<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 1996
Commission File No. 0-24676
CARACO PHARMACEUTICAL LABORATORIES, LTD.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2505723
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1150 ELIJAH MC COY DRIVE, DETROIT, MICHIGAN 48202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (313) 871-8400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [ ]
Common Stock outstanding at May 8, 1996: 7,540,762 shares
The Exhibit Index is located on page 14
--
The total number of pages is 14
--
<PAGE> 2
CARACO PHARMACEUTICAL LABORATORIES, LTD.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 1996
(Unaudited)
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 198,909
Accounts receivable, net of allowances of $35,000 183,008
Inventories 288,024
Prepaid expenses and deposits 119,365
Subscription receivable (Note 3) 1,288,000
-----------
TOTAL CURRENT ASSETS 2,077,306
-----------
PROPERTY, PLANT AND EQUIPMENT - AT COST
Land 197,305
Building and improvements 6,682,724
Equipment 3,795,087
Furniture and fixtures 156,909
-----------
Total 10,832,025
Less accumulated depreciation 1,970,972
-----------
PROPERTY, PLANT AND EQUIPMENT, NET 8,861,053
-----------
MARKETABLE SECURITIES 128,739
-----------
TOTAL ASSETS $11,067,098
------------ ===========
</TABLE>
See Accompanying Notes.
<PAGE> 3
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 1,228,979
Current portion of long-term debt 475,833
Accrued expenses:
Deferred revenue 147,000
Interest 218,988
-----------
TOTAL CURRENT LIABILITIES 2,070,800
LONG-TERM DEBT, NET OF CURRENT PORTION 8,524,167
-----------
TOTAL LIABILITIES 10,594,967
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock - no par value;
authorized, 5,000,000 shares; issued
and outstanding, 285,714 Series A shares 1,000,000
Common stock - no par value;
authorized, 10,000,000 shares; issued
and outstanding, 7,540,762 shares 19,084,574
Subscription receivable (14,087)
Deficit accumulated during the development stage (19,437,432)
Unrealized loss on available-for-sale
marketable securities (160,924)
-----------
TOTAL STOCKHOLDERS' EQUITY 472,131
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,067,098
------------------------------------------ ===========
</TABLE>
See Accompanying Notes.
<PAGE> 4
CARACO PHARMACEUTICAL LABORATORIES, LTD.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Cumulative from
March 31, Inception
---------------------------------- (2/22/84
1996 1995 to 3/31/96)
------------- ------------- ----------------
<S> <C> <C> <C>
Net sales $ 450,342 $1,262,490 $ 9,651,588
Cost of goods sold 508,163 812,331 9,010,085
------------- ---------------- -----------------
Gross (loss) profit (57,821) 450,159 641,503
------------- ---------------- -----------------
Selling, general and administrative expenses 527,494 632,263 11,307,802
Research and development costs 458,074 486,580 5,270,758
------------- ---------------- -----------------
Operating loss (1,043,389) (668,684) (15,937,057)
------------- ---------------- -----------------
Other income (expense)
Interest income 1,825 1,225 221,180
Interest expense (164,527) (189,865) (4,050,906)
Other 1,023 - (52,592)
Loss on sale of equipment - - (48,209)
------------- ----------------- -----------------
Other expense, net (161,679) (188,640) (3,930,527)
------------- ----------------- -----------------
Loss before cumulative effect of
change in accounting principle (1,205,068) (857,324) (19,867,584)
Cumulative effect of change in
accounting principle - - 430,152
------------- ---------------- ---------------
Net loss $(1,205,068) $ (857,324) $(19,437,432)
============= ================ ===============
Net loss per common share $ (.17) $ (.16) $ (6.15)
============== ================ ===============
Weighted average number of
common shares outstanding 7,007,600 5,233,443 3,162,464
============== ================ ===============
</TABLE>
See Accompanying Notes.
<PAGE> 5
CARACO PHARMACEUTICAL LABORATORIES, LTD.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated Unrealized
Preferred Stock Common Stock During the Loss on
-------------------- --------------------- Subscription Development Marketable
Shares Amount Shares Amount Receivable Stage Securities Total
-------- ---------- --------- -------- ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at inception
(February 22, 1984) -- $ -- -- $ -- $ -- $ -- $ -- $ --
Issuance of 2,433,471
shares of common stock
for stock subscription
receivable -- -- 2,433,471 2,500 (2,500) -- -- --
-------- ---------- --------- -------- ------------ ----------- ---------- ------------
Balance at
December 31, 1984 -- -- 2,433,471 2,500 (2,500) -- -- --
Net loss -- -- -- -- -- (3,832) -- (3,832)
-------- ---------- --------- -------- ------------ ----------- ---------- ------------
Balance at
December 31, 1985 -- -- 2,433,471 2,500 (2,500) (3,832) -- (3,832)
Net loss -- -- -- -- -- (50) -- (50)
-------- ---------- --------- -------- ------------ ----------- ---------- ------------
Balance at
December 31, 1986 -- -- 2,433,471 2,500 (2,500) (3,882) -- (3,882)
Net loss -- -- -- -- -- (1,270) -- (1,270)
-------- ---------- --------- -------- ------------ ----------- ---------- ------------
Balance at
December 31, 1987 -- -- 2,433,471 2,500 (2,500) (5,152) -- (5,152)
Net loss -- -- -- -- -- (81,297) -- (81,297)
Collection of
subscription
receivable -- -- -- -- 2,500 -- -- 2,500
-------- ---------- --------- -------- ------------ ----------- ---------- ------------
Balance at
December 31, 1988 -- -- 2,433,471 2,500 -- (86,449) -- (83,949)
Net loss -- -- -- -- -- (146,978) -- (146,978)
-------- ---------- --------- -------- ------------ ----------- ---------- ------------
Balance at
December 31, 1989 -- -- 2,433,471 2,500 -- (233,427) -- (230,927)
Additional stockholder
contribution -- -- -- 97,500 -- -- -- 97,500
Net loss -- -- -- -- -- (666,314) -- (666,314)
-------- ---------- --------- -------- ------------ ----------- ---------- ------------
Balance at
December 31, 1990 -- -- 2,433,471 100,000 -- (899,741) -- (799,741)
Net loss -- -- -- -- -- (2,271,108) -- (2,271,108)
-------- ---------- --------- -------- ------------ ----------- ---------- ------------
Balance at
December 31, 1991 -- -- 2,433,471 100,000 -- (3,170,849) -- (3,070,849)
Issuance of
common stock -- -- 539,055 2,480,449 -- -- -- 2,480,449
Stock issued upon
conversion of debt -- -- 143,947 692,382 -- -- -- 692,382
Net loss -- -- -- -- -- (3,568,135) -- (3,568,135)
-------- ---------- --------- -------- ------------ ----------- ---------- ------------
</TABLE>
(Continued)
<PAGE> 6
CARACO PHARMACEUTICAL LABORATORIES, LTD.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated Unrealized
Preferred Stock Common Stock During the Loss on
-------------------- --------------------- Subscription Development Marketable
Shares Amount Shares Amount Receivable Stage Securities Total
-------- ---------- --------- ----------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1992 -- -- 3,116,473 3,272,831 -- (6,738,984) -- (3,466,153)
Issuance of
common stock -- -- 529,947 2,182,256 -- -- -- 2,182,256
Net loss -- -- -- -- -- (3,769,940) -- (3,769,940)
-------- ---------- --------- ----------- ---------- ------------ --------- ----------
Balance at
December 31, 1993 -- -- 3,646,420 5,455,087 -- (10,508,924) -- (5,053,837)
Issuance of
common stock -- -- 1,400,000 7,924,251 -- -- -- 7,924,251
Issuance of
preferred stock 285,714 1,000,000 -- -- -- -- -- 1,000,000
Net loss -- -- -- -- -- (3,630,058) -- (3,630,058)
-------- ---------- --------- ----------- ---------- ------------ --------- ----------
Balance at
December 31, 1994 285,714 1,000,000 5,046,420 13,379,338 -- (14,138,982) -- 240,356
Issuance of
common stock -- -- 1,809,387 4,110,063 (14,087) -- -- 4,095,976
Contribution of
administrative
expenses by
Chairman Emeritus -- -- -- 56,000 -- -- -- 56,000
Net loss -- -- -- -- -- (4,093,382) -- (4,093,382)
Unrealized loss on
marketable securities -- -- -- -- -- -- (160,924) (160,924)
-------- ---------- --------- ----------- ---------- ------------ --------- ----------
Balance at
December 31, 1995 285,714 1,000,000 6,855,807 17,545,401 (14,087) (18,232,364) -- 138,026
Issuance of
common stock -- -- 684,955 1,539,173 -- -- -- 1,539,173
Net loss -- -- -- -- -- (1,205,068) -- (1,205,068)
-------- ---------- --------- ----------- ---------- ------------ --------- ----------
Balance at
March 31, 1996 285,714 $1,000,000 7,540,762 $19,084,574 $ (14,087) $(19,437,432) $(160,924) $ 472,131
======== ========== ========= =========== ========== ============ ========= ==========
</TABLE>
See Accompanying Notes.
<PAGE> 7
CARACO PHARMACEUTICAL LABORATORIES, LTD.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
from
Three Months Ended March 31, Inception
---------------------------- (2/22/84 to
1996 1995 3/31/96)
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,205,068) $ (857,324) $ (19,437,432)
Adjustments to reconcile net loss to net
cash used in operating activities
Cumulative effect of change in
accounting principle - - (430,152)
Depreciation 128,100 128,101 2,569,779
Loss on sale of equipment - - 48,230
Expenses paid by Chairman, emeritus - - 56,000
Changes in operating assets and liabilities
which provided (used) cash:
Accounts receivable 225,572 (293,411) (183,008)
Inventories 91,336 (335,846) (288,024)
Prepaid expenses and deposits 42,278 27,742 (119,365)
Accounts payable 239,585 72,709 1,228,979
Accrued expenses 150,208 (280,287) 381,987
------------- ------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (327,989) (1,538,316) (16,173,006)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (56,539) (95,309) (2,373,247)
Proceeds from sale of equipment - - 195,000
------------- ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (56,539) (95,309) (2,178,247)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 251,173 1,040,686 16,690,824
Proceeds from issuance of preferred stock - - 1,000,000
Proceeds from long-term debt - - 868,601
Repayments of long-term debt - - (509,263)
Net short-term borrowings - 300,000 500,000
------------- ------------- -------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 251,173 1,340,686 18,550,162
------------- ------------- -------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (133,355) (292,939) 198,909
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 332,264 567,274 -
------------- ------------- -------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 198,909 $ 274,335 $ 198,909
============= ============= =============
Supplemental disclosures of cash flows information:
Cash paid for interest -0- $ 411,482 $ 3,988,059
============= ============= =============
</TABLE>
See Accompanying Notes.
<PAGE> 8
CARACO PHARMACEUTICAL LABORATORIES, LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The balance sheet as of March 31, 1996 and the related statements
of operations, stockholders equity and cash flows for the three
months ended March 31, 1996 and 1995 are unaudited. In the
opinion of management, all adjustments necessary for a fair
presentation of such financial statements has been included. Such
adjustments consisted of only normal recurring items, except for
the establishment of a subscription receivable as further
described in Note 3. Interim results are not necessarily
indicative of results for the full year.
The financial statements as of March 31, 1996 and for the three
months ended March 31, 1996 and 1995 should be read in conjunction
with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended December
31, 1995.
The accounting policies followed by the Company with respect to
the unaudited interim financial statements are consistent with
those stated in the 1995 Caraco Pharmaceutical Laboratories, Ltd.
Annual Report on Form 10-KSB.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business.
The Company has not currently achieved sales necessary to support
operations. The Company has, as of March 31, 1996, stockholders'
equity of $472,131 and working capital of $6,506. Realization of
a major portion of the assets is dependent upon the Company's
ability to meet its future financing requirements and the success
of future operations, the outcome of which cannot be determined at
this time. These and other factors raise substantial doubt about
the Company's ability to continue as a going concern in the
absence of sufficient additional funds and the achievement of
profitable operations. The accompanying financial statements do
not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and
classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
<PAGE> 9
CARACO PHARMACEUTICAL LABORATORIES, LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTE 2: LOSS FROM DEFALCATION
On October 17, 1994, the Company filed a Form 8-K with the
Securities and Exchange Commission which stated (1) managements
discovery of misappropriations of approximately $514,000 of
Company funds by its former Controller and his brother and (2) the
agreement by Dr. C. Arnold Curry, Chairman Emeritus, to purchase
for cash in the total amount of the loss, the Company claims
against those who may be responsible for the loss. All amounts
outstanding have been collected in full.
The Company has made appropriate filings with the Securities and
Exchange Commission (SEC). The SEC is currently conducting an
investigation into the matter, and the Company is complying on a
voluntary basis.
NOTE 3: STOCKHOLDERS' EQUITY
On March 31, 1996, the Company converted a $250,000 stockholder
loan into 111,111 shares of its common stock at $2.25 per share.
In connection with a private placement offering that was completed
effective March 31, 1996, the Company sold 572,444 shares of
unregistered common stock which netted the Company approximately
$1,250,000.
All of the private placement cash proceeds were received in April
1996.
<PAGE> 10
CARACO PHARMACEUTICAL LABORATORIES, LTD.
(A DEVELOPMENT STAGE COMPANY)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net losses for the quarters ended March 31, 1996 and 1995 were
$1,205,068 and $857,324, respectively. The increase in the net
loss in 1996 is due to the Company's inability to raise money
needed to sustain ongoing operations. The Company continues to
seek additional funding requirements to meet its business
objectives.
Net sales for the quarter ended March 31, 1996 and 1995 were
$450,342 and $1,262,490, respectively. The decrease in sales is
directly attributable to the Company's inability to purchase
materials needed to produce product for sale. At March 31, 1996
the Company had an open sales order backlog of approximately
$250,000.
Cost of sales for the quarters ended March 31, 1996 and 1995 were
$508,163 or 112.8% of sales, and $812,331 or 64.3% of sales,
respectively. The increase percentage in cost of sales between
periods was a result of the under absorption of fixed production
overhead costs due to significantly lower sales and manufacturing
volumes.
Selling, general and administrative expenses for the quarters
ended March 31, 1996 and 1995 were $527,494 and $632,263,
respectively. The decrease in 1996 was due to the Company's cost
cutting program which was put in effect in mid-1995.
Research and development expenses for the quarters ended March 31,
1996 and 1995 were $458,074 and $486,580, respectively. The
Company continues to fund its aggressive product development
strategy as a means to accelerate its planned future growth.
Interest expense for the quarters ended March 31, 1996 and 1995
were $164,527 and $189,864, respectively. The decrease in 1996 is
attributable to the elimination of short-term 1995 borrowings used
to fund equipment purchases.
At March 31, 1996 the Company's working capital was $6,506
compared with working capital of $298,910 at March 31, 1995. The
difference is directly attributable to the Company's continued
losses from operations offset by the private placement completed
on March 31, 1996.
<PAGE> 11
CARACO PHARMACEUTICAL LABORATORIES, LTD.
(A DEVELOPMENT STAGE COMPANY)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Liquidity and Capital Resources
Management estimates that, at its currently planned level of
operations, the Company will continue to experience operating
losses of between $800,000 and $1,000,000 per quarter through 1996
and, accordingly, that it needs approximately $5,000,000 of
additional funds to provide the required working capital to
execute its business plan for 1996. Management intends to raise
between $800,000 and $1,000,000 through the private sale of its
securities prior to May 31, 1996; and to follow that with a larger
offering of its securities to raise the balance of the funds
required for 1996.
Management also contemplates borrowing an additional $3,000,000
through a loan to be secured by a first mortgage on the Company's
manufacturing and office facility. The Economic and Development
Corporation of the City of Detroit, which has loaned $9,000,000 to
the Company secured by a lien on the building, has agreed to
subordinate its security interest to a first mortgage not
exceeding $3,000,000 subject to its right to approve the lender
and the terms of the loan. The Company could use the proceeds of
that loan, if available, to complete a cytotoxic manufacturing
capability in its building in anticipation of the possible
approval by the FDA in 1997 and 1998 of ANDA's to be filed by the
Company for certain cytotoxic generic products. Any balance of
the loan proceeds would be added to the Company's working capital.
There is no assurance that the foregoing funds will be made
available to the Company timely or on financially satisfactory
terms; or that any of the Company's ANDAs will be approved by the
FDA within time parameters anticipated by management or at all; or
that the Company will be able to manufacture and sell profitably
any product resulting from FDA approval of an ANDA filed by the
Company. To the extent that capital requirements should exceed
available capital, the Company would be required to reduce its
research and development activity, reduce personnel and delay
capital expenditures while continuing to seek alternative sources
of financing for its business.
<PAGE> 12
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports
a. None
b. The following Form 8-K's were filed during the first quarter of
1996:
Report of Form 8-K dated February 23, 1996
Report of Form 8-K dated April 2, 1996
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARACO PHARMACEUTICAL LABORATORIES, LTD.
By: /s/ Allan J. Hammer
-------------------------------------
Allan J. Hammer
Chief Financial Officer (Principal
Accounting Officer and a duly
authorized signatory of the Company)
DATED: May 14, 1996
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT TABLE
NUMBER EXHIBIT PAGE
- -----------------------------------------------------------------------
<S> <C> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 198,909
<SECURITIES> 0
<RECEIVABLES> 218,008
<ALLOWANCES> 35,000
<INVENTORY> 288,024
<CURRENT-ASSETS> 2,077,306
<PP&E> 10,832,025
<DEPRECIATION> 1,970,972
<TOTAL-ASSETS> 11,067,098
<CURRENT-LIABILITIES> 2,070,800
<BONDS> 8,524,167
0
1,000,000
<COMMON> 19,084,574
<OTHER-SE> (14,087)
<TOTAL-LIABILITY-AND-EQUITY> 11,067,098
<SALES> 450,342
<TOTAL-REVENUES> 450,342
<CGS> 508,163
<TOTAL-COSTS> 508,163
<OTHER-EXPENSES> 985,568
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 164,527
<INCOME-PRETAX> (1,205,068)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,205,068)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,205,068)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> 0
</TABLE>
