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U.S. Securities and Exchange Commission
Washington, D.C. 20549

Form 10-Q

Commission file number 0-20424

          Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

          Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.

APPLICABLE ONLY TO CORPORATE ISSUERS

          State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

          Common Stock, $.01 Par Value— 7,240,711  shares outstanding as of March 17, 2003.

          Transitional Small Business Disclosure Format:

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INDEX

HI-TECH PHARMACAL CO., INC.

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PART I. ITEM 1

HI-TECH PHARMACAL CO., INC.

CONDENSED BALANCE SHEETS

(1)  The number of shares outstanding, per share amounts, common stock and additional capital for prior periods has been adjusted to reflect a three for two stock  split distributed in January 2003.

See notes to condensed financial statements

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HI-TECH PHARMACAL CO., INC.

CONDENSED STATEMENTS OF OPERATIONS (unaudited)

(1)  The number of shares outstanding and per share amounts for prior periods has been adjusted to reflect a three for two stock  split distributed in January 2003.

See notes to condensed financial statements

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HI-TECH PHARMACAL CO., INC.

CONDENSED STATEMENTS OF CASH FLOWS (unaudited)

See notes to condensed financial statements

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HI-TECH PHARMACAL CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2003

BASIS OF PRESENTATION

          The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The preparation of the Company’s financial statements in conformity with generally accepted accounting principles necessarily requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expense during the reporting periods. Actual results could differ from these estimates and assumptions. Operating results for the three and nine month periods ended January 31, 2003 are not necessarily indicative of the results that may be expected for the year ended April 30, 2003. For further information, refer to the financial statements and footnotes thereto for the year ended April 30, 2002 on Form 10-K.

REVENUE RECOGNITION

          Sales are recorded as products are shipped. Estimates are made for sales returns, allowances and discounts. Additional conditions for recognition of revenue are that collection of sales proceeds is reasonably assured and the Company has no further performance obligations. Contract research income is recognized as work is completed and as billable costs are incurred. In some cases, contract research income is based on attainment of certain designated milestones. For generic pharmaceutical products, which includes private label contract manufacturing, net sales for the three months ended January 31, 2003 and January 31, 2002 were $13.4 million and $7.4 million respectively. The Company’s Health Care Products division, which markets the Company’s branded products, for the three months ended January 31, 2003 and January 31, 2002 had net sales of $2.5 million and $1.9 million respectively.

NET EARNINGS PER SHARE AND STOCKHOLDERS EQUITY

          Net income per common share is computed based on the weighted average number of common shares outstanding for basic earnings per share and on the weighted average number of common shares and share equivalents (stock options) outstanding for diluted earnings per share.  All references to number of shares and per share amounts have been restated to reflect the three for two stock split which was distributed in January 2003.  Stockholder’s equity has been restated to give retroactive recognition to the stock split for all periods presented. 

WORKING CAPITAL REVOLVING LOAN

          On October 23, 2002 the Company replaced its existing credit facility with a new three year $8,000,000 revolving credit facility. The revolving credit facility bears interest at a rate selected by the Company equal to the Prime Rate or LIBOR Rate plus 1.50%. Loans are collateralized by inventory, accounts receivable and other assets. The agreement contains covenants with respect to working capital, net worth and certain ratios, as well as other covenants and prohibits the payment of cash dividends. For the nine months ended January 31, 2003 there were no borrowings under the credit facility.

INVENTORIES

          The components of inventory consist of the following:

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HI-TECH PHARMACAL CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

January 31, 2003

PROPERTY, PLANT AND EQUIPMENT

          The components of net property, plant and equipment consist of the following:

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

          The components of accounts payable and accrued expenses consist of the following:

CONTINGENCIES AND OTHER MATTERS

          The Company’s products and facilities are subject to regulation by a number of Federal and State governmental agencies. The Food & Drug Administration (“FDA”), in particular, maintains oversight of the formulation, manufacture, distribution, packaging and labeling of all of the Company’s products. In October 2002, the Company received approval from the FDA to market its EQ 5mg base/5ml Prednisolone Sodium Phosphate Oral Solution. In September, 2002, the Company received approval from the FDA to market its Timolol Maleate Opthalmic Solution 0.5%. In June 2002, the FDA approved the Company’s application to manufacture and market its 20mg/ 5ml Fluoxetine Oral Solution. The management of the Company believes that it is substantially in compliance with the law and regulations governing pharmaceutical marketing and manufacturing.

          During the quarter ended January 31, 2003 the Company’s significant customers were Walgreens, which accounted for approximately 22% of the gross sales and Cardinal Distribution L.P., which accounted for approximately 11% of gross sales. At January 31, 2003, trade receivables from Walgreens and CVS Corporation were approximately 27% and 16%, respectively.

          On October 23, 2002 the Company replaced its existing credit facility with a new three year $8,000,000 revolving credit facility. The revolving credit facility bears interest at a rate elected by the Company equal to the Prime Rate or the LIBOR Rate plus 1.50%. Loans are collateralized by inventory, accounts receivable and other assets. The agreement contains covenants with respect to working capital, net worth and certain ratios, as well as other covenants and prohibits the payment of cash dividends. For the nine months ended January 31, 2003 there were no borrowings under the credit facility.

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HI-TECH PHARMACAL CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

January 31, 2003

          The Company has a net investment of approximately $166,000 in a joint venture for the marketing and development of a nutritional supplement. Mr. Reuben Seltzer, a director of the Company, has an interest in the joint venture. Mr. Reuben Seltzer is the son of Mr. Bernard Seltzer, Chairman of the Board of the Company. Pursuant to the cost method of accounting for its investment, the Company included a distribution of approximately $ 50,000 in its pre – tax income for the period ended January 31, 2003.

          On or about October 28, 2002 an action was commenced in the United States District Court for the Northern District of Texas, Dallas Division, against the Company, Wyeth; Wyeth Consumer Healthcare; Bayer Corporation; Bayer A.G.; Novartis Consumer Health, Inc.; Novartis Pharmaceuticals Corporation; Schering-Plough Corporation; The Delaco Company and Chattem, Inc. The complaint alleges claims for permanent and debilitating injuries as a result of exposure to phenylpropanolamine (hereinafter referred to “PPA”) through ingestion of PPA-containing products designed, formulated, marketed, manufactured, distributed, and /or sold by the Company and the other defendants. The plaintiffs, individually, seek compensatory damages in the amount of $15 million for actual damages, plus punitive damages. The Company has filed an answer to this action and believes it has meritorious defenses. The Company’s defense costs, after its deductible, are being covered under its product liability policy which has a $5 million limit for defense costs and liability (“Product Liability Policy”). The last date of sale of the limited number of products containing PPA by the Company, was December, 2000.

          On or about November 15, 2002 an action was commenced against the Company and Albertson’s Inc., American Drug Stores, Inc., Osco Drug, Inc., Walgreen Co; American Procurement and Logistics Company in the Circuit Court of Cook County, Illinois. The complaint alleges that the defendants sold and supplied Brometane, and certain other product which allegedly caused plaintiffs to suffer severe and permanent injuries. The plaintiffs’ seek judgment against all defendants, jointly and severally, in amounts in excess of $400,000, together with interest, costs and disbursements. The Company has filed an answer to this action and believes it has meritorious defenses. The Company’s defense costs, after its deductible, are being covered under its Product Liability Policy which has a $5 million limit for defense costs and liability.

          In March 2001, the Center for Environmental Health (“CEH”) filed a lawsuit against several defendants alleging violations of California’s Proposition 65 and Unfair Trade Practices Act for failure to provide clear and reasonable warnings regarding the carcinogenicity and reproductive toxicity of lead and the reproductive toxicity of cadmium to the users of FDA-approved anti-diarrheal medicines. In December 2001, CEH amended its complaint by adding the Company as a defendant. In January 2002, the California Attorney General served an amended complaint against the Company and several other defendants covering the same products and asserting similar allegations and damages. The Company has agreed to indemnify several of its customers who are named as defendants in the actions. On January 29, 2002, the Attorney General filed a motion to consolidate the two actions in San Francisco County Superior Court. The Company’s Answers to the CEH complaint and the Attorney General’s complaint were filed on February 14, 2002 and February 28, 2002, respectively. Settlement discussions are ongoing.

          In October 2001, the California Attorney General filed a lawsuit against the Company and other defendants alleging violations of California’s Proposition 65 and Unfair Trade Practices Act for failure to provide clear and reasonable warnings regarding the carcinogenicity and reproductive toxicity of mercury compounds to the users of certain FDA-approved nasal sprays. The Company’s answer to the complaint was filed on December 26, 2001. Settlement discussions are ongoing.

          The Company believes that the effect of these litigation matters will not be material to the financial position or operations of the Company.

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ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

January 31, 2003

          With the exception of the historical information contained in this Form 10-Q, the matters described herein may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to materially differ from those projected or implied. These risks include, but are not limited to, regulatory matters, the ability of the Company to grow internally or by acquisition, and to integrate acquired businesses, changing industry and competitive conditions, and other risks outside the Company’s control referred to in its registration statement and periodic reports filed with the Securities and Exchange Commission. The Company disclaims any obligation to update any forward-looking statements.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JANUARY 31, 2003 COMPARED TO THREE MONTHS ENDED JANUARY 31, 2002

          Net sales for the three months ended January 31, 2003 were $15.9 million an increase of $6.6 million or 70% as compared to the net sales for the three months ended January 31, 2002 of $9.3 million. Generic pharmaceutical net sales for the three months ended January 31, 2003 was $13.4 million, an increase of $6.0 million or 81%, compared to the fiscal 2002 respective period sales of $7.4 million. Of the $6.0 million increase, $3.8 million came from products not sold in the comparative period. The Company continued to see an increase in sales and distribution of its other generic products to chain drug stores, wholesalers and managed care organizations throughout the country.  This increase is a result of the Company’s ability to deliver high quality products supported with a high level of customer service. 

          The Company’s Health Care Products division, which markets the Company’s branded products, increased sales to $2.5 million for the three months ended January 31, 2003, an increase of $600,000 or 32% from $1.9 million for the three months ended January 31, 2002. The increase was due to the introduction of new products such as Multi-betic®, a multivitamin supplement, and DiabetiDerm® Foot Cream. 

          During the quarter ended January 31, 2003 the Company’s significant customers were Walgreens, which accounted for approximately 22% of gross sales and Cardinal Distribution L.P., which accounted for approximately 11% of gross sales. At January 31, 2003, trade receivables from Walgreens and CVS Corporation were approximately 27% and 16%, respectively.

          Cost of sales, as a percentage of net sales, increased from 49% or $4.6 million for the three months ended January 31, 2002 to 52% or $8.3 million for the three months ended January 31, 2003. The percentage increase resulted from the product mix.

          Research and product development costs for the three months ended January 31, 2003 increased to $555,000, or 4% of net sales compared to $451,000 or 5% of net sales for the same period ended January 31, 2002. There was no contract research income in the three months ended January 31, 2003 period compared to $110,000 in the fiscal 2002 respective period.

          Selling, general and administrative expenses, as a percentage of net sales, decreased to 26% from 31%, or $4.1 million and $2.9 million for the three months ended January 31, 2003 and 2002, respectively. This was the result of sales growing at a faster rate than advertising and other expenses. The Company believes its advertising methods were more effective and efficient.

          Net income for the three months ended January 31, 2003 and 2002 was $1.9 million and $1.0 million, respectively, an increase of $900,000, or 89%. The overall increase is due to the increase in units shipped and average unit selling price and the other factors noted above.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JANUARY 31, 2003 COMPARED TO NINE MONTHS ENDED JANUARY 31, 2002

          Net sales for the nine months ended January 31, 2003 were $36.5 million, an increase of $12.8 or 54% as compared to the for the nine months ended January 31, 2002 of $23.7 million. Net sales of generic pharmaceutical products for the nine months ended January 31, 2003 were $30.8 million, an increase of $11.8 million, or 62%, compared to the fiscal 2002 respective period sales of $19.0 million. Of the $11.8 million increase, $7.1 million came from products not sold in the comparative period. The Company continued to see an increase in sales and distribution of its other generic products to chain drug stores, wholesalers and managed care organizations throughout the country.

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          MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

          The Health Care Products division, which markets the Company’s branded products, for the nine months ended January 31, 2003 and 2002 had net sales of $5.7 million and $4.7 million, respectively, an increase of $1.0 million or 21%. The increase was due to the introduction of new products such as Multi-betic® and DiabetiDerm® Foot Cream. 

          Cost of sales, as a percentage of net sales, decreased from 52% or $12.3 million for the nine months ended January 31, 2002 to 50% or $18.2 million for the nine months ended January 31, 2003. The percentage increase resulted from the product mix.

          Research and product development costs for the nine months ended January 31, 2003 increased to $1.5 million or 4% of net sales compared to $1.3 million or 5% of net sales for the same period ended January 31, 2002, and contract research income decreased to $122,000 in the fiscal 2003 period compared to $343,000 in the fiscal 2002 respective period.

          Selling, general and administrative expenses, as a percentage of net sales, decreased to 27% from 28%, or to $10.0 million from $6.7 million for the nine months ended January 31, 2003 and 2002, respectively. This was the result of sales growing at a faster rate than advertising and other expenses. The Company believes its advertising methods were more effective and efficient.

          Net income for the nine months ended January 31, 2003 and 2002 was $4.5 million and $2.4 million, respectively, an increase of $2.1 million, or 88%. The overall increase is due to the increase in units shipped and average unit selling price and the other factors noted above.

LIQUIDITY AND CAPITAL RESOURCES

          The Company’s operations are financed principally by cash flow from operations. During the January 31, 2003 period, working capital increased to $22.4 million from $17.9 million at April 30, 2002, an increase of $4.5 million. During the nine months ended January 31, 2003 the Company invested $1.7 million in fixed assets.

          On October 23, 2002 the Company replaced its existing credit facility with a new three year $8,000,000 revolving credit facility. The revolving credit facility bears interest at a rate selected by the Company equal to the Prime Rate or the LIBOR Rate plus 1.50%. Loans are collateralized by inventory, accounts receivable and other assets. The agreement contains covenants with respect to working capital, net worth and certain ratios, as well as other covenants and prohibits the payment of cash dividends. For the nine months ended January 31, 2003 there were no borrowings under the credit facility.

          The Company’s products and facilities are subject to regulation by a number of Federal and State governmental agencies. The Food & Drug Administration (“FDA”), in particular, maintains oversight of the formulation, manufacture, distribution, packaging and labeling of all of the Company’s products.  Subsequent to period end, on February 28, 2003, the Company announced that it received approval from the FDA to market its Prednisolone Syrup USP, 15mg per 5ml.  In October 2002, the Company received approval from the FDA to market its EQ 5mg dose/5ml Prednisolone Sodium Phosphate Oral Solution. In September 2002, the Company received approval from the FDA to market its Timolol Maleate Opthalmic Solution 0.5%. In June 2002, the FDA approved the Company’s application to manufacture and market its 20mg/ 5ml Fluoxetine Oral solution. The management of the Company believes that it is substantially in compliance with the law and regulations governing pharmaceutical marketing and manufacturing.

          The Company has a net investment of approximately $166,000 in a joint venture for the marketing and development of a nutritional supplement. Mr. Reuben Seltzer, a director of the Company, has an interest in the joint venture. Mr. Reuben Seltzer is the son of Mr. Bernard Seltzer, Chairman of the Board of the Company. Pursuant to the cost method of accounting for its investment, the Company included a distribution of approximately $ 50,000 in its pre – tax income for the period ended January 31, 2003.

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SEASONALITY

          Historically, the months of September through March account for a greater portion of the Company’s sales than the other months of the fiscal year. Accordingly, period-to-period comparisons within the same fiscal year are not necessarily meaningful and should not be relied on as indicative of future results.

CRITICAL ACCOUNTING POLICIES

          In preparing financial statements in conformity with generally accepted accounting principles in the United States of America, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses for the reporting period covered thereby. Actual results could differ from those estimates. Our estimates for sales returns and allowances, the useful lives of property and equipment and the realization of deferred tax assets represent a significant portion of the estimates made by management.

           Sales are recorded as products are shipped. Estimates are made for sales returns and allowances and discounts. Additional conditions for recognition of revenue are that collection of sales proceeds is reasonably assured and the Company has no further performance obligations. Contract research income is recognized as work is completed and as billable costs are incurred. In some cases, contract research income is based on attainment of certain designated milestones.

ITEM 4: CONTROLS AND PROCEDURES

          Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures within 90 days of the filing date of this quarterly report, and, based on their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

          On or about October 28, 2002 an action was commenced in the United States District Court for the Northern District of Texas, Dallas Division, against the Company, Wyeth, Wyeth Consumer Healthcare, Bayer Corporation, Bayer A.G., Novartis Consumer Health, Inc., Novartis Pharmaceuticals Corporation, Schering-Plough Corporation, The Delaco Company and Chattem, Inc. The complaint alleges claims for permanent and debilitating injuries as a result of exposure to phenylpropanolamine (hereinafter referred to “PPA”) through ingestion of PPA-containing products designed, formulated, marketed, manufactured, distributed, and /or sold by the Company and the other defendants. The plaintiffs seek compensatory damages in the amount of $15 million for actual damages, plus punitive damages. The Company filed an answer to this action and believes it has meritorious defenses. The Company’s defense costs, after its deductible, are being covered under its product liability policy which has a $5 million limit for defense costs and liability (“Product Liability Policy”). The last date of sale of the limited number of products containing PPA, by the Company, was December, 2000.

          On or about November 15, 2002 an action was commenced against the Company and Albertson’s Inc., American Drug Stores, Inc., Osco Drug, Inc., Walgreen Co; American Procurement and Logistics Company in the Circuit Court of Cook County, Illinois. The complaint alleges that the defendants sold and supplied Brometane, and certain other products which allegedly caused plaintiffs to suffer severe and permanent injuries. The plaintiffs’ seek judgment against all defendants, jointly and severally, in amounts in excess of $400,000, together with interest, costs and disbursements. The Company has filed an answer to this action and believes it has meritorious defenses. The Company’s defense costs, after its deductible, are being covered under its Product Liability Policy which has a $5 million limit for defense costs and liability.

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.

HI-TECH PHARMACAL CO., INC.
(Registrant)

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CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, David Seltzer, certify that:

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CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Arthur Goldberg, certify that: