U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
-----------------------------------------------
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
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ELITE PHARMACEUTICALS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 22-3542636
- ------------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
165 Ludlow Avenue, Northvale, New Jersey 07647
- -------------------------------------------- ---------------------------
(Address of principal executive offices) (Zip Code)
(201)750-2646
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(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 [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the issuer's common stock as of September
----------
30, 2001 is 9,629,227.
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-1-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
INDEX
Page No.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 2001 (unauditied) and
March 31, 2001 (audited) 3
Consolidated Statements of Operations for the three and six months
ended September 30, 2001 and September 30, 2000 (unaudited) 4
Consolidated Statements of Cash Flows for the six months
ended September 30, 2001 and September 30, 2000 (unaudited) 5
Notes to Form 10-Q 6 - 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11 - 13
PART II OTHER INFORMATION 14
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 15
-2-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, March 31,
2001 2001
-------------- --------------
ASSETS
--------
CURRENT ASSETS:
Cash and cash equivalents $ 7,864,911 $ 7,296,702
Contract revenue receivable --- 13,314
Restricted Cash 149,877 306,040
Amount receivable from Joint Venture 133,713 80,932
Prepaid expenses and other current assets 77,402 81,732
-------------- --------------
Total current assets 8,225,903 7,778,720
-------------- --------------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 3,810,098 3,891,308
INTANGIBLE ASSETS, net of accumulated amortization 54,977 57,173
OTHER ASSETS:
Investment in Joint Venture 74,553 ---
Amount receivable from sale of state tax losses 146,132 146,132
Restricted Cash 300,000 300,000
EDA bond offering costs, net of accumulated amortization
of $28,535 and $20,885, respectively 170,368 176,968
-------------- --------------
Total other assets 691,053 623,100
-------------- --------------
$ 12,782,031 $12,350,301
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------
CURRENT LIABILITIES:
Current portion of EDA Bonds $ 130,000 $ 120,000
Accounts payable and accrued expenses 69,738 220,220
Amount payable to Joint Venture 107,104 64,827
-------------- --------------
Total current liabilities 306,842 405,047
LONG TERM LIABILITIES:
EDA Bond - net of current portion 2,635,000 2,765,000
-------------- --------------
Total liabilities 2,941,842 3,170,047
-------------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock at liquidating value of $1,000 per share -
$.01 par value; 20,000 shares authorized;
Series A convertible exchangeable preferred stock;
12,015 issued and outstanding 12,015,000 12,015,000
Preferred stock at liquidation value of $1 per share -
$.01 par value; 7,250,000 shares authorized;
Series B convertible preferred stock; 4,806,000 shares
designated, and 200,000 shares issued and outstanding 200,000 ---
Common stock - $.01 par value;
Authorized - 25,000,000 shares; issued and outstanding -
9,629,227 and 9,376,389 shares, respectively 96,292 93,764
Additional paid-in capital 19,248,066 18,071,503
Accumulated deficit (21,719,169) (21,000,013)
-------------- --------------
Total stockholders' equity 9,840,189 9,180,254
-------------- --------------
$ 12,782,031 $ 12,350,301
============== ==============
The accompanying notes are an integral part of the consolidated
financial statements.
-3-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- ----------------------
2001 2000 2001 2000
---- ---- ---- ----
REVENUES:
Research and Development $ 250,000 $ --- $ 250,000 $ ---
Product Formulation Revenues 133,713 --- 209,511 ---
Testing Fees 3,450 --- 3,450 ---
--------------- -------------- -------------- --------------
Total revenues 387,163 --- 462,961 ---
--------------- -------------- -------------- --------------
OPERATING EXPENSES:
Research and development 319,443 331,892 630,066 705,900
General and administrative 175,023 162,753 305,296 320,769
Depreciation and amortization 70,848 58,980 141,696 117,960
--------------- -------------- -------------- --------------
565,314 553,625 1,077,058 1,144,629
--------------- -------------- -------------- --------------
LOSS FROM OPERATIONS (178,151) (553,625) (614,097) (1,144,629)
--------------- -------------- -------------- --------------
OTHER INCOME (EXPENSES):
Interest income 68,205 60,383 176,035 120,496
Interest expense (55,122) (57,382) (111,019) (115,507)
Equity in loss of Joint Venture (107,105) (12,015,000) (167,819) (12,015,000)
--------------- -------------- -------------- --------------
(94,022) (12,011,999) (102,803) (12,010,011)
--------------- -------------- -------------- --------------
LOSS BEFORE PROVISION FOR INCOME TAXES (272,173) (12,565,624) (716,900) (13,154,640)
--------------- -------------- -------------- --------------
PROVISION FOR INCOME TAXES --- 700 2,255 1,255
--------------- -------------- -------------- --------------
NET LOSS $ (272,173) $ (12,566,324) $ (719,155) $ (13,155,895)
=============== ============== ============== ==============
NET LOSS PER COMMON SHARE $ (.03) $ (1.41) $ (.08) $ (1.48)
=============== ============== ============== ==============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 9,543,556 8,911,329 9,476,443 8,885,287
=============== ============== ============== ==============
The accompanying notes are an integral part of the consolidated
financial statements.
-4-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
SEPTEMBER 30,
---------------------------
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (719,155) $ (13,155,895)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation 132,900 110,193
Amortization of intangibles 8,796 7,767
Equity in loss of Joint Venture 167,819 12,015,000
Changes in assets and liabilities:
Contract revenue receivable 13,314 ---
Prepaid expenses and other current assets 4,330 281,521
Amount receivable from Joint Venture (52,781) ---
Accounts payable, accrued expenses and other current liabilities (150,483) (479,275)
Amount payable to Joint Venture (95) ---
--------------- ---------------
NET CASH USED IN OPERATING ACTIVITIES (595,355) (1,220,689)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (51,690) (221,146)
Payment for deposit on property and equipment --- (1,230)
Restricted cash 156,163 324,618
--------------- ---------------
104,473 102,242
NET CASH PROVIDED BY INVESTING ACTIVITIES --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock and warrants 1,179,091 269,711
Principal repayments of NJEDA Bonds (120,000) (115,000)
--------------- ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,059,091 154,711
--------------- ---------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 568,209 (963,736)
CASH AND CASH EQUIVALENTS - beginning of period 7,296,702 3,937,217
--------------- ---------------
CASH AND CASH EQUIVALENTS - end of period $ 7,864,911 $ 2,973,481
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 111,794 $ 116,250
Cash paid for income taxes 2,255 1,255
SUPPLEMENTAL SCHEDULE NON-CASH TRANSACTIONS IN
CONNECTION WITH JOINT VENTURE:
Preferred Stock - Series A Issuance in Exchange for Interest in
Joint Venture $ --- $ 12,015,000
Preferred Stock - Series B Issuance 200,000 ---
Paydown of Amounts Due to Joint Venture (125,447) ---
Additional Investment in Joint Venture (74,553) ---
The accompanying notes are an integral part of the consolidated
financial statements.
-5-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO FORM 10-Q
SIX MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
---------------------
The information in this Form 10-Q includes the results of
operations of Elite Pharmaceuticals, Inc. ("the Company") and
its wholly-owned subsidiary, Elite Laboratories, Inc. ("Elite"),
for the three and six months ended September 30, 2001 and 2000.
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-Q are the same as those set forth in the Company's Form
10K-SB at March 31, 2001 and should be read in conjunction with
the disclosures presented therein.
The Company does not anticipate being profitable for fiscal year
2002, therefore a current provision for income tax was not
established for the six months ended September 30, 2001.
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.
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.
On December 31, 1999, this consulting agreement was amended to
provide for payment of a monthly consulting fee of $5,000,
commencing on July 1, 1999 and was terminated on December 1,
2000.
On November 14, 2000, the Company amended its referral agreement
with a member of its Board of Directors to provide certain
consulting services for the period of November 1, 2000 through
October 31, 2003. The Company previously advanced $20,000 under
a prior agreement dated April 8, 1997 in addition to a payment
of $50,000 made during the quarter ended December 31, 2000.
The agreement calls for 25 monthly installments of $3,200
beginning on December 1, 2001.
-6-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO FORM 10-Q
SIX MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(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.
Joint Venture Subscription Offering
-----------------------------------
On September 21, 2000, 409,165 shares of the Company's common
stock and 12,015 shares of a newly created Elite Series A
convertible exchangeable preferred stock ("Series A Preferred
Stock") were issued to Elan International Services, Ltd. ("EIS")
for consideration of $5,000,000 and $12,015,000, respectively,
during the month of October. Proceeds from the sale of the
Series A Preferred Stock were used to fund the Company's 80.1%
share of Elite Research, Ltd. ("ERL"), a joint venture with EIS.
The Series A Preferred Stock accrues a dividend of 7% per annum,
compounded annually and payable in shares of Series A Preferred
Stock. Dividends shall be accrued and compounded annually
beginning on October 16, 2001. The Series A Preferred Stock is
convertible at anytime after two years, at EIS's option, into
the Company's common stock at a price of $18.00 per share and
has a term of six years. At the end of the sixth year, at the
option of Elite, the Series A Preferred Stock shall either be
redeemed in cash or in shares of Elite common stock at a fair
market value equal to the aggregate outstanding Series A
liquidation preference and accrued dividends. As of September
30, 2001, the Company has accrued no dividends on the Series A
Preferred Stock.
For a period of one year after the issuance of the above
securities, EIS shall have the right to require registration
under the Securities Act of all or part of these securities. All
registration expenses will be borne by EIS. EIS also has the
right to piggyback registration if at any time the Company shall
propose to register shares of common stock under the Securities
Act.
On October 17, 2000, the Company also authorized 7,250,000
shares of newly created Elite Series B Preferred Stock of which
4,806,000 has been designated for issuance to EIS for a total
consideration of $4,806,000. These shares can be issued upon
demand by Elite in increments of $100,000 and shall be used to
fund Elite's 80.10% portion of the future capital contributions
to ERL and for subsequent funding of the research and
development activities for ERL.
Series B Preferred Stock shall be entitled to receive a
mandatory dividend equal to 7% per year of the original issue
price. Such dividend shall be accrued and compounded on each
succeeding twelve month anniversary of the first issuance and is
payable solely by the issuance of additional Series B Preferred
Stock, at a price per share equal to the original issue price
and not in cash. Dividends shall be compounded commencing one
year after issuance. Additionally, Class B Preferred Stock shall
have a senior liquidation preference of $1 per share (original
issue price) plus any accrued and unpaid dividends.
-7-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO FORM 10-Q
SIX MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(UNAUDITED)
Additionally, Series B Stock shall be exchangeable, at the
option of EIS, at any time after two years from the date of
issuance, into shares of the Company's common stock using an
exchange price of $14.84 per share and has a term of six years
from the date of first issuance.
At the end of the sixth year, at the option of Elite, Series B
Stock can be redeemed in cash or by the issuance of shares of
Elite common stock at a fair market value equal to the Series B
liquidation preference and accrued dividends.
In addition to the offering above, on October 17, 2000 the
Company issued EIS 100,000 warrants to purchase common stock of
Elite Pharmaceuticals at the exercise price of $18 per share.
The warrants are exercisable at any time on or before October
17, 2005.
As of September 30, 2001, a $200,000 capital contribution was
made on behalf of ERL and financed through the issuance of
200,000 shares of Series B Preferred Stock.
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. Interest on the bonds accrues at 7.75% per
annum. 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 than the $300,000 Debt Service
Reserve are expected to be expended within twelve months and are
therefore categorized as current assets.
NOTE 6 - MEMORANDUM OF UNDERSTANDING
---------------------------
On June 1, 2000, the Company entered into a Memorandum of
Understanding (MOU) 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. Although Elite declined to extend the term of the MOU
after its initial term of six months expired, both Inabata and
the Company continued in good faith to explore opportunities.
On October 8, 2001, Inabata agreed not to extend the terms of
the Memorandum of Understanding.
-8-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO FORM 10-Q
SIX MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(UNAUDITED)
NOTE 7 - COLLABORATIVE AGREEMENTS
------------------------
In October 2000, Elite entered into a joint development and
operating agreement with Elan Corporation, plc, and Elan
International Services, Ltd. (together "Elan") to develop
products using drug delivery technologies and expertise of both
companies. This joint venture, Elite Research, Ltd. ("ERL"), a
Bermuda corporation, is initially owned 80.1% by Elite and 19.9%
by Elan. ERL will fund its research through capital
contributions from its partners based on the partners' ownership
percentage. ERL will subcontract research and development
efforts to Elite, Elan and others. It is anticipated that Elite
will likely provide most of the formulation and development
work. Elite has commenced some preliminary work for one product.
For the six months ending September 30, 2001, Elite charged
$209,511 to this joint venture which is reflected in product
formulation revenues.
While the Company owns 80.1% of the outstanding common stock of
ERL, Elan and its subsidiaries have retained significant
minority investor rights that are considered "participating
rights" as defined in the Emerging Issues Task Force Consensus
No. 96-16. Accordingly, the Company will not consolidate the
financial statements of ERL, but will instead account for its
investment in ERL under the equity method of accounting.
For the six months ended September 30, 2001, ERL recognized a
net loss of $209,511. Elite recognized 80.1% of ERL's loss, or
$167,819 for the six months ended September 30, 2001. To date,
ERL has not recognized any revenue. In December 2000, the joint
venture had its first organizational meeting and approved one
product for development. In March 2001, the management committee
of ERL met to finalize its budget and business plan and to
complete a preliminary formulation of the drug product.
During the quarter ended June 30, 2001, ERL identified and
authorized the development of a second compound by Elite.
During the quarter ended September 30, 2001, the Company
provided formulation services on both products.
As of September 30, 2001, the Company owed ERL $107,104
representing its 80.1% contribution to ERL to cover ERL's
expenses for the three months ending September 30, 2001.
On June 27, 2001, the Company entered into two separate and
distinct development and license agreements with another
pharmaceutical company ("partner"). The Company will develop two
drug compounds for the partner in exchange for certain milestone
payments and royalties. Elite also reserves the right to
manufacture the compounds. On July 2, 2001, the Company received
$250,000 as its first milestone payment on one of the two
agreements. Such amount is reflected as income on the
accompanying statement of operations, as this payment was earned
in the quarter ended September 30, 2001.
NOTE 8 - SALE OF STATE TAX LOSSES
------------------------
The Company received approval for the sale of $4,872,267 of New
Jersey net operating losses under the Technology Tax Certificate
Transfer Program sponsored by the New Jersey Economic
Development Authority (NJEDA). The total tax benefit receivable
by the Company is $368,343 of which $222,211 was received. The
remaining balance of $146,132 will be received pending the
NJEDA's authorization. Such amounts are classified as
non-current assets on the accompanying consolidated balance
sheet.
-9-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO FORM 10-Q
SIX MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(UNAUDITED)
NOTE 9 - RECENTLY ISSUED ACCOUNTING STANDARDS
------------------------------------
In December 1999, the SEC staff released Staff Accounting
Bulletin No. 101 ("SAB 101"), which provides guidance on the
recognition, presentation and disclosure of revenue in financial
statements. The Company adopted SAB 101 as required in the third
quarter of 2000.
NOTE 10 - CONTINGENCY
-----------
Elite is the plaintiff in a civil action brought in the Superior
Court of New Jersey on November 20, 2000 against three parties
to recover damages in an unspecified amount based on the alleged
failure of the defendants to properly perform and complete
certain pharmaceutical tests and studies for which Elite paid
approximately $950,000. The defendants have brought a
counterclaim of approximately $253,000 allegedly due for
services rendered to Elite by the defendants. Elite will
vigorously contest the counterclaim.
The action and counterclaim are in their preliminary stages.
NOTE 11 - SUBSEQUENT EVENT
----------------
In October 2001, the Company authorized the repurchase of up to
100,000 shares of its common stock in the open market at the
then prevailing market price on or before March 31, 2002.
-10-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
PART I. ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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.
In October 2000, Elite entered into a joint development and operating
agreement with Elan Corporation, plc, and Elan International Services, Ltd.
(together "Elan") to develop products using drug delivery technologies and
expertise of both companies. This joint venture, Elite Research, Ltd. ("ERL"), a
Bermuda corporation, is initially owned 80.1% by Elite and 19.9% by Elan. ERL
will fund its research through capital contributions from its partners based on
the partners' ownership percentage. ERL will subcontract research and
development efforts to Elite, Elan and others. The first product formulated by
Elite is under going in-vivo (pilot clinical trial) testing. Elite has
initiated to develop formulation for the second product.
In September 2000, Elite received approval of its application to sell
$4,872,267 in New Jersey Net Operating Tax Losses under the New Jersey Economic
Development Agency's Technology Business Tax Certificate Program. The Company
expects to receive $368,343 from the proceeds of this sale. $222,211 was
received during the quarter ending December 31, 2000.
In June 2001, the Company entered into two separate and distinct
development and license agreements with another U.S. pharmaceutical company to
develop two products in exchange for development fees, certain milestone
payments, royalties and manufacturing rights. Elite has undertaken formulation
development for the first product and expects to begin formulation development
for the second product in the quarter ending December 31, 2001.
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.
Three Months Ended September 30, 2001 Compared to Three Months Ended
September 30, 2000
Elite's revenues for the three months ended September 30, 2001 were
$387,163, an increase of $387,163 over the comparable period of the prior year.
For the three months ended September 30, 2001, revenues consisted of product
formulation fees of $133,713 earned in conjunction with the Company's joint
venture in ERL, development fees of $250,000 and testing fees of $3,450.
-11-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
PART I. ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Three Months Ended September 30, 2001 Compared to Three Months Ended
September 30, 2000 (Continued)
General and administrative expenses for the three months ended
September 30, 2001 were $175,023, an increase of $12,270, or approximately 7%
from the comparable period of the prior year. The increase in general and
administrative expenses was substantially due to an increase in payroll.
Research and development costs for the three months ended September 30,
2001, were $319,443, a decrease of $12,449 or approximately 4% from the
comparable period of the prior year. Research and development costs have
declined as the Company has not undertaken the kind of biostudies that were
undertaken in the comparable period of the prior year.
Elite's net loss for period ended September 30, 2001 was $272,173 as
compared to $12,566,324 for the comparable period of the prior year. The
decrease in the net loss was primarily due to the increase in revenues and to
the fact that a one time charge of $12,015,000 was made in the quarter ending
September 30, 2000 relating to the Company's equity loss in its 80.1% owned
joint venture, Elite Research, Ltd.
Six Months Ended September 30, 2001 Compared to Six Months Ended
September 30, 2000
Elite's revenues for the six months ended September 30, 2001 were
$462,961, an increase of $462,961 over the comparable period of the prior year.
For the six months ended September 30, 2001, revenues consisted of product
formulation fees of $209,511 earned in conjunction with the Company's joint
venture in ERL, development fees of $250,000 and testing fees of $3,450.
General and administrative expenses for the six months ended September
30, 2001 were $305,296, a decrease of $15,473, or approximately 5% 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 six months ended September 30,
2001, were $630,066, a decrease of $75,834 or approximately 11% from the
comparable period of the prior year. Research and development costs have
declined as the Company has not undertaken the kind of biostudies and testing
that were undertaken in the comparable period of the prior year. These decreases
are partially offset by increases in payroll.
Elite's net loss for period ended September 30, 2001 was $719,155 as
compared to $13,155,895 for the comparable period of the prior year. The
decrease in the net loss was primarily due to the increase in revenues and to
the fact that a one time charge of $12,015,000 was made in the quarter ending
September 30, 2000 relating to the Company's equity loss in its 80.1% owned
joint venture, Elite Research, Ltd.
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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
PART I. ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Material Changes in Financial Condition
The Company's working capital (total current assets less total current
liabilities), which was $7,373,673 as of March 31, 2001, increased to $7,919,061
as of September 30, 2001. The increase in working capital is primarily due to
the receipt of $1,179,091 from the issuance of common stock and preferred stock
partially offset by the Company's net loss from operations.
The Company experienced negative cash flow from operations of $720,802
for the period ended September 30, 2001 primarily due to the Company's net loss
from operations of $719,155.
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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ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No Report Required
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No Report Required
ITEM 2. CHANGES IN SECURITIES
No Report Required
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No Report Required
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No Report Required
ITEM 5. OTHER INFORMATION
No Report Required
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Reports on Form 8-K. No report on Form 8-K has been
filed during quarter ending September 30, 2001.
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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: November 8, 2001 By: /s/Atul M. Mehta
------------------------------------------
Atul M. Mehta
President & Chief Executive Officer
(Principal Executive Officer)
Date: November 5, 2001 By: /s/Mark I. Gittelman
------------------------------------------
Mark I. Gittelman
Chief Financial Officer and Treasurer
(Principal Financial & Accounting Officer)
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