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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 June 30, 2004
-----------------------------------------------
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition 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 (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
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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 [_]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [_] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of the common stock, $.01 par value,
as of August 10, 2004: 12,104,426 (exclusive of 100,000 shares held in
treasury).
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2004 (unaudited)
and March 31, 2004 1 - 2
Consolidated Statements of Operations for the three months
ended June 30, 2004 and June 30, 2003 (unaudited) 3
Consolidated Statement of Changes in Stockholders' Equity
for the three months ended June 30, 2004 (unaudited) 4
Consolidated Statements of Cash Flows for the three months
ended June 30, 2004 and June 30, 2003 (unaudited) 5
Notes to Financial Statements 6 - 13
Item 2. Management's Discussion And Analysis of Financial
Condition And Results Of Operations 14 - 19
Item 3. Quantitative And Qualitative Disclosures
About Market Risk 20
PART II OTHER INFORMATION 20 - 21
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchase 20
of Equity Securities
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBITS
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30, MARCH 31,
2004 2004
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 804,214 $2,104,869
Accounts receivable 153,250 153,250
Restricted cash 289,818 203,995
Prepaid expenses and other current assets 97,747 137,892
---------- ----------
Total current assets 1,345,029 2,600,006
---------- ----------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 3,994,325 4,090,250
---------- ----------
INTANGIBLE ASSETS - net of accumulated amortization 96,061 102,196
---------- ----------
OTHER ASSETS:
Deposit on equipment 399,647 398,580
Restricted cash - debt service reserve 300,000 300,000
Restricted cash - note payable 206,250 225,000
EDA bond offering costs, net of accumulated
amortization of $63,758 and $60,458,
respectively 134,102 137,402
---------- ----------
Total other assets 1,039,999 1,060,982
---------- ----------
Total assets $6,475,414 $7,853,434
========== ==========
The accompanying notes are an integral part of
the consolidated financial statements.
-1-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
JUNE 30, MARCH 31,
2004 2004
(Unaudited)
CURRENT LIABILITIES:
Current portion - note payable $ 75,000 $ 75,000
Current portion of EDA bonds 150,000 150,000
Accounts payable and accrued expenses 785,890 1,085,242
Deferred revenue 150,000 --
------------ ------------
Total current liabilities 1,160,890 1,310,242
------------ ------------
LONG TERM LIABILITIES:
Note payable - net of current portion 131,250 150,000
EDA bonds - net of current portion 2,345,000 2,345,000
------------ ------------
Total long-term liabilities 2,476,250 2,495,000
------------ ------------
Total liabilities 3,637,140 3,805,242
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value;
Authorized - 25,000,000 shares
Issued and outstanding -12,204,426 and
12,204,426 shares, respectively 122,044 122,044
Additional paid-in capital 39,965,504 39,338,140
Accumulated deficit (36,942,433) (35,105,151)
------------ ------------
3,145,115 4,355,033
Treasury stock, at cost (100,000 shares) (306,841) (306,841)
------------ ------------
Total stockholders' equity 2,838,274 4,048,192
------------ ------------
Total liabilities and stockholder's equity $ 6,475,414 $ 7,853,434
============ ============
The accompanying notes are an integral part of
the consolidated financial statements.
-2-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
JUNE 30,
2004 2003
(Unaudited) (Unaudited)
------------ ------------
REVENUES $ -- $ --
------------ ------------
COST OF OPERATIONS:
Research and development 646,229 487,482
General and administrative 408,572 413,556
Depreciation and amortization 105,360 89,610
------------ ------------
1,160,161 990,648
------------ ------------
LOSS FROM OPERATIONS (1,160,161) (990,648)
------------ ------------
OTHER INCOME (EXPENSES):
Interest income 3,044 5,385
Interest expense (51,801) (53,508)
Charge relating to issuance of stock options (229,632) (1,002,483)
Charge relating to repricing of stock options (397,732) --
------------ ------------
(676,121) (1,050,606)
------------ ------------
LOSS BEFORE PROVISION FOR INCOME TAXES (1,836,282) (2,041,254)
------------ ------------
PROVISION FOR INCOME TAXES 1,000 --
------------ ------------
NET LOSS $ (1,837,282) $ (2,041,254)
============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE $ (.15) $ (.19)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 12,204,426 10,544,426
============ ============
The accompanying notes are an integral part of
the consolidated financial statements.
-3-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
ADDITIONAL
COMMON STOCK PAID-IN TREASURY ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCK DEFICIT EQUITY
----------- ----------- ------------ ------------ ------------ -------------
BALANCE AT MARCH 31, 2004 (Audited) 12,204,426 $ 122,044 $ 39,338,140 $ (306,841) $(35,105,151) $ 4,048,192
Three months ended June 30, 2004 (unaudited)
Charge related to issuance of stock options -- -- 229,632 -- -- 229,632
Charge related to repricing of stock options -- -- 397,732 -- -- 397,732
Net loss for three months ended June 30, 2004 -- -- -- -- (1,837,282) (1,837,282)
----------- ----------- ------------ ------------ ------------ -----------
BALANCE AT JUNE 30, 2004 (Unaudited) 12,204,426 $ 122,044 $ 39,965,504 $ (306,841) $(36,942,433) $ 2,838,274
=========== =========== ============ ============ ============ ===========
The accompanying notes are an integral part of
the consolidated financial statements.
-4-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
JUNE 30,
-------------------------
2004 2003
----------- -----------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,837,282) $(2,041,254)
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation and amortization 105,360 89,610
Charge related to issuance of stock options 229,632 1,002,483
Charge related to repricing of stock options 397,732 --
Changes in assets and liabilities:
Accounts and accrued interest receivable -- 4,681
Prepaid expenses and other current assets 40,145 47,059
Accounts payable, accrued expenses and
other current liabilities
(299,352) 49,310
Deferred revenue 150,000 --
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,213,765) (848,111)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit on equipment (1,067) --
Restricted cash (67,073) (86,138)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (68,140) (86,138)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal bank note payments (18,750) (18,750)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (18,750) (18,750)
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,300,655) (952,999)
CASH AND CASH EQUIVALENTS - beginning of period 2,104,869 3,264,081
----------- -----------
CASH AND CASH EQUIVALENTS - end of period $ 804,214 $ 2,311,082
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 3,461 $ 4,156
Cash paid for income taxes 1,000 --
The accompanying notes are an integral part of
the consolidated financial statements.
-5-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The information in this Form 10-Q Report includes the results of
operations of Elite Pharmaceuticals, Inc. and its consolidated
subsidiaries (collectively the "Company") including its wholly-owned
subsidiary, Elite Laboratories, Inc. ("Elite Labs"), for the three
months ended June 30, 2004 and 2003 and its wholly-owned subsidiary,
Elite Research, Inc. ("ERI"), for the three months ended June 30,
2004 and June 30, 2003. On September 30, 2002, the "Company" acquired
from Elan Corporation, plc and Elan International Services, Ltd.
(together "Elan"), Elan's 19.9% interest in Elite Research Ltd.
("ERL), a joint venture formed between the Company and Elan in which
the Company's interest originally was 80.1%. On December 31, 2002,
the Company entered into an agreement of merger whereby ERL (a
Bermuda corporation) was merged into a new Delaware Corporation, ERI,
a wholly owned subsidiary of the Company. As a result of the merger,
ERI became the owner of all of the assets and liabilities of ERL. The
merger was accounted for as a tax-free reorganization. As of June 30,
2004, the financial statements of all entities are consolidated and
all significant intercompany accounts are eliminated upon
consolidation. The accompanying unaudited consolidated financial
statements have been prepared pursuant to rules and regulations of
the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of the consolidated financial
position, results of operations and cash flows of the Company for the
periods presented have been included.
The financial results for the interim periods are not necessarily
indicative of the results to be expected for the full year or future
interim periods.
The accompanying consolidated financial statements of the Company
have been prepared in accordance with accounting principles generally
accepted for interim financial statement presentation and should be
read in conjunction with the consolidated financial statements and
notes included in the Company's Annual Report on Form 10-K for the
year ended March 31, 2004. There have been no changes in significant
accounting policies since March 31, 2004.
The Company does not anticipate being profitable for fiscal year
2005; therefore a current provision for income tax was not
established for the three months ended June 30, 2004. Only the
minimum corporation tax liability required for state purposes is
reflected.
NOTE 2 - STOCKHOLDERS' EQUITY
PRIVATE PLACEMENT
The Company was successful in its completion in December 2003 of a
private placement of 1,645,000 shares of its common stock at $2.00
per share, increasing the Company's outstanding shares to 12,104,426,
exclusive of 100,000 treasury shares. The offering was exempt from
registration pursuant to Section 4(2) and Regulation D under the
Securities Act of 1933, as amended. In connection with the offering,
the Company paid a cash commission of $75,000 to First Montauk Group
Inc., as selling agent and issued to the agent a five year warrant to
purchase 50,000 shares of Company's common stock at a price of $2.00
per share. Legal fees approximating $36,000 were also incurred in
connection with this private placement.
-6-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED)
NOTE 2 - STOCKHOLDERS' EQUITY (Continued)
TREASURY STOCK TRANSACTIONS
As of June 30, 2004, the Company had purchased prior to March 31,
2003, in the open market, 100,000 shares of common stock for a total
consideration of $306,841 pursuant to the authorization by the Board
of Directors on June 27,2002.
WARRANTS AND OPTIONS
In June 2004, the stockholders of the Company approved the adoption
by the Board of Directors of the Company's 2004 Stock Option Plan
(the "2004 Plan"). The Plan reserves 1,500,000 shares of Common Stock
for grant by the Board of Directors of incentive or nonqualified
stock options to officers, employees, or directors of and consultants
to the Company.
At June 30, 2004, Elite had outstanding 2,537,050 options with
exercise prices ranging from $1.00 to $10.00 and 2,654,239 warrants
with exercise prices ranging from $2.00 to $5.00; each option and
warrant representing the right to purchase one share of common stock.
On June 22, 2004, the Company granted 120,000 options to Directors
and 123,300 options to employees to purchase an aggregate of 243,300
shares of Common Stock at a price of $2.34 per share under its 2004
Stock Option Plan, which was approved on that date by the
stockholders. The options granted to employees were in replacement of
previously granted options containing exercise prices greater than
$2.34 per share. On the same date the stockholders approved
amendments made previously by the Board of Directors to outstanding
warrants and options including the repricing of options to purchase
420,000 shares of which options to purchase 330,000 shares were held
by Directors of the Company. Accordingly, during the three months
ended June 30, 2004 options with respect to an aggregate of 543,300
options were repriced (treating the options granted in lieu of
outstanding options as repriced options). The options have exercise
prices between $2.21 and $2.34 per share. 162,300 options are vested
and 381,000 options are in various stages of three year vesting
periods. The options expire ten years from date of issuance. The per
share weighted-average fair value of options repriced during the
three months ended June 30, 2004, ranged from $1.51 - $1.91 using the
Black-Scholes options pricing model with the following
weighted-average assumptions: no dividend yield; expected volatility
of 76.69%; risk-free interest rate of 4.0%; and expected lives of ten
years. The Company has taken a charge of $397,732 for the three
months ended June 30, 2004 which represents the fair value of the
options vested, utilizing the Black-Scholes options pricing model on
each grant date.
The 120,000 options granted under the 2004 Plan to members of the
Board of Directors expire ten years from the date of issuance; have
an exercise price of $2.34 per share and are fully vested. The per
share weighted-average fair value of the options amounted to $1.91
using the Black-Scholes options pricing model with the following
weighted-average assumptions: no dividend yield; expected volatility
of 76.69%; risk free interest rate of 4.0%; and expected lives of ten
years. The Company has taken a charge of $229,632 for the
three-months ended June 30, 2004, which represents the fair value of
the vested options, utilizing the Black-Scholes options pricing model
on the grant date.
-7-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED)
NOTE 2 - STOCKHOLDERS' EQUITY (Continued)
WARRANTS AND OPTIONS (Continued)
The following table illustrates the effect on net loss and loss per
share as if the Company had applied the fair value recognition
provisions of SFAS No. 123 to all outstanding and unvested awards in
each period presented:
THREE MONTHS ENDED JUNE
2004 2003
----------- -----------
Net loss as reported $(1,837,282) $(2,041,254)
Add: Stock-based compensation
expense included in reported net loss,
net of related tax effects 627,364 1,002,483
Deduct: Total stock-based
compensation expense determined
under fair value method for all awards
net of related tax effects (641,121) (1,222,686)
----------- -----------
Pro-forma net loss (1,851,039) (2,261,457)
Loss per share as reported (0.15) (0.19)
Pro-forma loss per share (0.15) (0.21)
CLASS A WARRANT EXCHANGE OFFER
On October 23, 2002, the Company entered into a Settlement Agreement
with various parties in order to end a Consent Solicitation contest
and various litigation initiated by the Company. The Agreement
provided, among other things, an agreement to commence an exchange
offer (the "Exchange Offer") whereby holders of the Company's Class A
Warrants which expired on November 30, 2002 (the "Old Warrants") had
the opportunity to exchange those warrants for New Warrants (the "New
Warrants") upon payment to the Company of $.10 per share of common
stock issuable upon the exercise of the old warrants. In September
2003 the Company issued New Warrants to the record holders as of
November 30, 2002 of the Old Warrants without requiring any cash
payment.
Each New Warrants is exercisable for the same number of shares of
common stock as the Old Warrants at an exercise price of $5.00 per
share, and expires on November 30, 2005. The New Warrants are not
transferable except pursuant to operation of law.
During the year ended March 31, 2003, the Company expensed $242,338
relating to the Exchange Offer, which represents the fair value of
the New Warrants,. The per share weighted-average fair value of each
warrant on the date of grant was $1.10 using the Black-Scholes option
pricing model with the following weighted-average assumptions: no
dividend yield; expected volatility of 73.77%; risk-free interest
rate of 2.88%; and expected lives of 3 years. The elimination of the
$0.10 per share fee resulted in an additional charge of $172,324
during the year ended March 31, 2004.
For the year ended March 31, 2003 the Company incurred legal fees and
other costs amounting to approximately $100,000, in connection with
the Exchange Offer, which has been charged to additional paid-in
capital.
-8-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED)
NOTE 3 - COMMITMENTS AND CONTINGENCIES
LITIGATION WITH ATUL M. MEHTA
The Company had an employment agreement ("Employment Agreement") with
its former President/CEO, Dr. Atul M. Mehta ("Mehta").
On June 3, 2003, Mehta resigned from all positions that he held with
the Company, while reserving his rights under his Employment
Agreement and under common law. On July 3, 2003, Mehta instituted
litigation against the Company and one of its directors in the
Superior Court of New Jersey, alleging, among other things, the
breach of his Employment Agreement and defamation, and claiming that
he is entitled to receive his salary through June 6, 2006.
On April 21, 2004, the Company settled the litigation. Under the
settlement agreement, Mehta relinquished any rights to the Company's
patents and intellectual properties and agreed to certain
non-disclosure and certain limited non-competition covenants. The
Company paid Mehta $400,000 and certain expense reimbursements in
accordance with the settlement agreement, and received a short-term
option for the Company or its designees to acquire all of the shares
of the common stock of the Company held by Mehta and his affiliates
at $2.00 per share. The Company paid $100,000 into escrow which will
be released to Mehta if the option is not exercised in full. See Note
4 for the release of the escrow to Mehta. As part of the settlement,
the Company extended expiration dates of certain options to purchase
770,000 shares of common stock held by Mehta (including options to
purchase 70,000 shares which had previously expired) and also
provided him with certain "piggyback" registration rights with
respect to shares underlying his options.
REFERRAL AGREEMENT
In January 2002, the Company entered into a Referral Agreement with
one of its directors (Referring Party) whereby the Company will pay
the Referring Party a fee based upon payments received by the Company
from sales of products, development fees, licensing fees and
royalties generated as a direct result of the Referring Party
identifying customers for the Company. These amounts are to be
reduced by the cost of goods sold directly incurred in the
manufacturing or development of products as well as any direct
expenses associated with these efforts. The Referral Agreement has no
expiration date.
-9-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED)
NOTE 3 - COMMITMENTS AND CONTINGENCIES (Continued)
REFERRAL AGREEMENT (Continued)
The Company committed to pay the Referring Party a referral fee each
year as follows:
PERCENTAGE OF REFERRAL REFERRAL BASE
BASE FROM TO
---- ---- --
5% $ 0 $1,000,000
4% 1,000,000 2,000,000
3% 2,000,000 3,000,000
2% 3,000,000 4,000,000
1% 4,000,000 5,000,000
As of June 30, 2004, no payments were required to be made under this
agreement.
COLLABORATIVE AGREEMENTS
Elite granted Purdue Pharma, L.P. ("Purdue") the right to evaluate
certain abuse resistance drug formulation technology of the Company
and an option to negotiate an exclusive license to develop and
commercialize Oxycodone products under the Company's technology
pursuant to which the Company received $150,000. This amount is
reflected in the accompanying consolidated balance sheet as deferred
revenue. See Note 4 for expiration of the option.
On December 18, 2003, the Company and Pivotal Development, L.L.C.
entered into an agreement to develop a controlled release product
utilizing Elite's proprietary drug delivery technology. The product
is a generic equivalent to a drug losing patent exclusivity with
addressable market revenues of approximately $150 million per year.
The agreement will also provide an option to develop a controlled
release NDA product.
Under the collaboration agreement, Pivotal Development will be
responsible for taking the Elite formulation through clinical
development and the FDA regulatory approval process. The partners
will seek a license during the development cycle from a
pharmaceutical company which has the resources to effectively market
the product and share the cost of defending the product against any
lawsuits.
Elite and Pivotal will bear costs in their respective areas of
responsibility. In addition Pivotal is to pay Elite $750,000 upon
attainment of certain milestones outlined in the agreement.
In June 2001, the Company entered into two separate and distinct
development and license agreements with another pharmaceutical
company ("partner"). The Company is developing two drug compounds for
the partner in exchange for certain payments and royalties. The
Company also reserves the right to manufacture the compounds. The
Company received $250,000 under one agreement and $300,000 under the
other agreement, all of which were earned as of March 31, 2002. The
Company is currently proceeding with development and formulation for
both products as specified in the development agreements. There were
no amounts earned in the three months ended June 30, 2003 or the
three months ended June 30, 2004.
-10-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED)
NOTE 3 - COMMITMENTS AND CONTINGENCIES (Continued)
COLLABORATIVE AGREEMENTS (Continued)
On September 13, 2002, the Company, entered into a manufacturing
agreement with Ethypharm S.A. ("Ethypharm"). Under the terms of this
agreement, the Company initiated the manufacturing of a new
prescription drug product for Ethypharm. The Company received an
upfront manufacturing fee for the first phase of the technology
transfer and billed an additional amount upon the completion of the
first phase of manufacturing.
The Company is entitled to receive additional fees in advance for the
final phase of the manufacturing. In addition, if and when FDA
approval is obtained and if requested by Ethypharm, the Company will
manufacture commercial batches of the product on terms to be agreed
upon.
The Company billed and earned revenues of $280,000, under the
Ethypharm agreement, all of which was billed and earned during the
year ended March 31, 2003, in accordance with the substantive
milestone method of revenue recognition. Under this method, the
milestone payments are considered to be payments received for the
accomplishment of a discrete, substantive earnings event.
Accordingly, the non-refundable milestone payments are recognized in
full when the milestone is achieved. There were no amounts earned in
the three month periods ended June 30, 2004 and 2003.
In addition to milestone payments, the Company billed and recognized
$75,000 in additional revenues as a result of the manufacturing and
delivery of additional batches during the year ended March 31, 2003.
No such revenues were earned in the three months ended June 30,2003
or the three months ended June 30, 2004.
EMPLOYMENT AGREEMENT
On July 23, 2003, the Company appointed Bernard Berk as its Chief
Executive Officer and President and entered into an employment
agreement with him. The initial term of this agreement is three
years. Pursuant to the agreement:
- Mr. Berk is entitled to receive a base salary of $200,000 per
annum, subject to increase to $330,140 if and when the Company
consummates a Strategic Transaction (as defined in the employment
agreement);
- The Company confirmed its grant to Mr. Berk on June 3, 2003 of
options to purchase 300,000 shares of the Company's common stock
at $2.01 per share. All of these options are vested.
- The Company granted Mr. Berk options to purchase an additional
300,000 shares of its common stock, with an exercise price equal
to $2.15, the closing price of the Company's common stock on the
date of grant. These options will vest solely upon consummation of
a Strategic Transaction.
-11-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED)
NOTE 3 - COMMITMENTS AND CONTINGENCIES (Continued)
EMPLOYMENT AGREEMENT (Continued)
- Mr. Berk will be entitled to receive severance in accordance with
the employment agreement if he is terminated without cause or
because of his death or permanent disability or if he terminates
his employment for good reason. The severance will be payable in
accordance with the terms of his employment agreement.
On May 14, 2004, the Company's Board of Directors appointed Bernard
Berk to the position of Chairman of the Board of Directors.
CONSULTING AGREEMENTS
On July 3, 2003, the Company entered into an agreement with Leerink
Swann & Company to provide a Valuation and a Fairness Opinion in
order for the Company to complete a proposed acquisition for which
the Company paid a non-refundable retainer fee of $50,000. If and
when the Board of Directors requests a Fairness Opinion, Leerink's
compensation is to be $50,000. No amounts were expensed in the three
month periods ended June 30, 2004 and 2003
The Company entered into one year consulting agreements with each of
Saggi Capital Corp. and Bridge Ventures Inc. on November 4, 2003. The
consultant's services will include, but not be limited to, advice
with respect to overall strategic planning, financing opportunities,
acquisition policy, commercial and investment banking relationships
and stockholder matters.
In consideration of the consultant's agreement to provide services,
the Company agrees to pay each consultant $75,000 payable in monthly
installments of $6,250 and to issue to each consultant a warrant to
purchase 100,000 shares of the Company's common stock.
On June 3, 2004, the Company agreed, subject to the approval of the
Board of Directors, to engage D. H. Blair Investment Banking Corp. to
provide consulting services and to issue in connection therewith a
five year warrant to purchase 100,000 shares of Common Stock at a
price of $2.50 per share.
For the three months ended June 30, 2004, consulting expenses under
these agreements amounted to an aggregate of $30,000. No consulting
expense was incurred for the three months ended June 30, 2003.
-12-
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED)
NOTE 4 - SUBSEQUENT EVENTS
On July 6, 2004, the Company agreed to issue 26,500 shares of Common
Stock and pay $10,000 per month to CEOcast, Inc. in consideration for
the rendering for a six-month period of investor relation consulting
services, including the distribution of the Company's press releases,
the provision of related strategic advice and the inclusion of the
Company on the consultant's website. The Company has agreed to
provide the holder with "piggy-back" registration rights.
On July 7, 2004, the Company repaid its bank note in the amount of
$200,000 with proceeds generated from the surrender of a Certificate
of Deposit which was included in restricted cash. Net proceeds after
processing fees were deposited into the Company's operating account.
On July 8, 2004, Elite Labs, to finance the purchase of certain
machinery and equipment, borrowed $400,000 payable in 36 monthly
installments of $13,671, including principal and interest at 14% per
annum. The first four and the last three months of scheduled payments
are being held by the lender and will be applied to the principal
balance when due. The loan is secured by two pieces of equipment and
the guaranty of the Company. In addition, designees of the lender
received 50,000 warrants which vest immediately, to purchase an
aggregate of 50,000 shares of the Company's common stock at $4.20 per
share. If the loan is repaid within six months, the warrant
holder(s)will forfeit 15,000 warrants, but the lender will be
entitled to a $10,000 prepayment penalty. A charge for the cost of
these warrants will be reflected in the quarter ending September 30,
2004.
At the adjourned Annual Meeting of Stockholders held on July 21,
2004, the shareholders approved the adoption of an amendment to the
Certificate of Incorporation increasing the number of authorized
shares of capital stock from 25,000,000 of Common Stock to 65,000,000
shares of Common Stock and 5,000,000 shares of Preferred Stock.
In July 2004, the Company's option granted under the Settlement
Agreement to acquire all of the shares of its former CEO, Dr. Atul M.
Mehta, expired unexercised and the $100,000 Company deposit was
released to Mehta. (See Note 3).
In August 2004 the option granted to Purdue Pharma L. P. to negotiate
an exclusive license to develop and commercialize the Oxycodone
products under the Company's technology patent expired unexercised
(See Note 3).
On August 9, 2004 the Company announced the termination of
negotiations to acquire Nostrum Pharmaceuticals Inc. ("Nostrum"), a
privately-held company engaged in the development of drug delivery
products. The Company had announced in August 2003 the authorization
by its Board of Directors of negotiations of an agreement to acquire
Nosturm by means of a merger with a wholly-owned subsidiary of the
Company in exchange for a substantial number of shares of Common
Stock of the Company and options to purchase a substantial number of
additional shares.
-13-
ELITE PHARMACEUTICALS, INC.
PART I.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED JUNE 30, 2004 COMPARED TO
THE THREE MONTH PERIOD ENDED JUNE 30, 2003
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements, the related Notes to Consolidated
Financial Statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 2004 (the "10-K") and the
Unaudited Consolidated Financial Statements and related Notes to Consolidated
Financial Statements included in Item 1 of Part I of this Quarterly Report on
Form 10-Q.
The Company has included in this Quarterly Report certain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 concerning the Company's business, operations and financial condition.
"Forward-looking statements" consist of all non-historical information, and the
analysis of historical information, including the references in this Quarterly
Report to future revenue growth, future expense growth, future credit exposure,
earnings before interest, taxes, depreciation and amortization, future
profitability, anticipated cash resources, anticipated capital expenditures,
capital requirements, and the Company's plans for future periods. In addition,
the words "could", "expects", "anticipates", "objective", "plan", "may affect",
"may depend", "believes", "estimates", "projects" and similar words and phrases
are also intended to identify such forward-looking statements.
Actual results could differ materially from those projected in the
Company's forward-looking statements due to numerous known and unknown risks and
uncertainties, including, among other things, unanticipated technological
difficulties, the volatile and competitive environment for drug delivery
products, changes in domestic and foreign economic, market and regulatory
conditions, the inherent uncertainty of financial estimates and projections, the
uncertainties involved in certain legal proceedings, instabilities arising from
terrorist actions and responses thereto, and other considerations described as
"Risk Factors" in other filings by the Company with the SEC including the Annual
Report on Form 10-K. Such factors may also cause substantial volatility in the
market price of the Company's Common Stock. All such forward-looking statements
are current only as of the date on which such statements were made. The Company
does not undertake any obligation to publicly update any forward-looking
statement to reflect events or circumstances after the date on which any such
statement is made or to reflect the occurrence of unanticipated events.
OVERVIEW
The Company is involved in the development of controlled drug delivery
systems and products. Its products are in varying stages of development and
testing. In addition, from time to time, the Company has also conducted research
and development projects on behalf of other pharmaceutical companies although
these activities have generated only limited revenue to date, all prior to the
current fiscal year.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's discussion addresses the Company's consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of financial statements and the
reported amounts of revenues and expenses during the reporting period. On an
ongoing basis, management evaluates its estimates and judgment, including those
related to long-lived assets, intangible assets, income taxes, equity-based
compensation, and contingencies and litigation. Management bases its estimates
and judgments on historical experience and on various other factors that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
-14-
ELITE PHARMACEUTICALS, INC.
PART I.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED JUNE 30, 2004 COMPARED TO
THE THREE MONTH PERIOD ENDED JUNE 30, 2003
(CONTINUED)
Management believes the following critical accounting policies, among
others, affect its more significant judgments and estimates used in the
preparation of its consolidated financial statements. The Company's most
critical accounting policies include the recognition of revenue upon completion
of certain phases of projects under research and development contracts. Revenues
from these contracts are recognized when management determines the Company has
completed its obligation under each phase. The Company also assesses a need for
an allowance to reduce its deferred tax assets to the amount that it believes is
more likely than not to be realized. Management estimates its net operating
losses will probably not be utilized in the near future, and has not recognized
a tax benefit from this deferred tax asset. If management anticipated being
profitable, a deferred tax benefit would be recognized and such estimate would
increase net income and earnings per share accordingly. The Company assesses the
recoverability of long-lived assets and intangible assets whenever events or
changes in circumstances indicate that the carrying value of the assets may not
be recoverable. Management estimates the Company's patents and property and
equipment are not impaired. If these assets were considered impaired, the
Company would recognize an impairment loss which would increase the Company's
net loss and net loss per share accordingly. The Company assesses its exposure
to current commitments and contingencies by advice of counsel. It should be
noted that actual results may differ from these estimates under different
assumptions or conditions.
During the fiscal year ended March 31, 2003, the Company elected to
prospectively recognize the fair value of stock options granted to employees and
members of the Board of Directors, effective as of the beginning of the fiscal
year. The prospective method allowed by the Financial Accounting Standards Board
effects the Company's results of operations for the three month periods ended
June 30, 2004 and 2003 as options were granted or repriced during these periods
which either vested immediately or vest over three to five years. The Company
does not know the future effect of options and warrants which may be granted to
employees and members of the Board of Directors. The Financial Accounting
Standards Board provided three transition alternatives for recognizing
stock-based compensation cost using the fair value method. If management did not
elect the prospective method during the three month periods ended June 30, 2004
and 2003, net loss and net loss per share would have been decreased. However,
the two other methods would have required either greater compensation cost to be
recognized as an expense or retroactive restatement of previously reported net
loss.
RESULTS OF CONSOLIDATED OPERATIONS
THREE MONTHS ENDED JUNE 30, 2004 COMPARED TO THREE MONTHS ENDED JUNE 30, 2003
As a result of inadequate funds to conduct significant research and
development and the resignations in June 2003 of the Company's principal
scientific officers, the Company was unable to generate revenues under its
existing customer contracts or to secure revenues from other sources during the
three months ended June 30, 2004 and June 30, 2003.
-15-
ELITE PHARMACEUTICALS, INC.
PART I.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED JUNE 30, 2004 COMPARED TO
THE THREE MONTH PERIOD ENDED JUNE 30, 2003
(CONTINUED)
THREE MONTHS ENDED JUNE 30, 2004 COMPARED TO THREE MONTHS ENDED JUNE 30, 2003
(continued)
General and administrative expenses for the three months ended June 30,
2004 were $408,572, a decrease of $4,984 or 1.2% from the comparable period of
the prior year. The decrease in general and administrative expenses was
substantially due to the reduction of operating economics.
Research and development costs for the three months ended June 30, 2004
were $646,229, an increase of $158,747 or 32.6% from the comparable period of
the prior year, which was substantially due to increases in consulting fees, lab
supplies and raw materials.
The decrease of $374,485 in other income (expense) for the three months
ended June 30, 2004 from $1,050,606 for the three months ended June 30,2003 was
primarily the result of reduction in charges related to the issuance of stock
options partially offset by the $397,732 charge related to repricing of stock
options.
The Company's net loss for the three months ended June 30, 2004 was
$1,837,282 compared to $2,041,254 for the comparable period of the prior year.
The decrease in the net loss was primarily due to the reduction of other income
(expense) described above.
MATERIAL CHANGES IN FINANCIAL CONDITION
The Company's working capital (total current assets less total current
liabilities), which was $1,289,764 as of March 31, 2004, decreased to $184,139
as of June 30, 2004. The decrease in working capital is primarily due to the
$1,837,282 net loss from operations.
The Company experienced negative cash flow from operations of $1,213,765
for the three months ended June 30, 2004, primarily due to the Company's net
loss from operations offset by non-cash charges of $732,724, which included, but
were not limited to, the charges of $397,732 in connection with the repricing of
stock options and $229,632 in connection with the issuance of stock options.
The Company recently completed a Good Manufacturing Practices ("GMP") batch
for a product currently licensed with a pharmaceutical company under a
development and license agreement entered into June 2001. The Company received
$30,000 in November 2003 under the Agreement and expects to complete two
additional GMP batches in the near future under the terms of the licensing
agreement. The Company expects to manufacture the product with revenues
projected to be generated in the second quarter of its fiscal year ending March
31, 2005. The Company also projects the earning of additional milestone payments
under the Agreement subject to completion of the GMP batches.
-16-
ELITE PHARMACEUTICALS, INC.
PART I.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED JUNE 30, 2004 COMPARED TO
THE THREE MONTH PERIOD ENDED JUNE 30, 2003
(CONTINUED)
MATERIAL CHANGES IN FINANCIAL CONDITION (Continued)
The Company recently entered into an Agreement with Pivotal Development,
L.L.C. Under the Agreement, the Company is to receive an aggregate of $750,000
upon attaining certain milestones. The Company anticipates that some of the
milestones will be achieved starting in the quarter ended September 30, 2004.
No assurance can be given that the Company will consummate any of the
transactions discussed above.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended June 30, 2004, the Company's operations did not
generate positive cash flow. As of June 30, 2004, the Company's had
approximately $804,000 of cash and cash equivalents.
For the three months ended June 30, 2004, the Company recorded negative
cash flow and financed its operations primarily through utilization of its
existing cash. The Company had working capital of approximately $.2 million at
June 30, 2004 compared with approximately $2.0 million at June 30, 2003. Cash
and cash equivalents at June 30, 2004 were $.8 million, a decrease of $1.5
million from the $2.3 million at June 30, 2003.
Net cash used in operating activities was $1,213,765 during the three
months ended June 30, 2004, compared to $848,111 for the three months ended June
30, 2003. Net cash used in operating activities during the three months ended
June 30, 2004 included the Company's net loss of $1,837,282 offset in part by
non-cash charges of $732,724 consisting of $627,364 in stock option charges, and
$105,360 in depreciation expense. A decrease in accrued expenses, which results
from payment of litigation settlement in an amount below the accrued amount also
contributed to the Company's cash used in operating activities for the three
months ended June 30, 2004. Net cash used in operating activities during the
three months ended June 30, 2003 resulted primarily from a net loss of
$2,041,254, offset in part by certain non-cash expenses consisting of, but not
limited to depreciation expense of $89,610 and charges related to issuance of
stock options of $1,002,843.
Investing activities used net cash of $68,140 and $86,138, respectively,
during the three months ended June 30, 2004 and June 30, 2003, which resulted
primarily from an increase in restricted cash.
-17-
ELITE PHARMACEUTICALS, INC.
PART I.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED JUNE 30, 2004 COMPARED TO
THE THREE MONTH PERIOD ENDED JUNE 30, 2003
(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
Financing activities utilized net cash of $18,750 during the three months
ended June 30, 2004 and June 30, 2003 to repay indebtedness.
There were no revenues generated for the three months ended June 30, 2004.
In order to conserve cash for the next twelve months, the Company intends to
reduce costs by continuing the reduction of the number of products under active
development to six.
The Company did not make any capital expenditures during either of the
three month periods ended June 30, 2004 and June 30, 2003.
The Company anticipates that its capital expenditures for the 12 months
ending June 30, 2005 will be limited to expenditures that can be funded entirely
by development contracts that include provisions for such funding. Management
estimates the Company has sufficient cash to allow it to continue for the 12
months ended June 30, 2005. The Company may seek additional funds through
additional debt or equity. No assurance can be given that any offering will be
concluded or that if concluded the proceeds will be material.
The Company had outstanding, as of June 30, 2004, $2,495,000 in aggregate
amount of bonds. The bonds bear interest at a rate of 7.75% per annum and are
due on various dates between 2005 and thereafter. The bonds are secured by a
first lien on the Company's facility in Northvale, New Jersey. Pursuant to the
terms of the bonds, several restricted cash accounts have been established for
the payment of bond principal and interest. Bond proceeds were utilized for the
refinancing of the land and building the Company currently owns, the purchase of
certain manufacturing equipment and related building improvements and the
maintenance of a $300,000 debt service reserve. All of the restricted cash,
other than the debt service reserve, is expected to be expended within twelve
months and is therefore categorized as a current asset on the Company's
consolidated balance sheet as of June 30, 2004. Pursuant to the terms of the
bond indenture agreement pursuant to which the bonds were issued, the Company is
required to observe certain covenants, including covenants relating to the
incurrence of additional indebtedness, the granting of liens and the maintenance
of certain financial covenants. As of June 30, 2004 the Company was in
compliance with the covenants contained in the bond indenture agreement.
-18-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED JUNE 30, 2004 COMPARED TO
THE THREE MONTH PERIOD ENDED JUNE 30, 2003
(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
On July 8, 2004, Elite Labs entered into a loan and financing agreement in
order to finance the purchase of certain machinery and equipment. Elite Labs
borrowed $400,000 payable in 36 monthly installments of $13,671,each, including
principal and interest at 14% per annum. The first four and the last three
months of scheduled payments are being held by the lender and will be applied to
the principal balance when due. The loan is secured by two pieces of equipment
and the guaranty of the Company. In addition, the Company issued to designees of
the lender 50,000 warrants, which vest immediately, to purchase 50,000 shares of
the Company's common stock at $4.20 per share. If the loan is repaid within six
months, 15,000 warrants will be forfeited, but the lender will be entitled to a
$10,000 prepayment penalty. A charge for the cost of these warrants will be
reflected in the quarter ending September 30, 2004.
The Company from time to time will consider potential strategic
transactions including acquisitions, strategic alliances, joint ventures and
licensing arrangements with other pharmaceutical companies. The Company retained
an investment banking firm to assist with its efforts. There can be no assurance
that any such transaction will be available or consummated in the future
-19-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company had no investments in marketable securities as of June
30, 2004 or assets and liabilities which are denominated in a
currency other than U.S. dollars or involve commodity price risks.
PART II. OTHER INFORMATION
Item 2. CHANGE IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASE OF EQUITY
SECURITIES
Since March 31, 2004, the Company issued or granted the following warrants
or options:
On June 3, 2004, the Company agreed, subject to the approval of its Board
of Directors, to grant five year warrants to purchase 100,000 shares of Common
Stock at a price of $2.50 per share to D. H. Blair Investment Banking Corp. as
consideration for financial consulting services.
On June 22, 2004, the Company granted under its 2004 Stock Option Plan ten
year options to purchase at a price of $2.34 per share an aggregate of 243,300
shares of Common Stock, of which options to purchase 30,000 shares were granted
to each of the Company's Directors, Messrs. Harmon Aronson, Bernard Berk, John
A. Moore and Eric L. Sichel and options to purchase an aggregate of 123,300
share were granted to 14 employees upon their surrender of previously granted
options to purchase a like number of shares containing an exercise price greater
than $2.34 per share.
On July 6, 2004, the Company agreed to issue 26,500 shares of Common Stock
to CEOcast, Inc. in partial consideration for the rendering for a six-month
period of investor relation consulting services and provide the holder with
"piggy-back" registration rights.
On July 7, 2004, the Company issued three year warrants to purchase an
aggregate of 50,000 shares of Common Stock at a price of $4.20 per share to
designees of the lender in connection with the refinancing of the outstanding
equipment loan, with the provision that warrants to purchase 15,000 shares will
be cancelled in the event of the repayment in full of the new loan within six
months, in which event the Company is to pay $10,000 to the lender as a
prepayment penalty.
On July 20, 2004, the Company issued to Jason Lyons five-year warrants to
purchase 50,000 shares of Common Stock at a price of $3.00 per share in
consideration of his agreement to render financial consulting services.
The Company intends to register under the Securities Act of 1933, as
amended (the "Act") the shares subject to the options granted under the 2004
Stock Option Plan.
CEOcast, Inc. and each of the warrant holders has agreed that no transfer
of the shares, warrants or any shares issuable upon exercise of the warrants
will be made unless such transfer is registered under the Act or exempt from
registration under the Act.
In the opinion of the Company, the issuance of the foregoing shares of
Common Stock, warrants and the offering of the shares of Common Stock subject to
the warrant were exempt from registration under the Act by virtue of Section
4(2) of the Act.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Stockholders at Registrant's Annual Meeting of Stockholders held on June
22, 2004 took the following actions:
-20-
1. Elected its four Directors.
FOR WITHHELD
---------- ---------
Bernard Berk 9,675,884 1,481,900
Harmon Aronson 9,676,384 1,481,900
John A. Moore 9,674,884 1,482,900
Eric L. Sichel 10,927,778 115,000
2. Approved the adoption of the Company's 2004 Stock Option Plan by a
vote of 4,188,929 shares for, 561,691 shares against, and 1,526,844
shares abstaining.
3. Approved the proposal to ratify amendments of options and warrants
described in the related proxy statement by a vote of 4,520,229 shares
for, 1,695,665 shares against and 61,570 shares abstaining.
4. Approved the proposal to ratify the sale at $2.00 per share in a
private placement consummated in December 2003 of 50,000 shares of
Common Stock to Edson Moore Healthcare Ventures, Inc., of which John
A. Moore, a Director, is President and a principal stockholder and
20,000 shares of Common Stock to Eric L. Sichel, a Director, and Dana
Lerna, as co-tenants by a vote of 3,512,449 shares for, 576,898 shares
against and 1,638,117 shares abstaining.
At the adjourned Annual Meeting held on July 21, 2004, the
stockholders approved the adoption by the Board of Directors of an amendment to
the Company's Certificate of Incorporation increasing the authorized capital
stock to 65,000,000 shares of Common Stock and 5,000,000 shares of Preferred
Stock, all with the par value of $.01 per share, by a vote of 6,052,807 shares
for, 102,745 share against and 1,494,994 shares abstaining.
Item 5. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 Amendment to Certificate of Incorporation approved in
July 2004 increasing authorized shares of capital stock.
10.1 2004 Stock Option Plan incorporated by reference to
Exhibit A to Schedule 14A with respect to Annual Meeting
of Stockholders held on June 22, 2004.
10.2 Form of Warrant issued to Jason Lyons.
10.3 Form of Warrant issued to designees of lender with
respect to financing of equipment loan.
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification by Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
Since March 31, 2004 Registrant filed current reports on Form
8-K, each such report containing information under items 5
and 7, on April 2, 2004, April 16, 2004, May 4, 2004, May 10,
2004, May 17, 2004, July 29, 2004, August 5, 2004 and August
9, 2004.
-21-
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 13, 2004 By: /s/Bernard Berk
----------------------------
Bernard Berk
Chief Executive Officer
(Principal Executive Officer)
Date: August 13, 2004 By: /s/Mark I. Gittelman
----------------------------
Mark I. Gittelman
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)