<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from____________to_____________
Commission file number 0-20424
Hi-Tech Pharmacal Co., Inc.
New York 11-2638720
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organizations)
369 Bayview Avenue, Amityville, New York 11701
(Address of principal executive offices)
516 789-8228
----------------------------------
(Issuer's telephone number)
Not applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) 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 XX NO
-------- -------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 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
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock, $.01 Par Value - 4,475,707 shares as of September 11, 1996.
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INDEX
HI-TECH PHARMACAL CO.,INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed balance sheets--JULY 31, 1996 AND
APRIL 30, 1996.
Condensed statements of operations--THREE MONTH
PERIODS ENDED JULY 31, 1996 AND 1995.
Condensed statements of cash flows--THREE MONTH
PERIODS ENDED JULY 31, 1996 AND 1995.
Notes to condensed financial statements.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
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
2
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PART I. ITEM 1
HI-TECH PHARMACAL CO., INC.
CONDENSED BALANCE SHEETS (UNAUDITED)
JULY 31, APRIL 30,
1996 1996
---------- ------------
(unaudited) (From Audited
Financial
Statements)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,234,000 1,746,000
Accounts receivable, less allowances of 3,332,000 3,699,000
$175,000 at July 31, 1996 and $160,000
at April 30, 1996
Inventories 4,298,000 3,646,000
Income taxes receivable 330,000 207,000
Prepaid expenses and other receivables 225,000 272,000
------------ -----------
TOTAL CURRENT ASSETS 9,419,000 9,570,000
PROPERTY, PLANT AND EQUIPMENT -NET 10,478,000 10,598,000
OTHER ASSETS 96,000 66,000
------------ -----------
TOTAL ASSETS $19,993,000 20,234,000
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable: Bank $ 815,000 815,000
Current Portion - Long-term debt 576,000 599,000
Accounts payable and accrued expenses 2,959,000 2,992,000
------------ -----------
TOTAL CURRENT LIABILITIES 4,350,000 4,406,000
LONG-TERM DEBT 2,290,000 2,427,000
DEFERRED TAXES 230,000 230,000
SHAREHOLDERS' EQUITY
Preferred stock, par value $ .01 per share; - -
authorized 3,000,000 shares.
Common stock, par value $ .01 per share; 45,000 45,000
authorized 10,000,000 shares, issued and
outstanding 4,476,000 at July 31, 1996 and
4,472,0000 at April 30, 1996.
Additional capital 8,605,000 8,591,000
Retained earnings 4,473,000 4,535,000
------------ -----------
TOTAL SHAREHOLDERS' EQUITY 13,123,000 13,171,000
------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY $19,993,000 20,234,000
============ ===========
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
3
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HI-TECH PHARMACAL CO., INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED
JULY 31,
----------------------
1996 1995
---------- ---------
NET SALES $4,155,000 3,863,000
Cost of goods sold 3,021,000 2,363,000
---------- ---------
GROSS PROFIT 1,134,000 1,500,000
Selling, general, administrative 967,000 872,000
expense
Research & product development costs 239,000 138,000
Contract research (income) (44,000) (34,000)
Interest expense 86,000 30,000
Interest (income) (13,000) (21,000)
---------- ---------
Total 1,235,000 985,000
INCOME (LOSS) BEFORE INCOME TAXES (101,000) 515,000
Provision (benefit) for income taxes (40,000) 197,000
---------- ---------
NET INCOME (LOSS) $ (61,000) 318,000
---------- ---------
NET EARNINGS (LOSS)
PER COMMON SHARE $ (0.01) 0.07
========= =========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 4,474,000 4,468,000
=========== =========
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
4
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HI-TECH PHARMACAL CO., INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED
JULY 31,
-----------------------
1996 1995
------------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES $ (155,000) 788,000
CASH FLOWS FROM FINANCING ACTIVITIES
Mortgaged property - repayments (47,000) (47,000)
Repayments of equipment debt (113,000) (114,000)
Issuance of common stock 14,000 -
Loans from stockholders 0 (21,000)
--------- ---------
CASH FROM FINANCING ACTIVITIES (146,000) (182,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and
equipment and other assets (211,000) (217,000)
--------- ---------
CASH USED IN INVESTING ACTIVITIES (211,000) (217,000)
NET INCREASE (DECREASE) IN CASH (512,000) 389,000
Cash at beginning of the period 1,746,000 1,781,000
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,234,000 2,170,000
=========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest $ 82,000 102,000
Income taxes $ 82,000 -
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
5
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HI-TECH PHARMACAL CO., INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JULY 31, 1996
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended July 31,
1996 are not necessarily indicative of the results that may be expected for the
year ended April 30, 1997. For further information, refer to the financial
statements and footnotes thereto for the year ended April 30, 1996 on Form 10K-
SB.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, Rose Laboratories Inc. In consolidation, all
significant intercompany transactions and balances have been eliminated.
CONTRACT RESEARCH INCOME
Contract research income is recognized as work is completed and as billable
costs are incurred. In some cases, contract research income is based on
attainment of certain designated milestones.
NET EARNINGS (LOSS) PER SHARE
Net earnings (loss) per share is computed based on the weighted average number
of common shares and equivalents outstanding for each period. The effect of
outstanding options and warrants is computed, if dilutive, using the "treasury
stock" method.
INVENTORIES
The components of inventory consist of the following:
JULY 31, APRIL 30,
1996 1996
---------- ----------
Raw materials $2,530,000 2,380,000
Finished products and work in process 1,768,000 1,266,000
---------- ----------
$4,298,000 3,646,000
========== ==========
6
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HI-TECH PHARMACAL CO., INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JULY 31, 1996
FIXED ASSETS
The components of net plant and equipment consist of the following:
JULY 31, APRIL 30,
1996 1996
----------- -----------
Land and Building $ 4,438,000 4,342,000
Machinery and equipment 8,830,000 8,751,000
Transportation equipment 13,000 13,000
Computer equipment 307,000 305,000
Furniture and fixtures 100,000 96,000
----------- -----------
13,688,000 13,507,000
Depreciation and amortization 3,210,000 2,909,000
----------- -----------
TOTAL FIXED ASSETS $10,478,000 10,598,000
=========== ===========
WORKING CAPITAL REVOLVING LOAN
The Company has a working capital credit line with a bank of $2,000,000 which
expires December 1996 at the bank's prime interest rate, 8.25% at July 31, 1996.
7
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HI-TECH PHARMACAL CO., INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JULY 31, 1996
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The components of accounts payable and accrued expenses consist of the
following:
JULY 31, APRIL 30,
1996 1996
---------- ---------
Accounts payable $2,350,000 2,269,000
Accrued expenses 609,000 723,000
---------- ---------
$2,959,000 2,992,000
========== =========
CONTINGENCIES AND OTHER MATTERS
For the quarter ended July 31, 1996 the Company had shipments to Zenith Goldline
Laboratories, an Ivax Company, which accounted for approximately 21% of the
shipments during the quarter, up from 11% during the quarter ended July 31,
1995. This customer represented approximately 34% of the outstanding trade
receivables at July 31, 1996.
LEASED FACILITY
On July 18, 1996, the Company executed a lease for a 50,000 square foot
building in Amityville, New York. The lease commenced August 1, 1996 and expires
January 31, 2003. The initial annual base rent is $157,000 and is payable in
monthly installments of $13,125. The Company is responsible for all operating
costs of this facility and has the option to purchase the premises at the end of
the lease for $1,300,000.
SUBSEQUENT EVENTS
During August 1996, the Company received ANDA approval from the FDA for
Promethazine Hydrocloride and Dextromethorphan Hydrobromide Syrup, 6.25 mg/15mg
per 5ml, the generic form of Phenergan with Dextromethorphan Syrup 6.25 mg/15mg
per 5ml manufactured by Wyeth Ayerst Laboratories, Inc. In addition, the Company
received ANDA approval from the FDA for Thhioridazine Hydrochloride Oral
Solution USP (Concentrate), 30 mg/ml, equivalent to Mellaril Oral Solution,
30 mg/ml manufactured by Sandoz Pharmaceuticals Corp.
8
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
JULY 31, 1996
For the three months ended July 31, 1996 net sales increased by $ 292,000 , or
8% compared to the fiscal 1995 respective period. Total three months net sales
were $4,155,000 for the period ended July 31, 1996. Rugby Laboratories,
previously the Company's largest customer, accounted for approximately 6% of the
shipments during the quarter, down from 18% during respective fiscal 1995
quarter. However, shipments of new product during the fiscal quarter mitigated
the decline in sales to Rugby Laboratories. For the quarter ended July 31, 1996
Zenith Goldline Laboratories accounted for approximately 21% of the shipments
during the quarter, up from 11% during the quarter ended July 31, 1995. This
customer represented approximately 34% of the outstanding trade receivables at
July 31, 1996.
Health Care Products division for the three months ended July 31, 1996 and 1995
had sales of $164,000 and $420,000, respectively. Rose Laboratories had sales of
$194,000 and $309,000 respectively for the three months ended July 31, 1996 and
1995.
Cost of sales, as a percentage of net sales, increased from 61.2% to 72.7% for
the three months ended July 31, 1996 compared to the three months ended July 31,
1995. This increase was principally the result of the costs in excess of
revenues associated with the sterile manufacturing facility including Labor
$90,000; Depreciation $103,000; Factory supplies and expense $127,000. As the
unit volume manufactured in the sterile facility increases such excess costs
will diminish.
Research and product development costs for the three months ended July 31, 1996
increased $101,000 or 73% compared to the fiscal 1995 respective period, as a
result of the Company's efforts to develop new products.
Selling, general and administrative expenses, as a percentage of net sales,
increased for the three months to 23% from 22.5%. Such percentage increases
resulted from increased selling and general expenses without sales increasing in
the same proportion.
Net income (loss) for the three months ending July 31, 1996 and 1995 were
$ (61,000) and $318,000 respectively a decrease of $379,000 , because of the
factors noted above.
MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES
The Company's operations are financed principally by cash flow from operations.
During the quarter ended July 31, 1996, working capital decreased to $ 5,069,000
from $ 5,164,000 at April 30, 1996. During the quarter ended July 31, 1996 the
Company invested $ 181,000 in fixed assets.
The Company has constructed a sterile manufacturing facility for the purpose of
manufacturing ophthalmic and otic products. This facility and the required
systems and procedures were completed in the last three months of Fiscal 1996.
Although the Company has not previously manufactured sterile products, the
Company believes that it will be able to operate this facility profitably over
the long term. However, the Company will incur additional expense over the
initial start-up period.
The Company's management believes that its financial resources, operating
revenue and credit line will be sufficient to meet its expected working capital
requirements.
9
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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
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
HI-TECH PHARMACAL CO.,INC.
(REGISTRANT)
Date September 16, 1996
By:
/S/ BERNARD SELTZER
___________________________________________
Bernard Seltzer,
(President and Chief Executive Officer)
Date September 16, 1996
By:
/S/ ARTHUR S. GOLDBERG
__________________________________________
Arthur S. Goldberg
(Vice President - Finance and Chief Accounting Officer)
10
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<CURRENT-LIABILITIES> 4350
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<COMMON> 45
<OTHER-SE> 13078
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