<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, 1997
[ ] 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.
______________________Delaware____________________________112638720_____________
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
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 - 4,513,000 shares as of September 11, 1997.
<PAGE>
INDEX
HI-TECH PHARMACAL CO.,INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed balance sheets--JULY 31, 1997 AND
APRIL 30, 1997.
Condensed statements of operations--THREE MONTH
PERIODS ENDED JULY 31, 1997 AND 1996.
Condensed statements of cash flows--THREE MONTH
PERIODS ENDED JULY 31, 1997 AND 1996.
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
<TABLE>
<CAPTION>
HI-TECH PHARMACAL CO., INC.
CONDENSED BALANCE SHEETS (UNAUDITED)
JULY 31, APRIL 30,
1997 1997
--------------- -------------
(unaudited) (From Audited
Financial
Statements)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,922,000 1,985,000
Accounts receivable, less allowances of
$175,000 at July 31, 1997 and $160,000
at April 30, 1997 3,196,000 4,034,000
Inventories 4,414,000 4,014,000
Prepaid expenses and other receivables 440,000 548,000
--------------- -------------
TOTAL CURRENT ASSETS 9,972,000 10,581,000
PROPERTY, PLANT AND EQUIPMENT -NET 10,087,000 10,106,000
OTHER ASSETS 173,000 119,000
--------------- -------------
TOTAL ASSETS $20,232,000 20,806,000
=============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable: Bank $ 815,000 815,000
Current Portion - Long-term debt 507,000 529,000
Accounts payable and accrued expenses 2,791,000 3,325,000
--------------- -------------
TOTAL CURRENT LIABILITIES 4,113,000 4,669,000
LONG-TERM DEBT 1,784,000 1,896,000
Deferred taxes 240,000 240,000
SHAREHOLDERS' EQUITY
Preferred stock, par value $ .01 per share;
authorized 3,000,000 shares - -
Common stock, par value $ .01 per share;
authorized 10,000,000 shares, issued and
outstanding 4,526,000 at July 31, 1997 and
at April 30, 1997 45,000 45,000
Additional capital 8,604,000 8,604,000
Retained earnings 5,497,000 5,352,000
Treasury stock, 13,500 shares of common
stock, at cost (51,000) -
--------------- -------------
TOTAL SHAREHOLDERS' EQUITY 14,095,000 14,001,000
--------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY $20,232,000 20,806,000
=============== =============
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
3
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<TABLE>
<CAPTION>
HI-TECH PHARMACAL CO., INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED
JULY 31,
----------------------
1997 1996
----------- ----------
<S> <C> <C>
NET SALES $4,708,000 4,155,000
Cost of goods sold 3,205,000 3,021,000
----------- ----------
GROSS PROFIT 1,503,000 1,134,000
Selling, general, and administrative
expense 1,040,000 967,000
Research & product development costs 179,000 239,000
Contract research (income) (1,000) (44,000)
Interest expense 74,000 86,000
Interest (income) (21,000) (13,000)
----------- ----------
Total 1,271,000 1,235,000
INCOME (LOSS) BEFORE INCOME TAXES 232,000 (101,000)
Provision (benefit) for income taxes 87,000 (40,000)
----------- ----------
NET EARNINGS (LOSS) $ 145,000 (61,000)
=========== ==========
NET EARNINGS (LOSS)
PER COMMON SHARE $0.03 (0.01)
=========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 4,546,000 4,474,000
=========== ==========
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
4
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<TABLE>
<CAPTION>
HI-TECH PHARMACAL CO., INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED
JULY 31,
------------------------
1997 1996
------------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 472,000 (155,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Mortgaged property - repayments (47,000) (47,000)
Repayments of equipment debt (87,000) (113,000)
Issuance (purchase) of common stock (51,000) 14,000
------------- ----------
CASH FROM FINANCING ACTIVITIES (185,000) (146,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and
equipment and other assets (350,000) (211,000)
------------- ----------
CASH USED IN INVESTING ACTIVITIES (350,000) (211,000)
NET INCREASE (DECREASE) IN CASH (63,000) (512,000)
Cash at beginning of the period 1,985,000 1,746,000
------------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,922,000 1,234,000
============= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest $ 70,000 82,000
Income taxes $ 50,000 82,000
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
5
<PAGE>
HI-TECH PHARMACAL CO., INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JULY 31, 1997
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,
1997 are not necessarily indicative of the results that may be expected for the
year ended April 30, 1998. For further information, refer to the financial
statements and footnotes thereto for the year ended April 30, 1997 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:
<TABLE>
<CAPTION>
JULY 31, APRIL 30,
1997 1997
------------- ----------
<S> <C> <C>
Raw materials $2,900,000 2,507,000
Finished products and work in process 1,514,000 1,507,000
------------- ----------
$4,414,000 4,014,000
============= ==========
</TABLE>
6
<PAGE>
HI-TECH PHARMACAL CO., INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JULY 31, 1997
FIXED ASSETS
The components of net plant and equipment consist of the following:
<TABLE>
<CAPTION>
JULY 31, APRIL 30,
1997 1997
------------- -----------
<S> <C> <C>
Land and Building $ 4,570,000 4,564,000
Machinery and equipment 9,463,000 9,180,000
Transportation equipment 13,000 13,000
Computer equipment 354,000 354,000
Furniture and fixtures 149,000 142,000
------------- -----------
14,549,000 14,253,000
Depreciation and amortization 4,462,000 4,147,000
------------- -----------
TOTAL FIXED ASSETS $10,087,000 10,106,000
============= ===========
</TABLE>
WORKING CAPITAL REVOLVING LOAN
The Company had a working capital credit line with a bank of $2,000,000 which
expired in August 1997 and bearing interest at the bank's prime interest rate,
8.50%, at July 31, 1997. The Company is in the final stages of effecting the
renewal of this credit line.
7
<PAGE>
HI-TECH PHARMACAL CO., INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JULY 31, 1997
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The components of accounts payable and accrued expenses consist of the
following:
<TABLE>
<CAPTION>
JULY 31, APRIL 30,
1997 1997
--------------- ------------
<S> <C> <C>
Accounts payable $1,927,000 2,384,000
Accrued expenses 864,000 941,000
--------------- ------------
$2,791,000 3,325,000
=============== ============
</TABLE>
CONTINGENCIES AND OTHER MATTERS
For the quarter ended July 31, 1997 the Company's gross sales to Zenith Goldline
Laboratories, an Ivax company, accounted for approximately 12% of gross sales
during the quarter, a decrease from 21 % during the quarter ended July 31, 1996.
In addition, the Company's gross sales to The Rugby Group, Inc. accounted for
approximately 25% of the gross sales during the quarter ended July 31, 1997.
These customers represented approximately 40% of the outstanding trade
receivables at July 31, 1997.
On May 28, 1997 the Company announced that its Board of Directors has authorized
a common stock buy-back program under which the Company could purchase up to
$500,000 of its common stock. As at July 31, 1997, the Company had purchased
13,500 shares.
SUBSEQUENT EVENTS
During August 1997, the Company received ANDA approval from the FDA for
Promethazine Hydrochloride and Dextromethorphan Hydrobromide and Codeine Syrup,
6.25 mg/10mg per 5ml, the generic form of a product manufactured by Wyeth Ayerst
Laboratories, Inc.
8
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
JULY 31, 1997
For the three months ended July 31, 1997 net sales increased by $ 553,000 , or
13% compared to the fiscal 1997 respective period. Total three months net sales
were $4,708,000 for the period ended July 31, 1997. Zenith Goldline
Laboratories, an Ivax company, accounted for approximately 12% of the gross
sales during the quarter, a decrease from 21% during the quarter ended July 31,
1996. In addition, the Company had gross sales to The Rugby Group, Inc. which
accounted for approximately 25% of the gross sales during the quarter ended July
31, 1997. These customers represented approximately 40% of the outstanding trade
receivables at July 31, 1997.
Health Care Products division for the three months ended July 31, 1997 increased
gross sales of $444,000 compared to the fiscal 1997 respective period. Rose
Laboratories had sales of $274,000 and $194,000, respectively, for the three
months ended July 31, 1997 and 1996.
Cost of sales, as a percentage of net sales, decreased from 72.7% to 68.1% for
the three months ended July 31, 1997 compared to the three months ended July 31,
1996. This decrease was principally the result of increased unit volume with
little change in labor and overhead costs.
Research and product development costs for the three months ended July 31, 1997
decreased $60,000 or 25% compared to the fiscal 1997 respective period, as a
result of fewer research contracts.
Selling, general and administrative expenses, as a percentage of net sales,
decreased for the three months ended July 31,1997 to 22% from 23% for the
fiscal 1997 respective period. Such percentage decrease resulted from increased
sales without selling and general expenses increasing in the same proportion.
Net income (loss) for the three months ended July 31, 1997 and 1996 was $145,000
and $(61,000) respectively, an increase of $206,000, 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 July 31, 1997 period, working capital decreased to $ 5,859,000 from
$ 5,912,000 at April 30, 1997. During the quarter ended July 31, 1997 the
Company invested $ 350,000 in fixed assets.
The Company's working capital credit line of $2,000,000 expired on August 31,
1997. The Company is in the final stages of effecting a new working capital
credit line.
The Company will incur additional expense over the start-up period of its
sterile facility. The Company believes that it will be able to operate its
sterile facility profitably over the long term even though the Company has not
previously manufactured sterile products.
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
<PAGE>
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 12, 1997
By:/s/ Bernard Seltzer
___________________________________________
Bernard Seltzer
(President and Chief Executive Officer)
Date September 12, 1997
By:/s/ Arthur S. Goldberg
__________________________________________
Arthur S. Goldberg
(Vice President - Finance and Chief Accounting Officer)
10
<PAGE>
HI-TECH PHARMACAL CO., INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
Schedule 11
<TABLE>
<CAPTION>
Three months
Ended
July 31, 1997
-------------
Primary
-------
<S> <C>
Net income................................ $ 145,000
==========
Weighted average number of
shares outstanding: 4,523,489
Shares issuable upon exercise of
dilutive stock options and warrants
net of shares assumed to be
repurchased (at the average
market price for the period)
from exercise proceeds................. 22,836
----------
Shares used for computation............... 4,546,325
==========
Primary net income
per common share $ .03
==========
Fully Diluted
-------------
Net income................................ $ 145,000
==========
Weighted average number of
shares outstanding: 4,523,489
Shares issuable upon exercise of
dilutive stock options and warrants-
net of shares assumed to be
repurchased (at end market
price for the period)
from exercise proceeds................. 22,836
-----------
Shares used for computation.... 4,546,325
===========
Fully diluted net
income per common share (a) $ .03
===========
</TABLE>
(a) Not presented because dilution from primary net income per common share
amount is less than 3%.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
10-QSB
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 1922
<SECURITIES> 0
<RECEIVABLES> 3371
<ALLOWANCES> (175)
<INVENTORY> 4414
<CURRENT-ASSETS> 440
<PP&E> 14549
<DEPRECIATION> (4462)
<TOTAL-ASSETS> 20232
<CURRENT-LIABILITIES> 4113
<BONDS> 0
0
0
<COMMON> 45
<OTHER-SE> 14050
<TOTAL-LIABILITY-AND-EQUITY> 20232
<SALES> 4708
<TOTAL-REVENUES> 4708
<CGS> 3205
<TOTAL-COSTS> 4402
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74
<INCOME-PRETAX> 232
<INCOME-TAX> 87
<INCOME-CONTINUING> 145
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 145
<EPS-PRIMARY> $0.03
<EPS-DILUTED> $0.03
</TABLE>
