ELITE PHARMACEUTICALS INC /DE/
10QSB, 1999-02-16
PHARMACEUTICAL PREPARATIONS
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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                    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)
<TABLE>
<CAPTION>
<S>                                                                                      <C>

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
 </TABLE>


                   ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY






                                      INDEX
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<CAPTION>
<S>                                                                                                 <C>    


                                                                                                 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
</TABLE>











<PAGE>


                   ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
<S>                                                                                     <C>               <C>

                                                                                           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.
</TABLE>


<PAGE>







                   ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
<S>                                                                     <C>               <C>              <C>               <C>    

                                                                       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.
</TABLE>

<PAGE>


                   ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
<S>                                                                                                        <C>               <C>    

                                                                                                          NINE MONTHS ENDED
                                                                                                                DECEMBER 31,
                                                                                                  ------------------ ---------------
                                                                                                           1998              1997
                                                                                                  ------------------ ---------------
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.
</TABLE>


<PAGE>



                   ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

                              NOTES TO FORM 10-QSB

                  NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997
                                   (UNAUDITED)
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<CAPTION>
<S>            <C> 


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.
</TABLE>











                   ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY

                              NOTES TO FORM 10-QSB

                  NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997
                                   (UNAUDITED)
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<CAPTION>
<S>           <C>    


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.

</TABLE>
















                           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
<TABLE>
<CAPTION>
<S>     <C>    





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).
 </TABLE>


                           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)
<TABLE>
<CAPTION>
<S>     <C>   



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)

</TABLE>





























WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<TABLE> <S> <C>

<ARTICLE>5
         
<S> 
                                                                         <C>
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
        

</TABLE>


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