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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 June 30, 2000
---------------------------------------------
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)
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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 June 30,
2000 is 8,908,804
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
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INDEX
Page No.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 2000 and
June 30, 1999 (unaudited) 3
Consolidated Statements of Operations for the three months
ended June 30, 2000 and June 30, 1999 (unaudited) 4
Consolidated Statements of Cash Flows for the three months
ended June 30, 2000 and June 30, 1999 (unaudited) 5
Notes to Form 10-QSB 6 - 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8 - 9
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
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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June 30, March 31,
___________ ___________
2000 2000
___________ ___________
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,586,558 $ 3,937,217
Restricted cash 382,836 571,730
Prepaid expenses and other current assets 39,149 338,670
---------- ----------
Total current assets 4,008,543 4,847,617
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 2,571,486 2,479,327
INTANGIBLE ASSETS - net of accumulated amortization 28,979 29,564
OTHER ASSETS:
Deposits 1,315,710 1,315,710
Restricted cash 300,000 300,000
EDA Bond offering costs, net of accumulated amortization 186,868 190,165
-------- --------
8,411,586 9,162,383
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of EDA Bonds 115,000 115,000
Accounts payable and accrued expenses 198,095 597,780
-------- -------
Total current liabilities 313,095 712,780
EDA BONDS - net of current portion 2,885,000 2,885,000
--------- ---------
3,198,095 3,597,780
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value;
Authorized - 25,000,000 shares
Issued and outstanding - 8,908,804 and
8,855,519 shares, respectively 89,088 88,555
Additional paid capital 12,749,008 12,511,080
Accumulated deficit (7,624,605) (7,035,032)
----------- -----------
Total stockholders' equity 5,213,491 5,564,603
$ 8,411,586 $ 9,162,383
=========== ===========
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)
THREE MONTHS ENDED
JUNE 30,
______________________________________
2000 1999
_________________ _________________
REVENUES
Consulting and test fees $ --- $ 693
_________ _________
Total revenues --- 693
--- ---
_________ _________
OPERATING EXPENSES:
Research and development 374,008 394,476
General and administrative 158,016 376,237
Depreciation and amortization 58,980 17,449
_________________ ________________
591,004 788,162
_________________ ________________
LOSS FROM OPERATIONS (591,004) (787,469)
_________________ _________________
OTHER INCOME (EXPENSES):
Interest income 60,113 19,519
Interest expense (58,125) (999)
__________________ _________________
1,988 18,520
__________________ _________________
LOSS BEFORE PROVISION FOR INCOME TAXES (589,016) (768,949)
PROVISION FOR INCOME TAXES (555) ---
---
_________________ _________________
NET LOSS $ (589,571) $ (768,949)
========== ==========
$ $
NET LOSS PER COMMON SHARE (0.07) (0.10)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 8,882,162 7,447,778
========= =========
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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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THREE MONTHS ENDED
JUNE 30,
_______________________________________
2000 1999
___________________ __________________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (589,571) $ (768,949)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation 55,098 17,098
Amortization of intangibles 3,882 351
Changes in assets and liabilities:
Prepaid expenses and other current assets 299,521 19,602
Accounts payable, accrued expenses and other current liabilities (399,687) (154,118)
---------------- ----------------
NET CASH USED IN OPERATING ACTIVITIES (630,757) (886,016)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (147,257) (410,313)
Restricted Cash 188,894 ---
------- ---
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 41,637 (410,313)
------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock and warrants 238,461 ---
Proceeds from issuance of common stock and warrants in connection
with private placement --- 4,418,750
__________ _________
NET CASH PROVIDED BY FINANCING ACTIVITIES 238,461 4,418,750
_________ _________
NET CHANGE IN CASH AND CASH EQUIVALENTS (350,659) 3,122,421
CASH AND CASH EQUIVALENTS - beginning 3,937,217 1,559,443
___________ ___________
CASH AND CASH EQUIVALENTS - ending $ 3,586,558 $ 4,681,864
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ --- $ 1,142
Cash paid for income taxes 555 ---
NONCASH FINANCING ACTIVITIES
Issuance of Stock Subscriptions $ --- $ 43,750
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
THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
---------------------
The information in this Form 10-QSB includes the results of
operations of Elite Pharmaceuticals, Inc. ("the Company") and its
wholly-owned subsidiary, Elite Laboratories, Inc. ("Elite"), for
the three months ended June 30, 2000 and 1999. 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, 2000 and should be read in conjunction with
the disclosures presented therein.
The Company does not anticipate being profitable for fiscal year
2001, therefore a current provision for income tax was not
established for the three months ended June 30, 2000.
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.
NOTE 3 - COMMITMENTS
-----------
On October 1, 1998, the Company entered into a 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.
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As compensation for the consultant's 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.
On June 30, 1999, this consulting agreement was amended to
provide for payment of a monthly consulting fee of $5,000,
commencing on July 1, 1999 and terminating on December 1, 2000.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO FORM 10-QSB
THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
NOTE 4 - STOCKHOLDER'S EQUITY
--------------------
Private Placement Offering
--------------------------
In a private placement offering dated May 17, 1999, the Company
raised $4,462,500 from the sale of 12.75 units of its securities;
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 5 - 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
$197,860, including the $60,000 mentioned above which were paid
from bond proceeds. Offering costs included underwriter fees
equal to $90,000 (three percent (3%) of the par amount of the
bonds).
The bonds are collateralized by a first lien on the building
which includes property and equipment. Several restricted cash
accounts are maintained in connection with the issuance of these
bonds. These include amounts restricted for payments of bond
principal and interest, for the refinancing of the land and
building the Company currently owns, for the purchase of certain
manufacturing equipment and related building improvements as well
as for the maintenance of a $300,000 Debt Service Reserve. All
restricted amounts other that the $300,000 Debt Service Reserve
are expected to be expended within twelve months and are
therefore categorized as current assets.
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NOTE 6 - MEMORANDUM OF UNDERSTANDING
---------------------------
On June 1, 2000, the Company entered into a Memorandum of
Understanding with Inabata America Corporation ("Inabata"), an
international trading company which markets specialty chemicals
throughout the world in several industry segments including the
pharmaceutical industry. The purpose of the Memorandum was to
agree that the two parties would explore the possibility of
entering into a joint venture for the purpose of marketing Elite
products in Japan through the efforts of Inabata. The parties
will review each other's capabilities and obtain information
concerning regulatory procedures, price restrictions and
marketing information for the Japanese markets. The parties will
perform other due diligence investigations and analyses.
ELITE PHARMACEUTICALS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED JUNE 30, 2000 COMPARED TO
THE THREE MONTH PERIOD ENDED JUNE 30, 1999
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 June 30, 2000 vs. Period Ended June 30, 1999
Elite's revenues for the periods ended June 30, 2000 were $0, a
decrease of $693 or approximately 100% over the comparable period of the prior
year. Net revenues consisted of consulting and test fees of $693 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
THREE MONTH PERIOD ENDED JUNE 30, 2000 COMPARED TO
THE THREE MONTH PERIOD ENDED JUNE 30, 1999
(CONTINUED)
Period Ended June 30, 2000 vs. Period Ended June 30, 1999 (Continued)
General and administrative expenses for the period ended June 30, 2000
were $158,016, a decrease of $218,221, or approximately 58% from the comparable
period of the prior year. The decrease in general and administrative expenses
was substantially due to a decrease in consulting fees.
Research and development costs for the period ended June 30, 2000, were
$374,008, a decrease of $20,468 or approximately 5% from the comparable period
of the prior year. Research and development costs have remained constant with
the comparable period of the prior year and are comprised of expenditures for
laboratory raw materials, supplies, payments to clinical organizations for
conducting biostudies on drug products developed by the Company, and new hires.
These expenditures have been made possible principally because of the Company
raising equity in its May 1999 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 June 30, 2000 was $589,571 as
compared to $768,949 for the comparable period of the prior year. The decrease
in the net loss was primarily due to the decrease in general and administrative
expenses.
Material Changes in Financial Condition
The Company's working capital (total current assets less total current
liabilities), which was $4,134,837 as of March 31, 2000, decreased to $3,695,448
as of June 30, 2000. The decrease in working capital is due to the Company's
utilization of EDA Bond proceeds to purchase manufacturing and laboratory
equipment and related building improvements.
The Company experienced negative cash flow from operations of
$630,757 for the period ended June 30, 2000 primarily due to the Company's net
loss of $589,571.
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.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 - Financial Data Schedule
(b) Reports on Form 8-K No report on Form 8-K has been
filed during quarter ending June 30, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ELITE PHARMACEUTICALS, INC.
Date: August 10, 2000 By: /s/Atul M. Mehta
---------------------------------------------------
Atul M. Mehta
President & Chief Executive Officer
(Principal Executive Officer)
Date: August 10, 2000 By: /s/Mark I. Gittelman
---------------------------------------------------
Mark I. Gittelman
Chief Financial Officer and Treasurer
(Principal Financial & Accounting Officer)
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