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 December 31, 1998
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)
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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 [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the issuer's common stock as of December 31,
1998 is 7,237,613
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
INDEX
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Page No.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 1998 and
December 31, 1997 (unaudited) 3
Consolidated Statements of Operations for the nine months
ended December 31, 1998 and December 31, 1997 (unaudited) 4
Consolidated Statements of Cash Flows for the nine months
ended December 31, 1998 and December 31, 1997 (unaudited) 5
Notes to Form 10-QSB 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II OTHER INFORMATION 10
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security-Holders
Item 5 Other Information
Item 6 Exhibits and Reports or Form 8-K
SIGNATURES 11
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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December 31,
------------------ ------------------
1998 1997
------------------ ------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,088,291 $ 4,854,942
Consulting and test fees receivable --- 8,000
Prepaid expenses and other current assets
21,936 5,816
Total current assets 2,110,227 4,868,758
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 1,432,033 9,945
INTANGIBLE ASSETS - net of accumulated amortization 25,529 17,393
OTHER ASSETS:
Deposits and other assets
--- 18,250
$ 3,567,789 $ 4,914,346
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capitalized lease obligation $ 42,331 $ ---
Accounts payable and accrued expenses 5,790 ---
Related party notes payable
--- ---
Total current liabilities
48,121 0
CAPITALIZED LEASE OBLIGATION - net of current portion
15,693 ---
Total liabilities
63,814 0
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value;
Authorized - 25,000,000 shares
Issued and outstanding - 7,237,613 shares 72,376 47,876
Additional paid-in capital 6,817,202 6,950,631
Accumulated deficit (3,385,603) (2,084,161)
Total stockholders' equity 3,503,975 4,914,346
$ 3,567,789 $ 4,914,346
The accompanying notes are an integral part of the consolidated financial statements.
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
---------------------------------- ---------------------------------
1998 1997 1998 1997
----------------- ---------------- ----------------- ---------------
REVENUES:
Licensing fees $ 150,000 $ $ 150,000 $ 100,000
---
Contract research and development --- --- --- ---
Consulting and test fees
--- 1,000 4,222 2,731
Total revenues 150,000 154,222 102,731
1,000
OPERATING EXPENSES:
Research and development 281,526 156,325 763,200 339,887
General and administrative 174,987 97,080 474,107 211,073
Depreciation and amortization 18,972
6,324 8,925 26,775
462,837 262,330 1,256,279 577,735
LOSS FROM OPERATIONS (312,837) (261,330) (1,102,057) (475,004)
OTHER INCOME (EXPENSES):
Interest income 30,742 8,806 119,527 8,966
Interest expense
(1,720) (9,956) (6,313) (9,956)
29,022 113,214
(1,150) (990)
LOSS BEFORE PROVISION FOR INCOME TAXES (283,815) (262,480) (988,843) (475,994)
PROVISION FOR INCOME TAXES
--- --- --- ---
NET LOSS $ (283,815) $ (262,480) $ (988,843) $ (475,994)
NET LOSS PER COMMON SHARE $ (0.04) $ (0.05) $ (0.14) $ (0.10)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,237,613 4,787,613 7,237,613 4,787,613
The accompanying notes are an integral part of the consolidated financial statements.
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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NINE MONTHS ENDED
DECEMBER 31,
------------------ ---------------
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss to cash used in operating activities: $ (988,843) $ (475,994)
Depreciation and Amortization 18,972 26,775
Changes in assets and liabilities:
Consulting and test fees receivable 25,000 4,208
Prepaid expenses and other current assets (9,969) 1,889
Accounts payable (13,670) 8,457)
Accrued expenses and other current liabilities (21,034)
---
NET CASH USED IN OPERATING ACTIVITIES ( 989,544) (451,579)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,219,495) ---
Payments for Patent Filings (8,286) ---
Proceeds from Security Deposits
9,000 (2,100)
NET CASH USED IN INVESTING ACTIVITIES (1,218,781)
(2,100)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of notes payable - related parties --- (100,000)
Proceeds from issuance of common stock and warrants --- 5,317,859
Payments of offering costs in connection with private placement (19,203) --
Principal Payments on Capital Lease Obligation (31,328)
---
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (50,531) 5,217,859
NET CHANGE IN CASH AND CASH EQUIVALENTS (2,258,856) 4,764,180
CASH AND CASH EQUIVALENTS - beginning 4,347,147
90,762
CASH AND CASH EQUIVALENTS - ending $ 2,088,291 $ 4,854,942
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ $
6,313 9,956
Cash paid for income taxes 200 200
The accompanying notes are an integral part of the consolidated financial statements.
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO FORM 10-QSB
NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
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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 nine months ended December 31, 1998 and 1997. The data is
unaudited, but includes all adjustments including the elimination
of intercompany accounts and transactions which are, in the
opinion of management, necessary for a fair presentation of the
interim periods presented.
The accounting policies utilized in the preparation of this Form
10-QSB are the same as those set forth in the Company's SB-2
registration statement at March 31, 1998 and should be read in
conjunction with the disclosures presented therein.
Certain prior period balances have been reclassified to conform
to the current period classification.
All information in this Form 10-QSB has been adjusted to reflect
a two-for-one stock split on August 21, 1997 and a one-for-two
reverse stock split on March 30, 1998.
The Company does not anticipate being profitable for fiscal year
1999, therefore a provision for income tax was not established
for the nine months ended December 31, 1998.
This quarterly report may contain forward-looking statements
which involve certain risks and uncertainties. Important factors
could arise which could cause the Company's operating results to
differ materially from those contained in any forward looking
statement.
NOTE 2 - EARNINGS PER SHARE
Earnings per share are based on the weighted average number of
shares outstanding during each period presented. The Company has
adopted FAS 128, "Earnings Per Share" and has restated prior
periods to comply with the provisions of this pronouncement.
Common stock equivalents have not been included as their effect
would be antidilutive.
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO FORM 10-QSB
NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
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NOTE 3 - PURCHASE OF BUILDING
In May 1998, the Company closed on a contract to purchase a
15,000 square foot building to house its new office, laboratory
and manufacturing facility in Northvale, New Jersey. The purchase
price was $1,050,000 plus closing costs of $22,123.
NOTE 4 - CHANGES IN AUTHORIZED COMMON SHARES
In May 1998, the Company increased the authorized common shares,
par value $ .01 to 25,000,000.
NOTE 5 - COMMITMENTS
On October 1,1998, the Company entered into an investment banking
firm consulting agreement with an investment banking firm
("Consultant"). The terms of the agreement provide for the
consultant to render various services to the Company relating to
financial and investment activities for a term of twenty four
months.
As compensation for the consultants services the Company shall
grant warrants to purchase 300,000 shares of the Company's common
stock at an exercise price of $6 per share. The warrants shall
vest at the rate of 50,000 warrants every ninety days after the
commencement of the agreement.
The agreement may be terminated by the Company at any time after
ninety days following the commencement date, upon thirty days
written notice.
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ELITE PHARMACEUTICALS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NINE MONTH PERIOD ENDED DECEMBER 31, 1998 COMPARED TO
THE NINE MONTH PERIOD ENDED DECEMBER 31, 1997
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Introduction
The Company has developed nine oral controlled release pharmaceutical
products to varying states of the development process. Elite Labs has granted an
option on a one of its products to a multinational company for the worldwide
market, however the agreement does not provide for any royalties or other
payments to Elite Labs unless certain conditions are met, which may or may not
occur.
Elite Labs has also conducted several research and development projects
on behalf of several large pharmaceuticals companies. These activities have
generated only limited revenue for Elite Labs to date.
Results of Consolidated Operations
The Company plans to focus its efforts on the following areas: (i) to
receive FDA approval for one or all 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.
To effectively achieve its goals, the Company has recently purchased an
office and laboratory facility in Northvale, New Jersey, and has moved its
operations to this facility. This facility is larger and better suited to
Elite's needs than its prior, leased, space, and will increase the space
available to conduct further research and development and scale-up, and possibly
for the eventual manufacturing of its products.
Period Ended December 31, 1998 vs. Period Ended December 31, 1997
Elite's revenues for the periods ended December 31, 1998 were $154,222,
a increase of $51,491 or approximately 50% over the comparable period of the
prior year. Net revenues primarily consisted of licensing fees of $150,000
(compared with $100,000 for the comparable period of the prior year).
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ELITE PHARMACEUTICALS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NINE MONTH PERIOD ENDED DECEMBER 31, 1998 COMPARED TO
THE NINE MONTH PERIOD ENDED DECEMBER 31, 1997
(CONTINUED)
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Period Ended December 31, 1998 vs. Period Ended December 31, 1997 (Continued)
General and administrative expenses for the period ended December 31,
1998 were $474,107, an increase of $263,034, or approximately 125% from the
comparable period of the prior year. The increase in general and administrative
expenses was substantially due to legal fees, consulting fees and new
hires.General and administrative expenses expressed as a percentage of revenues
was approximately 307% for the period ended December 31, 1998 as compared to
205% for the comparable period of the prior year.
Research and development costs for the period ended December 31, 1998,
were $763,200, an increase of $423,313 or approximately 125% from the comparable
period of the prior year.The increase in research and development costs can be
attributed to increases in laboratory raw materials, supplies, payments to
clinical organizations for conducting biostudies on drug products developed by
the Company, and new hires. These increases have been made possible principally
because of the Company raising equity in its recent private placement offering,
and reflects increased efforts to develop drug release products and technology
in accordance with management's plan of operations.
Elite's net loss for period ended December 31, 1998 was $988,843 as
compared to $475,994 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 December 31, 1998, net cash of $989,544 was used
in operating activities due to the Company's net loss of $988,843. For the
period ended December 31, 1997, net cash of $451,579 was used in operating
activities as a result of the Company's net loss of $475,994.
Forward Looking Statements
This report contains forward-looking statements that describe the Company's
business prospects. These statements involve risks and uncertainties including,
but not limited to, rapid technology changes, regulatory uncertainty, level of
demand for the Company's products and services, product acceptance, industry
wide competitive factors, and political, economic or other conditions.
Furthermore, market trends are subject to changes which could adversely affect
future results. Reference should be made to the Company's Prospectus for its
initial public offering declared effective on August 14, 1998, and the
supplement to the Prospectus dated August 19, 1998, for additional discussion
concerning such risk factors.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.7 - None
27 - Financial Data Schedule
(b) Reports on Form8-K No report on Form 8-K has been filed
during quarter ending December 31,1998.
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: February 10, 1998 By: /s/Atul M. Mehta
---------------------------------------------------
Atul M. Mehta
President & Chief Executive Officer
(Principal Executive Officer)
Date: February 10, 1998 By: /s/Mark I. Gittelman
---------------------------------------------------
Mark I. Gittelman
Chief Financial Officer and Treasurer
(Principal Financial & Accounting Officer)
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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ARTICLE 5 FDS FOR 3RD QUARTER 10-Q
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> OCT-1-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,088,291
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,110,227
<PP&E> 1,716,671
<DEPRECIATION> 284,638
<TOTAL-ASSETS> 3,567,789
<CURRENT-LIABILITIES> 48,121
<BONDS> 0
0
0
<COMMON> 72,376
<OTHER-SE> 3,431,599
<TOTAL-LIABILITY-AND-EQUITY> 3,567,789
<SALES> 154,222
<TOTAL-REVENUES> 154,222
<CGS> 0
<TOTAL-COSTS> 1,255,279
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,313
<INCOME-PRETAX> (988,843)
<INCOME-TAX> 0
<INCOME-CONTINUING> (988,843)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (988,843)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> 0
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