SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ELITE PHARMACEUTICALS, INC.
(Name of small business issuer in its charter)
DELAWARE 2834 22-3542636
State or jurisdiction Primary Standard I.R.S. Employer
of incorporation or Industrial Identification Number
organization Classification Code
Number
230 West Passaic Street, Maywood, NJ 07606 (201)845-6611
(Address and telephone number of principal executive
offices and principal place of business)
Atul M. Mehta, President, Elite Pharmaceuticals,Inc.
230 West Passaic Street, Maywood, NJ 07606/(201)845-6611
(Name, address and telephone number of agent for service)
Copies to:
Pender R. McElroy, James, McElroy & Diehl, P.A.
600 South College Street, Charlotte, NC 28202
(704)372-9870
Approximate date of proposed sale to the public: As soon as
practicable after the effective date of this registration
statement.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act
registration number of the earlier effective registration
statement for the same offering.
[ ]____________
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box
and list the Securities Act registration number of the earlier
effective registration statement for the same offering.
[ ]____________
If delivery of the prospectus is expected to be made pursuant to
Rule 434, check the following box.
[ ] ____________
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Proposed Proposed Amount of
Each Class of Amount Maximum Maximum Registn.
Securities to to be Offering Price Aggregate Fee
be Registered(1) Registered per Security(2) Offer Price
<S> <C> <C> <C> <C>
Common Stock, 4,400,000 $1.25 $5,500,000 $1,896.55
$.01 par value
Class A Redeemable Common
Stock Purchase Warrants
3,050,000 $.50 $1,525,000 $ 525.86
Common Stock, $.01 par
value Underlying Class A
Redeemable Common Stock
Purchase Warrants(3)
3,050,000 $1.25 $3,812,500 $1,314.66
</TABLE>
(1) All Securities registered herein are held by Selling
Security Holders; Elite Pharmaceuticals is registering none
of its own securities.
(2) Estimated solely for the purposes of calculating the
registration fee pursuant to Rule 457 under the Securities Act of 1933,
as amended. Based upon the price for which the Common Stock and Warrants
were sold in a private placement conducted by the Registrant on
October 30, 1997, in which private placement units of 40,000 shares of
Common Stock and 20,000 Warrants were sold for $60,000. The allocation
of the offering price in the above described private placement between
the shares of Common Stock and Warrants
offered herein is purely arbitrary.
(3) Reserved for issuance upon exercise of the Class A.
Redeemable Common Stock Purchase Warrants.
<PAGE>
ELITE PHARMACEUTICALS, INC.
CROSS REFERENCE PAGE
Registration Statement Item
Number and Heading Location in Prospectus
1. Front of Registration Statement and
Outside Front Cover Page of Prospectus...Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus......................Inside Front and
Outside Cover
3. Summary Information and Risk Factors.....Prospectus Summary;Risk Factors
4. Use of Proceeds..........................Use of Proceeds
5. Determination of Offering Price..........Cover Page; Risk Factors
6. Dilution.................................Dilution
7. Selling Security Holders.................Selling Security Holders
8. Plan of Distribution.....................Risk Factors
Selling Security Holders
9. Legal Proceedings........................Business-Legal Proceedings
10. Directors,Executive Officers,Promotors
and Control Persons......................Management
11. Security Ownership of Certain
Beneficial Owners and Management.........Principal Stockholders
12. Description of Securities................Description of Securities
13. Interests of Named Experts and Counsel...Experts and Counsel
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................Management
15. Organization Within Last Five Years......Business
16. Description of Business..................Business
17. Management's Discussion and Analysis
or Plan of Operation.....................Management's Discussion
and Analysis
18. Description of Property.................Business-Property
19. Certain Relationships
and Related Transactions................Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters.....................Cover Page; Principal
Stockholders;
Description of Securities;
Risk Factors
21. Executive Compensation..................Management
22. Financial Statements....................Financial Statements
23. Changes in and Disagreements With
Accountants on Accounting and
Financial Disclosure....................Not applicable
Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities may not
be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer tosell or the solicitation of an offer
to buy nor shall there by any sale of these securities in any State
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of such State.
<PAGE>
ELITE PHARMACEUTICALS, INC.
7,450,000 VOTING COMMON SHARES
(including 3,050,000 Common Shares Underlying Class A
Redeemable Common Stock Purchase Warrants)
3,050,000 CLASS A REDEEMABLE COMMON STOCK PURCHASE WARRANTS
This Prospectus covers an aggregate of 7,450,000 shares of the common
stock of ("Common Stock"), $.01 par value, and 3,050,000 Class A Redeemable
Common Stock Purchase Warrants ("Warrants") of Elite Pharmaceuticals,
Inc. ("Elite Pharmaceuticals" or the "Company"), Delaware corporation,
on behalf of certain selling security holders of the Company
("Selling Security Holders"). Of the securities offered hereunder
(i) 4,000,000 shares of Common Stock and 2,000,000 Warrants were heretofore
issued in a private offering on October 31, 1997 ("Private Placement"),
(ii) 400,000 shares of Common Stock and 200,000 Warrants are issuable
pursuant to warrants issued to the placement agent of Private Placement
("Placement Agent Warrants"), (iii) 850,000 Warrants were issued in
connection with private transactions dated; and (iv) the 3,050,000
shares of Common Stock are issuable upon the exercise of the Warrants
referred to in items (i) through (iii) above. See "Selling Security
Holders". Each Warrant entitles the holder to purchase one
share of Common Stock at an exercise price of $3.00 during commencing
November 30, 1997 and continuing until November 29, 2002.
See "Description of Securities." The offering price will be
determined by the Selling Security Holders. See "Selling Security
Holders" "Plan of Distribution" and "Underwriting."
The Company will receive proceeds only upon the exercise of
the Warrants or the Placement Agent Warrants. See "Use of Proceeds".
Elite Pharmaceuticals has applied for quotation of the
Common Stock and Warrants on the American Stock Exchange and the
Nasdaq SmallCap Stock Market. There can be no assurance that these
securities will be approved for listing, or, if approved, that an
active trading market will develop. See "Risk Factors."
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A
HIGH DEGREE OF RISK. INVESTORS SHOULD NOT INVEST ANY FUNDS
IN THIS OFFERING UNLESS THEY CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The securities are being offered for cash as follows:
<TABLE>
<CAPTION>
Underwriting Proceeds to issuer
Price to discounts and or other
public (1) commissions(1) persons(1)
<S>
<C> <C> <C>
Per Share of Common Stock unknown unknown unknown
Per Warrant unknown unknown unknown
Total unknown unknown unknown
</TABLE>
(1) The securities offered hereunder will be offered by
the Selling Security Holders at market price; Elite Pharmaceuticals
is unaware of any arrangements entered into between such
Selling Security Holders and any broker or dealer, or underwriter.
It is anticipated that the securities will be offered through the
over the counter market.
The date of this Prospectus is January 29, 1998
<PAGE>
Elite Pharmaceuticals intends to furnish its shareholders and
holders of Warrants with annual reports containing audited financial
statements, examined by an independent accounting firm, and
such interim reports as it may determine to furnish or as may be
required by law. Where any document is incorporated by reference in the
Prospectus but not delivered therewith, Elite Pharmaceuticals will
undertake to provide without charge to each person,
including any beneficial owner, to whom a prospectus is delivered, upon oral
or written request of such person, a copy of any and all of the information
incorporated by reference in the Prospectus (not including exhibits to
the information incorporated by reference unless the exhibits are
specifically incorporated by reference into the information that the
Prospectus contains). Requests should be addressed to Pender R. McElroy
at (704) 372-9870.
UNTIL 90 DAYS AFTER THE LATER TO OCCUR OF (i) THE EFFECTIVE DATE OF
THE REGISTRATION STATEMENT OR (ii) THE DATE ON WHICH THE SECURITIES
REGISTERED HEREUNDER ARE BONA FIDE OFFERED TO THE PUBLIC, ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety
by the detailed information financial statements
appearing elsewhere in this Memorandum. Each prospective
investor is urged to read this Memorandum in its
entirety. All statements other than statements of
historical fact contained in this Memorandum are forward-
looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-
looking statements in this Memorandum generally are
accompanied by words such as "intend," "anticipate",
"believe", "estimate," "project," or "expect" or
similar statements. Although Elite Pharmaceuticals
believes that the expectations reflected in such forward-
looking statements are reasonable, no assurance can be
given that such expectations will prove correct.
Factors that could cause the Company's results to differ
materially from the results discussed in such forward-
looking statements include the risks described under
"Risk Factors." All forwardlooking statements in
this Memorandum are expressly qualified in their
entirety by the cautionary statements in this paragraph.
ELITE PHARMACEUTICALS, INC.
Elite Pharmaceuticals, Inc. was incorporated in the State of
Delaware on October 1, 1997, for the purpose of merging with, and
thus changing the name and state of incorporation of, Prologica
International, Inc. ("Prologica"). Prologica was incorporated in the
State of Pennsylvania on April 20, 1984. Since its incorporation
and completion of its initial public offering in August 1988, and
until the merger, Prologica had not engaged in any business other
than searching for suitable acquisitions had not identified any suitable
acquisitions. Prior to the merger with Elite Pharmaceuticals,
Inc., Prologica created a wholly owned subsidiary, HMF Enterprises, Inc.
("HMF") for the sole purpose of merging with Elite Laboratories.
The merger of Prologica with Elite Pharmaceuticals, Inc. and the merger
of Elite Laboratories, Inc. with HMF were made in connection with
a Private Placement of the common stock and warrants to purchase
common stock of Prologica (the "Private Placement"). The sole business
of Elite Pharmaceuticals, Inc., is to hold one hundred percent of
the stock of Elite Laboratories, Inc.
Elite Pharmaceuticals' principal offices are located
at 230 W. Passaic Street, Maywood, New Jersey 07607 its telephone
number is (201) 845-6611.
ELITE LABORATORIES, INC.
Elite Laboratories, Inc. ("Elite Labs") was
incorporated in the State of Delaware on August 23, 1990.
Elite Labs engages in the research, development, licensing,
manufacturing and marketing of both new and and generic,
controlled-release pharmaceutical products. Controlled drug
delivery involves releasing a drug into the bloodstream or
delivering it to a target site in the body over an extended
period of time, or at predetermined times. Since its inception
in 1990, Elite Labs has established a research and
development laboratory and has developed six oral controlled release
pharmaceutical products to varying stages of the development process.
There is no assurance that any of Elite Labs's products will be
approved by the United States Food and Drug Administration ("FDA"),
marketed, or be commercially viable products. Furthermore, there
are no agreements in effect requiring the payment of royalties
to Elite Labs, except under certain conditions, which may not be
fulfilled.
Elite Labs also has conducted several research and
development projects on behalf of large pharmaceutical companies.
These activities have generated only limited revenues to date.
THE OFFERING
Although this is the initial public offering of the stock
of Elite Pharmaceuticals, the Company itself is issuing no securities.
All of the securities registered in connection with this offering are
currently held by, and will be offered by, current Selling Security
Holders, or are subject to execution of Warrants currently held by
Selling Security Holders. (See "Terms of the Offering",
and "Description of Securities").
SECURITIES OUTSTANDING
There are 14,475,200 shares of common stock of
Elite Pharmaceuticals, Inc. ("Common Stock") issued and
outstanding. In addition, there are Warrants and
options outstanding to purchase an additional 5,900,000
shares of Common Stock.
USE OF PROCEEDS
The Company will not receive any proceeds from the
sale of shares of Common Stock by the Selling
Shareholders. See "Selling Shareholders". The Company
will receive proceeds only upon the exercise of the
Warrants or the Placement Agent Warrants by the holders
thereof. See "Use of Proceeds".
RISK FACTORS
The Securities offered hereby are highly
speculative and involve a high degree of risk and
should not be purchased by investors who cannot afford
the loss of their entire investment. Prospective
investors should carefully review and consider the
factors set forth under "Risk Factors" as well as
all other information contained herein, before
subscribing for any of the Securities.
NASDAQ LISTING
Elite Pharmaceuticals is applying to list the
Common Stock and Warrants on the American Stock Exchange
and/or the Nasdaq SmallCap Market. The Company will
attempt to obtain the ticker symbol ELIP. There can
be no assurance that the Company will be approved for
listing of these securities, or if approved, that it
will be able to continue to meet the requirements for
continued quotation or that a public trading factor will
develop or be sustained. See "Risk Factors".
<PAGE>
RISK FACTORS
The securities offered hereby are highly speculative
in nature and investment therein involves a high degree of risk
and should not be purchased by investors who cannot afford the loss
of their entire investment. Therefore each prospective investor should
consider very carefully certain risks and speculative
factors inherent in and affecting the business of, and investment
in, Elite Pharmaceuticals prior to the purchase of any of the securities
offered hereby, as well as all of the other matters set forth elsewhere
in this Memorandum. Investors should be prepared to suffer a loss of
their entire investment. Hereinafter Elite Pharmaceuticals
and Elite Labs shall sometimes collectively be referred to as the
"Company." Certain of these risks and speculative factors are
as follows:
1. Limited Operating History - Anticipated Future Losses.
Since the inception in 1984 of Elite
Pharmaceutical's predecessor, neither Prologica nor Elite
Pharmaceuticals has carried on any business or generated
any revenues. Elite Pharmaceutical's sole source
of income is income received through its ownership
of Elite Labs. The Company expects to realize
significant losses in the next year of operation. Since
Elite Labs' inception in 1990, it has not generated
any significant revenues and had a retained earnings
deficit of $1,616,000 at its fiscal year ended March
31, 1997. Elite Labs' operations are subject to all of
the risks inherent in the establishment of a new
commercial enterprise and the likelihood of the success
of the Company must be considered in light of
various factors, including working capital deficits,
competition with established and well financed entities,
anticipated negative cash flow in the period following
completion of this offering, the absence of substantial
written commitments for purchase of Elite Labs'
services and the need for further development of
the its products. The Company expects to continue to
incur losses until it is able to generate sufficient
revenues to support its operations and offset operating
costs. There can be no assurance that such revenues and
become profitable.
2. Significant Capital Requirements; Need for Additional Financing.
The Company anticipates, based on its currently
proposed plans and assumptions relating to its
operations, that it currently has sufficient operating
capital to satisfy its contemplated cash requirements
until October 31, 1999. After such time, the completion
of the Company's development activities will require
significant funding than that otherwise currently
available to the Company. The Company has no current
arrangements with respect to sources of additional
financing other than with respect to the potential
exercise of the options and warrants currently
outstanding. There can be no assurance that any of
the warrants will be exercised or that other
additional financing will be available to the
Company on commercially reasonable terms, or at all. The
inability of the Company to obtain additional
financing, when needed, would have a material adverse
effect on the Company, including possibly requiring
the Company to curtail or cease its operations. To the
extent that any future financing involves the sale
of the Company's equity securities, the Company's then
existing stockholders, including investors in this
Offering, could be substantially diluted. On the other
hand, to the extent the Company recurs indebtedness
or otherwise issues debt securities, the Company will be
subject to risks associated with indebtedness,
including the risk that interest rates may fluctuate
and cash flow may be insufficient to pay principal and
interest on such indebtedness.
3. Possible Earlier Need for Additional Financing.
In the event the Company's plans change, its
assumptions change or prove to be inaccurate, or its cash
flow proves to be insufficient to fund the Company's
operations (due to unanticipated expenses, delays,
problems, difficulties or otherwise), the Company
would be required to seek additional financing sooner
than anticipated. There can be no assurance that any
of such warrants will be exercised or that the Company
would be able to secure additional financing to
fund its operations.
4. No Assurance of Successful Product Development.
Elite Labs has not yet developed a product to the stage
of generating commercial sales. While Elite Labs'
President has successfully developed controlled release
products for his prior employers, Elite Labs' research
activities are characterized by the inherent risk that
the research will not yield results which will receive
FDA approval or otherwise be suitable for commercial
exploitation.
5. No Assurance of Successful Licensing and Marketing.
Initially, the Company plans to market its
products, once developed, either directly or through
agreements with third parties and by way of licensing
agreements with other pharmaceutical companies. There
can be no assurance that such third-party arrangements
can be successfully negotiated or that any such
arrangements, if available, will be on commercially
reasonable terms. Even if acceptable and timely
marketing arrangements are entered into, there can be
no assurance that products developed by the Company
will be competitive and profitable in the
marketplace. Because the Company's clients will in many
cases make all or many material marketing and other
commercialization decisions regarding such products, a
significant number of the variables that affect the
Company's royalties and fees, and, in turn,
profitability, are not exclusively within the
Company's control. Achieving market acceptance for the
Company's products and services requires additional
funding for which a portion of the proceeds of this
Offering have been allocated. The Company's business
strategy is to expand its client relations for various
new pharmaceutical products. However, to date, the
Company has had only a limited number of clients.
Implementation of the Company's growth will depend upon,
among other things, the Company's ability to hire and
retain skilled marketing personnel.
6. Government Regulation.
The design, development and marketing of
pharmaceutical compounds are reviewed, and
manufacturing facilities are inspected, by government
regulatory agencies, including the United States Food
and Drug Administration and comparable agencies in
other countries (collectively "Agency"). The Company is
unable to predict the effect that reviews by any Agency
will have on the development, clinical testing,
manufacturing, marketing or sale of its pharmaceutical
products. Failure to obtain Agency approvals in a timely
fashion or on the terms and with the scope or breadth
contemplated by the Company could adversely affect the
Company. In addition, in certain cases, the Company's
license agreements for new formulations of pharmaceutical
compounds may provide that the licensees, rather than
the Company, are responsible for obtaining the
Agency approval of new formulations. In such cases, the
timing of the submission of applications for Agency
approval and of any supplementary data requested by
an Agency is not within the Company's control. Any
delays in the submission of such applications and
supplementary data requested could adversely affect the
business of the Company. Continued growth in the
Company's revenues and profits will depend, in large part
if not exclusively, on successful introduction and
marketing of products subject to Agency approval. There
can be no assurance as to when or whether such approvals
from such regulatory authorities will be received. See
"Business-Governmental Regulation."
7. Competition.
In recent years, an increasing number of
pharmaceutical companies have become interested in
the development and commercialization of products
incorporating advanced or novel drug delivery systems.
The Company expects that competition in the field of
drug delivery will significantly increase in the future
since smaller specialized research and development
companies are beginning to concentrate on this aspect
of the business. Some of the major
pharmaceutical companies have invested and are
continuing to invest significant resources in the
development of their own drug delivery systems and
technologies and some have invested funds in such
specialized drug delivery companies. Many of these
companies have greater financial and other resources as
well as more experience than the Company in
commercializing pharmaceutical products. Such companies
may develop new drug formulations and products or may
improve existing drug formulations and products more
efficiently than the Company. While the Company's
product development capabilities and patent protection
may help the Company to maintain its market
position in the field of advanced drug delivery, there
can be no assurance that others will not be able to
develop such capabilities or alternative technologies
outside the scope of the Company's patents if any, or
that even if patent protection is obtained, such
patents will not be successfully challenged in the
future.
8. Proprietary Technology: Unpredictability of Patent Protection.
The Company's success, competitive position and
amount of royalty income will depend in part on its
ability to obtain patent protection in various
jurisdictions related to the technologies, processes
and products it develops. The Company may file patent
applications seeking such protection. There can be no
assurance that these applications will result in the
issuance of patents(s), or if any patent(s) are
issued, that litigation will not be commenced seeking to
challenge such patent protection or that such challenges
will fail. In addition, there can be no assurance that
the scope and validity of the Company's patents will
prevent third parties from developing similar or
competing products. The expenses involved in litigation
regarding patent protection or a challenge thereto
can be significant and cannot be estimated by the
Company. Furthermore, there can be no assurance that
the Company's activities will not infringe on patents
owned by others. The Company could incur substantial
costs in defending itself in suits brought against it,
or in suits in which the Company may assert, against
others, claiming infringement of the Company's patents.
There can be no assurance that the Company would
possess sufficient funds to protect its patents from
infringement. Should the products be found to infringe
upon patents issued to third parties, the manufacture,
use and sale of such products could be enjoined and the
Company could be required to pay substantial damages.
In addition, the Company may be required to obtain
licenses to patents, or other proprietary rights of
third parties, in connection with the development and use
of the Company's products and technologies as they relate
to other persons' technologies. No assurance can be
given that any licenses required under any such patents
or proprietary rights would be available on acceptable
terms, if at all. The Company will also rely on trade
secrets and proprietary knowhow, which it will seek to
protect in part, by confidentiality agreements with
employees. There can be no assurance that such
employees, or others, will maintain the confidentiality
of such trade secrets or proprietary information or that
trade secrets or proprietary knowhow of the Company will
not otherwise become known or be independently developed
in such manner that the Company will have no practical
recourse. See "Business-Patents."
9. Key Research Personnel.
The Company is heavily dependent upon the
scientific expertise of Dr. Atul M. Mehta, President
and CEO of Elite Pharmaceuticals and Elite Labs.
Although Elite Labs now employs and will in the
future continue to employ other qualified scientists,
as of the date of this Offering, only Dr. Mehta has the
advanced knowledge, knowhow and track record of
having successfully developed controlled-release
products for other companies. The loss of Dr. Mehta's
services would have a material adverse effect on the
Company's business. Therefore, Elite Labs has entered
into a five-year employment contract with Dr. Mehta which
ends on December 31, 2000. Additionally, Elite Labs has
obtained insurance coverage with respect to Dr. Mehta's
life in an amount of $1,000,000.
10. Lack of Trading Market.
Purchasers of the securities offered hereby must be
aware of the long-term nature of their investment and be
able to bear the economic risks of their investment for
an indefinite period of time. No trading market exists
for the Common Stock or Warrants, although those shares
of Elite Pharmaceuticals' Common Stock held by the
former shareholders of Prologica are currency listed for
trading in the over-the-counter market in the National
Quotation Service Bureau "pink sheets". A limited
market for the securities offered hereunder may develop
on the over-thecounter bulletin board, although there
can be no assurance of such an occurrence. Even if
such a market developed, it would still be more
difficult for an investor to dispose of, or to
obtain quotations as to, the price of the Common Stock
than a security traded on a national securities exchange.
While the Company intends to apply for a listing on
the Nasdaq SmallCap Market "Nasdaq" for the Common
Stock and Warrants, there can be no assurance that the
Company will obtain such listing. Nasdaq has recently
proposed amendments to its rules increasing listing
eligibility and maintenance criteria. Existing
eligibility criteria for inclusion on Nasdaq require,
among other things, that an issuer have total assets
of $4 million and total equity of $2 million, and that
the security to be listed has a minimum bid price of
$3.00 per share. The proposed amendment would require
among other things, that an issuer have net tangible
assets (i.e., total assets less total liabilities and
intangible assets) of $4 million (or alternatively, net
income in two of the most recent three fiscal years of
at least $750,000, or a market capitalization of $50
million) and that the security to be listed has a
minimum bid price of $4.00 per share. Adoption of the
proposed amendments, which are expected to become
effective in 1997 would further increase the risk of
not having Elite Pharmaceuticals' Common Stock listed on
Nasdaq. In the event only the Minimum Securities are
sold Elite Pharmaceuticals will likely not be eligible
for listing on Nasdaq.
11. Penny Stock Regulation.
The trading of the Company's Common Stock, if any, will
be subject to Rule 15g-9 promulgated under the Exchange
Act for nonNasdaq and non-exchange listed securities.
Under such rule, brokers-dealers who recommend such
securities to persons other than established customers
and accredited investors must make a special written
suitability determination for the purchaser and receive
the purchaser's written agreement to a transaction prior
to sale. Securities are exempt from this rule if the
market price is at least $5.00 per share. The Commission
has adopted regulations that generally define a "penny
stock" to be an equity security that has a market price
of less than $5.00 per share or an exercise price of
less than $5.00 per share subject to certain
exceptions. Such exceptions include equity securities
listed on Nasdaq and equity securities issued by an
issuer that has (i) net tangible assets of at least
$2,000,000, if such issuer has been in continuous
operation for more than three years, or (ii) net
tangible assets of at least $5,000,000, if such issuer
has been in continuous operation for less than three
years, or (iii) average revenue of at least $6,000,000
for the preceding three years. Unless an exception is
available, the regulations require the delivery, prior
to any transaction involving a penny stock, of a risk
of disclosure schedule explaining the penny stock
market and the risks associated therewith. Elite
Pharmaceuticals' Common Stock is currently a penny
stock as defined in the Exchange Act and as such, the
market liquidity for the Common Stock will be limited to
the ability of broker-dealers to sell the Common Stock
in compliance with the above-mentioned disclosure
requirements.
12. Outstanding Warrants and Options.
There are outstanding warrants and options to
purchase an aggregate of 5,900,000 shares of Common Stock
for prices ranging from $1.00 to $3.00. To the extent
that outstanding warrants or options are exercised,
dilution of the interests of Elite Pharmaceuticals'
stockholders will occur. Moreover, the terms upon
which the Company will be able to obtain additional
equity may be adversely affected since the holders of
the outstanding warrants can be expected to exercise
them at a time when the Company would, in all
likelihood, be able to obtain capital on terms more
favorable to the Company than those provided by such
securities.
13. No Dividends.
Elite Pharmaceuticals has not paid any cash
dividends to date and does not expect to pay cash
dividends in the foreseeable future.
14. Potential Anti-Takeover Effects of Delaware Law.
Certain provisions of Delaware law could make more
difficult a merger, tender offer or proxy contest
involving the Company, even if such events could be
beneficial to the interests of the shareholders. These
provisions include Section 2 03 of the Delaware
General Corporation law. Such provisions could limit
the price that certain investors might be willing to pay
in the future for shares of the Company's Common Stock.
15. Arbitrary Offering Price.
The Securities offered hereunder will be offered by
the Selling Security Holders at a price or prices to be
determined by such Selling Security Holders. The
Company does not know that the offering price of the
Common Stock and Warrants will be; the offering
price will be arbitrarily determined by the Selling
Security Holders and will bear no relation to Elite
Pharmaceuticals' book value, assets, or any other
objective criteria of value. There can be no assurance
that the Securities offered hereby can be resold at or
near the offering price. In addition, the exercise price
of the Warrants bears no relation to Elite
Pharmaceuticals' book value, assets, or any other
objective criteria of value. The Company does not know
whether all, or even any, of the Selling Security
Holders will sell their securities, or when they will
do so. See "Selling Security Holders" and "Plan of
Distribution".
16. Limitation on Personal Liability of Directors.
The Bylaws of the Company contain provisions
reducing the potential personal liability of the
directors of the Company for certain monetary damages and
providing for indemnity of directors. The Company is
unaware of any present, pending or threatened litigation
which would result in any liability for which a director
would seek such indemnification or protection. The
provisions affecting personal liability provide that the
Company will indemnify its directors to the fullest
extent permitted by Section 145 of the Delaware
Corporation Law against (a) expenses (including
attorney's fees) reasonably incurred in connection with
any threatened, pending or completed civil, criminal,
administrative, investigative or arbitrative action, suit
or proceeding (and appeal therefrom) against any
director, whether or not brought by or on behalf of the
Company seeking to hold the director liable by reason of
the fact that he was acting in such capacity; and (b) any
reasonable payments made by him in satisfaction of any
judgment, money decree, fine, penalty or settlement in
such action, suit or proceeding. In that respect, the
provisions diminish the potential right of action which
might otherwise be available to shareholders by affording
indemnification by the Company against most damages and
settlement amounts paid by a director.
17. Product Liability.
The design, development and manufacture of the
Company's Products involve an inherent risk of product
liability claims. The Company does not have products
liability insurance, although it intends to seek to
obtain such coverage in the future. A successful
claim against the Company could have a material adverse
effect upon the Company's results of operations and
financial position.
18. Forward Looking Statements.
All statements other than statements of historical
fact contained in this Memorandum are forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking
statements in this Memorandum generally are accompanied
by words such as "intend," "anticipate," "believe,"
"estimate," "project," or "expect" or similar statements.
Although Elite Pharmaceuticals believes that the
expectations reflected in such forward-looking
statements are reasonable, no assurance can be given that
such expectations will prove correct. Factors that
could cause the Company's results to differ materially
from the results discussed in such forward-looking
statements include the risks described hereinabove. All
forward-looking statements in this Memorandum are
expressly qualified in their entirety by the cautionary
statements in this paragraph.
<PAGE>
SELLING SECURITY HOLDERS
Any securities offered and sold pursuant hereto
will be offered and sold from time to time by existing
security holders of the Company ("Selling Security
Holders") for their own accounts. The securities offered
may be sold from directly by the Selling Security
Holders; alternatively, the Selling Security Holders may
offer such securities through underwriters, dealers or
agents. The distribution of securities by Selling
Security Holders may be effected in one or more
transactions that may take place on the over-the-counter
market, including broker's transactions, privately-
negotiated transactions or through sales to one or more
broker-dealers for resale of such securities as
principals, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices
or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may
be paid by the Selling Security Holders in connection
with such sales of securities. The Selling Security
Holders and intermediaries through whom such securities
are sold may be deemed "underwriters" within the meaning
of the Securities Act with respect to the securities
offered, and any profits realized or commissions received
may be deemed underwriting compensation.
At the time a particular offer of securities is made
by a Selling Security Holder, the Selling Security Holder
must, to the extent required by law, deliver prospectus
setting forth the number of shares being offered, and the
terms of the offering, including the name or names of any
underwriters, dealers or agents, if any, the purchase
price paid by any underwriter for shares purchased from
the Selling Security Holder, and any discounts,
commissions, or concessions allowed or reallowed or paid
to dealers, and the proposed selling price to the public.
The Selling Security Holders will be subject to the
applicable provisions of the Exchange Act and the rules
and regulations thereunder, which provisions may limit
the time of purchases and sales by the Selling Security
Holders.
The following table shows the names Selling Security
Holders, along with any material relationships such
security holders have or have had with the Company and
the amount of securities held by such security holder and
available to be offered. Certain Security Holders own
securities in Elite Pharmaceuticals that are not being
offered hereunder and are not included in the table.
Column A shows the name of the Selling Security
Holder; Column B describes any positions or offices held
by the Selling Security Holder within the last three
years with the Company, its predecessor or its
affiliates; Column C shows number of Shares being offered
that are owned by the Security Holder prior to the
offering; Column D shows the number of Warrants being
offered that are owned by the Selling Security Holder. As
used in the preceding sentence "Shares" means shares of
Common Stock of Elite Pharmaceuticals, Inc., and
"Warrants" mean Class A Redeemable Common Stock Purchase
Warrants, each warrant entitling the holder
to purchase one share of Common Stock at an exercise
price of $3.00 exercisable for five years from November
30, 1997. As stated above, the Company does not know
which, if any, Security Holders will be offering their
securities for sale, when they intend to do so, or what
percentage of their securities will be offered.
<TABLE>
<CAPTION>
A. B. C. D.
Number of Number of
Name of Security Holder Positions Held Shares Owned Warrants Owned
<S> <C> <C> <C>
Maurice J. Abadi None 20,000 10,000
Robert G. Ackerly None 20,000 10,000
Hymie Akst None 20,000 10,000
Joan F. Albrecht None 20,000 10,000
All American Funding None 40,000 20,000
David Altschuler None 20,000 10,000
The Aquidneck Trust,
Marielle T. Reilly
and Michael Plunkett TTEES None 40,000 20,000
Marcel Aronheim None 40,000 20,000
Joan Rich Baer, Inc.
Pension Plan
and Trust U/A/D 1/1/78,
Joan Rich Baer and
Arthur Bugs Baer TTEE None 40,000 20,000
Robert W. Baird & Co.
TTEE,FBO Albert L. Saphier
IRA None 40,000 20,000
Mayer Ballas, M.D. None 20,000 10,000
Norman Barrie and
Laurel Barrie None 20,000 10,000
B&B Management, Ltd. None 104,000 52,000
Jerome Belson None 280,000 290,000
Susan J. Bender None 40,000 20,000
Birchcrest Industries, Inc.
Employee Profit Sharing Plan
& Trust None 20,000 10,000
Harvey Blitz None 40,000 20,000
Dr. Daniel Scott Brandwein None 20,000 10,000
Bridge Ventures, Inc. See Note 1 100,000 550,000
Susan Brauser None 20,000 10,000
Michael E. Bushey DDS Inc.
Profit Sharing Trust None 20,000 10,000
C. Ames Byrd and
Donna M. Byrd, JT None 20,000 10,000
Joseph Michael Cafiero and
Veronica Walsh Cafiero JT None 10,000 5,000
McDonald & Company Securities
FBO Frank B. Carr IRA None 60,000 30,000
Chillington Corporation N.V. None 140,000 70,000
Alan R. Cohen None 20,000 10,000
Israel Cohen None 20,000 10,000
Phyllis J. Cohen None 10,000 5,000
Irving W. Davies None 10,000 5,000
Ronny Lee Doran None 10,000 5,000
Joseph A. Dussich None 40,000 20,000
Sidney Dworkin None 40,000 20,000
Anita Elias Living Trust,
Anita and Jack Elias,TTEES None 20,000 10,000
Dr. Edward R. Falkner, Inc.
Profit Sharing Trust None 20,000 10,000
Alan Feldman None 20,000 10,000
Cary Fields None 80,000 40,000
Stuart Flaum None 20,000 10,000
F&N Associates, Inc. None 13,333 6,666
Gary W. Funk None 40,000 20,000
Joseph Giamanco None 160,000 80,000
Lawrence and Diane Gorelick None 40,000 20,000
Edward A. Harycki None 20,000 10,000
Hasenfield-Stein,
Pension Trust None 13,333 6,666
Delaware Charter Gurantee
& Trust Co.
FBO Ronald I. Heller IRA None 30,000 15,000
Richard A. Horstmann None 80,000 40,000
Intergalactic Growth
Fund, Inc. None 80,000 40,000
Barbara Kantor None 20,000 10,000
Robert Karsten, D.D.S. None 40,000 20,000
Richard Katz None 20,000 10,000
E. Gerald Kay None 40,000 20,000
Kentucky National
Insurance Co. None 20,000 10,000
Keys Foundation None 160,000 80,000
Ali H. Khin
and Mariam K. Ohn None 40,000 20,000
Ernest Howard King, Jr. None 20,000 10,000
Marvin Kogod
and Muriel Kogod JTWROS None 20,000 10,000
Jay Lieberman None 40,000 20,000
Andrew Licari None 40,000 20,000
James Lynch None 20,000 10,000
Leonard Makowka None 80,000 40,000
Virginia Meade None 10,000 5,000
Beno Michel M.D. Trust None 20,000 10,000
Harold Miller None 20,000 10,000
Farrell Moore
and Ann Moore JT None 20,000 10,000
Gee Gee Morgan None 10,000 5,000
Morgan Steel Limited None 80,000 40,000
Delaware Charter Guarantee
& Trust Co. FBO
David S. Nagelberg IRA None 30,000 15,000
Daniel Orenstein None 56,000 28,000
Donald Orenstein None 20,000 10,000
Seymour Orenstein None 32,000 16,000
The Chandrakant and Krishna
Patel Family Trust Dtd.
8/25/92 None 40,000 20,000
Sanjay K. Patel None 40,000 20,000
Vijay Patel None 60,000 30,000
James M. Persky None 10,000 5,000
Stephen J. Posner None 40,000 20,000
Delaware Charter Guaranty
Trust TTEE FBO
Paul Prager IRA None 60,000 30,000
Tis Prager None 40,000 20,000
R. Capital II, Ltd. None 80,000 40,000
Kenneth M. Reichle, Jr. None 20,000 10,000
Fahnestock & Co., Inc.
C/F Gerald Richter IRA None 20,000 10,000
R&J Trust Dtd. 7/1/93,
Roger P. Siegel
and Joan K. Siegel TEES None 40,000 20,000
Kenneth M. Robbins None 20,000 10,000
Wayne Robbins None 40,000 20,000
Joseph Roselle None 80,000 40,000
Carl Rosen None 40,000 20,000
Robert M. Rosin None 20,000 10,000
Harvey L. Ross None 40,000 20,000
Irving Russo None 20,000 10,000
Rutgers Casualty Insurance Co.None 20,000 10,000
Saggi Captial Corporation See Note 2 0 200,000
Ronald Schaffer None 48,000 24,000
Harry Schwartz None 20,000 10,000
Mark Schwartz None 20,000 10,000
Merton J. Segal None 40,000 20,000
Norman Seiden None 80,000 40,000
Robert Shiff None 20,000 10,000
Barbara Snyder None 40,000 20,000
Nachum Stein None 13,333 6,666
Myron M. Teitelbaum, M.D. None 10,000 5,000
Edmund Tennenhaus None 40,000 20,000
Tissera Overseas Fund N.V. None 40,000 20,000
Robert and Sarah Wax None 40,000 20,000
For the Following Selling
Shareholders, See Note 3:
Norman Gottlieb See Note 4 104,580 52,290
Dino Niso None 104,580 52,290
First Montauk Securities Corp.None 58,480 29,240
Ameriprop, Inc. None 36,680 18,340
Cantella & Company, Inc. None 9,040 4,520
Lawrence Zaslow None 25,200 12,600
Nathan Low None 10,800 5,400
Susan Bender None 3,000 1,500
M.H. Meyerson None 4,480 2,240
Z/A Associates None 10,800 5,400
Comprehensive Capital None 3,000 1,500
First National Fund Corp None 12,000 6,000
Stephen J. Posner None 9,480 4,740
Donald Orenstein None 4,760 2,380
Benjamin Leifer None 2,368 1,184
Southwall Capital None 592 296
</TABLE>
Note 1: Consultant under terms of Consulting Agreement entered
into between Elite Laboratories, Inc. and Bridge Ventures, Inc.,
dated as of August 1, 1997, and assumed by Elite Pharmaceuticals,
Inc. as of November 7, 1997.
Note 2: Consultant under terms of Consulting Agreement entered into
between Elite Laboratories, Inc. and Saggi Capital Corporation, dated
as of August 1, 1997, and assumed by Elite Pharmaceuticals, Inc.
as of November 7, 1997.
Note 3: The securities held by the following Selling Security
Holders underlie the Placement Agent Warrants. See "Description
of Securities".
Note 4: Norman Gottleib is a principal of Normandy Securities,Inc.,
which is a consultant under terms of a Consulting Agreement entered
into between Elite Laboratories, Inc. and Normandy Securities, Inc.,
dated as of October 31, 1997, and effective through October 31, 1998.
Under the terms of said agreement, Normandy Securities, Inc. provides
to Elite Labs consulting services relating to corporate finance to in
exchange for monthly payments of $3,000.
USE OF PROCEEDS
The Company will not receive any proceeds from the
sale of shares of Common Stock by the Selling
Shareholders. See "Selling Shareholders". The Company
will receive proceeds only upon the exercise of the
Warrants or the Placement Agent Warrants by the holders
thereof. If all of the Warrants (other than those
underlying the Placement Agent Warrants) are exercised
(each Warrant entitling the holder thereof to purchase
one share of Common Stock at 3.00 per share), the
proceeds generated therefrom will be $6,000,000. If all
the Placement Agent Warrants are exercised (each
Placement Agent Warrant entitling the holder thereof to
purchase 40,000 shares of Common Stock and 20,000
Warrants for $72,000), the proceeds therefrom will be
$720,000. If, subsequent to the exercise of the
Placement Agent Warrants, the holders of the underlying
Warrants exercise such warrants, the proceeds therefrom
will be $600,000. There can be no assurance as to when,
if ever, any or all of such securities will be exercised.
Proceeds, if any, received from the exercise of the
Warrants, Placement Agent Warrants and Warrants
underlying the Placement Agent Warrants will be used for
working capital requirements and other general corporate
purposes.
DILUTION
There will be no dilution of the book value of the
Common Stock since no additional shares are being issued
as a result of this offering. There are outstanding
options warrants not offered hereunder which entitle
the holders thereof to purchase shares of Common Stock
at exercise prices ranging from $1.00 to $3.00; exercise
of such options or warrants by the holders thereof
may dilute the book value of the Common Stock if such
warrants or options are exercised at a time when the
book value of the Common Stock exceeds the exercise
price.
PLAN OF DISTRIBUTION
Any securities offered and sold pursuant hereto
will be offered and sold from time to time by Selling
Security Holders for their own accounts. The securities
offered may be sold from directly by the Selling Security
Holders, or the Selling Security Holders may offer such
securities through underwriters, dealers or agents. The
distribution of securities by Selling Security Holders
may be effected in one or more transactions that may take
place on the over-the-counter market, including broker's
transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of
such securities as principals, at market prices
prevailing at the time, at prices related to such
prevailing market prices or at negotiated prices. Usual
and customary or specifically negotiated fees or
commissions may be paid by the Selling Security Holders
in connection with such sales of securities. The Selling
Security Holders and intermediaries through whom such
securities are sold may be deemed "underwriters" within
the meaning of the Securities Act with respect to the
securities offered, and any profits realized or
commissions received may be deemed underwriting
compensation.
At the time a particular offer of securities is
made by a Selling Security Holder, the Selling Security
Holder must, to the extent required by law, deliver a
prospectus setting forth the number of shares being
offered, and the terms of the offering, including the
name or names of any underwriters, dealers or agents, if
any, the purchase price paid by any underwriter for
shares purchased from the Selling Security Holder, and
any discounts, commissions, or concessions allowed or
reallowed or paid to dealers, and the proposed selling
price to the public. The Selling Security Holders will
be subject to the applicable provisions of the Exchange
Act and the rules and regulations thereunder, which
provisions may limit the time of purchases and sales by
the Selling Security Holders.
The Company is unaware of securities being offered
other than for cash. No Selling Security Holder has the
right to designate any of the Company's Board of
Directors. No persons are or have been indemnified
against liability arising under the Securities Act with
respect to this offering of the Common Stock and
Warrants, except to the extent that the Bylaws of the
Company indemnify the members of its Board of Directors
generally against civil, criminal and administrative
actions against any director by reason of action taken by
such person in his or her capacity as director. (See
"Risk Factors-Limitation on Personal Liability of
Directors"). The Company is unaware any contracts that
any Selling Security Holder may have entered into with
any dealer, underwriter or finder, or of any passive
market making activity being contemplated or undertaken
by any Selling Security Holder.
Pursuant to the provisions under the Exchange Act
and the rules and regulations thereunder, any persons
engaged in a distribution of the Common Stock offered by
this Prospectus may no simultaneously engage in market
making activities with regard to the Common Stock of the
Company during applicable "cooling off" periods prior to
the commencement of such distribution. In addition, and
without limiting the foregoing, the Selling Security
Holders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder
including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and
sales of Common Stock by the Selling Security Holders.
<PAGE>
MANAGEMENT
Identification of Directors and Executive Officers.
The directors and executive officers of Elite
Pharmaceuticals and Elite Labs are identical, and are:
NAME AGE POSITION
Atul M. Mehta 48 President, Chief Executive Officer
and Director
Barri M. Blauvelt 44 Director
John W. Jackson 53 Director
Atul M. Mehta has been President, Chief Executive
Officer and a director of Elite Labs since its inception
in 1990. He has served as President, Chief Executive
Officer, and a director of Elite Pharmaceuticals since
1997. Barri Blauvelt has served as a director of
Elite Labs since 1992, and as a director of Elite
Pharmaceuticals since 1997. John Jackson has served as a
director of Elite Labs since 1995, and as a
director of Elite Pharmaceuticals since 1997. There
are no arrangements between any director or executive
officer and any other person, pursuant to which the
director or officer is to be selected as such. There
is no family relationship between the directors,
executive officers, or persons nominated or chosen by
the Company to become directors or executive officers.
Dr. Mehta, the founder of Elite Labs, was
Vice President at Nortec Development Associates, a
company specializing in the development of food,
pharmaceutical and chemical specialty products, from
1984 to 1989. From 1981 to 1984, he was
associated with Ayerst Laboratories, a division of
American Home Products Corporation in the solids
formulation section as Group Leader. His responsibilities
included development of formulations of ethical drugs
for conventional and controlled-release dosage forms
for both USA and international markets. He received
his B.S. degree in Pharmacy with honors from Shivaii
University, KoIhapur, India, and a BS, MS, and a
Doctorate of Philosophy in Pharmaceutics from the
University of Maryland in 1981. Other than Elite
Labs, no company with which Mr. Mehta was affiliated in
the past was a parent, subsidiary or other affiliate of
the Company.
Barri M. Blauvelt, Director of Elite,
is President of Innovara, Inc., a company engaged in
pharmaceutical marketing and management. Prior to
forming Innovara, Inc. in 1983, Mrs. Blauvelt had
ten years of marketing and management experience at
Pfizer (USA) and American Cyanamid Company
(International). Mrs. Blauvelt holds an MBA in Marketing
from Columbia University, and was an instructor in the
Pharmaceutical Degree Program, Graduate School of
Business, at Farleigh Dickensen University. Other than
Elite Labs, no company with which Ms. Blauvelt was
affiliated in the past was a parent, subsidiary or
other affiliate of the Company.
John W. Jackson, Director of Elite, is Chairman and
CEO of Celgene Corporation, a reporting company under
the Securities Exchange Act (Nasdaq:CELG). Celgene
Corporation uses proprietary expertise in small
molecule chemistry to serve the pharmaceutical,
agricultural and allied industries. Previously he was
President of Gemini Medical, a company engaged in
providing consulting to medical companies, inventors
and investors. From 1986 to 1991 he was President of
Medical Device Division of American Cyanamid Company
and from 1978-1986 he was VP International for
Medical Products. From 1971-1978 he worked for Merck &
Company in international marketing. Mr. Jackson obtained
an MBA from the European Institute of Business
Administration, France, a BA in Political Science
from Yale University and graduated from Gordonstoun
School in Scotland. Other than ElitexxxLabs, no
company with which Mr. Jackson was affiliated in the
past was a parent, subsidiary or other affiliate of the
Company.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
No director, executive officer, or person
nominated to become an executive officer or director,
or control person has been the subject of any of the
following actions taken during the past 10 years and not
subsequently reversed, suspended, vacated, annulled or
otherwise rendered of no effect: (i) Bankruptcy or
insolvency proceedings described in Reg. Paragraph
228.401(d)(1)(i); (ii) Criminal proceedings
described in Reg. 228.401(d)(1)(ii); (iii) Civil or
administrative proceedings described in Reg.
228.401(d)(1)(iii); or (iv) Self-regulatory organization
proceedings described in Reg. 228.401(d)(1)(i).
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES.
The Bylaws of the Company contain provisions reducing
the potential personal liability of the directors of the
Company for certain monetary damages and providing for
indemnity of directors. The Company is unaware of any
present, pending or threatened litigation which would
result in any liability for which a director would seek
such indemnification or protection. In addition, the
Company has applied for directors and officers liability
insurance, but has not yet received such coverage. The
provisions affecting personal liability provide that
the Company will indemnify its directors to the
fullest extent permitted by Section 145 of the Delaware
Corporation Law against (a) expenses (including
attorney's fees) reasonably incurred in connection
with any threatened, pending or completed civil,
criminal, administrative, investigative or arbitrative
action, suit or proceeding (and appeal therefrom)
against any director, whether or not brought by or on
behalf of the Company seeking to hold the director
liable by reason of the fact that he was acting in such
capacity; and (b) any reasonable payments made by him in
satisfaction of any judgment, money decree, fine,
penalty or settlement in such action, suit or
proceeding. In that respect, the provisions diminish
the potential right of action which might otherwise be
available to shareholders by affording indemnification by
the Company against most damages and settlement amounts
paid by a director. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 (the
"Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant
to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of
the Securities and Exchange Commission such
indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable.
COMPENSATION
<TABLE>
<CAPTION>
SUMMARY EXECUTIVE COMPENSATION TABLE FOR YEARS 1995, 1996 AND 1997.
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
a b c e f g h i
Name and Calendar Base Bonus Other Restricted Securities LTIP All
principal Year(1) Salary Annual Stock Underlying payouts other
position Compen- awards options compen-
sation SARs sation
Atul M.Mehta 1997 $180,000 $0 $1,785(2) -- 200,000 -- --
President 1996 $165,000 $0 $1,795(2) -- 200,000 -- --
1995 $150,000 $0 $1,795(3) -- ------- -- --
</TABLE>
(1) Dr. Mehta's compensation is awarded as of a calendar year,
as opposed to the Company's fiscal year.
(2) Represents the use of a company car, and premiums on life insurance on
Dr. Mehta's life for the benefit of his wife. Paid by the company.
(3) Represents premiums on life insurance on Dr. Mehta's life for the
benefit of his wife. Paid by the company.
EXECUTIVE OPTION / SAR GRANTS TABLE FOR FISCAL YEAR ENDED MARCH 31, 1997.
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C>
a b c d e
No. of % Grant Per-Share
Securities Represents of Exercise or
Underlying of Options to Base Expiration
Options(1) Employees Price Date
Name
Atul M. Mehta 200,000 100% $1.00 1/1/2007
</TABLE>
(1) The number of securities underlying the options were initially
shares of Elite Labs; however under the terms of the Private Placement,
they have been replaced with shares of Elite Pharmaceuticals. The number
of shares reflects the two-for-one split of Elite Labs' stock undertaken
on August 14, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION/ SAR EXERCISES AND FISCAL YEAR END
OPTION/SAR VALUE TABLE FOR FISCAL YEAR ENDED MARCH 31, 1997.
a b c d e
# of Securities Underlying Value Unexercised
Unexercised Options/ In-the Money Options/
SARS at FY-End SARs at FY-End
Shares Acquired Value Exercisable/ Exercisable/
on Exercise Realized Unexercisable(1) Unexercisable
<S>
<C> <C> <C> <C> <C>
Name
Atul M.Mehta None $0 400,000 $200,000(2)
Exercisable
</TABLE>
(1) The number of securities underlying the options
were initially shares of Elite Labs; however under the
terms of the Private Placement, they have been replaced
with shares of Elite Pharmaceuticals. The number of
shares reflects the two-for-one split of Elite Labs'
stock undertaken on August 14, 1997.
(2) The market value of the shares of Common Stock is
unknown and uncalculable. However, in the Private
Placement, units consisting of 40,000 shares of Common
Stock and 20,000 Warrants were issued for $60,000 per
unit. Based on that offering price, the maximum amount
the shares of Common Stock could be worth is $1.50. It
is on this hypothetical value that the figure in column
(e) is calculated. This figure may have no relation to
the actual value of the unexercised options.
<TABLE>
<CAPTION>
Director Compensation for Fiscal Year Ending March 31, 1997
<S>
<C> <C> <C> <C> <C> <C>
b c d e f
Cash Compensation Security Grants
_________________ _______________
Annual Consulting Number Securities
Retainer Meeting or Other of Underlying Options
Name Fees Fees Fees Shares
Atul M.Mehta $0 $0 $0 0 200,000 shares(2)
Barri M. Blauvelt $0 $0 $0 0 20,000 shares(3)
John W. Jackson $0 $0 $0 0 20,000 shares(3)
</TABLE>
(1) These options are the same options described in the
preceding table entitled "Option / SAR Grants Table for
fiscal year ended March 31, 1997," and their inclusion
herein should not be construed to mean that Dr. Mehta
received more than options to purchase 200,000 in the
aggregate for any reason for fiscal year ending March 31,1997.
(2) Exercisable for ten years at an exercise price of
$1.00. The number of securities underlying the options
were initially shares of Elite Labs; however under the
terms of the Private Placement, they have been replaced
with shares of Elite Pharmaceuticals. The number of
shares reflects the two-for-one split of Elite Labs'
stock undertaken on August 14, 1997.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company entered into an employment with Atul M.
Mehta, effective January 1, 1996, pursuant to which he is
employed full time as President and CEO of the company.
The agreement will remain in effect until December 31,
2000. Under the terms of the agreement, Dr. Mehta agrees
to devote a sufficient amount of his business time to
diligently perform his obligations. His base salary
under the agreement is $165,000 in 1996, $180,000 in
1997, $200,000 in 1998, with a raise in 1999 and 2000 to
be determined by the Board of Directors. Under the
agreement, Dr. Mehta is entitled to a bonus equal to five
percent of the net profits of the company; to health
insurance for him and his dependents; term life insurance
in a minimum amount of $300,000 for the benefit of his
spouse or estate; and any benefits provided to employees
generally. He is also entitled to receive options on
January 1 of each year beginning with January 1, 1996, to
purchase 200,000 shares of Common Stock (such number
reflecting the two-for-one split of Elite Labs' stock
undertaken on August 14, 1997) at $1.00 per share. The
agreement provides that, in the event that Dr. Mehta
loses his job as a result of a change of control in the
Company, he will be entitled all salary, bonuses and
deferred compensation through the earlier of May 22, 2001
or three years following his termination.
Dr. Mehta is required to refrain from competing with the
Company during the term of the Agreement.
PRINCIPAL SHAREHOLDERS
The following table sets forth the security ownership of
certain beneficial owners(1) and management as of the date of
this prospectus with respect to the beneficial ownership of
the Company's Common Stock by (i) each person known to the
Company to be the beneficial owners of more than 5% of the
Company's Common Stock; (ii) each director of the Company;
(iii) each executive officer of the Company; and (iv) the
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
a b c d
Title of Name and Address Amount and Nature Percent
Class of Beneficial Owner of Beneficial Ownership of Class
<S> <C> <C> <C>
Voting Atul M. Mehta 4,465,628(2) 28.8%
Common 252 E. Crescent Ave.
Ramsey, NJ 07446
Voting John de Neufville, Trustee 1,850,000(3) 12.5%
Common Margaret deNeufville
Revocable Trust
197 Meister Avenue
North Branch, NJ 08876
Voting Bakul and Dilip Mehta 1,260,000 8.7%
Common P.O. Box 438
Muscat, Sultanate of Oman
Voting Vijay Patel 812,072(4) 6.0%
Common 19139 Pebble Court
Woodbridge, CA 95258
Voting Bridge Ventures, Inc. 916,666(5) 6.0%
Common 575 Lexington Ave., Ste. 410
New York, NY 10022
Voting Barri M. Blauvelt 600,000(6) 4.1%
Common 175 Cherry Lane
Amherst, MA 01022
Voting John W. Jackson 250,000(7) 1.7%
Common 32 Gregory Lane
Warren, NJ 07059
Voting Officers and 5,315,628(8) 33.2%
Common Directors as a Group
</TABLE>
(1) For purposes of this table, a person or group of
persons is deemed to have "beneficial ownership" of any
shares of Common Stock which such person has the right
to acquire within 60 days of January 29, 1997. For
purposes of computing the percentage of outstanding
shares of Common Stock held by each person or group of
persons named above, any security which such person or
persons has or have the right to acquire within such date
is deemed to be outstanding but is not deemed to be
outstanding for the purpose of computing the percentage
ownership of any other person. Except as indicated in
the footnotes to this table and pursuant to applicable
community property laws, the Company believes based on
information supplied by such persons, that the persons
named in this table have sole voting and investment power
with respect to all shares of Common Stock which they
beneficially own.
(2) Includes (i) 200,000 shares of Common Stock held
by Asha Mehta, Dr. Mehta's wife; (ii) 12,600 shares held
by Dr. Mehta C/F Amar Mehta; (iii) 12,600 shares held
by Dr. Mehta C/F Anand Mehta; and (iv) options to
purchase 1,040,428 shares of Common Stock.
(3) Represents (i) 1,800,000 shares of Common Stock
held by the Margaret de Neufville Revocable Trust, of
which Mr. de Neufville is Trustee, and (ii) options held
by Mr. de Neufville to purchase 50,000 shares of Common
Stock.
(4) Includes options to purchase 67,000 shares of
Common Stock and warrants to purchase 204,572 shares of
Common Stock.
(5) Includes warrants to purchase 550,000 shares
of Common Stock.
(6) Includes (i) 20,000 shares of Common Stock held
by G.C. and Barri Blauvelt C/F Heather Blauvelt; (ii)
20,000 shares held by G.C. and Barri Blauvelt C/F Meghan
Blauvelt; (iii) 20,000 shares held by G.C. and Barri
Blauvelt C/F Chris Blauvelt; and (iv) options to
purchase 250,000 shares of Common Stock.
(7) Represents options to purchase 250,000 shares
of Common Stock.
(8) Includes options to purchase 1,540,428 shares of
Common Stock.
<PAGE>
DESCRIPTION OF SECURITIES
Elite Pharmaceuticals is authorized to issue
20,000,000 shares of Common Stock. There are 14,475,200
shares of Common Stock outstanding, and an additional
5,900,000 shares of Common Stock are subject to
outstanding options or warrants to purchase said
shares. Of such shares, 9,575,200 shares of such Common
Stock could be sold pursuant to Rule 144 under the
Securities Act; it is currently registering 7,450,000
shares under the Securities Act for sale by Security
Holders (3,050,000 of which such shares underlie
Warrants held by such Security Holders); and 900,000
shares of Common Stock of Elite
Pharmaceuticals have been previously registered under the
name of Prologica International, Inc. The shares,
options and warrants are held by approximately 188
security holders.
Description of Common Stock
The Common Stock registered is the sole class of
stock in the Company. The holders of Common Stock are
entitled to one vote for each share held of record on
each matter submitted to a vote of stockholders and do
not have cumulative voting rights for the election of
directors. The Common Stock has no conversion rights
and includes no preemptive subscription, conversion,
redemption or other rights to subscribe for additional
securities. The holders of the Common Stock will be
entitled to receive dividends, if any, as may be declared
by the Board of Directors out of legally available funds
and to share pro rata in any distribution to the
stockholders, including any distribution upon
liquidation, dissolution or winding up of the Company
subject to the rights of any holders of Preferred
Stock, if any Preferred Stock is ever issued. All
outstanding Common Stock and the Shares issuable upon
exercise of the Warrants, upon issuance and when paid
for, will be duly authorized, validly issued, fully paid
and nonassessable.
The Company has not, to date, paid any cash
dividends upon its Common Stock and does not expect to
declare or pay any dividends.
Warrants.
The Company is also registering 3,050,000 Warrants, each
of which entitles the holder to purchase one share of
Common Stock at an exercise price of $3.00 during the
five-year period commencing November 30, 1997. There are
currently warrants and options issued and outstanding
exercisable for 5,900,000 shares of Common Stock,
including the Warrants being Registered, although not all
warrants or options outstanding have the same exercise
rights, exercise period or exercise price as those being
Registered. No fractional shares will be issued upon
exercise of the Warrants. However, if a Warrant Holder
exercises all Warrants then owned of record by him or
her, the Company will pay to such holder, in lieu of the
issuance of any fractional share which is otherwise
issuable, an amount in cash based on the market value of
the Common Stock on the last trading day prior to the
exercise date
PLACEMENT AGENT WARRANTS.
Ten Placement Agent Warrants were issued to the placement
agent and its designees in connection with the Private
Placement of the Company's securities. Each Placement
Agent Warrant entitles the holder(s) thereof to purchase
a unit consisting of 40,000 shares of Common Stock and
20,000 Warrants for the sum of $72,000. The Placement
Agent Warrants are not themselves being registered or
offered hereunder; however the securities underlying
them are being registered and, if the Placement Agent
Warrants are exercised and the holders thereof become the
holders of the underlying securities, such securities
may be offered by the holders thereof in the same manner
as any other Security Holder. See "Use of Proceeds" and
"Plan of Distribution".
TRANSFER AGENT.
The transfer agent and registrar for the Company's
Common Stock is Jersey Transfer and Trust Company,
201 Bloomfield Avenue, Verona, New Jersey, 07044.
TRADING MARKET
There is currently no established trading market for the
Common Stock or Warrants.
<PAGE>
EXPERTS AND COUNSEL
COUNSEL.
The legality of the securities offered hereby and certain
other legal matters will be passed upon for the Company
by James, McElroy & Diehl, P.A, 600 South College Street,
Charlotte, North Carolina 28202.
EXPERTS
The financial statements included in this Prospectus
have been audited by Goldman & Gittelman, P.C.,
independent certified accountants, to the extent and for
the periods set forth in their report appearing elsewhere
herein, and is included in reliance upon such report
given the authority of said firm as experts in auditing
and accounting.
INTERESTS OF EXPERTS AND COUNSEL
Neither (a) any expert named in the Registration
Statement as having prepared or certified any part of the
Registration Statement or a report, or valuation to be
used in connection with the Registration Statement, nor
(b) any counsel for the Elite Pharmaceuticals named in
the Prospectus as having given an opinion on the validity
of the securities being registered or on other legal
matters in connection with the Registration or the
Offering, (i) was employed for that purpose on a
contingency basis; (ii) had at any time prior hereto, or
is to receive in connection with the offering; a
substantial interest, direct or indirect, in Elite
Pharmaceuticals, its parents or subsidiaries; or (iii)
was connected with the Elite Pharmaceuticals or any of
its parents or subsidiaries as a promoter, managing
underwriter, or principal underwriter, voting trustee,
director, officer or employee.
<PAGE>
DESCRIPTION OF BUSINESS
ELITE PHARMACEUTICALS, INC.'S BUSINESS.
Elite Pharmaceuticals' predecessor, Prologica
International, Inc., was incorporated in the State of
Pennsylvania on April 20, 1984. From the time of its
incorporation, and the completion of its initial public
offering in August 1988, until the date of its merger
with Elite Pharmaceuticals, Prologica engaged in no
business other than searching for suitable acquisitions.
Except for Elite Pharmaceuticals, it located no such
acquisitions. Elite Pharmaceuticals was incorporated in
the State of Delaware on October 1, 1997, for the sole
purpose of merging with Prologica in order to change the
name and state of incorporation of Prologica. Elite
Pharmaceuticals survived the merger with Prologica;
Prologica ceased to exist at the time of the merger on
October 24, 1997. Contemporaneous with the merger of
Elite Pharmaceuticals and Prologica, Elite Labs (the
business of which is described below) merged with a
wholly owned subsidiary of Prologica, HMF. HMF was
incorporated on August 1, 1997 for the sole purpose of
providing a vehicle into which Elite Labs Laboratories
could merge. Elite Labs and HMF merged on October 30,
1997. Elite Labs survived the merger with HMF and HMF
ceased to exist subsequent to the merger. The net result
of the two mergers is that Prologica and HMF have ceased
to exist, and Elite Pharmaceuticals owns one hundred
percent of the stock of Elite Labs, Inc. Such stock
ownership is Elite Pharmaceuticals' sole business.
There were no promotors of Elite Pharmaceuticals prior to
its incorporation.
Neither Elite Pharmaceuticals nor Prologica had had any
operating revenue for the three years preceding the
merger. At the present time, Elite Pharmaceuticals has
no plans to conduct any other business apart from the
ownership of Elite Labs, Inc. None of the proceeds of
the current offering will inure to the benefit of Elite
Pharmaceuticals or Elite Labs.
ELITE LABORATORIES, INC.'S BUSINESS.
Elite Labs Laboratories, Inc. was incorporated in the
State of Delaware on August 23, 1990. As described
above, on October 30, 1997, one hundred percent of the
stock of Elite Labs as acquired by Elite Pharmaceuticals,
Inc. via the merger between Elite Labs and HMF. With
that exception, no acquisition or disposition of any
material assets, nor any material changes in the method
of conducting business have incurred since its
incorporation.
PRODUCTS AND MARKETS
Elite Labs Laboratories, Inc. primarily engages in
researching, developing, licensing, manufacturing, and
marketing proprietary drug delivery systems and products.
Elite Labs' drug delivery technology involves releasing a
drug into the bloodstream or delivering it to a target
site in the body over an established period of time or at
predetermined times. Such products are designed to allow
drugs to be administered less frequently, with reduced
side effects and, in certain circumstances, in reduced
dosages. Elite Labs has concentrated on developing
orally administered controlled release products. Elite
Labs' primarily targets existing controlled release drugs
that are reaching the end of their exclusivity period,
and works to develop cheaper generic controlled-release
version of those drugs. Six controlled release products
developed by Elite Labs are at various stages of testing.
The products include drugs which provides, therapeutic
benefits for angina and hypertension, a nonsteroidal
analgesic drug, and one which appears to lower blood
glucose by stimulating insulin from the pancreas. None
of these products have yet been brought to the
manufacturing stage, and Elite therefore does not yet
market any products.
Elite Labs also engages in contract research and
development activities sponsored by several other
pharmaceutical companies.
Controlled drug delivery of a pharmaceutical compound
is a relatively new concept
which offers a safer and more effective means of
administering drugs. It involves releasing a drug into
the bloodstream or delivering it to a target site in the
body at predetermined rates over an extended period of
time, or at predetermined times. Its goal is to provide
more effective drug therapy while reducing or eliminating
many of the side effects associated with conventional
drug therapy.
In the United States and European health care
communities, a great deal of interest has been evident
in the area of new drug delivery systems. Several
pharmaceutical products have been introduced as oral
controlled-release dosage forms, both as tablets and as
capsules.
The U.S. sales of pharmaceutical products developed
utilizing drug delivery technology has grown from $8.3
billion in 1994 to $11.5 billion in 1996. Oral
controlled-release delivery accounts for over half of all
drug delivery sales. Drug delivery stocks have
outperformed both large cap pharmaceutical stocks and the
S&P 500 the past two years. This should not be
construed as an indication of any future performance of
such stocks.
RESEARCH AND DEVELOPMENT COSTS.
Elite Labs spent approximately $318,533 in fiscal
year 1996 and $377,637 in fiscal year 1997 on company-
sponsored research and development activities. As Elite
Labs does not yet sell any of its products, no part of
the cost of such research was passed on to consumers of
Elite Labs' products.
DISTRIBUTION METHODS OF PRODUCTS OR SERVICES.
As yet, Elite Labs has not developed nor needed an
elaborate method of distribution of products or services.
COMPETITIVE BUSINESS CONDITIONS AND ISSUER'S
COMPETITIVE POSITION
Elite Labs competes in two related but distinct
markets: It performs contract research and development
work regarding controlled-release drug technology for
large pharmaceutical companies, and it seeks to develop
and market (either on its own or by licensure to other
companies) proprietary controlled-release pharmaceutical
products. In both arenas, Elie's competition consists of
those companies which are able (or perceived as able) to
develop controlled-release drugs.
In recent years, an increasing number of pharmaceutical
companies have become interested in the development and
commercialization of products incorporating advanced or
novel drug delivery systems. The Company expects that
competition in the field of drug delivery will
significantly increase in the future since smaller
specialized research and development companies are
beginning to concentrate on this aspect of the business.
Some of the major pharmaceutical companies have invested
and are continuing to invest significant resources in the
development of their own drug delivery systems and
technologies and some have invested funds in such
specialized drug delivery companies. Many of these
companies have greater financial and other resources as
well as more experience than the Company in
commercializing pharmaceutical products. A comparatively
small number of companies have a track record of success
in developing controlled-release drugs. Significant among
these are Alza Corporation, Andrx, Elan Corporation,
Biovail Corporation, Faulding, Schering, KV
Pharmaceutical, Forest Laboratories, etc. Each of these
companies have developed expertise in certain types of
drug delivery systems, although such expertise does not
carry over to developing a controlled-release version of
all drugs. Such companies may develop new drug
formulations and products or may improve existing drug
formulations and products more efficiently than the
Company. While the Company's product development
capabilities and patent protection may help the Company
to maintain its market position in the field of advanced
drug delivery, there can be no assurance that others will
not be able to develop such capabilities or alternative
technologies outside the scope of the Company's patents
if any, or that even if patent protection is obtained,
such patents will not be successfully challenged in the
future. In addition, it must be noted that almost all of
the Company's competitors have vastly greater resources
than the Company.
SOURCES AND AVAILABILITY OF RAW MATERIAL.
The Company is not yet in the manufacturing phase of any
product and therefore does not have a requirement for
significant amounts of raw materials. It currently
obtains what limited raw materials it needs from over
twenty suppliers. The failure of any supplier to provide
raw materials would not have a material adverse effect on
the Company's ability to continue its operations. The
materials required by the Company are readily available
from these sources.
DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS.
The Company has had some customers which each year have
accounted for a large percentage of its sales. The
Company's largest single customer during the last fiscal
year accounted for approximately 50% of the Company's
revenue. This is due to the fact that prior to the
Private Placement the Company lacked adequate capital,
facilities, and personnel, to service more than a limited
number of customers at one time. It is the intention of
the Company to expand its business to service a greater
number of customers at one time.
PATENTS, TRADEMARKS, ROYALTY AGREEMENTS ETC.
Elite Labs has received Notices of Allowance from the
U.S. Patent and Trademark Office for the following
trademarks: Nifelite, Diltilite SR, Diltilite CD,
Ketolite CR, Verelite CR and Glucolite CR.
The Company has not yet patented any of its products,
although it has applied for two patents for one of its
products and intends to apply for patents for other
products in the future. The Company believes that future
patent protection of its technologies and processes and
of its products may be important to its operations. The
success of the Company's products may depend, in part,
upon the Company's ability to obtain strong patent
protection. There can be no assurance, however, that
these patents or any additional patents will prevent
other companies from developing similar or functionally
equivalent dosage forms of products. Furthermore, there
can be no assurance that (i) any additional patents will
be issued to the Company in any or all appropriate
jurisdictions, (ii) the Company's patents will not be
successfully challenged in the future, (iii) the
Company's processes or products do not infringe upon the
patents of third parties or (iv) the scope and validity
of the Company's patents will prevent third parties from
developing similar products. Although a patent has a
statutory presumption of validity in the United States,
there can be no assurance that patents issued covering
the Company's technologies will not be infringed or
successfully avoided through design innovation or by the
challenge of that presumption of validity. Finally, there
can be no assurance that products utilizing the Company's
technologies, if and when issued, will not infringe
patents or other rights of third parties. It is also
possible that third parties will obtain patents or other
proprietary rights that might be necessary or useful to
the Company. In cases where third parties are first to
invent a particular product or technology, it is possible
that those parties will obtain patents that will be
sufficiently broad so as to prevent the Company from
using such technology or from marketing such products.
GOVERNMENT REGULATION AND APPROVAL
The design, development and marketing of pharmaceutical
compounds are intensely regulated by governmental
regulatory agencies, including the Food and Drug
Administration. Non-compliance with applicable
requirements can result in fines and other judicially
imposed sanctions, including product seizures, injunction
actions and criminal prosecution based on products or
manufacturing practices that violate statutory
requirements. In addition, administrative remedies can
involve voluntary withdrawal of products, as well as the
refusal of the Government to enter into supply contracts
or to approve abbreviated new drug applications ("ANDAs")
and new drug applications ("NDAs"). The FDA also has the
authority to withdraw approval of drugs in accordance
with statutory due process procedures.
The FDA approval procedure for an ANDA relies on
bio-equivalency tests which compare the applicant's drug
with an already approved reference drug, rather than with
clinical studies. Because Elite Labs has concentrated,
during the first few years of its business operations, on
developing products which are intended to be
big-equivalent to existing controlled-release
formulations, the Company expects that most of its drug
products will require ANDA filings. There can be no
marketing in the United States of a product for which
ANDA is required until it has been approved by the FDA.
The FDA approval procedure for an NDA is a two-step
process. During the Initial Product Development stage, an
investigational new drug ("IND") for each product is
filed with the FDA. A 30-day waiting period after the
filing of each IND is required by the FDA prior to the
commencement of initial (Phase I) clinical testing in
healthy subjects. If the FDA does not comment on or
question the IND within such 30-day period, initial
clinical studies may begin. If, however, the FDA has
comments or questions, the questions must be answered to
the satisfaction of the FDA before initial clinical
testing can begin. In some instances this process could
result in substantial delay and expense. Phase I studies
are intended to demonstrate the functional
characteristics and safety of a product.
After Phase I testing, extensive efficacy and safety
studies in patients must be conducted. After completion
of the required clinical testing, an NDA is filed, and
its approval, which is required for marketing in the
United States, involves an extensive review process by
the FDA. The NDA itself is a complicated and detailed
document and must include the results of extensive
clinical and other testing, the cost of which is
substantial. While the FDA is required to review
applications within 180 days of their filing, in the
process of reviewing applications, the FDA frequently
requests that additional information be submitted and
starts the 180-day regulatory review period anew when the
requested additional information is submitted. The effect
of such request and subsequent submission can
significantly extend the time for the NDA review process.
Until an NDA is actually approved, there can be no
assurance that the information requested and submitted
will be considered adequate by the FDA to justify
approval. The packaging and labeling of all Company
developed products are also subject to FDA regulation. It
is impossible to anticipate the amount of time that will
be required to obtain approval from the FDA to market any
product. The time period to obtain FDA approval of the
ANDA may range from approximately 12 to 36 months while
that for an NDA may range from 12 to 24 months.
Whether or not FDA approval has been obtained, approval
of the product by comparable regulatory authorities in
any foreign country must be obtained prior to the
commencement of marketing of the product in that country.
All marketing in territories other than the United States
shall be conducted through other pharmaceutical companies
based in those countries. The approval procedure varies
from country to country, can involve additional testing,
and the time required may differ from that required for
FDA approval. Although there are some procedures for
unified filings for certain European countries, in
general each country has its own procedures and
requirements, many of which are time consuming and
expensive. Thus, there can be substantial delays in
obtaining required approvals from both the FDA and
foreign regulatory authorities after the relevant
applications are filed. After such approvals are
obtained, further delays may be encountered before the
products become commercially available.
All facilities and manufacturing techniques used for the
manufacture of products for clinical use or for sale must
be operated in conformity with Good Manufacturing
Practice ("GMP") regulations. In the event the Company
shall engage in manufacturing, it will be required to
operate its facilities in accordance with GMP
regulations. If the Company shall hire another company to
perform contract manufacturing for it, it must take steps
to ensure that its contractor's facilities conform to GMP
regulations.
Under the Generic Drug Enforcement Act, ANDA applicants
(including officers, directors and employees) who are
convicted of a crime involving dishonest or fraudulent
activity (even outside the FDA regulatory context) are
subject to debarment. Debarment is disqualification from
submitting or participating in the submission of future
ANDAs for a period of years or permanently. The Generic
Drug Enforcement Act also authorizes the FDA to refuse to
accept ANDAs from any company which employs or uses the
services of a debarred individual. The Company does not
believe that it receives any services from any debarred
person.
The Company is governed by federal, state, and local laws
of general applicability, such as laws relating to
working conditions and environmental protection. The
Company estimates that it spends approximately $3,000.00
per year in order to comply with applicable environmental
laws. The Company is also licensed by, registered with,
and subject to period inspection and regulation by the
DEA and New Jersey state agencies, pursuant to federal
and state legislation relating to drugs and narcotics.
Certain drugs that the Company may develop in the future
may be subject to regulation under the Controlled
Substances Act and related Statutes. At such time as the
Company being manufacturing products, it may become
subject to the Prescription Drug Marketing Act, which
regulates wholesale distributors of prescription drugs.
EMPLOYEES.
The Company has five full-time and three part-time
employees. Its full-time employees are engaged in
administrative, research and development while its
part-time employees are engaged in research and
development. Elite Pharmaceuticals does not have any
employees except its President/CEO. Elite Labs believes
its employee relations to be satisfactory; it is not a
party to any labor agreements and none of its employees
are represented by a labor union. Atul M. Mehta is the
sole significant employee of the Company at this time.
EMPLOYEE INCENTIVE STOCK OPTION PLAN.
On August 7, 1997, the shareholders of the Elite Labs
approved an the Company's Incentive Stock Option Plan
("Plan"). The purpose of the Plan is to promote the
success of the Company by providing a method wherein
eligible employees may be awarded additional remuneration
for services rendered. The Plan provides that the
maximum number of shares of Common Stock reserved for
awards thereunder shall be 1,250,000. The purpose of this
stock option plan (this "Plan") is to secure for the
company and its stockholders the benefits which flow from
providing key employees and officers with the incentive
inherent in common stock ownership. The stock options
granted under the Plan are intended to qualify as
incentive stock options within the meaning of Internal
Revenue Code Section 422. The total number of shares of
common stock to be subject to the options granted
pursuant to the Plan shall not exceed 1,250,000 shares.
The plan is administered by the Board of Directors. The
purchase price per share of Stock purchasable under
options granted pursuant to the Plan shall not be less
than 100% of the fair market value at the time the
options are granted. The purchase price per share of
Stock purchasable under options granted pursuant to the
Plan to a person who owns more than 10 percent of the
voting power of the company's voting stock shall not be
less than 110 % of the fair market value at the time the
options are granted. No option granted pursuant to this
Plan shall be exercisable after the expiration of ten
years from the date it is first granted. No option
granted pursuant to this Plan to a person who owns more
than 10 percent of the voting power of the company's
voting stock will be exercisable after the expiration of
five years from the date it is first granted.
In August 1997, Atul M. Mehta was awarded options
to purchase 250,000 shares of Common Stock (which number
reflects the two-for-one split of Elite Labs' Stock on
August 14, 1997) under the Incentive Stock Option Plan.
The options were to vest over five years; however, under
their terms, they vested immediately at the time the
Company undertook the registration of its securities.
LEGAL PROCEEDINGS
Neither Elite Pharmaceuticals nor Elite Labs is
involved in or the subject of any current or aware of any
pending legal proceedings, nor is any of the property of
either company the subject of any such legal proceedings.
PROPERTY
Elite Labs leases approximately 5,000 sq.ft. at 230 W.
Passaic Street, Maywood, NJ 07607 at a rental of $62,832
per annum. The lease term expires on October 30, 1998.
Elite is in discussion with its landlord regarding an
option to renew for an additional 3 years. If needed, the
premises would be sufficient to conduct the Company's
operations for the foreseeable future. However, Elite
Labs has entered into an offer to purchase and contract
regarding a piece of real property and building located
at 165 Ludlow Avenue, Northvale, New Jersey. The
purchase price of the property is $1,050,000. The
building located on the real property is suitable for use
as a laboratory and offices. If the purchase of the
property is consummated, Elite Labs will undertake to
relocate its facilities to the new location prior to the
termination of its current lease. The Company's
operations are not dependent on any specific location. If
the purchase of the property is not consummated,
management believes that office and laboratory facilities
will be available at reasonable cost after the expiration
of the term of the current lease.
Elite Pharmaceuticals, which has no operations, is
located at 230 W. Passaic Street, Maywood, NJ 07607; at
any time that the operations of Elite Labs move, the
location of Elite Pharmaceuticals will move to the same location.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION OF THE COMPANY AND ITS SUBSIDIARY
Introduction
Elite Pharmaceuticals' predecessor , Prologica International, Inc.,
was incorporated in the State of Pennsylvania on April 20, 1984.
From the time of its incorporation, and the completion of its initial
public offering in August 1988, until the date of its merger with Elite
Pharmaceuticals, Prologica engaged in no business other than searching
for suitable acquisitions. Except for Elite Pharmaceuticals,
it located no such acquisitions. Elite Pharmaceuticals was incorporated
in the State of Delaware on October 1, 1997, for the sole purpose of merging
with Prologica in order to change the name and state of incorporation
of Prologica. (Prior to the merger with Elite Pharmaceuticals,
Prologica underwent a three-for-one reverse split of its stock.)
Elite Pharmaceuticals survived the merger with Prologica;
Prologica ceased to exist at the time of the merger on October 24, 1997.
Contemporaneous with the merger of Elite Pharmaceuticals and Prologica,
Elite Labs (described below) merged with a wholly owned subsidiary of
Prologica, HMF. HMF was incorporated on August 1, 1997 for the sole
purpose of providing a vehicle into which Elite Labs could merge. Elite
Labs survived the merger with HMF and HMF ceased to exist subsequent to
the merger. The net result of the two mergers is that Prologica and
HMF have ceased to exist, and Elite Pharmaceuticals owns one hundred
percent of the stock of Elite Labs. Such stock ownership is Elite
Pharmaceuticals' sole business.
Elite Labs was incorporated in the State of Delaware on
August 23, 1990. As described above, on October 30,1997,
one hundred percent of the stock of Elite Labs as acquired
by Elite Pharmaceuticals, Inc. via the merger between Elite Labs
and HMF. With that exception, no acquisition or disposition of any
material assets, nor any material changes in the method of conducting
business have incurred since its incorporation.
In a private placement concluding on November 30, 1997,
Elite Pharmaceuticals raised $6,000,000. The private
placement offering consisted of 100 units, each unit
consisting of 40,000 shares of common stock of the
Company and 20,000 warrants, each warrant entitling the
holder to purchase one share of common stock at an exercise
price of $3.00 per share during the five year period
commencing with the date of closing of the private offering
memorandum (November 30, 1997). The price per unit was $60,000.
Elite Labs, now a wholly owned subsidiary of Elite Pharmaceuticals,
engages in the research, development, licensing, manufacturing and
marketing of both new and generic controlled-release pharmaceuticals
products. Elite is a 100% owned subsidiary of Elite Pharmaceuticals,
Inc. The Company has developed six oral controlled release
pharmaceutical products to varying states of the development process.
Elite has licensed one of these products to a large pharmaceutical
company for the North American market, and granted and option on it
to another multinational company for the worldwide market.
Elite has also conducted several research and development projects
on behalf of several large pharmaceuticals companies. These
activities have generated only limited revenue for Elite to date.
Elite was founded by Dr. Atul M. Mehta who was Elite's President
and CEO. Dr. Mehta, who has extensive experience in controlled
drug release technology, is principally responsible for the
development of all of Elite's products.
The Company intends to utilize the net proceeds from the private
placement offering of approximately $5,325,000 for research and
development of existing and new products, capital improvements,
legal expenses and patent filings, additional administrative and
technical personnel, and general corporate and working capital purpose.
Elite expects that substantially all of its immediate and future
revenues will be dependent upon the sales and licensing of its
current controlled release pharmaceutical products, from the
development of future new products, and possibly from contract
research and development work for other companies.
Plan of 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 future 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 is looking to
relocate its current office and laboratory facility in Maywood,
New Jersey to a larger, better suited facility. This facility
would increase the space available to conduct further research
and development and scale-up, and possibly for the eventual
manufacturing of tablets and capsules.
Results of Operations
Eight Months Ended November 30, 1997 vs. November 30, 1996
Elite's revenues for the eight months ended November 30, 1998
were $102,936, a decrease of $213,054 or approximately 67% over
the comparable period of the prior year. For the eight months
ended November 30, 1997, $100,000 or approximately 97% of revenues
were derived from license agreements from other pharmaceutical
companies as compared with $160,000 or approximately 51% for
the comparable period of the prior year.
Operating expenses for the eight months ended November 30, 1997
were $392,293, an increase of 464,853 or approximately 20% from
the comparable period of the prior year. The increase in
operating expenses was substantially due to legal fees, rent
expense, salaries and interest paid on a related party loan
agreement. Operating expenses expressed as a percentage of
revenues was approximately 381% for the eight months ended
November 30, 1997 as compared to 104% for the comparable
period of the prior year.
Elite's net loss for the eight months ended November 30, 1997
was $289,357 as compared to $11,450 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 increased internal product development.
Year Ended March 31, 1997 vs. Year Ended March 31, 1996.
Elite's net revenues for the year ended March 31, 1997 were
$330,659 an increase of $180,091 or approximately 120% over
the comparable period of the prior year. Net revenues primarily
consisted of licensing fees of $160,000 and contract research
and development of $153,000.
Elite's research and development activities for the year ended
March 31, 1997 were $377,637, and increase of $59,104 or
approximately 19% over the comparable period of the prior year.
General and administrative expenses for the year ended
March 31, 1997 were $156,671, an increase of $50,597 or
approximately 48% from the comparable period of the prior
year. The increase in general and administrative expense
was due to an increase in sales, advertising, salaries and
promotion and travel expenses.
For the year ended March 31, 1997, interest expense paid
to a related party was $8,500 as compared to $412 for the
comparable period of the prior year.
Elite's net loss for the year ended March 31, 1997 was
$260,111 as compared to $326,240 for the comparable period
of the prior year. The decrease in net loss was primarily
due to an increase of approximately $160,000 in licensing
as compared to the comparable period of the prior year.
Liquidity and Capital Resources
From inception through March 31, 1997, cash flow from
financing activities principally came from the issuance
of common stock, initially from a private placement on
August 15, 1991. Subsequently, the Company raised
additional funds from common stock issuance and received
a loan from a related party in the amount of $100,000.
This loan was subsequently repaid during the eight months
ended November 30, 1997.
The Company estimates that the net proceeds from the
private placement offering will be sufficient to meet
its cash requirements for a period of between 18 and 24
months following the date of the closing of the private
placement offering. However, there can be no assurance
that unexpected future developments may result in the
Company requiring additional financing or, that if required,
additional financing will be available to the Company.
For the year ended March 31, 1997, net cash of $211,550
was used in operating activities due to the Company's net
loss of $260,111 increased by increases in the Company's
contract revenues receivable and prepaid assets. For the
year ended March 31, 1996, net cash of $303,572 was used
in operating activities as a result of a net loss of
$326,240 as well as increases in contract revenues
receivable above the Company's net loss.
CERTAIN TRANSACTIONS
Transactions With Management and Others.
Elite Laboratories, Inc. is a party to a three-year Consulting
Agreement entered into with Bridge Ventures, Inc. ("Bridge") on
August 1, 1997, under which Bridge provides the company with
marketing and management consulting services. Under the terms
of the Consulting Agreement, Elite Labs pays Bridge the sum of
$10,000 per month and reimburses Bridge for all out-of-pocket
expenses incurred on behalf of Elite Labs. Bridge is an owner
of at least five percent of the Elite Pharmaceuticals' Common
Stock, as described in more detail in the in the section
entitled Security Ownership of Certain Beneficial Owners and Management.
Other than as described above, the Company is not (and has not
been in the last two years) a party to any transaction in which
any of the persons described in Reg. Sec. 228.404(a) has or had
a direct or indirect material interest.
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Financial Statements of Elite Laboratories, Inc. and Elite Pharmaceuticals, Inc.
Fiscal Years Ending March 31, 1997 and March 31, 1996
Independent Auditor's Report
Audited Balance Sheets for Elite Laboratories, Inc.
Audited Statements of Operations for Elite Laboratories, Inc.
Audited Statements of Stockholders' Equity for Elite Laboratories, Inc.
Audited Statements of Cash Flows for Elite Laboratories, Inc.
Note to Financial Statements
Fiscal Years Ending March 31, 1996 and March 31, 1995
Independent Auditor's Report
Audited Balance Sheets for Elite Laboratories, Inc.
Audited Statements of Operations for Elite Laboratories, Inc.
Audited Statements of Stockholders' Equity for Elite Laboratories, Inc.
Audited Statements of Cash Flows for Elite Laboratories, Inc.
Notes to Financial Statements
Period from April 1, 1997 through November 30, 1997
Letter of Certified Public Accountant
Unaudited Interim Financial Statements for Elite Laboratories, Inc.
for Quarter Ended June 30, 1997.
Unaudited Interim Financial Statements for Elite Laboratories, Inc.
for Six Months Ended September 30, 1997.
Unaudited Interim Financial Unconsolidated Statements for Elite Laboratories,
Inc. for Eight Months Ended November 30, 1997.
Unaudited Interim Financial Unconsolidated Statements for Elite
Pharmaceuticals, Inc. for Eight Months Ended November 30, 1997.
INDEPENDENT AUDITOR'S REPORT
BOARD OF DIRECTORS-ELITE LABORATORIES, INC.
We have audited the accompanying balance sheets of Elite
Laboratories, Inc. (the "Company") as of March 31, 1997
and 1996, and the related statements of operations, changes
in stockholders' equity and cash flows for the years then ended.
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 audit.
We conducted our audit 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 statement. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position
of Elite Laboratories, Inc., at March 31, 1997 and 1996, and
the results of its operation and its cash flows for the years
then ended in conformity with generally accepted accounting principles.
/S/ Mark I. Gittelman
PUBLIC ACCOUNTANT GOLDMAN & GITTELMAN, P.C.
Clifton, New Jersey
June 11, 1997
<PAGE>
ELITE LABORATORIES, INC.
BALANCE SHEETS
MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS
1997 1996
_________ __________
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 90,762 $ 113,644
Contract Revenue Receivable 12,20 8,800
Prepaid Expenses and
Other Current Assets 2,155 8,106
Deferred Income Tax Benefit 5,550 700
------ ---------
Total Current Assets 110,675 131,250
Equipment, Net 34,620 69,260
Patent and Trademarks, Net 17,393 11,750
Security Deposit 9,000 9,000
Deferred Income Tax Benefit 9,250 27,000
------ ---------
Total Assets $180,938 $ 248,260
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts Payable and
Accrued Expenses $ 8,458 $ 11,041
Total Current Liabilities $ 8,458 $ 11,041
Note Payable to Related Party 100,000 100,000
Commitments and Contingencies
Stockholders' Equity:
Class A Voting Common Stock,
$.01 Par Value;
10,000,000 Shares Authorized,
4,767,600 and 4,645,314 Shares
Issued and Outstanding,
Respectively
Class B Non-voting Common
Stock, $.01 Par Value;
5,000,000 Shares Authorized,
No Shares Issued
and Outstanding 47,676 46,453
Additional Paid In Capital 1,632,972 1,438,823
Accumulated Deficit (1,608,168) (1,348,057)
---------- ----------
Total Stockholders' Equity 72,480 137,219
Total Liabilities and
Stockholders' Equity $ 180,938 $ 248,260
___________ ____________
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
<TABLE>
<CAPTION>
<S>
ELITE LABORATORIES, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1997 AND 1996
<C> <C>
1997 1996
_________ __________
Revenues:
Licensing Fees $ 160,000 $ --
Contract Research and
Development 153,000 134,165
Consulting and Test Fees 17,659 16,403
_________ __________
Total Revenues 330,659 150,568
_________ __________
Costs and Expenses:
Research and Development 377,637 318,533
General and Administrative 156,671 106,074
Depreciation and
Amortization 35,701 54,815
Interest (Income) Expense,
Net of Interest Expense
of $8,500 and $412,
Respectively 7,648 (2,814)
_________ __________
Total Expenses 577,657 476,608
_________ __________
Net (Loss) Before Income
Taxes (246,998) (326,040)
Income Tax Expense 13,113 200
_________ __________
Net (Loss) $(260,111) $ (326,240)
_________ __________
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
STATEMENTS OF STOCKHOLDER EQUITY
YEARS ENDED MARCH 31, 1997 AND 1996
<CAPTION>
Class A (Voting)
Common Stock Additional Stock Stock-
--------------- Paid-In Accum. ------------ holders
Shares Amt. Capital Deficit Shares Amount Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
3/31/95 5,211,314 $51,123 $1,663,810 $(1,021,817) 80,000 $(100,000)$563,116
Issuance
of Common
Stock 10,000 100 19,900
Retirement
of Common
Stock (45,000) (450) (89,550)
Retirement
of Treasury
Stock (80,000) (800 (99,200) (80,000) 100,000
Retirement of
Common Stock
Acquired in
Forbearance
Agreement (352,000) (3,520) (26,137)
Net(Loss)
for the Year (326,240)
-------- ------- --------- --------- -------- -------- -----
Balance
3/31/96 4,465,314 $46,453 $1,438,823 $(1,348,057) 0 0 $137,219
========= ======= ========== =========== ======= ======= ========
Issuance of
Common Stock
Warrants 122,286 1,223 194,149 195,372
Net(Loss)
for the Year (260,111)
------- ------- -------- --------- ------- -------- -------
Balance
3/31/97 4,767,600 $47,676 $1,432,972 $(1,608,168) 0 0 $72,480
========= ======= ========== =========== ======== ===== ========
</TABLE>
The accompanying notes form an integral part
of these financial statements
<PAGE>
ELITE LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
___________ _________
<S> <C> <C>
Cash Flows From Operating Activities:
Net (Loss) $ (260,111) $ (326,240)
Adjustments Necessary to
Reconcile Net (Loss) to Net Cash
Used in Operating Activities:
Depreciation and Amortization 35,701 54,815
Gain on Retirement of Common
Stock --- (29,657)
Changes in Assets and Liabilities:
Decrease in Prepaid and Other Assets 18,851
(Increase) in Contract Revenue Receivable (3,408) (6,800)
Increase (Decrease) in Accounts Payable
and Accrued Expenses (2,583) 4,310
_________ __________
Net Cash (Used in) Operating
Activities (211,550) (303,572)
_________ __________
Cash Flows From Investing Activities:
Purchase of Equipment -- (3,180)
Payments for Patent and Trademark Filing (6,704) (11,750)
Net Cash Used in Investing Activities (6,704) (14,930)
Cash Flows From Financing Activities:
Net Proceeds From Issuance of Common Stock 195,372 20,000
Payment of Principal on Capital Lease -- (4,052)
Proceeds from Related Party Note -- 100,000
Payment for Retirement of Common Stock -- (90,000)
________ _______
Net Cash Provided by Financing Activities 195,372 25,948
________ _______
Net (Decrease) in Cash and Cash
Equivalents (22,882) (298,095)
Cash and Cash Equivalents at Beginning
of Year 113,644 411,739
________ _______
Cash and Cash Equivalents at End
of Year $ 90,762 $ 113,644
========= ==========
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest $ 8,594 $ 34
Income Taxes 213 37
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ELITE LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Nature of Business
- -------------------
Elite Laboratories, Inc. (the "Company") was incorporated on
August 23, 1990 under the Laws of the State of Delaware, in
order to engage in research and development activities for the
purpose of obtaining Food and Drug Administration approval, and,
thereafter, commercially exploiting generic and new controlled-release
pharmaceutical products. The Company also engages in contract research
and development on behalf of other pharmaceutical companies.
Cash and Cash Equivalents
- -------------------------
The Company considers highly liquid short-term investments purchased
with initial maturities of three months or less to be cash equivalents.
Equipment
- -------------------
Equipment is stated at cost. Depreciation is provided on the
straight-line method based on the estimated useful lives of the
respective assets which range from five to seven years. Major repairs
or improvements are capitalized. Minor replacements and maintenance
and repairs which do not improve or extend asset lives are expensed
currently.
Upon retirement or other disposition of assets, the cost and
related accumulated depreciation are removed from the accounts
and the resulting gain or loss, if any, is recorded.
Research and Development
- ------------------------
Research and development expenditures are charged to expense
as incurred.
Patents and Trademarks
- -----------------------
Costs incurred for the application of patents and trademarks are
capitalized and amortized on the straightline method, based on an
estimated useful life of fifteen years, upon approval of the patent
and trademarks. These costs are charged to expense if the patent or
trademark is unsuccessful.
Concentration of Credit Risk
- ----------------------------
The Company derives substantially all of its revenues from contracts
with other pharmaceutical companies.
<PAGE>
ELITE LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
1. Summary of Significant Accounting Policies (Continued)
Use of Estimates
- -----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes
- -------------
Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently
due plus deferred taxes. Deferred taxes are recognized for differences
between the basis of assets and liabilities for financial statement
and income tax purposes. The differences relate primarily to
depreciable assets (use of different depreciation methods and lives
for financial statement and income tax purposes), allowance for
doubtful receivables (deductible for financial statement purposes but not
for income tax purposes), and profit on installment
sales (deferred for income tax purposes but recognized for
financial statement purposes). The deferred tax assets and
liabilities represent the future tax return consequences of those
differences which will either be taxable or deductible when the
assets and liabilities are recovered or settled. Deferred taxes
also are recognized for operating losses and tax credits that
are available to offset future taxable income.
2. Equipment
Equipment at March 31, 1997 and 1996 consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
_____ ______
Furniture, Fixtures and
Laboratory Equipment $ 203,910 $ 203,910
Equipment Under Capital Lease 73,465 73,465
277,375 277,375
Less: Accumulated Depreciation
and Amortization 242,755 208,115
_________ __________
$ 34,620 $ 69,260
_________ __________
</TABLE>
Depreciation and amortization expense as of March 31, 1997 and 1996
was $34,640 and $54,815, respectively.
<PAGE>
ELITE LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
3. Income Taxes
The provision for income taxes consists of the following components:
<TABLE>
<CAPTION>
1997 1996
_________ _________
<S> <C> <C>
Federal:
Current $ -- $ --
Deferred 9,800 92,400
Tax Benefit of Net
Operating --
Loss Carryforward -- (92,400)
_________ _________
9,800 0
State:
Current 213 200
Deferred 3,100 29,100
Tax Benefit of Net
Operating -- (29,100)
Loss Carryforward 3,313 200
_________ _________
Total Tax Expense $ 13,113 $ 200
_________ _________
</TABLE>
The Company's total deferred tax assets and deferred tax asset
valuation allowances at March 31, are as follows:
<TABLE>
1997 1996
_________ _________
<S> <C> <C>
Total Deferred
Tax Assets $ 587,000 $ 488,400
Less: Valuation
Allowance 572,200 460,700
_________ _________
Net Deferred Tax Asset $ 14,800 $ 27,700
======== =========
</TABLE>
<PAGE>
ELITE LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
3. Income Taxes (Continued)
The Company has a loss carryforward of $1,630,600 for Federal and
$1,448,900 for State tax purposes that may be offset against future
taxable income. The amounts and expiration dates are as follows:
<TABLE>
<CAPTION>
Expiration
Amount Year
____ ______ _____
<S> <C> <C>
Federal: $ 543,000 2007
437,300 2008
60,100 2010
347,200 2011
243,000 2012
__________ ____
Total $ 1,630,600
___________
State: $ 367,900 1999
437,300 2000
53,600 2002
347,100 2003
243,000 2004
___________
Total $ 1,448,900
___________
</TABLE>
The income tax provision differs from the expense that would
result from applying statutory rates to income before taxes
because deferred income taxes are based on average tax rates,
because certain expenses are not deductible for tax purposes
and because a valuation allowance had been provided to reduce
deferred tax assets to the amount that is more likely than not
to be realized.
4. Capital Stock
As per the Private Placement Memorandum ("PPM") dated August
15, 1991, the Company sold a total of 214,000 units priced at
$2.50 which consists of two (2) shares of common stock, $.01 par
value and one (1) class A warrant to purchase one (1) share of
common stock at an exercise price of $2.00 per share. Total
proceeds from the PPM amounted to $535,000. As of March 31, 1992,
the Company had subscriptions receivable of $35,750 for a total
of 14,300 units. In addition, prior to the PPM, the Company raised
approximately $402,000 through the issuance of 1,435,714 shares
of common stock.
As of March 31, 1992, the Company had Class A warrants outstanding
to purchase 199,700 common shares. The warrants were exercisable
at $2.00 per share commencing August 28, 1992 and expiring on or
before March 1, 1993. The Class A warrants could have been redeemed
by the Company at any time upon providing thirty days written
notice and for payment at the rate of $.05 per warrant.
<PAGE>
ELITE LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
4. Capital Stock (Continued)
As of March 31, 1993, the Company collected the subscriptions
receivable as of March 31, 1992 in the amount of $35,750 and
issued the related 14,300 units. The Company also raised
$49,200 through the exercise of warrants to purchase 24,600
shares of common stock, $.01 par value, at an exercise price
of $2 per share.
As of March 31, 1993, after the PPM, the Company raised $70,000
through the issuance of 35,000 shares of common stock. The
Company also received $30,000 during March 1993 for the issuance
of 15,000 shares of common stock, issued during April 1993,
through the exercise of warrants.
As of March 31,1995, the Company raised $300,000 through the
issuance of 150,000 shares of common stock and issued an option
to purchase an additional 280,000 shares at $2.50 per share,
such option expiring on April 25, 1995 without exercise.
On October, 26, 1995, the Company amended its certificate of
incorporation to authorize 5,000,000 shares of $.01 par value
Class B non-voting common stock. The original 10,000,000 shares
of the Company shall be classified as $.01 par value Class A
voting common stock.
As of March 31, 1996, the Company raised $20,000 through the
issuance of 10,000 shares of Class A voting common stock. The
Company also purchased 45,000 shares of its Class A voting
common stock from shareholders at a cost of $90,000 and retired
these shares. The 80,000 shares of Class A common stock being
held in Treasury at a cost of $100,000 were also retired.
In accordance with the Company's forbearance agreement
(see note 5) with a former employee executed on June 15, 1996,
the Company redeemed and retired 352,000 shares of its Class A
common stock originally issued to the former employee as
consideration for his acceptance to continue his employment
with the Company. These shares have been valued at $.08425
per share, which approximates the book value of these shares
currently and as originally issued, resulting in a gain of $29,657.
As of March 31, 1997, the Company raised $195,372 through the
issuance of 122,286 shares of Class A voting common stock and
122,286 Class A voting stock purchases warrants, exercisable at
$2 per share, expiring between July 24, 2001 and March 19, 2002.
5. Commitments and Contingencies
Employment Agreement:
On December 28, 1995 the Company renewed its employment agreement
(the "Agreement") with its President, dated May 23, 1991, for
a term of five (5) years with annual compensation of $165,000
in the first year of his employment, increasing to $200,000 per
annum during the next five years.
<PAGE>
ELITE LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
5. Commitments and Contingencies (Continued)
In addition to certain standard employee benefits, the
agreement provides for the following:
a) Additional incentive commissions equal to five percent
(5 %) of net profit for each fiscal year.
b) Options to purchase 500,000 shares of Class A common
voting stock of the Company, granted on January 1, 1996,
and vesting on each of the four succeeding years, at the
rate of 100,000 shares per year. The option price of these
shares begins at $1 per share and increases to $3 per share
over the next four years (see note 8).
In the event of the termination of this Agreement by the
Company, future minimum payments will consist of the present
value (based on the prime rate at the date of termination)
of the unpaid portion of the benefits.
Leases:
The Company leases its laboratory and office space in
Maywood, New Jersey under an operating lease which expires
on October 31, 1998. The leases provide for the landlord to
pay all utility costs and for increases in rent based on cost
of living formulas. Future minimum payments under these leases
at March 31, 1997 are as follows:
Fiscal Year Ending March 31,
1998 $ 63,512
1999 37,100
Total rent expense for the years ended March 31, 1997 and
1996 was $62,083 and $60,645, respectively.
Forbearance Agreement:
The Company has entered into an agreement dated June 15, 1995
with a former employee of the Company. The employee was employed
by the Company under an agreement dated September 4, 1991 which
prohibits him from disclosing certain Company confidential
information and restricts his employment involving competition
with the Company's business.
The employee resigned on November 16, 1994 and commenced
employment with a competitor of the Company.
<PAGE>
ELITE LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
5. Commitments and Contingencies (Continued)
Although the former employee is not actually performing any
research which involves the utilization of the Company's
confidential information, the forbearance agreement permits
the employee to work for the competitor in consideration for
his representations and assurances that he will not assist
his new employer in the development of any products on which
he performed development work for the Company for a period
of two years commencing November 16, 1994, and that he
will continue not to disclose any confidential information.
As additional consideration for the above, the former employee
tendered 352,000 shares of the Company's Class A common shares
to the Company at no cost (see note 4).
6. Contractual Agreements
On August 20 and November 22, 1993, the Company entered into
two separate and distinct product development agreements with
two multi-national pharmaceutical companies. The agreements
provide for the Company to develop various drug products in
return for various financial considerations.
On September 21, 1993, the Company also entered into a licensing
agreement with a pharmaceutical company. The terms of the
agreement provide the right to acquire the license to sell,
manufacture and distribute the licensed product, subject to
licensing fees and royalties.
During the year ended March 31, 1994, the Company recognized
revenues of approximately $645,000 from these agreements, with
an additional $500,000 plus royalties due if certain milestones
are achieved in the future.
On December 15, 1994, the Company entered into a product
research and development agreement with a multinational
pharmaceutical company. The agreement provides for the
Company to perform product development for three drugs
subject to financial considerations.
During the year ended March 31, 1995, the Company recognized
revenues of approximately $438,000 from these agreements.
On November 30, 1995, the Company entered into a product
research and development agreement with a multinational
pharmaceutical company which provides for the Company to
perform product development for two drugs.
During the year ended March 31, 1996, the Company recognized
revenues of $115,000 from this agreement.
On May 2, 1996, the Company entered into a research and
development agreement with a pharmaceutical company to
undertake formulation of a new oral medication.
<PAGE>
ELITE LABORATORIES, INC.
NOTES TO FINANCIAI, STATEMENTS
(Continued)
6. Contractual Agreements (continued)
In accordance with the agreement, for the year ended March 31,
1997, the Company received revenues totaling $150,000, with an
option to perform supplemental development for additional
revenues of $25,000, and $150,000, respectively, upon the
pharmaceutical company's election to proceed with commercial
sale of the product.
On November 26, 1996, the Company entered into a formulation
development agreement with yet another multinational
pharmaceutical company. The terms of the agreement provide
the right to acquire the license to sell, manufacture and
distribute the product worldwide, subject to licensing fees
and royalties.
For the year ended March 31, 1997, the Company recognized
revenue of $160,000 from this agreement with $40,000 to be
received upon completion of the formulation development.
If the pharmaceutical company exercises its option to
license the Company's product, Elite shall receive milestone
payments of up to $600,000, plus royalties, upon
commercialization of the product.
7. Stock Options:
The Company has entered into compensatory stock option
agreements with its President (see note 5), under an
employment agreement, and with certain individuals who
serve on its Board of Directors and on its advisory board.
The agreements were entered into on December 21, 1995,
January 2, 1996, April 4, 1996 and May 6, 1997 (dates of
grants) and provide the President of the Company an option
to purchase 500,000 shares of Class A voting common stock
over five years (vesting period), at exercise prices between
$1 per share and $3 per share, and also provide certain
individuals who serve on the Company's Board of Directors
and on its advisory board an option to purchase an additional
250,000 shares of Class B non-voting common shares over four
years (vesting period) at an exercise price of $1 per share.
The options expire ten years from the dates of grant or
earlier upon death or changes in appointment.
The following summarizes the stock options outstanding as of
March 31, 1997:
<TABLE>
<CAPTION>
Option Option
Dates of Class A Price Class B Price
Vesting Shares Per Share Shares Per Share
<S> <C> <C> <C> <C>
March 31, 1996 100,000 $1.00 50,000 $1.00
March 31, 1997 100,000 $1.50 55,000 $1.00
March 31, 1998 100,000 $2.00 60,000 $1.00
March 31, 1999 100,000 $2.50 65,000 $1.00
March 31, 2000 100,000 $3.00 15,000 $1.00
March 31, 2001 -- -- 5,000 $1.00
_______ ______ ______ _____
500,000 250,000
</TABLE>
<PAGE>
ELITE LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
7. Stock Options (Continued):
There were no options exercised as of March 31, 1997 and
1996 and the Company's stock price was valued to be lower
than the exercise price at the date of each grant.
As disclosed in notes 4 and 9, the Company has issued
292,286 Class A common stock purchase warrants, exercisable
at $2 and $3 per share. When considering all options and
warrants, the Company may be obligated to issue a total
of 792,286 Class A voting common shares and 250,000 Class B
nonvoting shares.
8. Related Party Note Payable:
On March 15, 1996, the Company borrowed $100,000 from a
Company stockholder subject to a loan agreement. Under the
terms of the agreement, the note bears interest only,
payable quarterly, at the rate of 8.50% per annum, and is
due and payable on March 15, 1998. The note is secured by a
guarantee from the Company and cannot be subordinated to
subsequent loans without consent of the lender.
Furthermore, if the Company raises $500,000 through the
issuance of its common stock at any time during the term
of the agreement, the lender may require the immediate
repayment of the principal.
If the principal remains unpaid on March 15, 1998
(the due date), then the lender shall have the option
to either receive payment of principal in full or convert
the amount, together with any unpaid interest, to Class A
common stock at $2 per share or a lower price, based on
sales of shares sold from March 15, 1996 through the due date.
The Company incurred interest expense of $8,500 and $378,
respectively for the years ended March 31, 1997 and 1996.
9. Subsequent Events:
a.) On May 20, 1997, the Company raised $28,000 through
the issuance of 20,000 shares of Class A voting common stock
and 20,000 Class A voting common stock purchase warrants,
exercisable at $2 per share, expiring on May 19, 2002.
b.) On May 23, 1997, the Company amended its formulation
development agreement dated November 26, 1996 extending
the option period for product licensing.
c.) One June 5, 1997, the Company borrowed $150,000 from
an individual lender subject to a promissory note. The
terms of the note include:
1. Payment in full on the earlier of June 5, 1998 or
the receipt by the Company of gross proceeds pursuant
to a private placement of its securities in the amount
of $2,400,000.
<PAGE>
ELITE LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
9. Subsequent Events:(Continued)
2. The Company agrees to sell the lender 150,000 common
stock purchase warrants, after giving effect to the Company's
proposed stock split of its common stock, exercisable during
the five year period commencing June 5, 1997, at $3 per
share. The total purchase price for the warrants will be $150.
3. Should the Company default on the note, the lender shall
have the right to convert the note into shares of the
Company's Class A common stock at a rate of $1 per share.
4. The note shall bear simple interest at the rate of six
percent (6%) with interest payable in full on June 5, 1998.
d.) On June 5, 1997 the Company signed a letter of intent
to merge with a newly formed subsidiary of a Company
registered for sale in accordance with the Securities Act of
1933. The Company will exchange its shares with the new
subsidiary on a one-for-one basis as a tax free
reorganization under Section 368 of the Internal Revenue
code. Subsequent to this proposed merger, the subsidiary
will disappear, leaving Elite as the survivor of the
merger. Elite shareholders will own approximately 90% of
the new entity.
The merger is subject to a merger agreement and related
documents. The merger agreement shall provide for the
following:
1. A private placement of a minimum of $2,400,000 and a
maximum of $6,000,000 of the Company's securities, before
the merger, consisting of 100 units at $60,000 per unit,
each unit consisting of 40,000 shares of common stock and
20,000 common stock purchase warrants. The warrants will
be exercisable during the five year period commencing at
the close of the private placement at $3 per share.
2. Within 90 days of the closing of the private placement,
the Company agrees to file a registration statement
registering the common stock and the common stock
underlying the warrants issued pursuant to the proposed
private placement.
3. The execution of a three year consulting agreement between
the Company and an investor relations consulting services
firm. The agreement shall provide for payments of up to
$15,000 per month and the issuance of up to 700,000 five
year common stock purchase warrants, after giving effect
to a Company stock split, exercisable at $3 per share.
4. It is intended that the merger will consummate no later
than July 15, 1997
<PAGE>
ELITE LABORATORIES, INC.
FINANCIAL STATEMENTS WITH
INDEPENDENT AUDITOR'S REPORT
MARCH 31, 1996 AND 1995
INDEPENDENT AUDITOR'S REPORT
BOARD OF DIRECTORS - ELITE LABORATORIES, INC.
We have audited the accompanying balance sheets of
Elite Laboratories, Inc. (the "Company") as of
March 31, 1996 and 1995, and the related statements of
operations, changes in stockholders' equity and cash
flows for the years then ended. 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 audit.
We conducted our audit 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 statement. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of Elite Laboratories, Inc., at
March 31, 1996 and 1995, and the results of its
operation and its cash flows for the years then
ended in conformity with generally accepted
accounting principles.
/S/Mark I. Gittelman
CERTIFIED PUBLIC ACCOUNTANT GOLDMAN & GITTELMAN, P.C.
Clifton, New Jersey
June 10, 1996
<PAGE>
ELITE LABORATORIES, INC.
BALANCE SHEETS
MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
-------- -------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 113,644 $ 411,739
Contract Revenue Receivable 8,800 2,000
Prepaid Expenses and Other
Current Assets 8,106 2,565
Deferred Income Tax Benefit 700 700
________ _________
Total Current Assets 131,250 417,004
Equipment (Net) 69,260 120,895
Patent 11,750 --
Security Deposit 9,000 9,000
Deferred Income Tax Benefit 27,000 27,000
________ _________
Total Assets $ 248,260 $ 573,899
========= =========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Current Liabilities:
Accounts Payable and Accrued
Expenses $ 11,041 $ 6,731
Current Portion of Capital
Lease Obligations -- 4,052
________ _________
Total Current Liabilities 11,041 10,783
_________ _________
Note Payable to Related Party 100,000 ---
_________ _________
Commitments and Contingencies
Stockholders' Equity:
Class A Voting Common Stock,
$.01 Par Value;
10,000,000 Shares Authorized,
4,645,314 and 5,112,314 Shares
Issued and Outstanding, Respectively
Class B Non-voting Common Stock,
$.01 Par Value;
5,000,000 Shares Authorized,
No Shares Issued
and Outstanding $ 46,453 $ 51,123
Additional Paid In Capital 1,438,823 1,633,810
Accumulated Deficit (1,348,057)(1,021,817)
Less: 80,000 Common
Shares Held In Treasury
At Cost --- (100,000)
__________ _________
Total Stockholders' Equity 137,219 563,116
__________ _________
Total Liabilities and
Stockholders' Equity $ 248,260 $ 573,899
========= ==========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
ELITE LABORATORIES, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
________ _________
<S> <C> <C>
Revenues:
Licensing Fees $ - $ 170,000
Contract Research and
Development 134,165 262,000
Consulting and Test Fees 16,403 8,538
________ _________
Total Revenues 150,568 440,538
________ _________
Costs and Expenses:
Research and Development 318,533 345,147
General and Administrative 106,074 100,238
Depreciation and Amortization 54,815 49,434
Interest Income, Net of
Interest Expense PF $412
and $3,763, Respectively (2,814) (1,931)
________ _________
Total Expenses 476,608 492,888
Net (Loss) Before Income
Taxes (326,040 (52,350)
Income Tax Expense 200 28,200
__________ __________
Net (Loss) $(326,240) $ (80,550)
========== =========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
<TABLE>
STATEMENTS OF STOCKHOLDER EQUITY
YEARS ENDED MARCH 31, 1997 AND 1996
<CAPTION>
Class A (Voting)
Common Stock Additional Stock Stock-
--------------- Paid-In Accum. ------------- holders
Shares Amount Capital Deficit Shares Amount Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
3/31/94 4,962,314 $49,623 $1,335,310 $(941,267) 80,000 $(100,000) $343,666
Issuance
of Common
Stock 150,000 1,500 298,500
Net (Loss)
For The Year (80,550)
Balance,
3/31/95 5,112,314 $51,123 $1,633,810 $(1,021,817) 80,000 $(100,000) $563,116
Issuance of
Common
Stock 10,000 100 19,900
Retirement
of Common
Stock (45,000) (450) (89,550)
Retirement
of Treasury
Stock (80,000) (800) (99,200) (80,000) 100,000
Retirement of
Common Stock
Acquired in
Forbearance
Agreement (352,000) (3,520) (26,137)
Net(Loss)
for the Year (326,240)
-------- ------- -------- --------- ------- ------- -------
Balance
3/31/96 4,465,314 $46,453 $1,438,823 $(1,348,057) 0 0 $137,219
========= ======= ========== =========== ======= ======= =======
</TABLE>
<PAGE>
ELITE LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
________ _________
<S> <C> <C>
Cash Flows From Operating
Activities:
Net (Loss) $ (326,240) $ (80,550)
Adjustments Necessary to Reconcile
Net Income (Loss) to Net Cash Used
in Operating Activities:
Depreciation and Amortization 54,815 49,434
Deferred Income Tax --- 28,200
Gain on Retirement of Common Stock (29,657) --
Changes in Assets and Liabilities:
(Increase) in Prepaid and Other
Current Assets (5,541) (282)
(Increase) Decrease in Contract
Revenue Receivable (6,800) 18,600
Increase (Decrease) in Accounts Payable
and Accrued Expenses 4,310 (16,834)
__________ ________
Net Cash (Used in) Operating
Activities (309,113) (1,432)
Cash Flows From Investing Activities:
Purchase of Equipment (3,180) (51,535)
Payments for Patent Filing (11,750) --
__________ ________
Net Cash Used in Investing
Activities (14,930) (51,535)
Cash Flows From Financing Activities:
Net Proceeds From Issuance of
Common Stock 20,000 300,000
Payment of Note Payable --- (1,025)
Payment of Principal on Capital Lease (4,052) (9,086)
Proceeds from Related Party Note 100,000 --
Payment for Retirement of Common Stock (90,000) --
__________ ________
Net Cash Provided by Financing
Activities 25,948 289,889
Net Increase (Decrease) in Cash
and Cash Equivalents (298,095) 236,922
Cash and Cash Equivalents at Beginning
of Yea 411,739 174,817
__________ ________
Cash and Cash Equivalents at End
of Year $ 113,644 $ 411,739
========= ==========
Supplemental Disclosures of Cash Flow information:
Cash Paid During the Year For:
Interest $ 34 $ 3,763
Income Taxes 37 25
Non-Cash Investing Activities:
Acquisition of Equipment -- 33,465
Cash Payment -- --
_________ ________
Note Payable Assumed $ --- $ 33,465
=========== =========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
ELITE LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Nature of Business
- -------------------
Elite Laboratories, Inc. (the "Company") was incorporated
on August 23, 1990 under the Laws of the State of Delaware,
in order to engage in research and development activities
for the purpose of obtaining Food and Drug Administration
approval, and, thereafter, commercially exploiting generic
and new controlled-release pharmaceutical products. The
Company also engages in contract research and development
on behalf of other pharmaceutical companies.
Cash and Cash Equivalents
- ----------------------------
The Company considers highly liquid short-term investments
purchased with initial maturities of three months or less to
be cash equivalents.
Equipment
- ---------
Equipment is stated at cost. Depreciation is provided on
the straight-line method based on the estimated useful
lives of the respective assets which range from five to
seven years. Major repairs or improvements are capitalized.
Minor replacements and maintenance and repairs which do not
improve or extend asset lives are expensed currently.
Upon retirement or other disposition of assets, the cost and
related accumulated depreciation are removed from the accounts
and the resulting gain or loss, if any, is recorded.
Research and Development
- -------------------------
Research and development expenditures are charged to expense
as incurred.
Patents
- --------
Costs incurred for the application of patents are capitalized
and amortized on the straight-line method, based on an
estimated useful life of seventeen years, upon approval
of the patent. These costs are charged to expense if the
patent is unsuccessful.
Concentration of Credit Risk
- ------------------------------
The Company derives substantially all of its revenues from
contracts with other pharmaceutical companies.
The Company also maintains cash accounts in various banks.
The amount on deposit in one bank exceeds the $100,000
federally insured limit.
<PAGE>
ELITE LABORATORIES INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
1. Summary of Significant Accounting Policies (Continued)
Income Taxes
- -------------
Income taxes are provided for the tax effects of
transactions reported in the financial statements and
consist of taxes currently due plus deferred taxes.
Deferred taxes are recognized for differences between the
basis of assets and liabilities for financial statement
and income tax purposes. The differences relate primarily
to depreciable assets (use of different depreciation
methods and lives for financial statement and income tax
purposes) allowance for doubtful receivables (deductible
for financial statement purposes but not for income tax
purposes) and profit on installment sales (deferred for
income tax purposes but recognized for financial statement
purposes). The deferred tax assets and liabilities represent
the future tax return consequences of those differences
which will either be taxable or deductible when the assets
and liabilities are recovered or settled. Deferred taxes
also are recognized for operating losses and tax credits
that are available to offset future taxable income.
2. Equipment
Equipment at March 31, 1996 and 1995 consists of the following:
<TABLE>
<CAPTION>
1996 1995
__________ ________
<S>
Furniture Fixtures and Laboratory
Equipment $ 203,910 $ 200,730
Equipment Under Capital Lease 73,465 73,465
_________ _________
277,375 274,195
Less: Accumulated Depreciation
and Amortization 208,115 153,300
_________ _________
$ 69,260 $ 120,895
Depreciation and amortization expense as of
March 31,1996 and 1995 consisted of $54,815 and
$49,434, respectively.
<PAGE>
ELITE LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
3. Income Taxes
The provision for income taxes consists of the following
components:
1996 1995
____ _____
Federal:
Current $ -- $ --
Deferred 92,400 37,700
Tax Benefit of Net Operating
Loss Carryforward (92,400)(16,800)
_______ ________
__ 20,900
_______ ________
State:
Current 200 --
Deferred 29,100 8,700
Tax Benefit of Net Operating
Loss Carryforward (29,100) (1,400)
_______ ________
200 7,300
_______ ________
Total Tax Expense $ 200 $ 28,200
=========== =========
The Company's total deferred tax assets and deferred tax
asset valuation allowances at March 31, are as follows:
1996 1995
_______ ________
Total Deferred Tax Assets $ 488,400 $ 366,900
Less: Valuation Allowance 460,700 339,200
________ ________
Net Deferred Tax Asset $ 27,700 $ 27,700
======== ========
<PAGE>
ELITE LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
3. Income Taxes (Continued)
The Company has a loss carryforward of $1,364,400 for
Federal and $1,182,800 for State tax purposes that may
be offset against future taxable income. The amounts and
expiration dates are as follows:
Expiration
Amount Year
______ ___________
Federal: $ 543,000 2007
437,300 2008
60,100 2010
324,000 2011
__________
Total $ 1,364,400
___________
State: $ 367,900 1999
437,300 2000
53,600 2002
324,000 2003
___________
Total $ 1,182,800
___________
The income tax provision differs from the expense that
would result from applying statutory rates to income
before taxes because deferred income taxes are based on
average tax rates, because certain expenses are not
deductible for tax purposes and because a validation
allowance had been provided to reduce deferred tax assets
to the amount that is more likely than not to be realized.
4. Capital Stock
As per the Private Placement Memorandum ("PPM") dated
August 15, 1991, the Company sold a total of 214,000
units priced at $2.50 which consists of two (2) shares
of common stock, $.01 par value and one (1) class A
warrant to purchase one (1) share of common stock at
an exercise price of $2.00 per share. Total proceeds from
the PPM amounted to $535,000. As of March 31, 1992, the
Company had subscriptions receivable of $35,750 for a
total of 14,300 units. In addition, prior to the PPM,
the Company raised approximately $402,000 through the
issuance of 1,435,714 shares of common stock.
As of March 31, 1992, the Company had Class A warrants
outstanding to purchase 199,700 common shares. The
warrants were exercisable at $2.00 per share commencing
August 28, 1992 and expiring on or before March 1, 1993.
The Class A warrants could have been redeemed by the
Company at any time upon providing thirty days written
notice and for payment at the rate of $.05 per warrant.
As of March 31, 1993, the Company collected the
subscriptions receivable as of March 31, 1992 in the
amount of $35,750 and issued the related 14,300 units.
The Company also raised $49,200 through the exercise
of warrants to purchase 24,600 shares of common stock,
$.01 par value, at an exercise price of $2.00 per share.
<PAGE>
ELITE LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
4. Capital Stock (Continued)
As of March 31, 1993, after the PPM, the Company raised
$70,000 through the issuance of 35,000 shares of common
stock. The Company also received $30,000 during March 1993
for the issuance of 15,000 shares of common stock, issued
during April 1993, through the exercise of warrants.
As of March 31,1995, the Company raised $300,000 through
the issuance of 150,000 shares of common stock and issued
an option to purchase an additional 280,000 shares at
$2.50 per share, such option expiring on April 25, 1995
without exercise.
On October 26, 1995, the Company amended its certificate
of incorporation to authorize 5,000,000 shares of $.01
par value Class B non-voting common stock. The original
10,000,000 shares of the Company shall be classified as
$.01 par value Class A voting common stock.
As of March 31, 1996, the Company raised $20,000 through
the issuance of 10,000 shares of Class A voting common
stock. The Company also purchased 45,000 shares of its
Class A voting common stock from shareholders at a cost
of $90,000 and retired these shares. The 80,000 shares
of Class A common stock being held in Treasury at a cost
of $100,000 were also retired.
In accordance with the Company's forbearance agreement
(see note 5) with a former employee executed on
June 15, 1996, the Company redeemed and retired
352,000 shares of its Class A common stock originally issued
to the former employee as consideration for his acceptance
to continue his employment with the Company. These
shares have been valued at $.08425 per share, which
approximates the book value of these shares currently
and as originally issued, resulting in a gain of $29,657.
5. Commitments and Contingencies
Employment Agreement:
- ----------------------
On December 28, 1995 the Company renewed its employment
agreement (the "Agreement") with its President,
dated May 23, 1991, for a term of five (5) years with
annual compensation of $165,000 in the first year of his
employment, increasing to $200,000 per annum during the
next five years.
In addition to certain standard employee benefits, the
agreement provides for the following:
a) Additional incentive commissions equal to five percent
(5%) of net profit for each fiscal year.
b) Options to purchase 500,000 shares of Class A common
voting stock of the Company, granted on January 1, 1996,
and vesting on each of the four succeeding years, at the
rate of 100,000 shares per year. The option price of
these shares begins at $ l per share and increases to
$3.00 per share over the next four years (see note 8).
In the event of the termination of this Agreement by the
Company, fixture minimum payments will consist of the
present valise (based on the prime rate at the date of
termination) of the unpaid portion of the benefits.
<PAGE>
ELITE LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
5. Commitments and Contingencies (Continued)
Leases:
- -------
The Company leases its laboratory and office space in
Maywood, New Jersey under an operating lease which expires
on October 31, 1998. The leases provide for the landlord to
pay all utility costs and for increases in rent based on
cost of living formulas. Future minimum payments under
these leases at March 31, 1996 are as follows:
Fiscal Year Ending March 31,
1997 $ 62,403
1998 63,600
1999 37,100
Total rent expense for the years ended March 31, 1996
and 1995 was $60,645 and $57,200, respectively.
Forbearance Agreement:
- ---------------------
The Company has entered into an agreement dated
June 15, 1995 with a fonder employee of the Company.
The employee was employed by the Company under an
agreement dated September 4, 1991 which prohibits
him from disclosing certain Company confidential
information and restricting his employment
involving competition with the Company's business.
The employee resigned on November 16, 1994 and
commenced employment with a competitor of the Company.
Although the former employee is not actually
performing any research which involves the
utilization of the Company's confidential
information, the forbearance agreement permits
the employee to work for the competitor in
consideration for his representations and
assurances that he will not assist his new
employer in the development of any products on
which he performed development work for the
Company for a period of two years commencing
November 16, 1994, and that he will continue
not to disclose any confidential information.
As additional consideration for the above, the
former employee tendered 352,000 shares of the
Company's Class A common shares to the Company
at no cost (see note 4).
6. Contractual Agreements
On August 20 and November 22, 1993, the Company
entered into two separate and distinct product
development agreements with two multi-national
pharmaceutical companies. The agreements provide
for the Company to develop various drug products
in return for various financial considerations.
<PAGE>
ELITE LABORATORIES INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
6. Contractual Agreements (Continued)
On September 21, 1993 the Company also entered
into a licensing agreement with a pharmaceutical
company. The terms of the agreement provide the
right to acquire the license to sell, manufacture
and distribute the licensed product subject to
licensing fees and royalties.
During the year ended March 31,1994, the Company
recognized revenues of approximately $645,000 from
these agreements with an additional $500,000 plus
royalties due if certain milestones are achieved
in the future.
On December 15, 1994, the Company entered into a product
research and development agreement with a multinational
pharmaceutical company. The agreement provides for the
Company to perform product development for three drugs
subject to financial considerations.
During the year ended March 31, 1995, the Company recognized
revenues of approximately $438,000 from these agreements.
On November 30, 1995, the Company entered into a product
research and development agreement with a multinational
pharmaceutical company which provides for the Company to
perform product development for two drugs.
During the year ended March 31, 1996, the Company recognized
revenues of $115,000 from this agreement.
7. Stock Options:
The Company has entered into compensatory stock option
agreements with its President (see note 5) under an
employment agreement and with certain individuals who
serve on its Board of Directors and on its advisory board.
The agreements were entered into on December 21, 1995,
January 2, 1996 and April 4, 1996 (dates of grants) and
provide the President of the Company an option to purchase
500,000 shares of Class A voting common stock over five
years (vesting period) at exercise prices between $1.00
per share and $3.00 per share and also provide certain
individuals who serve on the Company's Board of Directors
and on its advisory board an option to purchase an
additional 250,000 shares of Class B non-voting common
shares over four years (vesting period) at an exercise
price of $1.00 per share.
The options expire ten years from the dates of grant or
earlier upon death or changes in appointment.
<PAGE>
ELITE LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
7. Stock Options: (Continued)
The following summarizes the stock options outstanding
as of March 31, 1996:
<CAPTION>
Dates of Vesting Option Option
Within the Class A Price Class B Price
Years Ending Shares Per Share Shares Per Share
____________ _______ ________ ______ _______
<S> <C> <C> <C> <C>
March 31, 1996 100,000 $1.00 50,000 $1.00
March 31, 1997 100,000 $1.50 55,000 $1.00
March 31, 1998 100,000 $2.00 65,000 $1.00
March 31, 1999 100,000 $2.50 65,000 $1.00
March 31, 2000 100,000 $3.00 15,000 $1.00
_______ _______
500,000 250,000
</TABLE>
There were no options exercised as of March 31, 1996
and the Company's stock price was valued to be lower
than the exercise price at the date of each grant.
8. Related Party Note Payable:
On March 15, 1996, the Company borrowed $100,000
from a Company stockholder subject to a loan agreement.
Under the terms of the agreement, the note bears
interest only, payable quarterly, at the rate of
8.50% per annum, and is due and payable on
March 15, 1998. The note is secured by a guarantee
from the Company and cannot be subordinated to
subsequent loans without consent of the lender.
Furthermore, if the Company raises $500,000 through
the issuance of its common stock at any time during
the term of the agreement, the lender may require the
immediate repayment of the principal.
If the principal remains unpaid on March 15, 1998
(the due date), then the lender shall have the option
to either receive payment of principal in full or
convert the amount, together with any unpaid interest,
to Class A common stock at $2.00 per share or a
lower price, based on sales of shares sold from
March 15, 1996 through the due date.
9. Subsequent Events:
On May 2, 1996, the Company entered into a research
and development agreement with a pharmaceutical company
to undertake formulation of the new oral medication.
In accordance with the agreement, the Company will
receive revenues, upon obtaining certain milestones,
totaling $150,000, with an option to perform supplemental
development for additional revenues of $25,000, and
$150,000 upon the pharmaceutical company's election
to proceed with commercial sale of the product.
<PAGE>
GOLDMAN & GITTELMAN, P.C.
ACCOUNTANTS AND AUDITORS
A PROFESSIONAL CORPORATION
(201) 778 8885
(212) 477 3555
FAX (201) 778-0140
ELITE LABORATORIES. INC.
We have compiled the accompanying statement of assets,
liabilities and stockholders' equity arising from the
cash transactions of ELITE LABORATORIES, INC. as of
June 30, 1997, and the related statement of revenues
and expenses paid for the three months then ended,
in accordance with Statements on Standards for
Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
The financial statements have been prepared on the
cash basis of accounting, which is a comprehensive
basis of accounting other than generally accepted
accounting principles.
A compilation is limited to presenting in the form
of financial statements information that is the
representation of management. We have not audited
or reviewed the accompanying financial statements,
and accordingly, do not express an opinion or any
other form of assurance on them.
Management has elected to omit substantially all
of the informative disclosures ordinarily included
in financial statements. If the omitted disclosures
were included in the financial statements, they might
influence the user's conclusions about the Company's
assets, liabilities, equity, revenue and expenses.
Accordingly, these financial statements are not designed
for those who are not informed about such matters.
/s/ GOLDMAN & GITTELMAN, P.C.
GOLDMAN & GITTELMAN, P.C.
Clifton, New Jersey
July 23, 1997
ELITE LABORATORIES, INC.
Balance Sheet
June 30, 1997
ASSETS
Current Assets
Cash-Checking $ 97,534
Cash-Money Market(United) 3,705
Cash-Payroll Act. 12,993
Cash-Petty 98
Cash-Money Market(Midlan) 2,774
Accounts Receivable 12,208
Prepaid Insurance 691
Other Prepaid Expenses 316
Prepaid State Corp. Tax 100
Loan Rec.-Glenroy Brooks 250
Deferred NJ Income Tax Benefit 1,350
Deferred Federal Income Tax Benefit 4,200
_______
Total Current Assets 136,219
_______
Propertv & Equipment
Office Equipment 7,591
Laboratory Equipment 196,319
Equip. -Cap. Lease Obliga. 73,465
Accum. Depr.-Various -242,755
________
Total Property & Equipment 34,620
_______
Other Assets
Security Deposits-Rent 9,000
Deferred Federal Income Tax Benefit 7,000
Deferred NJ Income Tax Benefit 2,250
Patents and Trademarks, Net 17,393
_________
Total Other Assets 35,643
_________
Total Assets $ 206,482
=========
See Accountants Compilation Report
<PAGE>
ELITE LABORATORIES, INC.
Balance Sheet
June 30, 1997
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accrued Expenses 4,434
Belson-Loan Payable 150,000
_______
Total Current Liabilities 154,434
_______
Other Liabilities
Bridge Loan-de Neufville 100,000
_______
Total Other Liabilities 100,000
_______
Total Liabilities 254,434
Equity
Common Stock 47,876
Additional Pd in Capital 1,660,772
Accumulated Deficit -1,756,600
_______
Total Equity -47,952
_______
Total Liabilities and
Stockholders' Equity $ 206,482
=========
See Accountants Compilation Report
<PAGE>
Blite Laboratories, Inc.
Comparison of Monthly Operating Expenses to Budget
One Month Ended June 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Variance
Actual Budget Unfavorable
(Favorable)
______ ______ ___________
Revenues
Interest Income 6 1,667 -1,661
_____ ______ __________
Other Income 186 0 186
_____ ______ __________
Total Revenues 192 1,667 -1,475
Expenses
Officers Wages 30,000 12,500 17,500
Office Wages 2,333 2,500 -167
Lab Wages 7,428 8,333 -905
Futa Expense 13 41 -28
Fica Expense 1,517 1,250 267
SUI/SDI Expense 182 250 -68
Accounting Fees 409 833 -424
Legal Fees 18,300 4,167 14,133
Consulting Fees 0 833 -833
Lab Cleaning (Gladstone) 43 417 -374
Advertising & Promotion 1,380 1,250 130
Medical Ins. 1,301 1,667 -366
Life Insurance 256 833 -577
Other Insurance 314 833 -519
Telephone & Fax 605 417 188
Postage 209 167 42
Repairs & Maintenance 1,622 1,000 622
Rent 5,236 5,000 236
Petty Cash Expense 60 83 -23
Travel Expense 1,565 833 732
Entertainment 63 416 -353
Depreciation & Amort. 0 4,167 -4,167
Membership & Dues 0 42 -42
Subscriptions 790 417 373
Bank Charges 10 0 10
Interest Expense
Capital Leases 0 83 -83
Auto Expense 589 0 589
Meetings & Seminars 1,140 250 890
Raw Materials 497 1,667 -1,170
Lab Supplies 2,856 1,667 1,189
Office Expense 332 667 -335
Licenses & Fees 194 0 194
State Corp. Tax 200 0 200
FDA Regulatory 0 83 -83
Misc Expense 0 417 -417
Hazardous Waste Removal 0 417 -417
Service Contract-copier 78 0 78
Testing Fees 0 1,667 -1,667
Marketing/commissions 0 2,083 -2,083
Payroll Preparation 206 0 206
______ _______ _______
Total Expenses 79,728 57,250 22,478
======= ======= =======
Net Income (Loss) $-79,536 $-55,583 $-23,953
</TABLE>
See Accountants Compilation Report
<PAGE>
ELITE LABORATORIES, INC.
Comparison of Year to Date Operating Expenses to Budget
For the Three Months Ended June 30, 1997
<TABLE>
<CAPTION>
<S>
<C> <C> <C>
Three Months Three Months Variance
June 30, 1997 June 30, 1997 Unfavorable
Actual Budget (Favorable) ____________ ___________ ___________
Revenues
Interest Income 18 5,001 - 4,983
Other Income 4,719 0 4,719
______ ______ ______
Total Revenues 4,737 5,001 -264
______ ______ ______
Expenses
Officers Wages 45,000 37,500 7,500
Office Wages 11,673 7,500 4,173
Lab Wages 17,108 24,999 -7,891
Fica Expense 4,119 3,750 369
Futa Expense 72 123 -51
SUI/SDI Expense 572 750 -178
Accounting Fees 409 2,499 -2,090
Legal Fees 20,877 12,501 8,376
Consulting Fees 0 2,499 -2,499
Lab Cleaning (Gladstone 43 1,251 -1,208
Advertising & Promotion 5,762 3,750 2,012
Medical Ins. 3,782 5,001 -1,219
Life Insurance 768 2,499 -1,731
Other Insurance 903 2,499 -1,596
Telephone & Fax 1,531 1,251 280
Postage 607 501 106
Repairs & Maintenance 2,417 3,000 -583
Hazardous Waste Removal 893 1,251 -358
Rent 20,962 15,000 5,962
Petty Cash Expense 143 249 -106
Travel Expense 2,576 2,499 77
Entertainment 120 1,248 -1,128
Depreciation & Amort. 0 12,501 -12,501
Membership & Dues 0 126 -126
Subscriptions 1,902 1,251 651
Bank Charges -58 0 -59
Interest Expense-
Capital Leases 0 249 -249
Auto Expense 1,915 0 1,915
Meetings & Seminars 2,140 750 1,390
Raw Materials 657 5,001 -4,344
Lab supplies 4,344 5,001 -657
Office Expense 1,014 2,001 -987
Licenses & Fees 194 0 194
State Corp. Tax 200 0 200
FDA Regulatory 0 249 -249
Misc Expense 0 1,251 -1,251
Service Contract-copier 236 0 236
Testing Fees 0 5,001 -5,001
Marketing/commissions 0 6,249 -6,249
Payroll Preparation 289 0 289
________ ________ ________
Total Expenses 153,170 171,750 -18,580
________ ________ ________
Net Income (Loss) $-148,433 $-166,749 $-18,316
========== ========== =========
</TABLE>
See Accountants Compilation Report
<PAGE>
ELITE LABORATORIES. INC.
We have compiled the accompanying statement of assets,
liabilities and stockholders' equity arising from the cash
transactions of ELITE LABORATORIES INC. as of September 30,
1997, and the related statement of revenues and expenses
paid for the six months then ended, in accordance with
Statements on Standards for accounting and Review Services
issued by the American Institute of Certified Public
Accountants. The financial statements have been prepared
on the cash basis of accounting, which is a comprehensive
basis of accounting other than generally accepted accounting
principles.
A compilation is limited to presenting in the form of
financial statements information that is the representation
of management. We have not audited or reviewed the
accompanying financial statements, and accordingly, do not
express an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the
informative disclosures ordinarily included in financial
statements. If the omitted disclosures were included in
the financial statements, they might influence the user's
conclusions about the Company's assets, liabilities,
equity, revenue and expenses. Accordingly, these
financial statements are not designed for those who are
not informed about such matters.
/S/ GOLDMAN & GITTELMAN, P.C.
GOLDMAN & GITTELMAN, P.C.
Clifton, New Jersey
October 22, 1997
<PAGE>
ELITE LABORATORIES, INC.
Balance Sheet
September 30, 1997
ASSETS
Current Assets
Cash-Checking $ 54,012
Cash-Money Market(United) 5,707
Cash-Payroll Act. 6,539
Cash-Petty 113
Cash-Money Market(Midlan) 2,774
Accounts Receivable 8,000
Prepaid Insurance 292
Other Prepaid Expenses 79
Prepaid State Corp. Tax 100
Deferred NJ Income Tax
Benefit 1,350
Deferred Federal Income Tax
Benefit 4,200
________
Total Current Assets 83,166
________
Property & Equipment
Office Equipment 7,591
Laboratory Equipment 196,319
Equip. -Cap. Lease Obliga. 73,465
Accum. Depr.-Various -242,755
________
Total Property & Equipment 34,620
________
Other Assets
Security Deposits-Rent 9,000
Deferred Federal Income Tax
Benefit 7,000
Deferred NJ Income Tax
Benefit 2,250
Patents and Trademarks, Net 18,781
________
Total Other Assets 37,031
________
Total Assets $ 154,817
=========
See Accountants Compilation Report
<PAGE>
ELITE LABORATORIES, INC.
Balance Sheet
September 30, 1997
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Belson-Loan Payable 150,000
_________
Total Current Liabilities 150,000
_________
Other Liabilities
Bridge Loan-de Neufville 100,000
_________
Total Other Liabilities 100,000
_________
Total Liabilities 250,000
_________
Equity
Common Stock 47,876
Additional Pd in Capital 1,660,772
Accumulated Deficit -1,803,831
__________
Total Equity -95,183
__________
Total Liabilties and
Stockholders' Equity $ 154,817
=========
See Accountants Compilation Report
<PAGE>
ELITE LABORATORIES, INC.
Comparison of Monthly Operating Expenses to Budget
One Month dated September 30, 1997
<TABLE>
<CAPTION>
Variance
Actual Budget Unfavorable
(Favorable)
______ _______ ___________
<S> <C> <C> <C>
Revenues
Revenues-Licensing Fees $ 0 $133,333 $-133,333
Contract R&D Revenue 0 93,333 -93,333
Interest Income 129 1,667 -1,538
Other Income 203 0 203
_________ ________ __________
Total Revenues 332 28,333 -228,001
_________ ________ __________
Expenses
Officers Wage s 15,000 12,500 2,500
Office Wages 1,888 2,500 -612
Lab Wages 7,109 8,333 -1,224
Futa Expense 19 41 -22
Fica Expense 906 1,250 -344
SUI/SDI Expense 99 250 -151
Accounting Fees 300 833 -533
Legal Fees 0 4,167 -4,167
Consulting Fees 0 833 -833
Lab Cleaning (Gladstone) 0 417 -417
Advertising & Promotion 535 1,250 -715
Medical Ins. 120 1,667 -1,547
Life Insurance 0 833 -833
Other Insurance 5,931 833 5,098
Telephone & Fax 871 417 454
Postage 362 167 195
Repairs & Maintenance 0 1,000 -1,000
Rent 5,236 5,000 236
Petty Cash Expense 47 83 -36
Travel Expense 15 833 -818
Entertainment 25 416 -391
Depreciation & Amort. 0 4,167 -4,167
Membership & Dues 20 42 -22
Subscriptions 272 417 -145
Interest Expense
Capital Leases 0 83 -83
Auto Expense 539 0 539
Meetings & Seminars 25 250 -225
Raw Materials 570 1,667 -1,097
Lab Supplies 211 1,667 -1,456
Office Expense 37 667 -530
FDA Regulatory 0 83 -83
Misc Expense 0 417 -417
</TABLE>
See Accountants Compilation Report
<PAGE>
Elite Laboratories, Inc.
Comparison of Monthly Operating Expenses to Budget
One Month Ended September 30, 1997
Continued
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Variance
Actual Budget Unfavorable
(Favorable)
______ _______ ___________
Hazardous Waste Removal 0 417 -417
Service Contract-copier 1,026 0 1,026
Testing Fees 0 1,667 -1,667
Marketing/commissions 0 2,083 -2,083
Payroll Preparation 166 0 166
______ _______ __________
Total Expenses 41,429 57,250 -15,821
______ _______ _________
Net Income (Loss) $-41,097 $171,083 $-212,180
======== ======== ==========
</TABLE>
See Accountants Compilation Report
<PAGE>
ELITE LABORATORIES, INC.
Comparison of Year to Date Operating Expenses to Budget
For the Six Months Ended September 30, 1997
<TABLE>
<CAPTION>
<S>
<C> <C> <C>
Six Months Six Months Variance
September 30, 1997 September 30, 1997 Unfavorable
Actual Budget (Favorable)
_________________ _________________ ___________
Revenues
Revenues-
Licensing Fees $100,000 $133,333 $-33,333
Contract R&D Revenue 0 93,333 -93,333
Interest Income 160 10,002 -9,842
Other Income 1,731 0 1,731
_________ ________ _________
Total Revenues 101,891 236,668 -134,777
_________ _______ _________
Expenses
Officers Wages 90,000 75,000 15,000
Office Wages 16,934 15,000 1,934
Lab Wages 40,064 49,998 -9,934
Fica Expense 6,930 7,500 -570
Futa Expense 136 246 -110
SUI/SDI Expense 935 1,500 -565
Accounting Fees 2,251 4,998 -2,747
Legal Fees 21,001 25,002 -4,001
Consulting Fees 0 4,998 -4,998
Lab Cleaning (Gladstone) 43 2,502 -2,459
Advertising & Promotion 13,557 7,500 6,057
Medical Ins. 6,503 10,002 -3,499
Life Insurance 6,058 4,998 1,060
Other Insurance 7,191 4,998 2,193
Telephone & Fax 3,375 2,502 873
Postage 1,320 1,002 318
Repairs & Maintenance 3,389 6,000 -2,611
Hazardous Waste Removal 893 2,502 -1,609
Rent 36,670 30,000 6,670
Petty Cash Expense 314 498 -184
Travel Expense 3,592 4,998 -1,406
Entertainment 328 2,496 -2,168
Depreciation & Amort. 0 25,002 -25,002
Membership & Dues 20 252 -232
Subscriptions 3,830 2,502 1,328
Interest-De Neufville 1,865 0 1,865
Bank Charges -38 0 -38
Interest Expense-
Capital Leases 0 498 -498
Auto Expense 3,963 0 3,963
Meetings & Seminars 3,465 1,500 1,965
Hiring Expenses 253 0 253
Raw Materials 2,109 10,002 -7,893
Lab Supplies 6,118 10,002 -3,884
Office Expense 2,118 4,002 -1,884
Licenses & Fees 284 0 284
State Corp. Tax 200 0 200
FDA Regulatory 0 498 -498
</TABLE>
See Accountants Compilation Report
<PAGE>
ELITE LABORATORIES, INC.
Comparison of Year to Date Operating Expenses to Budget
For the Six Months Ended September 30, 1997
Continued
<TABLE>
<CAPTION>
Six Months Six Months Variance
September 30, 1997 September 30, 1997 Unfavorable
Actual Budget (Favorable)
_________________ _________________ ___________
<S> <C>M <C> <C>
Misc Expense 0 2,502 -2,502
Service Contract-copier 1,341 0 1,341
Testing Fees 0 10,002 -10,002
Marketing/commissions 0 12,498 -12,498
Payroll Preparation 543 0 543
Private Placement Fees 10,000 0 10,000
________ _________________ __________
Total Expenses 297,555 343,500 -45,945
________ _________________ __________
Net Income (Loss) $-195,664 $-106,832 $ -88,832
========== ===---======== ==========
</TABLE>
See Accountants Compilation Report
<PAGE>
ELITE LABORATORIES, INC.
We have compiled the accompanying statement of assets,
liabilities and stockholders' equity arising from the
cash transactions of ELITE LABORATORIES, INC. as of
November 30, 1997, and the related statement of revenues
and expenses paid for the eight months then ended, in
accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of
Certified Public Accountants. The financial statements
have been prepared on the cash basis of accounting, which
is a comprehensive basis of accounting other than generally
accepted accounting principles.
A compilation is limited to presenting in the form of
financial statements information that is the representation
of management. We have not audited or reviewed the
accompanying financial statements, and accordingly, do
not express an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the
informative disclosures ordinarily included in financial
statements. If the omitted disclosures were included in the
financial statements, they might influence the user's
conclusions about the Company's assets, liabilities, equity,
revenue and expenses. Accordingly, these financial statements
are not designed for those who are not informed about such matters.
/S/ GOLDMAN & GITTELMAN, P.C.
GOLDMAN & GITTELMAN, P.C.
Clifton, New Jersey
January 5, 1998
<PAGE>
ELITE LABORATORIES, INC.
Balance Sheet
November 30, 1997
ASSETS
Current Assets
Cash-Checking $ 238,749
Cash-Money Market(United) 30,751
Cash-Payroll Act. 51,888
Cash-Petty 306
Cash-Money Market(Midlan) 2,774
Accounts Receivable 8,000
Prepaid Insurance 208
Prepaid State Corp. Tax 100
Deferred NJ Income Tax Benefit 1,350
Deferred Federal Income
Tax Benefit 4,200
_______
Total Current Assets 338,326
_______
Property & Equipment
Office Equipment 7,591
Laboratory Equipment 196,319
Equip. -Cap. Lease Obliga. 73,465
Accum. Depr.-Various -242,755
_________
Total Property & Equipment 34,620
_________
Other Assets
Security Deposits-Rent 9,000
Deferred Federal Income
Tax Benefit 7,000
Deferred NJ Income Tax Benefit 2,250
Patents and Trademarks, Net 19,928
_________
Total Other Assets 38,178
_________
Total Assets $ 411,124
=========
See Accountants Compilation Report
<PAGE>
ELITE LABORATORIES, INC.
Balance Sheet
November 30, 1997
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Due to Pharmaceuticals 600,000
__________
Total Current Liabilities 600,000
__________
Other Liabilities
__________
Total Other Liabilities 0
__________
Total Liabilities 600,000
__________
Equity
Common Stock 47,876
Additional Pd in Capital 1,660,772
Accumulated Deficit -1,897,524
__________
Total Equity -188,876
__________
Total Liabilties and
Stockholders' Equity $ 411,124
==========
See Accountants Compilation Report .
<PAGE>
ELITE LABORATORIES, INC.
Comparison of Monthly Operating Expenses to Budget
One Month Ended November 30, 1997
<TABLE>
<CAPTION>
Variance
Actual Budget Unfavorable
(Favorable)
______ _______ ___________
<S> <C> <C> <C>
Revenues
Interest Income 35 1,667 -1,632
______ _______ __________
Total Revenues 35 1,667 -1,632
______ _______ __________
Expenses
Officers Wages 15,000 12,500 2,500
Office Wages 3,583 2,500 1,083
Lab Wages 8,948 8,333 615
Futa Expense 26 41 -15
Fica Expense 1,176 1,250 -74
SUI/SDI Expense 93 250 -157
Accounting Fees 300 833 -533
Legal Fees 0 4,167 -4,167
Consulting Fees 0 833 -833
Lab Cleaning (Gladstone) 0 417 -417
Advertising & Promotion 2,559 1,250 1,309
Medical Ins. 1,152 1,667 -515
Life Insurance 283 833 -550
Other Insurance 42 833 -791
Telephone & Fax 47 417 -370
Postage 223 167 56
Repairs & Maintenance 0 1,000 -1,000
Rent 5,236 5,000 236
Petty Cash Expense 78 83 -5
Travel Expense 104 833 -729
Entertainment 19 416 -397
Depreciation & Amort. 0 4,167 -4,167
Membership & Dues 0 42 -42
Subscriptions 565 417 148
Interest Expense-Belson 8,091 0 8,091
Interest Expense Capital
Lease 0 83 -83
Auto Expense 11 0 11
Meetings & Seminars 94 250 -156
Raw Materials 1,800 1,667 133
Lab Supplies 240 1,667 -1,427
Office Expense 3,039 667 2,372
FDA Regulatory 0 83 -83
Misc Expense 0 417 -417
</TABLE>
See Accountants Compilation Report
<PAGE>
Elite Laboratories, Inc.
Comparison of Monthly Operating Expenses to Budget
One Month Ended November 30, 1997
Continued
<TABLE>
<CAPTION>
Variance
Actual Budget Unfavorable
(Favorable)
______ _______ ___________
<S> <C> <C> <C>
Lab Maintenance 637 0 637
Hazardous Waste Removal 0 417 -417
Testing Fees 0 1,667 -1,667
Marketing/commissions 0 2,083 -2,083
Payroll Preparation 85 0 85
_____ ______ _______
Total Expenses 53,431 57,250 -3,819
_______ ______ _______
Net Income (Loss) $ -53,396 $-55,583 $ 2,187
See Accountants Compilation Report
<PAGE>
ELITE LABORATORIES, INC.
Comparison of Year to Date Operating Expenses to Budget
For the Eight Months Ended November 30, 1997
</TABLE>
<TABLE>
<CAPTION>
Eight Months Eight Months Variance
November 30, 1997 November 30, 1997 Unfavorable
Actual Budget (Favorable)
_________________ _________________ ___________
<S> <C> <C> <C>
Revenues
Revenues-Licensing
Fees $ 100,000 $ 133,333 $ -33,333
Contract R&D Revenue 0 93,333 93,333
Interest Income 205 13,336 -13,131
other Income 2,731 0 2,731
________ _______ ________
Total Revenues 102,936 240,002 -137,066
________ _______ ________
Expenses
Officers Wages 120,000 100,000 20,000
Office Wages 23,100 20,000 3,100
Lab Wages 56,236 6,664 -10,428
Fica Expense 9,029 10,000 -971
Futa Expense 185 328 -143
SUI/SDI Expense 1,099 2,000 -901
Misc Taxes 44 0 44
Accounting Fees 3,135 6,664 -3,529
Legal Fees 21,001 33,336 -12,335
Consulting Fees 0 6,664 -6,664
Lab Maintenance 637 0 637
Lab Cleaning (Gladstone) 43 3,336 -3,293
Advertising & Promotion 19,115 10,000 9,115
Medical Ins. 8,488 13,336 -4,848
Life Insurance 6,590 6,664 -74
Other Insurance 7,275 6,664 611
Telephone & Fax 3,808 3,336 472
Postage 1,750 1,336 414
Repairs & Maintenance 3,389 8,000 -4,611
Hazardous Waste Removal 893 3,336 -2,443
Rent 47,142 40,000 7,142
Petty Cash Expense 462 664 -202
Travel Expense 3,858 6,664 -2,806
Entertainment 483 3,328 -2,845
Depreciation & Amort. 0 33,336 -33,336
Membership & Dues 20 336 -316
Subscriptions 5,304 3,336 1,968
Interest-De Neufville 1,865 0 1,865
Interest Expense-Belson 8,091 0 8,091
Bank Charges -38 0 -38
Interest Expense-
Capital Leases 0 664 -664
Auto Expense 4,493 0 4,493
Meetings & Seminars 3,594 2,000 1,594
Hiring Expenses 253 0 253
Raw Materials 4,047 13,336 -9,289
Lab Supplies 7,348 13,336 -5,988
Office Expense 5,400 5,336 64
Equipment Rental 1,622 0 1,622
Licenses & Fees 284 0 284
State Corp. Tax 200 0 200
FDA Regulatory 0 664 -664
</TABLE>
See Accountants Compilation Report
<PAGE>
ELITE LABORATORIES, INC.
Comparison of Year to Date Operating Expenses to Budget
For the Eight Months Ended November 30, 1997
Continued
<TABLE>
<CAPTION>
Eight Eight
Months Month Variance
November 30, 1997 November 30, 1997 Unfavorable
Actual Budget (Favorable)
_________________ _________________ ___________
<S> <C> <C> <C>
Misc Expense 0 3,336 -3,336
Service Contract-copier 1,420 0 1,420
Testing Fees 0 13,336 -13,336
Marketing/commissions 0 16,664 -16,664
Payroll Preparation 628 0 628
Private Placement Fees 10,000 0 10,000
_______ _______ _______
Total Expenses 392,293 458,000 -65,707
________ _______ _______
Net Income (Loss) $ -289,357 $ -217,998 $-71,359
</TABLE>
See Accountants Compilation Report
<PAGE>
ELITE PHARMACEUTICALS, INC.
We have compiled the accompanying statement of assets,
liabilities and stockholders' equity arising from the
cash transactions of ELITE PHARMACEUTICALS, INC. as of
November 30, 1997, and the related statement of revenues
and expenses paid for the one month then ended, in accordance
with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified
Public Accountants. The financial statements have been
prepared on the cash basis of accounting, which is a
comprehensive basis of accounting other than generally
accepted accounting principles.
A compilation is limited to presenting in the form of
financial statements information that is the representation
of management. We have not audited or reviewed the
accompanying financial statements, and accordingly,
do not express an opinion or any other form of assurance
on them.
Management has elected to omit substantially all of the
informative disclosures ordinarily included in financial
statements. If the omitted disclosures were included in
the financial statements, they might influence the user's
conclusions about the Company's assets, liabilities,
equity, revenue and expenses. Accordingly, these
financial statements are not designed for those who are
not informed about such matters.
/s/ GOLDMAN & GITTELMAN, P.C.
GOLDMAN & GITTELMAN, P.C.
Clifton, New Jersey
December 24, 1997
<PAGE>
Elite Pharmaceuticals, Inc.
Balance Sheet
November 30, 1997
Assets
Current Assets
Cash and Equivalents $ 1,123,719.87
Investments 1,500,144.00
Total Current Assets 2,623,863.87
Investment in Subsidiary 600,000.00
_______________
Total Assets $ 3,223,863.87
Liabilities & Stockholders' Equity
Current Liabilities
______________
Total Current Liabilities 0.00
______________
Stockholders' Equity
Common Stock 3,275,170.16
Retained Earnings (51,306.29)
______________
Total Stockholders' Equity 3,223,863.87
Total Liabilities and
Stockholders' Equity $ 3,223,863.87
==============
See Accountants' Compilation Report.
<PAGE>
Elite Pharmaceuticals, Inc.
Statement of Operations
For the One Month Ended November 30, 1997
Revenues
Interest Income $ 1,490.71
___________
Total Revenues 1,490.71
___________
Administrative Expenses
Consulting Fees 45,000.00
Bank Charges 47.00
Register & Transfer Agent 7,750.00
___________
Total Administrative Expenses 52,797.00
Net Loss Before Taxes (51,306.29)
___________
Net Income (Loss) ($51,306.29)
===========
See Accountants' Compilation Report.
<PAGE>
No dealer, salesperson, or any other person has been authorized to
give any information or to make any representations in connection
with this offering other than those contained in this Prospectus.
Any information or presentations not herein contained, if given or
made, must not be relied upon as having been authorized by the Company.
This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any security other than the securities offered by
this Prospectus, nor does it constitute an offer to sell or solicitation
for an offer to buy securities by any person in any jurisdiction
where such an offer or solicitation is not authorized, or in
which the person making such offer is not qualified to do so,
or to any person to whom it is unlawful to make such offer or solicitation.
The delivery of this Prospectus shall not, under any circumstances,
create any implication that there has been no change in the affairs
of the Company since the date hereof.
TABLE OF CONTENTS
Prospectus Summary
Risk Factors
Selling Security Holders
Use of Proceeds
Dilution
Plan of Distribution
Management
Principal Shareholders
Description of Securities
Experts and Counsel
Description of Business
Management's Discussion and Analysis
Certain Transactions
Financial Statements
7,450,000 VOTING COMMON SHARES
(including 3,050,000 Common Shares Underlying Class A Redeemable
Common Stock Purchase Warrants)
3,050,000 CLASS A REDEEMABLE COMMON STOCK PURCHASE WARRANTS
ELITE PHARMACEUTICALS, INC.
_________________
PROSPECTUS
_________________
_______________, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Within the two most recent fiscal years, no
independent accountant who was previously engaged as the
principal accountant to audit the registrant's financial
statements or to audit a significant subsidiary, either
resigned, indicated an intention not to stand for re-
election after completion of the current audit, or was
dismissed.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Bylaws of the Company contain provisions reducing
the potential personal liability of the directors of the
Company for certain monetary damages and providing for
indemnity of directors. The Company is unaware of any
present, pending or threatened litigation which would
result in any liability for which a director would seek
such indemnification or protection. The provisions
affecting personal liability provide that the Company
will indemnify its directors to the fullest extent
permitted by Section 145 of the Delaware Corporation Law
against (a) expenses (including attorney's fees)
reasonably incurred in connection with any threatened,
pending or completed civil, criminal, administrative,
investigative or arbitrative action, suit or proceeding
(and appeal therefrom) against any director, whether or
not brought by or on behalf of the Company seeking to
hold the director liable by reason of the fact that he
was acting in such capacity; and (b) any reasonable
payments made by him in satisfaction of any judgment,
money decree, fine, penalty or settlement in such
action, suit or proceeding.
In addition, the Company has applied for directors and
officers liability insurance, but has not yet received
such coverage.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the Act) may be
permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has
been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable.
II-1
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES
The following represents all shares of unregistered
securities sold by the Company within the last three
years. The first group represents shares of Common
Stock and Warrants sold in the Private Offering. The
second group represents all other securities sold by the
Company within the last three years.
Private Offering. The aggregate offering price in the
Private Offering was $6,000,000. There were sales
commissions of 8% and a placement agent fee of 2% paid,
for an aggregate paid of $600,000. The Private Offering
was made under the exemption from registration afforded
by Section 4(6) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder.
<TABLE>
<CAPTION>
Number of Number of
Name of Security Holder Shares Owned Warrants Owned
<S> <C> <C>
Maurice J. Abadi 20,000 10,000
Robert G. Ackerly 20,000 10,000
Hymie Akst 20,000 10,000
Joan F. Albrecht 20,000 10,000
All American Funding 40,000 20,000
David Altschuler 20,000 10,000
The Aquidneck Trust,
Marielle T. Reilly
and Michael Plunkett
TTEES 40,000 20,000
Marcel Aronheim 40,000 20,000
Joan Rich Baer, Inc.
Pension Plan
and Trust U/A/D 1/1/78,
Joan Rich Baer and
Arthur Bugs Baer TTEE 40,000 20,000
Robert W. Baird & Co.
TTEE, FBO Albert L.
Saphier IRA 40,000 20,000
Mayer Ballas, M.D. 20,000 10,000
Norman Barrie and
Laurel Barrie 20,000 10,000
B&B Management, Ltd. 104,000 52,000
Jerome Belson 280,000 140,000
Susan J. Bender 40,000 20,000
Birchcrest Industries,
Inc. Employee Profit
Sharing Plan & Trust 20,000 10,000
Harvey Blitz 40,000 20,000
Dr. Daniel Scott
Brandwein 20,000 10,000
Bridge Ventures, Inc. 100,000 50,000
Susan Brauser 20,000 10,000
Michael E. Bushey DDS
Inc. Profit Sharing
Trust 20,000 10,000
C. Ames Byrd and
Donna M. Byrd, JT 20,000 10,000
Joseph Michael Cafiero and
Veronica Walsh Cafiero
JT 10,000 5,000
McDonald & Company Securities
FBO Frank B. Carr IRA 60,000 30,000
Chillington Corporation
N.V. 140,000 70,000
Alan R. Cohen 20,000 10,000
Israel Cohen 20,000 10,000
Phyllis J. Cohen 10,000 5,000
Irving W. Davies 10,000 5,000
Ronny Lee Doran 10,000 5,000
Joseph A. Dussich 40,000 20,000
Sidney Dworkin 40,000 20,000
Anita Elias Living Trust,
Anita and Jack Elias,
TTEES 20,000 10,000
Dr. Edward R. Falkner, Inc.
Profit Sharing Trust 20,000 10,000
Alan Feldman 20,000 10,000
Cary Fields 80,000 40,000
Stuart Flaum 20,000 10,000
F&N Associates, Inc. 13,333 6,666
Gary W. Funk 40,000 20,000
Joseph Giamanco 160,000 80,000
Lawrence and Diane
Gorelick 40,000 20,000
Edward A. Harycki 20,000 10,000
Hasenfield-Stein,
Pension Trust 13,333 6,666
Delaware Charter Gurantee
& Trust Co.
FBO Ronald I. Heller IRA 30,000 15,000
Richard A. Horstmann 80,000 40,000
Intergalactic Growth
Fund, Inc. 80,000 40,000
Barbara Kantor 20,000 10,000
Robert Karsten, D.D.S. 40,000 20,000
Richard Katz 20,000 10,000
E. Gerald Kay 40,000 20,000
Kentucky National
Insurance Co. 20,000 10,000
Keys Foundation 160,000 80,000
Ali H. Khin
and Mariam K. Ohn 40,000 20,000
Ernest Howard King, Jr. 20,000 10,000
Marvin Kogod
and Muriel Kogod JTWROS 20,000 10,000
Jay Lieberman 40,000 20,000
Andrew Licari 40,000 20,000
James Lynch 20,000 10,000
Leonard Makowka 80,000 40,000
Virginia Meade 10,000 5,000
Beno Michel M.D. Trust 20,000 10,000
Harold Miller 20,000 10,000
Farrell Moore
and Ann Moore JT 20,000 10,000
Gee Gee Morgan 10,000 5,000
Morgan Steel Limited 80,000 40,000
Delaware Charter
Guarantee
& Trust Co. FBO
David S. Nagelberg IRA 30,000 15,000
Daniel Orenstein 56,000 28,000
Donald Orenstein 20,000 10,000
Seymour Orenstein 32,000 16,000
The Chandrakant and Krishna
Patel Family Trust Dtd.
8/25/92 40,000 20,000
Sanjay K. Patel 40,000 20,000
Vijay Patel 60,000 30,000
James M. Persky 10,000 5,000
Stephen J. Posner 40,000 20,000
Delaware Charter Guaranty
Trust TTEE FBO
Paul Prager IRA 60,000 30,000
Tis Prager 40,000 20,000
R. Capital II, Ltd. 80,000 40,000
Kenneth M. Reichle, Jr. 20,000 10,000
Fahnestock & Co., Inc.
C/F Gerald Richter IRA 20,000 10,000
R&J Trust Dtd. 7/1/93,
Roger P. Siegel
and Joan K. Siegel TEES 40,000 20,000
Kenneth M. Robbins 20,000 10,000
Wayne Robbins 40,000 20,000
Joseph Roselle 80,000 40,000
Carl Rosen 40,000 20,000
Robert M. Rosin 20,000 10,000
Harvey L. Ross 40,000 20,000
Irving Russo 20,000 10,000
Rutgers Casualty Insurance
Co. 20,000 10,000
Ronald Schaffer 48,000 24,000
Harry Schwartz 20,000 10,000
Mark Schwartz 20,000 10,000
Merton J. Segal 40,000 20,000
Norman Seiden 80,000 40,000
Robert Shiff 20,000 10,000
Barbara Snyder 40,000 20,000
Nachum Stein 13,333 6,666
Myron M. Teitelbaum, MD 10,000 5,000
Edmund Tennenhaus 40,000 20,000
Tissera Overseas Fund
N.V. 40,000 20,000
Robert and Sarah Wax 40,000 20,000
</TABLE>
Other Sales of Securities within Last Three Years
On or about July 23, 1996, the Company sold (i) 12,286
shares of its Common Stock at $2.00 per share, for an
aggregate of $24,572, to Vijay Patel, (ii) 10,000 shares
of its Common Stock at $2.00 per share, for an aggregate
of $20,000 to Vijay Patel, C/F Amisha Patel, and (iii)
5,000 shares of its Common Stock at $2.00 per share, for
an aggregate of $10,000 to Vijay Patel, C/F Sagar Patel.
The sales were made in reliance upon Section 4(2) of the
Securities Act of 1993.
On or about October 21, 1996, the Company sold 13,000
shares of its Common Stock at $2.00 per share, for an
aggregate of $26,000, to Vijay Patel. The sale was made
in reliance upon Section 4(2) of the Securities Act of
1993.
II-4
<PAGE>
On or about March 5, 1997, the Company sold 42,000
shares of its Common Stock at $1.40 per share, for an
aggregate of $58,800 to Vijay Patel. The sale was made
in reliance upon Section 4(2) of the Securities Act of
1993.
On or about May 15, 1997, the Company sold 10,000 shares
of its Common Stock at $1.40 per share, for an aggregate
of $14,000 to Vijay Patel; (ii) 5,000 shares of its
Common Stock at $1.40 per share, for an aggregate of
$7,000 to Vijay Patel, C/F Amisha Patel; and (iii) 5,000
shares of its Common Stock at $1.40 per share, for an
aggregate of $7,000 to Vijay Patel, C/F Sagar Patel.
The sales were made in reliance upon Section 4(2) of the
Securities Act of 1993.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration Fees: $3,737.07
Federal Taxes: $0.00
State Taxes and Fees: $*
Trustee's Fees $0.00
Transfer Agents' Fees: $*
Costs of Printing and
Engraving: $*
Stock Exchange or NASD Fees: $*
Legal, Accounting and
Engineering Fees: $*
Premiums Paid by Registrant or
Selling Security Holder
on any Policy that Insures
or Indemnifies Directors and
Officers Against any
Liabilities They May Incur
in Connection
with the Registration,
Offering or Sale of Securities: $*
_______
Total: $*
* To be filed by amendment
The above numbers represent estimated costs incurred or
to be incurred by Registrant, and do not take into
account any unforeseen future contingencies.
II-5
<PAGE>
UNDERTAKINGS
Rule 415 Offering.
The Registrant hereby undertakes to file during
any period in which it offers or sells securities, a
post -effective amendment to this Registration Statement
to:
(i) include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) reflect in the prospectus any facts or events
which, individually or together, represent a fundamental
change in the information contained in the Registration
Statement; and notwithstanding the foregoing, (if the
total value of securities offered would not exceed that
which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b), if, in the aggregate
the changes in the volume and price represent no more
than a 20% change in the maximum aggregate offering
price set forth in the Calculation of Registration Fee
table in the effective registration statement; and
(iii) include any additional or changed material
information on the plan of distribution.
The Registrant further undertakes that, for the
purpose of determining any liability under the
Securities Act, each post-effective amendment will be
treated as a new registration statement relating to the
securities offered therein, and the offering of the
securities at the time of the post-effective amendment
will be treated as the initial bona fide offering of the
securities.
The Registrant further undertakes to file a post-
effective amendment remove from registration by a post-
effective amendment any securities remaining unsold at
the termination of the offering.
II-6
<PAGE>
EXHIBITS
3.1 Certificate of Incorporation of Registrant *
3.2 Bylaws of Registrant *
4.1 Specimen Common Stock Certificate *
4.2 Form of Warrant Agreement (including Warrant Certificate) *
4.3 Form of Placement Agent's Warrant*
4.4 Registration Rights Agreement*
5.1 Form of Opinion and Consent of
James, McElroy & Diehl, P.A. regarding
the legality of the securities being registered
10.1 Employment Agreement dated December 28, 1995
between the Registrant and Atul M. Mehta
10.2 Consulting Agreement dated August 1, 1997
between the Registrant and Bridge Ventures, Inc.
10.3 Consulting Agreement dated August 1, 1997 between
the Registrant and Saggi Capital Corporation
10.3 Commercial Lease
10.1 1997 Incentive Stock Option Plan *
10.5 Form of Private Placement Subscription Agreement *
15.1 Letter re unaudited interim financial information
(included in Financial Statements)
23.1 Consent of James, McElroy & Diehl, P.A. (included in Exhibit 5.1)
23.2 Consent of Goldman and Gittelman, P.C.
27.1 Financial Data Schedule*
*To be submitted by Amendment
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds
to believe that it meets all of the requirements of filing on
Form SB-2 and authorized this registration statement to be signed
on its behalf by the undersigned in the City of Maywood, State of
New Jersey, on January 28, 1998.
ELITE PHARMACEUTICALS, INC.
By: /s/
Atul M. Mehta, President
In accordance with the requirements of the Securities Act of
1933, this registration statement was signed by the following
persons in the capacities and on the dates dated.
/s/
Atul M. Mehta, President and Director
Date: ___January 29, 1998_____________
/s/
John W. Jackson, Director
Date: __January 29, 1998______________
JAMES, McELROY & DIEHL, P.A
ATTORNEYS AT LAW.
600 SOUTH COLLEGE STREET
CHARLOTTE, NORTH CAROLINA
(704) 372-9870
January 29,1998
Elite Pharmaceuticals, Inc.
230 West Passaic Street
Maywood, New Jersey 07606
Re: Elite Pharmaceuticals, Inc. (the "Company")
Registration Statement on Form SB-2
Ladies and Gentlemen:
You have requested our opinion with respect to the
shares of the Company's common stock, $.01 par value (the
"Shares") included in the Company's registration
statement on Form SB-2 (the "Registration Statement").
The Registration Statement has been filed with the United
States Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Securities
Act").
As counsel to the Company, we have examined the
original or certified copies of such records of the
Company, and such arrangements, certificates of public
officials, certificates of officers or representatives of
the Company and others, and such other documents as we
deem relevant and necessary for the opinion expressed in
this letter. In such examination, we have assumed the
genuineness of all signatures on original documents, and
the conformity to original documents of all copies
submitted to us as conformed or photostatic copies. As
to various questions of fact material to such opinion, we
have relied upon statements or certificates of officials
and representatives of the Company and others.
Based on, and subject to the foregoing, we are of
the opinion that the shares of Common Stock included in
the Registration Statement either (i) in the case of
outstanding shares, are duly and validly issued, fully
paid and non-assessable or (ii) in the case of Shares
issuable upon exercise of the Warrants or Placement
Agent's Warrants, when issued and paid for pursuant to
the terms thereof, will be duly and validly issued, fully
paid and non-assessable.
In rendering this opinion, we advise you that
members of this Firm are members of the Bar of the State
of North Carolina, and we express no opinion herein
concerning the applicability or effect of any laws of any
other jurisdiction, except the securities laws of the
United States of America referred to herein.
We hereby consent to the filing of this opinion as
an exhibit to the Registration Statement. We also
consent to the use of our name in the Registration
Statement. In giving such consent, we do not thereby
admit that we are included within the category of persons
whose consent is required under Section 7 of the
Securities Act, or the rules and regulations promulgated
thereunder.
Very truly yours,
JAMES McELROY & DIEHL, P.A.
By: /s/
Pender R. McElroy
Attorney at Law
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into this 28th day of December
1995, by and between Elite Laboratories, Inc., a Delaware
corporation (hereinafter "ELITE") and Atul M. Mehta of
Ramsey, New Jersey (hereinafter "MEHTA").
STATEMENT OF PURPOSE
MEHTA is currently employed by ELITE under a contract
dated May 23, 1991 presently terminable at will at any
time. ELITE desires to continue to employ MEHTA for a
period of five (5) years commencing January 1, 1996 in
order to be more certain of his continued services and in
order to have access to his research and development
skills and experience relating to pharmaceutical and
similar products. MEHTA desires to accept continued
employment upon the terms herein. Therefore, the parties
have agreed, and do hereby agree, that ELITE will employ
MEHTA and MEHTA will accept such continued employment,
upon the terms and conditions subsequently set out in
this Agreement.
AGREEMENT OF THE PARTIES
1. Term. ELITE hereby agrees to employ MEHTA and MEHTA
agrees to continue being employed by ELITE for a period
of five (5) years ending December 31, 2000, provided that
this Agreement is not sooner terminated pursuant to the
provisions contained herein. The current employment
agreement shall be superseded by this Agreement,
effective January 1, 1996.
2. Duties. MEHTA agrees to devote a sufficient amount of
his business time to diligently and faithfully perform
his duties and responsibilities on behalf of ELITE.
MEHTA, however, shall not be precluded from (a)
delivering lectures, fulfilling speaking engagements, and
writing or publishing any material related to his area of
expertise, (b) participating in professional
organizations and program activities, (c) serving as a
consultant in his area of expertise to government,
industrial, and academic entities where it does not
conflict with the interests of ELITE, (d) serving as a
director or member of a committee of any organization or
corporation or engaging in any other business activities;
provided that such activities do not materially interfere
with the regular performance of his duties hereunder and
except to the extent limited by paragraphs 11 and 12 of
this Agreement.
3. Responsibilities. ELITE agrees that during the term of
this Agreement, MEHTA shall serve as and retain the title
of both President and Chief Executive Officer of ELITE.
His responsibilities shall include the overall
management and direction of ELITE'S affairs, the hiring,
direction and dismissal of all subordinate employees, and
the development of ELITE'S products. In addition, MEHTA
shall be entitled to continue to serve as a director of
ELITE for the entire term of this Agreement.
4. Compensation. As compensation for the services
rendered hereunder, including any services provided as
President, Chief Executive Officer, and Director, MEHTA
shall receive the following:
a. An annual salary in the following amounts:
(1) From January 1, 1996 until December 31, 1996,
$165,000.00, payable in installments of $6,875.00 semi
monthly;
(2) From January 1, 1997 until December 31, 1997,
$180,000.00, payable in installments of $7,500.00 semi
monthly;
(3) From January 1, 1998 until December 31, 1998,
$200,000.00, payable in installments of $8,333.33 semi
monthly;
(4) From January 1, 1999 until December 31, 2000, at a
salary not less than $200,000.00 plus an additional
amount (i.e. a raise) to be determined by the Board of
Directors, in its discretion, for each of the two years.
b. Additional incentive commissions equal to five percent
(5 %) of net profit of each fiscal year as determined in
accordance with generally accepted accounting principles,
payable no later than the 15th day of the fourth month
following the completion of each such fiscal year.
c. Health insurance, purchased and maintained by ELITE,
which shall cover all medical expenses incurred by MEHTA
and his family.
d. Term life insurance on MEHTA'S life, for the benefit
of MEHTA'S surviving spouse or his estate, in an amount
of at least $300,000 for each year the policy is in
effect.
e. Such discretionary bonus as the Board may (with MEHTA
abstaining) from time to time determine to be
appropriate.
f. Options to purchase Class A Common voting stock of
ELITE to be granted on January 1, 1996 and each of the
four succeeding anniversaries thereafter in increments of
100,000 such options each year. The options shall be
exercisable from the date that they are granted until
earlier of (a) one year after MEHTA ceases to be employed
by ELITE or to serve as an officer or director of ELITE;
or (b) the expiration of ten years from the date the
options are granted. The options shall provide for MEHTA
to purchase shares at a price of:
$1.00 for options issued January 1, 1996;
$1,50 for options issued January 1, 1997;
$2.00 for options issued January 1, 1998;
$2.50 for options issued January 1, 1999;
$3.00 for options issued January 1, 2000;
The Options shall be issued upon such additional terms
and conditions as ELITE deems appropriate, provided that
such terms and conditions are not materially different
from terms and conditions of options issued to members of
the Board of Directors of ELITE.
5. Expenses. ELITE shall reimburse MEHTA for all
reasonable expenses incurred by him in connection with
his employment pursuant to this Agreement. ELITE will
reimburse MEHTA for such expenses upon the presentation
of an itemized account together with such receipts,
invoices, or other evidence of the expenditure that would
constitute satisfactory documentation for tax purposes.
Additionally, during the term of this Agreement, ELITE
shall provide MEHTA with the use of an automobile to be
selected by MEHTA, provided that the automobile selected
has a fair market value at the time of acquisition not
exceeding $50,000. MEHTA shall be responsible for
accounting for the use of the automobile in compliance
with all applicable regulations imposed by federal and
state taxing authorities.
6. Incentive and Benefit Plans. MEHTA shall be entitled
to (a) participate in any Management Incentive
Compensation Plans adopted by ELITE'S Board of Directors
(provided any such plan is adopted upon a vote in which
MEHTA abstains or does not cast a deciding vote) on a
basis to be determined by the Board of Directors at such
time; (b) participate in any stock option plan
established by the Board of Directors; and (c)
participate in, and benefit from, any and all pension,
profit-sharing, life, dental, medical, and other group
benefit plans provided to management and/or other
employees of ELITE.
7. Key Man Life Insurance. MEHTA shall do anything that
is reasonably necessary to enable ELITE to maintain key
man insurance upon his life should the Board of Directors
so determine, with all benefits payable to ELITE. Upon
termination of employment for reasons other than MEHTA's
death, MEHTA shall have the right to (a) cancel such
insurance policy or (b) rename the beneficiary provided
he assumes all subsequent payment of premiums.
8. Termination. MEHTA'S employment hereunder shall terminate
upon the occurrence of any of the following:
a. the death of MEHTA;
b. by election of either party upon the inability of
MEHTA to perform his duties on account of disability for
a total of one hundred twenty (120) days or more during
any consecutive twelve (12) month period;
c. by election of ELITE upon "Severe cause", defined as
(i) MEHTA'S commission of an act involving dishonesty,
embezzlement or fraud causing material damage to ELITE,
(ii) MEHTA'S conviction for the commission of a felony
involving an act of dishonesty or (iii) willful
misconduct by MEHTA which is materially and demonstrably
injurious to ELITE (and which MEHTA cannot or does not
cease or correct upon request). For purposes of this
provision, no act or failure to act by MEHTA shall be
considered "willful", unless done, or omitted to be done,
by him in bad faith and with knowledge that it was
contrary to the interests of ELITE;
d. by election of MEHTA upon (i) failure of ELITE to meet
its obligations under paragraph 4, (ii) substantial
interference with the discharge of his responsibilities
under paragraph 3, (iii) purported change by ELITE
without MEHTA's consent, of the duties and
responsibilities of MEHTA from those duties and
responsibilities described in this Agreement, (iv) a
change in ownership of more than fifty percent (50%) of
ELITE's shares in any one twelve (12) month period, or if
any person or entity (or commonly owned or controlled
group of entities) acquires shares which cause such
person or entity's shares to total more than fifty
percent (50 %) of the shares of ELITE; provided that
shares acquired from MEHTA shall not be counted in
calculating the fifty percent (50%) of shares, and
provided that "ownership" shall mean ownership or de
facto control, (v) requirement by ELITE that MEHTA be
based anywhere more than 40 miles from Ramsey, New Jersey
unless mutually agreed, (vi) any purported termination of
MEHTA'S employment which is not effected pursuant to the
terms of this Agreement or which does not constitute
grounds for termination under this Agreement, or (vii)
the occurrence of a vote by a majority of shares voting
upon an issue contrary to the vote of MEHTA, if MEHTA in
his sole discretion deems the vote "likely to result in
an interference in management" and requests at the
meeting that the shareholders reconsider and the
shareholders fail to reverse the vote.
The parties recognize that there may arise disputes and
controversies over alleged conditions or conduct that is
wrongful or that constitutes a breach of this Agreement.
However, the parties agree that such conditions or
conduct (which may give rise to a claim for damages)
shall not constitute grounds for termination of
employment or excuse performance under this Agreement
unless, and to the extent, provided above.
9. Payments upon Termination.
a. In the event of termination due to MEHTA's death, his
surviving spouse (or if she predeceases MEHTA, his
estate), shall be entitled to receive MEHTA's salary,
incentive commissions, benefits and any deferred
compensation accrued through the last day of the third
calendar month following the month in which the
termination of employment occurs and additional salary
payable monthly for the following three years at the rate
of one-half the aggregate annual amounts shown in
paragraph 4a above; provided that ELITE may purchase life
insurance (other than the life insurance provided under
paragraph 4d) payable to a designated beneficiary of
MEHTA to cover all or a portion of the obligation under
this paragraph 9a.
b. In the event of MEHTA's termination in accordance with
paragraphs 8b or c, MEHTA's salary, incentive
commissions, benefits and any deferred compensation
accrued through the last day of the calendar month in
which the termination of employment occurs shall be paid
promptly. No other unaccrued salary or benefits shall be
paid.
c. In the event of termination pursuant to paragraph 8d,
MEHTA shall receive all accrued salary, incentive
commissions, benefits, and any deferred compensation and
all salary and commissions payable under paragraph 4b
through a period ending upon the later of (i) May 22,
2001 or (ii) the third anniversary of such termination,
provided that the salary portion of such amounts shall be
aggregated and discounted to Present Value, using as the
discount factor the prime Rate published on the date of
termination (or nearest date thereafter) in the Wall
Street Journal; and provided that salary for the period
after May 22, 2001 shall be imputed at the same rate as
provided for under paragraph da(4).
10. Procedure for Termination. Termination of employment
by ELITE or MEHTA shall not be effective until notice is
received by the other party. The notice shall not be
effective unless it indicates the specific termination
provision(s) in paragraph 8 of this Agreement relied upon
and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination
of employment under the provisions indicated.
Additionally, no purported termination by ELITE shall be
effective unless and until there has been delivered to
MEHTA a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the
entire membership of the Board of Directors at a meeting
of the Board held for the purpose (after opportunity for
MEHTA, together with his counsel, to be heard before said
Board), finding that in the good faith opinion of the
Board, the facts and circumstances claimed to provide a
basis for termination under paragraph 8b or c of this
Agreement exist and specifying the particulars thereof.
11. Covenant Not To Compete. MEHTA covenants and agrees
that during the term of this Agreement, he will not
directly or indirectly engage in, conduct, solicit, be
involved in, aid or assist, either personally or as an
employee, partner, director or consultant any business
which is competitive with the business of ELITE. MEHTA,
however, shall be free to conduct any business he desires
outside of the United States, so long as such business
does not sell any product sold or licensed by ELITE in
any market in which ELITE competes, and provided that
MEHTA does not use confidential information that he could
not disclose under paragraph 12.
12. Confidentiality. MEHTA acknowledges and recognizes
that the disclosure of confidential information to
ELITE'S competitors will be highly detrimental to ELITE'S
business. Therefore, MEHTA agrees that he will not
disclose, reveal, or disseminate to any person, firm, or
organization, any information concerning ELITE'S business
which is of a confidential nature. This shall not
preclude MEHTA from disclosing confidential information
(i) to the extent that such information is generally
available and known in the industry or is available from
a source other than ELITE, through no action of MEHTA, or
(ii) as required by law, or (iii) information respecting
the business of ELITE after the Expiration Date of this
Agreement; or (iv) if such disclosure is in the Company's
best interest or is made in order to promote and enhance
the Company's business. This provision shall also not
preclude MEHTA from using or disclosing any information
and experience he possesses in his memory and knowledge.
13. Entire Agreement. Each party acknowledges that he has
read this Agreement, understands it, and agrees to be
bound by its terms, and further agrees that this
Agreement supersedes and merges all prior proposals,
understandings and all other agreements, oral or written,
between the parties relating to its subject matter. The
parties further agree that this Agreement may not be
modified or altered except by a written instrument duly
executed by both parties.
14. Nonwaiver. No failure of a party to exercise any
right or waiver of any remedy shall operate or be
construed to constitute a waiver or bar affecting such
party's assertion of the right or obtaining the remedy at
any future time. No failure of a party to insist upon
compliance with any provision of this Agreement at any
time or for any period of time shall impair the party's
right to insist upon compliance with such provision at
any future time.
15. Legality. In the event any provision of this
Agreement shall be held to be invalid, illegal, or
unenforceable, the validity, legality and enforceability
of the remaining provisions shall in no way be affected
or impaired thereby and said Agreement shall remain in
full force and effect as if such cause or provision had
not been inserted therein.
16. Binding Effect. This Agreement shall be binding upon
the parties, their respective successors and permitted
assigns. Neither party may assign this Agreement or any
of its rights or obligations hereunder without the prior
written consent of the other party, and any such attempt
at assignment shall be void.
17. Notices. Any notice to be given under this Agreement
shall be sufficient if it is in writing and is sent by
Certified or Registered Mail, or hand-delivered by a
person who is not affiliated with the sender. Notices to
MEHTA shall be sent to 252 East Crescent Avenue, Ramsey,
New Jersey 07446 or such other address as he designates
in writing. Notice to ELITE shall be sent to its
Secretary or to any member of its Board of Directors
(other than MEHTA).
IN WITNESS WHEREOF, the parties have here unto executed
this document the day and year first above written.
ELITE LABORATORIES, INC.
[Corporate Seal] by: /s/
Director, acting with authority of the Board of Directors
/s/
Assistant Secretary
/s/ Atul M. Mehta
BRIDGE VENTURES, INC.
1241 Gulf of Mexico Dr.
Longboat Key, Florida 34228
CONSULTING AGREEMENT
THE CONSULTING AGREEMENT ("Agreement") is made this
1st day of August 1997, by and between Bridge Ventures,
Inc.] (the "Consultant") whose principal place of
business is 1241 Gulf of Mexico Dr., Longboat Key,
Florida, and Elite Laboratories, Inc. (Elite), a Delaware
corporation (the "Client") whose principal place of
business is 230 W. Passaic Street, Maywood, New Jersey
07607.
W I T N E S S E T H
WHEREAS, the Consultant is willing and capable of
providing various marketing and management consultant
services for and on behalf of the Client in connection
with the marketing and manufacturing of time release
pharmaceuticals.
WHEREAS, THE Client wishes to retain the services of the
Consultant to consult on strategic alliances for the
Client pursuant to the terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants
and agreements herein contained, and for other good and
valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, it is agreed as follows:
1. Engagement. The client hereby retains the
Consultant subject to the provisions of paragraph 4, and
Consultant hereby accepts the engagement, to provided
Management and Marketing and Advisory services the
Client. Such services shall include assisting management
in their strategic planning, building a management team,
and such other managerial assistance as Bridge and Elite
shall deem necessary or appropriate for Clients business.
The Consultant hereby agrees to devote such time as
is necessary to the Client to fulfill the obligations
set forth in this Paragraph 1. It is expressly agreed
between the parties that the Consultant shall have no
fixed or minimum number of hours within which to perform
its obligations under this Agreement, however, the
Consultant will be diligent and use its best efforts to
perform the services hereunder. The Consultant shall
strictly observe all securities regulations and laws, and
all other laws.
It is understood that the services rendered under
this Agreement will be provided by either Harris Freedman
or Stanley Zaslow, or by a person directly under their
supervision.
2. Proprietary Information. In connection with
their services pursuant to this Agreement, Consultant
will obtain certain information from the Client
concerning the Client's business, operations and certain
inventions, know-how and technology, which the Client
considers proprietary. The Consultant agrees to treat
any such information (herein collectively referred to as
the "Confidential Information") in accordance with the
provisions of this paragraph 2. Confidential Information
does not include information which (I) is independently
obtained from members of the public to whom the
information was made available other than as a result of
a disclosure by the Consultant or its directors,
officers, employees, agents or advisors, or (ii) was or
becomes available to the Consultant on a non-confidential
basis from a source other than the Client or its
directors, officers, employees, agent or advisors
provided that such source is not known to the Consultant
to be bound by a confidentiality agreement with the
Client.
The Consultant hereby agrees that the Confidential
Information will be kept confidential by the Consultant,
provided, however, that any disclosure of such
Confidential Information may be made to which the Client
consents in writing.
Upon expiration or termination of this Agreement,
the Consultant shall promptly redeliver to the Client
any and all written material containing or reflecting any
of the Confidential Information and will not retain any
copies, extracts or other reproductions in whole or in
part of such written material. All documents, memoranda,
notes and other writings whatsoever prepared by the
Consultant or its advisor based on the information
contained in the Confidential Information shall be
destroyed, and such destruction shall, upon demand, be
certified in writing to the Client by an authorized
officer supervising such destruction. It is agreed that
all information and materials produced by the Client
shall be the sole and exclusive property of the Client.
All copyright and title of said work shall be the
property of the Client, free and clear of all claims
thereto by the Consultant, and the consultant shall
retain no claim of authorship therein.
The provisions of this paragraph 2 shall survive
expiration and termination of this Agreement.
The Consultant agrees to perform the work hereunder
diligently and in the highest professional manner and
shall provide all necessary personnel to complete the
work in the time and manner reasonably set forth by the
Client. The Consultant shall strictly observe all
securities regulations and laws, and all other laws.
3. Remuneration. In consideration for the
services to be provide to the Client by the Consultant
under this Agreement, the Client hereby agrees to the
payment of remuneration to the Consultant as follows:
(a) The Client hereby agrees to pay the Consultant an
annual consulting fee in the amount between $84,000 and
$120,000, payable in equal monthly installments of
between $7,000 and $10,000 per month for a period of
thirty six (36) months from the date of this Agreement.
Such payment shall be due on the first (1st) day of each
and every month hereafter.
(b) Upon execution of this Agreement, or as soon
thereafter as possible, the Client shall cause to be
issued to the Consultant pursuant to the authority
granted from the Client's Board of Directors 400,000 to
500,000 Warrants exercisable for a period of 5 years at
$3.00 per share of its common stock, which will be
identical to the Warrants purchased by investors in any
subsequent offering. The share certificate to be issued
shall be issued in the name which the Consultant provides
to the Client in the Consultant's sole discretion. The
shares underlying the warrants shall be free and clear of
all liens and encumbrances except it shall bear a legend
containing the restrictive language of Rule 144 of the
Securities Act of 1933, as amended.
(c) The Client agrees to reimburse the consultant
for all travel, entertainment, mailing, printing,
postage and all other out-of-pocket expenses directly
related to the services to be provided. Expenses in
excess of $100 per occasion shall be preapproved by the
Client. Upon termination of this Agreement, any
continuing obligation under this paragraph shall cease;
however any accrued but unpaid expenses due to the
Consultant under this subparagraph shall be due and
payable within ten (10) days from such date.
4. Term. It is agreed between the parties that
this Agreement shall expire on the last day of the Thirty
Six (36) full month from the date here unless terminated
as provided for in paragraph 3(a). The Consultant's
obligation to provide services hereunder shall commence
on the date on which the Consultant receives from the
Client the first payment compensation under paragraph
3(a) and the Client has caused to be issued the option
certificate referred to in paragraph 3(b) hereof.
Notwithstanding the foregoing, this Agreement may
be terminated by Client upon a material breach by
Consultant, or if Consultant or any of its directors,
officers, employees or consultants become the subject of
any criminal prosecution or any enforcement proceeding by
the Securities and Exchange Commission or any other state
or federal agency.
5. Miscellaneous Provisions.
(a) This Agreement and the duties and
responsibilities creased hereby may not be assigned,
transferred or delegated by the Consultant without the
prior written consent of the Client.
(b) This Agreement shall be interpreted and
governed by the laws of the State of New York; all
clauses of this Agreement are distinct and severable and
if any clause shall be held illegal or void, it shall not
affect the validity or legality of the remaining
provisions of this Agreement.
(c) No waiver of any breach of any
condition herein will constitute a waiver of any
subsequent reach of the same or any other condition.
(d) The parties hereto agree to execute
such other documents as are necessary to carry out the
intent and the spirit of this Agreement.
(e) Subject to the other provisions
hereof, the terms and conditions of this Agreement shall
extend to and be binding upon and shall inure to the
benefit of the successors and assigns of the Parties
hereto.
(f) This Agreement may not be assigned
without the prior written consent of all parties, and
that any attempted assignment in violation of this
provision will be null and void.
6. Notices. All notices, demands or requests
required or authorized hereunder shall be deemed
sufficiently given if in writing and sent by registered
or certified mail, return receipt requested and postage
prepaid, or by telex, telegram or cable to:
Client: ELITE LABORATORIES, INC.
230 Passaic Street
Maywood, New Jersey 07607
and if to Consultant:
BRIDGE VENTURES, INC.
1241 Gulf of Mexico Dr.
Longboat Key, Fl. 34228
Attn: Harris Freedman
7. Status of Parties. For the purpose of this
Agreement, and the services, duties and responsibilities
created hereunder, nothing other than exercise of
warrants provided for in paragraph 3, nothing contained
herein shall create an equity or ownership interest of
one party in the other. It is understood and agreed
between the parties that the Consultant is an independent
contractor of the Client for the purposes set forth
herein.
8. Entire Agreement. This instrument contains
the entire agreement of the parties relating to the
subject matter hereof. The parties have made no
agreements, representations or warranties relating to the
subject matter hereof which are not set forth herein. No
modification of this Agreement shall be valid unless made
in writing and signed by the parties hereto.
9. Notwithstanding the foregoing, this Agreement
may be terminated by client upon a material breach by
consultant, or if consultant or any of its directors or
officers become the subject of any criminal prosecution
or any enforcement proceeding by the Securities and
Exchange Commission or any other state or federal agency.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on the day and year first above
written.
CONSULTANT:
BRIDGE VENTURES, INC.
By: /s/
Harris Freedman
CLIENT:
ELITE LABORATORIES, INC.
By: /s/
SAGGI CAPITAL CORP.
545 Madison Avenue
New York New York 10022
CONSULTING AGREEMENT
THE CONSULTING AGREEMENT ("Agreement") is made this
1st day of August 1997, by and between Saggi Capital Corp.
(the "Consultant") whose principal place of
business is 545 Madison Avenue, New York, New York, and Elite
Laboratories, Inc. (Elite), a Delaware
corporation (the "Client") whose principal place of
business is 230 W. Passaic Street, Maywood, New Jersey
07607.
W I T N E S S E T H
WHEREAS, the Consultant is willing and capable of
providing various consulting and investor relation services for
and on behalf of the Client in connection
with the Client's interaction with broker dealers, shareholders and
members of the general public.
WHEREAS, THE Client wishes to retain the services of the
Consultant to consult on strategic alliances for the
Client pursuant to the terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants
and agreements herein contained, and for other good and
valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, it is agreed as follows:
1. Engagement. The client hereby retains the
Consultant subject to the provisions of paragraph 4, and
Consultant hereby accepts the engagement, act as an
investor relations and consultant to the Client. It is
the intention of the parties to this Agreement that the
Consultant will gather all publicly available information
on the Client and confer with officers and directors of
the Client in an effort to consolidate the information
obtained into summary for telephonc dissemination to
interested parties. The Consultant will then disseminate
such information about the Client to individuals and
registered representatives of broker-dealers who the
Consultant in its reaosnable discretion, believes can
most effectively disseminate such infomration to the
general pubic. The Conulstant will nto provide any
investment advice or recommmendations to any of its
contacts bout the client; rather the Consultant will
focus on telephonic and person-to-person meetings with
individuals targeted by the Client for contact and
familiarization with information which the Consultant has
collected and is otherwise available to the general
public about the Client.
However, the Consultant will be diligent and use its best
efforts to perform its obligations under this Agreement.
It is agreed that the consultant will strictly deserve
[sic] all securities regulations and laws, and all other
laws.
The Consultant hereby agrees to devote such time as
is necessary to the Client to fulfill the obligations
set forth in this Paragraph 1. It is expressly agreed
between the parties that the Consultant shall have no
fixed or minimum number of hours within which to perform
its obligations under this Agreement. It is understood
that the services rendered under this Agreement will be
provided by Sharon Will or a person directly under her
supervision.
2. Proprietary Information. In connection with
their services pursuant to this Agreement, Consultant
will obtain certain information from the Client
concerning the Client's business, operations and certain
inventions, know-how and technology, which the Client
considers proprietary. The Consultant agrees to treat
any such information (herein collectively referred to as
the "Confidential Information") in accordance with the
provisions of this paragraph 2. Confidential Information
does not include information which (i) is independently
obtained from members of the public to whom the
information was made available other than as a result of
a disclosure by the Consultant or its directors,
officers, employees, agents or advisors, or (ii) was or
becomes available to the Consultant on a non-confidential
basis from a source other than the Client or its
directors, officers, employees, agent or advisors
provided that such source is not known to the Consultant
to be bound by a confidentiality agreement with the
Client.
The Consultant hereby agrees that the Confidential
Information will be kept confidential by the Consultant,
provided, however, that any disclosure of such
Confidential Information may be made to which the Client
consents in writing.
Upon expiration or termination of this Agreement,
the Consultant shall promptly redeliver to the Client
any and all written material containing or reflecting any
of the Confidential Information and will not retain any
copies, extracts or other reproductions in whole or in
part of such written material. All documents, memoranda,
notes and other writings whatsoever prepared by the
Consultant or its advisor based on the information
contained in the Confidential Information shall be
destroyed, and such destruction shall, upon demand, be
certified in writing to the Client by an authorized
officer supervising such destruction. It is agreed that
all information and materials produced by the Client
shall be the sole and exclusive property of the Client.
All copyright and title of said work shall be the
property of the Client, free and clear of all claims
thereto by the Consultant, and the consultant shall
retain no claim of authorship therein.
The provisions of this paragraph 2 shall survive
expiration and termination of this Agreement.
The Consultant agrees to perform the work hereunder
diligently and in the highest professional manner and
shall provide all necessary personnel to complete the
work in the time and manner reasonably set forth by the
Client.
3. Remuneration. In consideration for the
services to be provide to the Client by the Consultant
under this Agreement, the Client hereby agrees to the
payment of remuneration to the Consultant as follows:
(a) The Client hereby agrees to pay the Consultant an
annual consulting fee in the amount between $42,000 and
$60,000, payable in equal monthly installments of
between $3,600 and $5,000 per month for a period of
thirty six (36) months from the date of this Agreement.
Such payment shall be due on the first (1st) day of each
and every month hereafter.
(b) Upon execution of this Agreement, or as soon
thereafter as possible, the Client shall cause to be
issued to the Consultant pursuant to the authority
granted from the Client's Board of Directors 150,000 to
200,000 Warrants exercisable for a period of 5 years at
$3.00 per share of its common stock, which will be
identical to the Warrants purchased by investors in any
subsequent offering. The share certificate to be issued
shall be issued in the name which the Consultant provides
to the Client in the Consultant's sole discretion. The
shares underlying the warrants shall be free and clear of
all liens and encumbrances except it shall bear a legend
containing the restrictive language of Rule 144 of the
Securities Act of 1933, as amended.
(c) The Client agrees to reimburse the consultant
for all travel, entertainment, mailing, printing,
postage and all other out-of-pocket expenses directly
related to the services to be provided. Expenses in
excess of $100 per occasion shall be preapproved by the
Client. Upon termination of this Agreement, any
continuing obligation under this paragraph shall cease;
however any accrued but unpaid expenses due to the
Consultant under this subparagraph shall be due and
payable within ten (10) days from such date.
4. Term. It is agreed between the parties that
this Agreement shall expire on the last day of the Thirty
Six (36) full month from the date here unless terminated
as provided for in paragraph 3(a). The Consultant's
obligation to provide services hereunder shall commence
on the date on which the Consultant receives from the
Client the first payment compensation under paragraph
3(a) and the Client has caused to be issued the option
certificate referred to in paragraph 3(b) hereof.
Notwithstanding the foregoing, this Agreement may
be terminated by Client upon a material breach by
Consultant, or if Consultant or any of its directors,
officers, employees or consultants become the subject of
any criminal prosecution or any enforcement proceeding by
the Securities and Exchange Commission or any other state
or federal agency.
5. Miscellaneous Provisions.
(a) This Agreement and the duties and
responsibilities creased hereby may not be assigned,
transferred or delegated by the Consultant without the
prior written consent of the Client.
(b) This Agreement shall be interpreted and
governed by the laws of the State of New York; all
clauses of this Agreement are distinct and severable and
if any clause shall be held illegal or void, it shall not
affect the validity or legality of the remaining
provisions of this Agreement.
(c) No waiver of any breach of any
condition herein will constitute a waiver of any
subsequent reach of the same or any other condition.
(d) The parties hereto agree to execute
such other documents as are necessary to carry out the
intent and the spirit of this Agreement.
(e) Subject to the other provisions
hereof, the terms and conditions of this Agreement shall
extend to and be binding upon and shall inure to the
benefit of the successors and assigns of the Parties
hereto.
6. Notices. All notices, demands or requests
required or authorized hereunder shall be deemed
sufficiently given if in writing and sent by registered
or certified mail, return receipt requested and postage
prepaid, or by telex, telegram or cable to:
Client: ELITE LABORATORIES, INC.
230 Passaic Street
Maywood, New Jersey 07607
and if to Consultant:
SAGGI CAPITAL CORP.
545 Madison Avenue
New York, NY 10022
Attn: Sharon Will
7. Status of Parties. For the purpose of this
Agreement, and the services, duties and responsibilities
created hereunder, nothing other than the exercise of
warrants provided for in Paragraph 3 contained herein
shall create an equity or ownership interest of one party
in the other. It is understood and agreed between the
parties that the Consultant is an independent contractor
of the Client for the purposes set forth herein.
8. Entire Agreement. This instrument contains
the entire agreement of the parties relating to the
subject matter hereof. The parties have made no
agreements, representations or warranties relating to the
subject matter hereof which are not set forth herein. No
modification of this Agreement shall be valid unless made
in writing and signed by the parties hereto.
9. Notwithstanding the foregoing, this Agreement
may be terminated by client upon a material breach by
consultant, or if consultant or any of its directors or
officers become the subject of any criminal prosecution
or any enforcement proceeding by the Securities and
Exchange Commission or any other state or federal agency.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on the day and year first above
written.
CONSULTANT:
SAGGI CAPITAL CORP.
By: /s/
Sharon Will
CLIENT:
ELITE LABORATORIES, INC.
By: /s/
Commercial Lease
This lease is made between Serex, Inc., a New Jersey
corporation, herein called Landlord and Elite Laboratories
of Englewood Cliffs herein called Tenant.
Landlord hereby offers to lease to Tenant the premises
situated in the City of Maywood, County of Bergen,
State of New Jersey, described as approximately 5000
square feet of offices and laboratory space and common
use of cafeteria area and organic laboratory on the top
floor of 230 W. Passaic Street delineated in accompanying
diagram, upon the following terms and conditions.
Term and rent. Landlord demises the above premises for
a term of two years commencing 1 November 1993 and
terminating 30 October 1995, for a monthly sum of $4,600
(3,000 rent plus $1,600 for utilities, services and
maintenance), for the first year and a monthly sum of
$5,000 ($3,400 rent plus $1600 for utilities, services
and maintenance) for the second year, payable in advance
on the first day of each month for that months rental
during the term of the lease. All rental payments shall
be made to Landlord at 230 W. Passaic St. Maywood NJ
Tenant shall use and occupy the premises for
Pharmaceutical Research and Development, small scale
manufacturing and related office and administrative
purposes. The premises shall be used for no other
purpose. Landlord represents that the premises may
lawfully be used for such purpose.
Care and maintenance of premises. Landlord represents
that the premises are in good order and repaid, and will
at his own expense and at all times maintain the
premises in good and safe condition, including plate
glass, electrical wiring, plumbing and heating and air
conditioning installations and any other system or
equipment upon the premises. Tenant shall surrender the
premises at termination of lease in as good condition as
received, normal wear and tear excepted. Landlord shall
be responsible for all repairs required including the
roof, exterior walls, structural foundation and shall
also maintain in good condition portions adjacent to the
premises, such as sidewalks, driveways, lawns and
shrubbery and be responsible for snow removal. Landlord
shall supply 2 hours per week cleaning of the laboratory
and office space and will remove and dispose of tenants
non-hazardous garbage. Landlord shall maintain outside
of building in good and safe condition
Alternations. Tenant shall not, without first obtaining
the written consent of landlord, make any alterations,
additions or improvements in or to or about the
premises. Permission shall not be unreasonably
withheld.
Ordinances and Statutes. Tenant shall comply with all
statutes, ordinances and requirements of all municipal,
state and federal authorities now in force or which my
hereafter be in force, pertaining to the premises,
occasioned by or affecting the use thereof by Tenant
Assignment and Subletting. Tenant shall not assigned
this lease or sublet any portion of the premises without
prior written consent which may not be unreasonably
withheld. Tenant understand that since it is shared
space, Serex must reasonably satisfy themselves
as to the potential subtenants effect upon the security
of Serex proprietary technology - no company in any
area competing with Serex technology will be
considered--, the stringent requirements of FDA
manufacturing code and ECRA etc., and the necessity that
there be mutual compatibility to feel comfortable with a
sharer of space.
All utilities, including sewer, water, gas, electricity,
distilled water and a common security system will be
supplied by Landlord, subject to utilities payment by
tenant as per paragraph 1.
Landlord shall have the right to enter upon the premises
at reasonable times and upon reasonable notice for the
purpose of inspecting the same, and will permit Landlord
at any time within 90 days of the expiration of the
lease to place upon the premises any usual to "To Let"
or "For Lease" signs and permit persons desiring to
lease the same to inspect the premises thereafter.
Possession. If Landlord is unable to deliver possession
of the premises by September 16th 1993, Landlord shall
not be liable for any damage caused thereby but the
lease shall be void or voidable. By delivering
possession, Landlord represents that Tenant can move all
equipment in on the 16th of September and that by the
20th of September 1993 the laboratory space shall be
securable and by 30 September 1993 the office space
shall be securable. Tenant shall not be responsible for
rent until possession i.e. walls and securable space is
available or November 1, whichever is later. Tenant
shall not be responsible for December rent until all
painting and repairing is complete.
Indemnification of Landlord. Landlord shall not be
liable for any damage or injury to Tenant, or any other
person, or to any property, occurring on the demised
premises or any part thereof, and Tenant agrees to held
Landlord harmless from any claims for damages no matter
how caused
Insurance. Tenant at his expense, shall maintain public
liability insurance including bodily injury and property
damage insuring Landlord and tenant with minimum
coverage as follows, $100,000 per person bodily injury,
$1,000,000 aggregate
Tenant shall provide Landlord with a Certificate of
Insurance showing Landlord as additional insured. The
Certificate shall provide for a ten-day written notice
to Landlord in the event of cancellation or material
change of coverage.
Eminent Domain. If the premises or any part thereof or
any estate therein, or any other part of the building
materially affecting Tenants use of the premises, shall
be taken by eminent domain, this lease shall terminate
as of the date when title vests pursuant to such taking.
The rent, and any additional rent, shall be portioned as
of the termination date, and any rent paid for any
period beyond that date shall be repaid to Tenant.
Tenant shall not be entitled to any part of the award
for such taking or any payment in lieu thereof, but
Tenant my file a claim for any taking of fixtures and
improvements owned by Tenant and for moving expenses.
Destruction of Premises. In the event of a partial
destruction of the premises during the term hereof, from
any cause, landlord shall forthwith repair the same,
provided that such repairs can be made within sixty (60)
days under existing governmental laws and regulations,
but such partial destruction shall not terminate this
lease, except that Tenant shall be entitled to a
proportionate reduction of rent while such repairs are
being made, based upon the extent to which the making of
such repairs shall interfere with the business of Tenant
on he premises. If such repairs cannot be made within
said sixty days, Tenant, at his option, may make the
same within a reasonable time, this lease continuing in
effect with the rent proportionately abated as
aforesaid, and in the event that the Landlord shall not
elect to make such repairs which cannot be made within
sixty days, this lease may be terminated at the option
of either party. In the event that the building in
which the demised premises may be situated is destroyed
to an extent or not less than one-third of the
replacement costs thereof, Landlord may elect to
terminate this lease whether the demised premises by
injured or not. A total destruction of the building in
which the premises are situated shall terminate this
lease.
Landlord's Remedies on default. If Tenant defaults in
the payment of rent, or any additional rent, or defaults
in the performance of any of the other covenants or
conditions hereof, Landlord may give Tenant notice of
such default and if Tenant does not cure any such
default within 45 days after the giving of such notice
(or if such other default is of such nature that it
cannot be completely cured with such period, if Tenant
does not commence such curing within such 45 days and
thereafter proceed with reasonable diligence and in good
faith to cure such default), then Landlord may terminate
this lease on not less than 30 days notice to Tenant.
On the date specified in such notice the term of this
lease shall terminate and the Tenant shall then quit
and surrender the premises to Landlord but Tenant shall
remain liable as hereinafter provided. If this lease
shall have been so terminated by Landlord, landlord may
at any time thereafter resume possession of the premises
by any lawful means and remove Tenant or other occupants
and their effects. No failure to enforce any terms
shall be deemed a waiver.
Securing Deposit. Tenant shall deposit with Landlord
$9,000.00 security deposit as follows; on the signing of
this lease the sum of $6,000, upon completion of
construction, $3,000.00 additional security is not
dependent upon completion of cosmetic touches, including
painting. Deposit will not accrue interest. Deposit is
security for the performance of Tenant obligations under
this lease, including without limitation the surrender
of possession of the premises to Landlord as herein
provided. If landlord applies any part of the deposit
to cure any default of Tenant, Tenant shall on demand
deposit with Landlord the amount so applied so that
Landlord shall have the full deposit amount at all times
during the term of this lease
Option to renew. Provided that Tenant is not in default
in the performance of this lease, Tenant shall have the
option to renew the lease for an additional term of
thirty six months commencing at the expiration of the
initial lease term. All of the terms and conditions of
the lease shall apply during the renewal term except
that he monthly rent shall be the sum of $3400 plus a
cost of living increase (based on CPI) + $1600 to
reflect increases in taxes, utilities and garbage of
1995 base year using 1995 as the base year, for 1996
(and base year of 1996 for 1997 rent). Should taxes or
any significant expensable service increase
substantially more than the cost of living Elite will be
assessed 20% of the increase over and above the CPI.
The option shall be exercise by written notice given to
Landlord not less than 90 days prior to the expiration
of the initial lease term. If notice is not given in
the manner provided herein within the time specified,
this option shall expire.
Legal Fees. In case suit should be brought for recovery
of the premises, or for any sum due hereunder, or
because of any act which may arise out of the possession
of the premises, by either party, the prevailing party
shall be entitled to all reasonable costs incurred in
attorney's fees. All legal actions shall be settled by
binding arbitration under the laws of New Jersey and
neither party will use an attorney who has agreed to
payment by contingency fee.
Waiver. No failure of Landlord to enforce any term
hereof shall be deemed to be a waiver.
Notices. Any notice which either party may or is
required to give, shall be given by mailing the same,
postage prepaid, to Tenant at the premises, or the
Landlord at the address shown below, or at such other
places as may be designated by the parties from time to
time.
Heirs, Assigns, Successors. This lease is binding upon
and inures to the benefit of the heirs, assigns and
successors in interest to the parties.
Subordination. This lease is and shall be subordinated
to all existing and future liens and encumbrances
against the property.
The foregoing constitutes the entire agreement between
the parties and may be modified only b a writing signed
by both parties. The following exhibits; floor plan,
listing work to be done; Binding Agreement letter and
rider, have been made a part of this lease before the
parties' execution hereof.
Signed this 7th day of September, 1993.
By: Dr. Atula Mehta
By: [ ]
Elite Laboratories, Inc.
RIDER TO LEASE
Between Serex, Inc.(as Landlord) and Elite Laboratories,
Inc. (as Tenant)
Date: September 7, 1993
The Tenant shall pay to the Landlord the following rent
For the period from 1 November 1993 to 30October 1994
the rent of $36,000 and utilities and amenities fees of
$19,200 payable in equal monthly installments of
$4,600.00 on the first day of each month in advance
For the period 1 November 1994 to 30 October 1995 the
rent of $40,800 and utilities and amenities fees of
$19,300 payable in equal monthly installment of $5000.00
on the first day of each month in advance
If any required payment of rent is not made by the
seventh day of the month, Tenant shall pay to the
Landlord a late charge equal to 5% of the payment due,
which late charge shall accompany the late payment
Landlord shall provide utilities and amenities as per
the binder letter dated September 2 1993 attached
herewith and incorporated by reference.
Landlord warrants that Tenant's current operation does
not require governmental approval to share lab and
office space with Serex; should the operation of tenants
business change, or governmental regulations change so
as to require governmental approvals these and any other
associated costs that are solely caused by tenant, shall
be at Tenant's sole cost and expense.
Landlord shall at Landlords expense construct a full
wall to separate the laboratory areas from the common
office and traffic areas, a wall to separate the office
area and demolish the wall directly in front of the
front door entrance thereby creating a hallway as shown
in the accompanying diagram. Landlord shall install
locks so as to make Elites offices and laboratory areas
securable, according to the plan attached herewith.
Landlord will remove safe from laboratory office to a Serex office.
Tenant shall have access to heating and air conditioning
on weekends and nights and shall exercise care to turn
these on and off in a prudent fashion.
It is understood that Landlord herein is the Tenant of
the entire premises at 230 West Passaic Street, Maywood,
New Jersey pursuant to a written lease ("the prime
lease") dated August 21, 1991 with Thomas E. Davis and
Judith F. Davis ("the prime landlord"). The Landlord
herein represents that it has the authority to enter
into this Lease and shall deliver to the Tenant herein
the consent of the Prime landlord to the within lease.
Tenant herein shall be given notice of any tenant
default in the Prime Lease and will be given the
opportunity, within thirty (30) days after notice to
cure said default.
Tenant shall have two (2) reserved parking spaces
located near the entrance located at the northeast
corner of the building and an additional 10 spaces in
the rear of the building. If Tenant desires to mark
said spaces as being reserved for its exclusive use,
Tenant may, at its sole cost and expense and in
compliance with all governmental requirements and
limitations, install signage at said spaces so
indicating.
Tenant acknowledges that smoking is prohibited in the
common areas and the balance of the building of which
the demised premises form a part and that said
prohibition is essential to the operations of the
Landlord and other tenants. Accordingly Tenant agrees
to monitor the activities of its agents, employees and
invitees so that this prohibition shall be complied
with.
Landlord reserves the right to establish uniform sign
and window treatment requirements for all tenants. No
sign shall be installed by the Tenant except upon first
obtaining any and all required governmental approvals
and the prior written consent of the Landlord, which
shall not be unreasonably withheld. Tenants name will e
on main building sign on lawn. Additional Tenant
signage costs shall be the responsibility of the Tenant.
Tenant and its employees, agents, contractors, invitees
or representatives shall not process, store, handle,
generate, spill, manufacture, bury, discharge or treat
any Hazardous Material (as defined by any governmental
statute, law, rule, regulation, ordinance, order,
decree, or interpretation now or hereafter in effect) at
the demised premises in a manner not consistent with
governmental regulations. Tenant shall, at Tenant's own
cost and expense, comply with all such governmental
environmental laws and regulations and shall keep and
maintain the demised premises free from leaks or spills
or contamination of Hazardous Materials. Tenant shall
indemnify, defend and save harmless the landlord from
all fines, suits, procedures, claims actions of any kind
and all losses, damages and expenses (including, without
limitation, attorneys' fees) arising out of a breach by
the Tenant of any of the aforesaid representations by
the Tenant
In the event of any inconsistency between this Rider and
the printed lease to which it is attached, the
provisions of this Rider shall govern.
Signed this 7th day of September, 1993.
[ ] (Landlord)
By: __________________________________
Elite Laboratories, Inc.
By: Atul M. Mehta
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public
accountants, we hereby consent to the use of
our reports (and to all references to our
firm) included in or made a part of this registration statement.
GOLDMAN & GITTELMAN, P.C.
Maywood, New Jersey
January 29, 1998
