHORIZED COMMON SHARES
In May 1998, the Company increased the authorized common shares, par value
$ .01 to 25,000,000.
NOTE 5 COMMITMENTS
On October 1,1998, the Company entered into an investment banking firm
consulting agreement with an investment banking firm ("Consultant"). The terms
of the agreement provide for the consultant to render various services to the
Company relating to financial and investment activities for a term of twenty
four months.
As compensation for the consultants services the Company shall grant warrants to
purchase 300,000 shares of the Company's common stock at an exercise price of $6
per share. The warrants shall vest at the rate of 50,000 warrants every ninety
days after the commencement of the agreement.
The agreement may be terminated by the Company at any time after ninety days
following the commencement date, upon thirty days written notice.
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ELITE PHARMACEUTICALS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SIX MONTH PERIOD ENDED SEPTEMBER 30, 1998 COMPARED TO
THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1997
Introduction
The Company has developed six oral controlled release pharmaceutical
products to varying states of the development process. Elite Labs has granted an
option on a one of its products to a multinational company for the worldwide
market, however the agreement does not provide for any royalties or other
payments to Elite Labs unless certain conditions are met, which may or may not
occur.
Elite Labs has also conducted several research and development projects
on behalf of several large pharmaceuticals companies. These activities have
generated only limited revenue for Elite Labs to date.
Results of Consolidated Operations
The Company plans to focus its efforts on the following areas: (i) to
receive FDA approval for one or all six of the oral controlled release
pharmaceutical products already developed, either directly or through other
companies; (ii) to commercially exploit these drugs either by licensure and the
collection of royalties, or through the manufacturing of tablets and capsules
using the formulations developed by the Company, and (iii) to continue the
development of new products and the expansion of its licensing agreements with
other large multinational pharmaceutical companies including contract research
and development projects.
To effectively achieve its goals, the Company has recently purchased an
office and laboratory facility in Northvale, New Jersey, and has moved its
operations to this facility. This facility is larger and better suited to
Elite's needs than its prior, leased, space, and will increase the space
available to conduct further research and development and scale-up, and possibly
for the eventual manufacturing of its products.
Period Ended September 30, 1998 vs. Period Ended September 30, 1997
Elite's revenues for the periods ended September 30, 1998 were $4,222,
a decrease of $97,509 or approximately 96% over the comparable period of the
prior year. Net revenues primarily consisted of consulting and test fees of
$4,222 (compared with $1,731 for the comparable period of the prior year).
General and administrative expenses for the period ended September 30,
1998 were $299,120, an increase of $185,127, or approximately 162% from the
comparable period of the prior year. The increase in general and administrative
expenses was substantially due to legal fees, consulting fees and new hires.
General and administrative expenses expressed as a percentage of revenues was
approximately 7085% for the period ended September 30, 1998 as compared to 112%
for the comparable period of the prior year.
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ELITE PHARMACEUTICALS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SIX MONTH PERIOD ENDED SEPTEMBER 30, 1998 COMPARED TO
THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1997
(CONTINUED)
Period Ended September 30, 1998 vs. Period Ended September 30, 1997 (Continued)
Research and development costs for the period ended September 30, 1998,
were $481,674, an increase of $298,112 or approximately 162% from the comparable
period of the prior year. The increase in research and development costs can be
attributed to increases in laboratory raw materials, supplies, payments to
clinical organizations for conducting biostudies on drug products developed by
the Company, and new hires. These increases have been made possible principally
because of the Company raising equity in its recent private placement offering,
and reflects increased efforts to develop drug release products and technology
in accordance with management's plan of operations.
Elite's net loss for period ended September 30, 1998 was $705,028 as
compared to $213,514 for the comparable period of the prior year. The increase
in the net loss was primarily due to decreases in revenue derived from contract
research and development and licensing fees, and increased internal research and
development costs, and general and administrative expense. The decrease in
contract research and development fees reflects a conscious decision on the part
of the Company not to seek contract work in order to be able to focus the
resources of the Company on developing its own proprietary products.
Liquidity and Capital Resources
For the period ended September 30, 1998, net cash of $723,694 was used
in operating activities due to the Company's net loss of $705,028. For the
period ended September 30, 1997, net cash of $705,028 was used in operating
activities as a result of the Company's net loss of $213,514.
Forward Looking Statements
This report contains forward-looking statements that describe the Company's
business prospects. These statements involve risks and uncertainties including,
but not limited to, rapid technology changes, regulatory uncertainty, level of
demand for the Company's products and services, product acceptance, industry
wide competitive factors, and political, economic or other conditions.
Furthermore, market trends are subject to changes which could adversely affect
future results. Reference should be made to the Company's Prospectus for its
initial public offering declared effective on August 14, 1998, and the
supplement to the Prospectus dated August 19, 1998, for additional discussion
concerning such risk factors.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS None
ITEM 2. CHANGES IN SECURITIES None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS None
ITEM 5. OTHER INFORMATION None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 - Financial Data Schedule
(b) Reports on Form8-K
No report on Form 8-K has been filed during quarter
ending September 30,1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ELITE PHARMACEUTICALS, INC.
Date: November 11, 1998
By: ___________________________
Atul M. Mehta
President & Chief Executive Officer
(Principal Executive Officer)
Date: November 11, 1998
By: ___________________________
Mark I. Gittelman
Treasurer
(Principal Financial & Accounting Officer)
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-1-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,594,338
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,637,229
<PP&E> 1,489,731
<DEPRECIATION> 278,638
<TOTAL-ASSETS> 3,875,840
<CURRENT-LIABILITIES> 57,435
<BONDS> 0
0
0
<COMMON> 72,376
<OTHER-SE> 3,719,618
<TOTAL-LIABILITY-AND-EQUITY> 3,875,840
<SALES> 4,222
<TOTAL-REVENUES> 4,222
<CGS> 0
<TOTAL-COSTS> 793,442
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,593
<INCOME-PRETAX> (705,028)
<INCOME-TAX> 0
<INCOME-CONTINUING> (705,028)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (705,028)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> 0
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