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 June 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
Commission File Number: 333-45241
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ELITE PHARMACEUTICALS, INC.
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(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
230 West Passaic Street, Maywood, NJ 07607
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(Address of principal executive offices) (Zip Code)
(201)845-6611
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(Registrant's telephone number, including area code)
N/A
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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 August
13, 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 June 30, 1998 and
June 30, 1997 (unaudited) 3
Consolidated Statements of Operations for the three months
ended June 31, 1998 and June 30, 1997 (unaudited) 4
Consolidated Statements of Cash Flows for the three months
ended June 30, 1998 and June 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
Item 1 Legal Proceedings 10
Item 2 Changes in Securities 10
Item 3 Defaults Upon Senior Securities 10
Item 4 Submission of Matters to a Vote of Security-Holders 10
Item 5 Other Information 10
Item 6 Exhibits and Reports or Form 8-K 10
SIGNATURES 11
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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June 30,
1998 1997
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $3,116,877 117,104
Consulting and test fees receivable --- 12,208
Prepaid expenses and other current assets 39,048 6,907
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Total current assets 3,155,925 136,219
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 1,173,554 25,960
INTANGIBLE ASSETS - net of accumulated amortization 17,892 17,128
OTHER ASSETS:
Deposits 9,000 18,250
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$4,356,371 $197,557
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capitalized lease obligation $ 42,331 ---
Accounts payable and accrued expenses 45,734 4,434
Related party notes payable --- 250,000
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Total current liabilities 88,065 254,434
CAPITALIZED LEASE OBLIGATION - net of current portion 47,021 ---
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Total liabilities 135,086 254,434
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value;
Authorized - 25,000,000 shares 72,376 47,876
Issued and outstanding - 7,237,613 shares 6,833,405 1,660,772
Additional paid-in capital (2,684,496) (1,765,525)
----------- -----------
Accumulated deficit 4,221,285 (56,877)
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Total stockholders' equity $4,356,371 $197,557
========== =========
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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THREE MONTHS ENDED
JUNE 30,
1998 1997
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REVENUES:
Licensing fees $ --- $ ---
Contract research and development --- ---
Consulting and test fees 4,222 4,719
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Total current revenues 4,222 4,719
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OPERATING EXPENSES:
Research and development 208,238 108,116
General and administrative 129,316 45,054
Depreciation and amortization 6,324 8,925
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343,878 162,095
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LOSS FROM OPERATIONS (339,656) (157,376)
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OTHER INCOME (EXPENSES):
Interest income 52,040 18
Interest expense (121) ---
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51,919 18
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LOSS BEFORE PROVISION FOR INCOME TAXES (287,737) (157,358)
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PROVISION FOR INCOME TAXES --- ---
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NET LOSS $ (287,737) $ (157,358)
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NET LOSS PER COMMONS SHARE $ (0.05) $ (0.03)
============= =============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUSTANDING 5,858,238 4,767,613
========= =========
The accompanying notes are an integral part of the consolidated financial statements
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4
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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THREE MONTHS ENDED
JUNE 30,
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(287,737) $(157,358)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation 6,000 8,660
Amortization of intangibles 324 265
Changes in assets and liabilities:
Consulting and test fees receivable 25,000 ---
Prepaid expenses and other current assets (27,081) 798
Accounts payable 5,240 (4,023)
Accrued expenses and other current liabilities --- ---
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NET CASH USED IN OPERATING ACTIVITIES (278,254) (151,658)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (949,016) ---
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NET CASH USED IN INVESTING ACTIVITIES (949,016) ---
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - related parties --- 150,000
Proceeds from issuance of common stock and warrants --- 28,000
Payments of offering costs in connection with private
placements (3,000) ---
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NET CASH PROVIDED BY FINANCING ACTIVITIES (3,000) 178,000
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NET CHANGE IN CASH AND CASH EQUIVALENTS (1,230,270) 26,342
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CASH AND CASH EQUIVALENTS - beginning 4,347,147 90,762
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CASH AND CASH EQUIVALENTS - ending $ 3,116,877 $ 117,104
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest $ 120 $ ---
Cash paid for income taxes --- 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 1O-QSB
THREE MONTHS ENDED JUNE 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 three months ended June 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 three months ended June 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.
6
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO FORM 1O-QSB
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
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.
NOTE 4 - CHANGES IN AUTHORIZED COMMON SHARES
In May 1998, the Company increased the authorized common
shares, par value $ .01 to 25,000,000.
7
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ELITE PHARMACEUTICALS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED JUNE 30, 1998 COMPARED TO THE THREE MONTH PERIOD ENDED
JUNE 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
For the twelve months following the completion of the offering, 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 will be moving its
operations to the facility over the next months. 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 June 30, 1998 vs. Period Ended June 30, 1997.
Elite's revenues for the periods ended June 30, 1998 were $4,222, a
decrease of $497 or approximately 11% over the comparable period of the prior
year. Net revenues primarily consisted of consulting and test fees of $4,222
(compared with $4,719 for the comparable period of the prior year).
8
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General and administrative expenses for the period ended June 30, 1998
were $129,316 an increase of $84,262, or approximately 187% from the comparable
period of the prior year. The increase in general and administrative expenses
was substantially due to legal fees, consulting fees and salaries. General and
administrative expenses expressed as a percentage of revenues was approximately
3,063% for the period ended June 30, 1998 as compared to 955% for the comparable
period of the prior year.
Research and development costs for the period ended June 30, 1998, were
$208,238, an increase of $100,122 or approximately 93% from the comparable
period of the prior year. The increase in research and development costs can be
attributed to increases in salaries, laboratory raw materials and supplies and
payments for biostudies on drug technologies developed by the Company. 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 June 30, 1998 was $287,737 as
compared to $157,358 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 to turn away 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 June 30, 1998, net cash of $278,254 was used in
operating activities due to the Company's net loss of $287,737. For the period
ended June 30, 1997, net cash of $151,658 was used in operating activities as a
result of the Company's net loss of $157,358.
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.
9
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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: None
(b) Reports on Form8-K No report on Form 8-K has been
filed during quarter ending June 30,1998.
10
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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: September 28, 1998 By: /s/Atul M. Mehta
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Atul M. Mehta
President & Chief Executive Officer
(Principal Executive Officer)
Date: September 28, 1998 By: /s/Mark I. Gittelman
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Mark I. Gittelman
Chief Financial Officer andTreasurer
(Principal Financial & Accounting Officer)
11
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<ARTICLE> 5
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-1-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,116,877
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,155,925
<PP&E> 1,446,192
<DEPRECIATION> 272,638
<TOTAL-ASSETS> 4,356,371
<CURRENT-LIABILITIES> 88,065
<BONDS> 0
0
0
<COMMON> 72,376
<OTHER-SE> 4,148,909
<TOTAL-LIABILITY-AND-EQUITY> 4,356,371
<SALES> 4,222
<TOTAL-REVENUES> 4,222
<CGS> 0
<TOTAL-COSTS> 343,878
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 121
<INCOME-PRETAX> (287,737)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (287,737)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
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