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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
------------------------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended to
Commission File Number: 333-45241
ELITE PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3542636
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
165 Ludlow Avenue, Northvale, New Jersey 07647
(Address of principal executive offices) (Zip Code)
(201)750-2646
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [x] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the issuer has filed all documents and reports required to be
filed by Sections 12, 13 or 15 (d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the issuer's common stock as of September 30, 1999 is 8,555,615
</TABLE>
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
INDEX
Page No.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Form 10-QSB 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II OTHER INFORMATION 10
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security-Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
SIGNATURES 11
-2-
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
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(UNAUDITED)
September 30,
1999 1998
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $4,667,472 $2,594,338
Consulting and test fees receivable --- ---
Prepaid expenses and other current assets 36,961 42,891
------ ------
Total current assets 4,704,422 2,637,229
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 1,864,035 1,211,093
OTHER ASSETS:
Deposits and other assets 340,538 9,000
Restricted Cash 1,975,603 ---
EDA bond offering costs - net of accumulated amortization 192,485 ---
Patents and Trademarks, net of accumulated amortization 17,057 18,518
------ ------
$9,094,151 $3,875,840
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capitalized lease obligation $20,194 $42,331
Accounts payable and accrued expenses 163,893 15,104
Current portion of EDA Bond 115,000 ---
------- ----------
Total current liabilities 299,087 57,435
ERA BOND, net of current portion 2,885,000 ---
CAPITALIZED LEASE OBLIGATION, net of current portin --- 26,411
----------- ------
Total liabilities 3,184,087 83,846
--------- ------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value; Authorized - 25,000,000 shares
Issued and outstanding - 8,555,516 and 7,237,613 shares, respectively 85,556 72,376
Additional paid-in capital 11,369,484 6,821,405
Accumulated deficit (5,544,976) (3,101,787)
----------- -----------
Total stockholders' equity 5,910,064 3,791,994
--------- ---------
$9,094,151 $3,875,840
========== ==========
The accompanying notes are an integral part of the consolidated
financial statements.
-3-
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDEDSIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------
1999 1998 1999 1998
---------------------- ---------------------
REVENUES:
Consulting and test fees 215 --- 908 4,222
----------- ---------- --- -----
Total revenues 215 --- 908 4,222
----------- ---------- --- -----
OPERATING EXPENSES:
Research and development 542,479 273,436 936,955 481,684
General and administrative 198,315 169,804 574,552 299,120
Depreciation and amortization 18,523 6,324 35,972 12,684
------ ----- ------ ------
759,317 449,564 1,547,479 793,442
------- ------- --------- -------
LOSS FROM OPERATIONS (759,102) (449,564) (1,546,571) (789,220)
--------- --------- ---------- ---------
OTHER INCOME (EXPENSES):
Interest income 42,912 36,745 62,431 88,785
Interest expense (1,196) (4,472) (2,195) (4,593)
------- ------- ------- -------
41,716 32,273 60,236 84,192
------ ------ ------ ------
LOSS BEFORE PROVISION FOR INCOME TAXES (717,386) (417,291) (1,486,335) (705,028)
-------- --------- ----------- ---------
PROVISION FOR INCOME TAXES --- --- --- ---
--- --- --- ---
NET LOSS $ (717,386) $ (417,291) $(1,485,335) $ (705,028)
=========== =========== ============ ===========
NET LOSS PER COMMON SHARE $ (0.08) $ (0.08) $(0.19) $ (0.10)
======== ======== ======= ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 8,520,037 7,237,613 7,986,838 7,237,613
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
-4-
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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SIX MONTHS ENDED
SEPTEMBER 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,486,335) $ (705,028)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation 34,375 12,000
Amortization of intangibles 1,777 648
Changes in assets and liabilities:
Consulting and test fees receivable --- 25,000
Prepaid expenses and other current assets 15,644 (30,924)
Accounts payable 19,940 (25,390)
Accrued expenses and other current liabilities (56,510) ---
-------- -------------
NET CASH USED IN OPERATING ACTIVITIES (1,471,109) (723,694)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (648,172) (992,555)
Payment of deposit for property and equipment (144,000) ---
Payments for Patent Filings --- (950)
Restricted Cash (1,975,603) ---
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (2,767,775) (993,505)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of NJ Economic Development
Authority (EDA) Bonds 3,000,000 ---
Payments of offering costs in connection with issuance of EDA Bonds (193,560) ---
Proceeds from issuance of common stock and warrants
in connection with private placement 4,462,500 ---
Payments of offering costs in connection with private placement (10,000) (15,000)
Proceeds from issuance of common stock and warrants 114,800 ---
Principal Payments on Capital Lease Obligation (26,827) (20,610)
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 7,346,913 (35,610)
--------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS 3,108,029 (1,752,809)
CASH AND CASH EQUIVALENTS - beginning 1,559,443 4,347,147
---------- ---------
CASH AND CASH EQUIVALENTS - ending $ 4,667,472 $ 2,594,338
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 1,196 $ 4,593
Cash paid for income taxes 200 200
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
-5-
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO FORM 10-QSB
SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The information in this Form 10-QSB includes the results of operations of
Elite Pharmaceuticals, Inc. ("the Company") and its wholly-owned
subsidiary, Elite Laboratories, Inc. ("Elite"), for the six months ended
September 30, 1999 and 1998. The data is unaudited, but includes all
adjustments including the elimination of intercompany accounts and
transactions which are, in the opinion of management, necessary for a
fair presentation of the interim periods presented.
The accounting policies utilized in the preparation of this Form 10-QSB are
the same as those set forth in the Company's Form 10K-SB at March 31,
1999 and should be read in conjunction with the disclosures presented
therein.
All information in this Form 10-QSB has been adjusted to reflect a one-for-two
reverse stock split on March 30, 1998.
The Company does not anticipate being profitable for fiscal year 2000,
therefore a provision for income tax was not established for the six
months ended September 30, 1999.
This quarterly report may contain forward-looking statements which involve
certain risks and uncertainties. Important factors could arise which
could cause the Company's operating results to differ materially from
those contained in any forward looking statement.
NOTE 2 - EARNINGS PER SHARE
Earningsper share are based on the weighted average number of shares
outstanding during each period presented. The Company has adopted FAS
128, "Earnings Per Share" and has restated prior periods to comply with
the provisions of this pronouncement. Common stock equivalents have not
been included as their effect would be antidilutive.
NOTE 3 - PURCHASE OF BUILDING
In May 1998, the Company closed on a contract to purchase a 15,000
square foot building to house its new office, laboratory and
manufacturing facility in Northvale, New Jersey. The purchase price
was $1,050,000 plus closing costs of $22,123.
-6-
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO FORM 10-QSB
SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
NOTE 4 - CHANGES IN AUTHORIZED COMMON SHARES
In May 1998, the Company increased the authorized common shares, par
value $ .01 to 25,000,000.
NOTE 5 - STOCKHOLDER'S EQUITY
Private Placement Offering
In a private placement offering dated May 17, 1999, the Company
raised $4,462,500 consisting of 12.75 units; each unit consisting of
100,000 shares of common stock of the Company and 50,000 warrants, each
warrant entitling the holder to purchase one share of common
stock at an exercise price of $5.00 per share during the five year
period commencing with the date of closing of the private placement
memorandum (June 16, 1999). The price per unit was $350,000. The
Company issued 1,275,000 shares of common stock and 637,500 warrants
to purchase common stock, at an exercise price of $5.00 per share.
The Company raised net proceeds of $4,452,500 from the private
placement after legal fees of $10,000.
NOTE 6 -BOND FINANCING OFFERING
On September 2, 1999, the Company completed the issuance of tax exempt
bonds by the New Jersey Economic Development Authority. The aggregate
principal proceeds of the fifteen year term bonds were $3,000,000. The
proceeds, net of offering costs of $60,000, are being used by the
Company to refinance the land and building it currently owns, and for
the purchase of certain manufacturing equipment and related building
improvements.
Offering costs in connection with the bond issuance totaled $193,560,
including underwriter fees equal to $90,000 (three percent (3%) of the
par amount of the bonds).
The bonds are collateralized by a first mortgage lien on the
building which includes property and equipment.
-7-
<PAGE>
ELITE PHARMACEUTICALS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SIX MONTH PERIOD ENDED SEPTEMBER 30, 1999 COMPARED TO
THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1998
Introduction
The Company has developed nine oral controlled release pharmaceutical products
to varying states of the development process.
Elite Labs has also conducted several research and development projects on
behalf of several large pharmaceuticals companies. These activities have
generated only limited revenue for Elite Labs to date.
Results of Consolidated Operations
The Company plans to focus its efforts on the following areas:(i) to receive FDA
approval for one or all nine of the oral controlled release pharmaceutical
products already developed, either directly or through other companies; (ii) to
commercially exploit these drugs either by licensure and the collection of
royalties, or through the manufacturing of tablets and capsules using the
formulations developed by the Company, and (iii) to continue the development of
new products and the expansion of its licensing agreements with other large
multinational pharmaceutical companies including contract research and
development projects.
Period Ended September 30, 1999 vs. Period Ended September 30, 1998
Elite's revenues for the periods ended September 30, 1999 were $908, a
decrease of $3,314 or approximately 78% over the comparable period of the prior
year. Net revenues primarily consisted of consulting and test fees of $908
(compared with $4,222 for the comparable period of the prior year).
General and administrative expenses for the period ended September 30,
1999 were $574,552, an increase of $275,432, or approximately 92% from the
comparable period of the prior year. The increase in general and administrative
expenses was substantially due to legal fees and consulting fees. General and
administrative expenses expressed as a percentage of revenues was approximately
63,277% for the period ended September 30, 1999 as compared to 7,085% for the
comparable period of the prior year.
-8-
<PAGE>
ELITE PHARMACEUTICALS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SIX MONTH PERIOD ENDED SEPTEMBER 30, 1999 COMPARED TO
THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1998
(CONTINUED)
Period Ended September 30, 1999 vs. Period Ended September 30, 1998 (Continued)
Research and development costs for the period ended September 30, 1999,
were $936,955, an increase of $455,281 or approximately 95% from the comparable
period of the prior year. The increase in research and development costs can be
attributed to increases in laboratory raw materials, supplies, payments to
clinical organizations for conducting biostudies on drug products developed by
the Company, and new hires. These increases have been made possible principally
because of the Company raising equity in its recent private placement offering
and incurring debt in connection with the issuance of New Jersey Economic
Development Authority (NJ EDA) Bonds, and reflects increased efforts to develop
drug release products and technology in accordance with management's plan of
operations.
Elite's net loss for period ended September 30, 1999 was $1,486,335 as
compared to $705,028 for the comparable period of the prior year. The increase
in the net loss was primarily due to increased internal research and development
costs, and general and administrative expenses.
Liquidity and Capital Resources
For the period ended September 30, 1999, net cash of $1,471,109 was
used in operating activities due to the Company's net loss of $1,485,335. For
the period ended September 30, 1998, net cash of $723,694 was used in operating
activities as a result of the Company's net loss of $705,028.
Forward Looking Statements
This report contains forward-looking statements that describe the Company's
business prospects. These statements involve risks and uncertainties including,
but not limited to, rapid technology changes, regulatory uncertainty, level of
demand for the Company's products and services, product acceptance, industry
wide competitive factors, and political, economic or other conditions.
Furthermore, market trends are subject to changes which could adversely affect
future results. Reference should be made to the Company's Prospectus for its
initial public offering declared effective on August 14, 1998, and the
supplements to the Prospectus dated August 19, 1998 and November 18, 1998, for
additional discussion concerning such risk factors.
-9-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
Subject to a confidential private offering memorandum dated
May 7, 1999, the Company offered 13 units ("units") of its
securities at $350,00 per unit. Each unit consists of 100,000
shares of common stock, $.01 par value and 50,000 Class A
Redeemable Callable Common Stock Purchase Warrants. Each
warrant entitles the holder to purchase one share of common
stock at an exercise price of $5.00 during the five-year
period commencing on the closing date of the offering. The
offering was conducted without registration under SEC
exemption afforded by Section 4(6) of the Securities Act and
Rule 506 of regulations promulgated thereunder. At the close
of the offering, the Company accepted subscriptions for 12.75
units, generating net proceeds of approximately $4,452,500
after legal and filing fees, of which $4,202,500 will be used
to fund working capital of the Company and the remaining
$250,000 will fund fees to advisors and consultants to the
Company. The Company offered the securities only to person it
believed after good faith investigation to be accredited
investors.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of the Company on September 3, 1999, the
shareholders voted to elect Harmon Aronson, Ph.D., Donald
Pearson and Atul M. Mehta as the directors of the Company.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27-Financial Data Schedule
(b) Reports on Form 8-K.
The company filed a Form 8-K on August 4, 1999, in
the form attached hereto.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ELITE PHARMACEUTICALS, INC.
Date: November 12 1999
By: /s/Atul M. Mehta
---------------------------------------------------
Atul M. Mehta
President & Chief Executive Officer
(Principal Executive Officer)
Date: November 12, 1999
By: /s/Mark I. Gittelman
---------------------------------------------------
Mark I. Gittelman
Treasurer
(Principal Financial & Accounting Officer)
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<ARTICLE> 5
<CIK> 0001053369
<NAME> ELITE PHARMACEUTICALS INC /DE?
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 4,667,472
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,704,433
<PP&E> 2,216,404
<DEPRECIATION> 352,369
<TOTAL-ASSETS> 9,094,151
<CURRENT-LIABILITIES> 299,087
<BONDS> 0
0
0
<COMMON> 85,556
<OTHER-SE> 5,824,508
<TOTAL-LIABILITY-AND-EQUITY> 9,094,151
<SALES> 908
<TOTAL-REVENUES> 908
<CGS> 0
<TOTAL-COSTS> 1,547,479
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,195
<INCOME-PRETAX> (1,486,335)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,486,335)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,486,335)
<EPS-BASIC> (.19)
<EPS-DILUTED> (.19)
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U.S. Securities And Exchange Commission
Washington, D.C. 20549
Form 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
ELITE PHARMACEUTICALS, INC.
....................................................................................................................
(Exact name of registrant as specified in its charter)
333-45241 22-3542636
....................................................................................................................
(Commission File Number) (I.R.S. Employer Identification No.)
....................................................................................................................
165 Ludlow Avenue, Northvale, New Jersey 07647
....................................................................................................................
(Address of principal executive office) (Zip Code)
(201) 750-2646
....................................................................................................................
Registrant's telephone number, including area code
....................................................................................................................
(Former Name or Former Address, if Changed Since Last Report)
</TABLE>
<PAGE>
................................................................................
Item 5. Other Events
The Company recently concluded a private placement of its securities
resulting in the issuance of 1,275,002 shares of its common stock and 637,501
warrants. The private placement resulted in net proceeds to the Company of
$4,452,500.
The information set forth in the press release issued by Elite
Pharmaceuticals, Inc. attached hereto as Exhibit 99.1, is incorporated herein by
reference.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
(c) Exhibits
99.1 Press release of Elite Pharmaceuticals, Inc. dated July 8,1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ELITE PHARMACEUTICALS, INC.
By:
Mark I. Gittelman, Treasurer
Date: August 4, 1999
<PAGE>
EXHIBIT INDEX
Item No.
99.1 Press release of Elite Pharmaceuticals, Inc. dated July 8, 1999.
3
<PAGE>
FOR IMMEDIATE RELEASE
ELITE CONCLUDES PRIVATE PLACEMENT OF ITS SECURITIES
July 8, 1999. Northvale, NJ Elite Pharmaceuticals, Inc. (OTC:BB ELIP) recently
raised $4,452,500 in a private placement of its securities. It intends to use
the bulk of the proceeds to fund working capital requirements, including
conducting clinical studies and product development with the object of obtaining
FDA approval. Elite also anticipates completing the issuance of tax-exempt bonds
by the New Jersey Economic Development Authority in the aggregate principal
amount of up to $3,000,000. Elite intends to apply the proceeds of the bond
financing to its new expanded facility in Northvale, New Jersey, to purchase
manufacturing equipment and qualify it to be a GMP facility by the FDA. This is
in keeping with Elite's goal of manufacturing pharmaceutical products in
sufficient quantities to seek FDA approval of drug products.
Elite Pharmaceuticals, Inc. through its wholly owned subsidiary is engaged in
the development of oral controlled release products such as delayed, sustained
or targeted release tablets and capsules. It has developed several products in
cardiovascular, anti-inflammatory and anti-diabetic therapeutic categories and
has undertaken contract development for some major pharmaceutical companies.
All statements other than statements of historical fact contained in this Press
Release are forward looking statements. Forward looking statements in this Press
Release generally are accompanied by words such as "intend," "anticipate,"
"believe," "estimate," "project," or "expect" or similar statements. Although
the Company 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 in the prospectus of ELIP. All forward looking statements in
this Press Release are expressly qualified in their entirety by the cautionary
statements in this paragraph.
Contact: Sharon Will, Investor Relations at 212-572-0791 or Fax 212-572-0764.
