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
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period ended ______________________ to ______________________
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) |
(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
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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
---------- ----------
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PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 3,994,325 4,090,250
---------- ----------
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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
========== ==========
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The accompanying notes are an integral part of the consolidated financial statements.
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
------------ ------------
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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
------------ ------------
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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
============ ============
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The accompanying notes are an integral part of the consolidated financial statements.
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
============ ============
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The accompanying notes are an integral part of the consolidated financial statements.
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
=========== =========== ============ ============ ============ ===========
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The accompanying notes are an integral part of the consolidated financial statements.
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
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 --
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The accompanying notes are an integral part of the consolidated financial statements.
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.
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.
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)
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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.
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.
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
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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.
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.
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.
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.
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.
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.
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.
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.
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.
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
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:
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.
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)
|
Exhibit 3.1
I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "ELITE PHARMACEUTICALS, INC.", FILED IN THIS OFFICE ON THE TWENTY-SIXTH DAY OF JULY, A.D. 2004, AT 12:59 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS.
/s/ HARRIET SMITH WINDSOR
2791326 8100 [Graphic Omitted] -----------------------------------------
Harriet Smith Windsor, Secretary of State
040545173
AUTHENTICATION: 3257234
DATE: 07-27-04
|
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ELITE PHARMACEUTICALS, INC.
ELITE PHARMACEUTICALS, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "CORPORATION"), does hereby certify as follows:
FIRST: The Board of Directors of the Corporation, by vote, adopted the following resolution setting forth the amendment to the Certificate of Incorporation of the Corporation as filed on October 1, 1997, as amended on October 24, 1997, further amended on March 13, 1988 and further amended on June 1, 1998:
RESOLVED, that the Board of Directors deems it in the best interest of the Corporation to amend the Certificate of Incorporation of the Corporation, as amended (the "CERTIFICATE OF INCORPORATION"), by deleting Articles Fourth of the Certificate of Incorporation in its entirety and replacing it with the following.
"FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is Seventy Million (70,000,000) shares, consisting of Five Million (5,000,000) shares of Preferred Stock each with a $.01 par value, and Sixty-Five Million (65,000,000) shares of Common Stock each with a par value of $.01 per share.
Subject to the provisions of Section 151 of the General Corporation Law, the Board of Directors of the Corporation is authorized to issue the shares of Preferred Stock in one or more series and determine the number of shares constituting each such series, the voting powers of shares of each such series and the designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions as set forth in a resolution or resolutions of the Board of Directors providing for the issue of such stock."
SECOND: That the holders of a majority of the outstanding stock of the Corporation entitled to vote thereon, and the holders of a majority of the outstanding stock of each class entitled to vote thereon as a class, were given written notice of the proposed amendment to the Certificate of Incorporation and voted in favor of the adoption of the amendment to the Certificate of Incorporation.
THIRD: That said amendment was duly adopted in accordance with Section 242 of the General Corporation Law of the State of Delaware.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
DELIVERED 12:59 PM 07/26/2004
FILED 12:59 PM 07/26/2004
SRV 040545173 - 2791326 FILE
IN WITNESS WHEREOF, Elite Pharmaceuticals, Inc. has caused this certificate to be signed by its Chief Executive Officer as of July 22, 2004.
/s/ BERNARD BERK -------------------- Bernard Berk Chief Executive Officer |
Exhibit 10.2
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS"), AND SHALL NOT BE SOLD OR OTHERWISE TRANSFERRED BY THE HOLDER EXCEPT BY REGISTRATION OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UPON THE ISSUANCE TO THE COMPANY OF AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT AND THE STATE ACTS.
Dated: July 20, 2004
WARRANT
TO
PURCHASE COMMON STOCK
OF
ELITE PHARMACEUTICALS, INC.
This certifies that, for good and valuable consideration, Elite
Pharmaceuticals, Inc, a Delaware corporation (the "COMPANY"), grants to Jason
Lyons, residing at 7239, San Salvador Drive, Boca Raton, Florida 33433 or hiss
registered assigns (the "WARRANTHOLDER"), the right to subscribe for and
purchase from the Company Fifty Thousand (50,000) shares (the "WARRANT SHARES")
of common stock, par value $0.01 per share, of the Company ("COMMON STOCK") at
the exercise price of $3.00 per share (subject to adjustment as provided herein,
the "EXERCISE PRICE"). This Warrant shall be exercisable from and after 9:00
A.M., Eastern Standard Time on July 20, 2004 but no later than July 20, 2007 to
and including 5:00 P.M. (the "EXPIRATION DATE"). The Exercise Price and the
number of Warrant Shares are subject to adjustment from time to time as provided
in Section 6.
SECTION 1. EXERCISE OF WARRANT; LIMITATION ON EXERCISE; TAXES; TRANSFER; DIVISIBILITY.
1.1. EXERCISE OF WARRANT. This Warrant is immediately exercisable and may be exercised, in whole or in part, at any time on or prior to the Expiration Date. The rights represented by this Warrant may be exercised by the Warrantholder of record, in whole or in part, from time to time, by (a) surrender of this Warrant, accompanied by the Exercise Form annexed hereto (the "EXERCISE FORM") duly executed by the Warrantholder of record and specifying the number of Warrant Shares to be purchased to the Company at its offices at 165 Ludlow Avenue, Northvale, New Jersey 07647 (or such other office or agency of the Company as it may designate by notice to the Warrantholder at the address of such
Warrantholder appearing on the books of the Company) during normal business hours on any day (a "BUSINESS DAY") other than a Saturday, Sunday or a day on which the American Stock Exchange is authorized to close or on which the Company is otherwise closed for business but not later than 5:00 P.M. on the Expiration Date; (b) payment of the Exercise Price by delivery to the Company in cash or by certified or official bank check in New York Clearing House Funds, of an amount equal to the Exercise Price for the number of Warrant Shares specified in the Exercise Form, and (c) such documentation as to the identity and authority of the Warrantholder as the Company may reasonably request. Such Warrant Shares shall be deemed by the Company to be issued to the Warrantholder as the record holder of such Warrant Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for the Warrant Shares as aforesaid. Certificates for the Warrant Shares specified in the Exercise Form shall be delivered to the Warrantholder as promptly as practicable. The stock certificates so delivered shall be in denominations as may be specified by the Warrantholder and shall be issued in the name of the Warrantholder or, if permitted by subsection 1.4 and in accordance with the provisions thereof, such other name as shall be designated in the Exercise Form. If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of the certificates for the Warrant Shares, deliver to the Warrantholder a new Warrant evidencing the rights to purchase the remaining Warrant Shares, which new Warrant shall in all other respects be identical with this Warrant.
1.2. LIMITATION ON EXERCISE. If this Warrant is not exercised prior to 5:00 P.M. on the Expiration Date, this Warrant, or any new Warrant issued pursuant to subsection 1.1, shall cease to be exercisable and shall become void, and all rights of the Warrantholder hereunder shall cease.
1.3. PAYMENT OF TAXES. The issuance of certificates for Warrant Shares shall be made without charge to the Warrantholder for any stock transfer or other issuance tax in respect thereto; PROVIDED, HOWEVER, that the Warrantholder shall be required to pay any and all taxes which may be payable in respect to any transfer involved in the issuance and delivery of any certificates for Warrant Shares in a name other than that of the then Warrantholder as reflected upon the books of the Company.
1.4. RESTRICTIONS ON TRANSFER. Neither this Warrant nor any of the Warrant Shares may be transferred or sold except in compliance with applicable United States federal and state securities laws. Subject to the foregoing, this Warrant and all rights hereunder are transferable, in whole or in part, by the Warrantholder and any such transfer is registrable at the office of the Company by the holder hereof in person or by its duly authorized attorney, upon surrender of this Warrant in accordance with Section 3 hereof.
Section 2. RESERVATION AND LISTING OF SHARES.
All Warrant Shares issued upon the exercise of the rights represented by this Warrant shall, upon issuance and payment of the Exercise Price in cash, be validly issued, fully paid and nonassessable and free from all taxes, liens, security interests, charges and other encumbrances with respect to the issuance thereof other than taxes in respect of any transfer occurring contemporaneously with such issuance. During the period within which this Warrant may be
exercised, the Company shall at all times have authorized and reserved, and keep available and free from preemptive or similar rights, a sufficient number of shares of Common Stock to provide for the exercise of this Warrant.
SECTION 3. EXCHANGE, LOSS OR DESTRUCTION OF WARRANT.
If permitted by subsection 1.4, upon surrender of this Warrant to the Company with a duly executed instrument of assignment and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant of like tenor in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant and, if requested by the Company, an agreement to indemnify the Company for any loss resulting from the Warrant to be replaced, the Company will execute and deliver a new Warrant of like tenor.
Section 4. OWNERSHIP OF WARRANT.
The Company may deem and treat the person or entity in whose name this Warrant is registered as the holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by anyone other than the Company) for all purposes and shall not be affected by any notice to the contrary, until presentation of this Warrant for registration of transfer as provided in subsection 1.1 or in Section 3.
Section 5. CERTAIN ADJUSTMENTS.
The Exercise Price at which Warrant Shares may be purchased hereunder and the number of Warrant Shares to be purchased upon exercise hereof are subject to change or adjustment as follows:
5.1. NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or the Exercise Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly send by first class mail, postage prepaid, to the Warrantholder, notice of such adjustment.
5.2. PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION. In case of any consolidation of the Company with or merger of the Company into another entity or in case of any sale, transfer or lease to another entity of all or substantially all the assets, the Warrantholder shall have the right thereafter upon payment of the Exercise Price in effect immediately prior to such action to receive upon exercise of this Warrant the kind and amount of shares and other securities and property which a holder of a number of shares of Common Stock equal to the number as to which this Warrant is exercised would be entitled to receive after the happening of such consolidation, merger, sale, transfer or lease had this Warrant been exercised immediately prior to such action, subject to future adjustments, which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 5. The provisions of this subsection 5.2 shall apply similarly to successive consolidations, mergers, sales, transfers or leases.
5.3. ADJUSTMENTS.
(a) STOCK DIVIDENDS, DISTRIBUTIONS OR SUBDIVISIONS. In the event the Company shall issue additional shares of Common Stock pursuant to a stock dividend, stock distribution, subdivision, share split or reclassification, concurrently with the effectiveness of such event, the Exercise Price in effect immediately prior to such event shall be proportionately decreased with the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior to such event and the number of shares underlying the Warrant shall be proportionately increased.
(b) COMBINATIONS OR CONSOLIDATIONS. In the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification, reverse split or otherwise, into a lesser number of shares of Common Stock, concurrently with the effectiveness of such event, the Exercise Price in effect immediately prior to such event shall be proportionately increased and the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior to such event shall be proportionately decreased.
Section 6. REGISTRATION RIGHTS.
6.1. PIGGYBACK REGISTRATION. If at any time or from time to time, the Company shall register the sale of any of its Common Stock under the Securities Act of 1933 (the "SECURITIES ACT") for its own account or the account of any of its security holders, other than a registration on Form S-8 relating solely to an employee benefit plan or a registration on Form S-4 relating solely to a transaction under Rule 145 of the Securities Act, the Company will:
(i) give to the initial Warrantholder and each other person or entity
who holds all or any portion of this Warrant or the Warrant Shares
(collectively with the initial Warrantholder, the "HOLDERS")
written notice thereof as soon as practicable prior to filing the
registration statement or offering statement, but in any event not
later than 10 days prior to such filing; and
(ii) on behalf of all entities requesting inclusion in such offering, include the Registrable Securities (as defined in Section 6.2) in the offering and may condition such offer on their acceptance of any other reasonable conditions (including, without limitation, if such offering is underwritten, that such requesting holders agree in writing to enter into an underwriting agreement with customary terms). If the representative of the underwriter advises the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, the numbers of shares to be included in the underwriting or registration shall be allocated first to the Company, second, to the Company's security holders that triggered the instant registration (the "TRIGGERING HOLDERS") and thereafter shall be allocated among the Holders and other security holders requesting inclusion in the offering pro rata on the basis of the number of shares each requesting Holder and other security holder requests to be included bears to the total number of shares of all requesting holders that have been requested to be included in such offering (to the extent not included as a Tiggering Holder). If a person who has requested inclusion in such offering as provided above does not agree to the terms of any such underwriting, such person shall be excluded therefrom by written notice from the Company or the underwriter. The securities so excluded shall also be withdrawn from registration, if applicable.
6.2. REGISTRABLE SECURITIES. For the purposes of this Section 6, the term "REGISTRABLE SECURITIES" shall mean any Warrant Shares issued or issuable to a Holder upon exercise of its Warrant, any shares of Common Stock issued to a Holder as a dividend on its Warrant Shares, and any other shares of Common Stock distributable on, with respect to, or in replacement of or substitution for such Registrable Securities, including those that have been transferred as permitted under this Warrant, except for those that have been sold or transferred pursuant to an effective registration statement or as may be resold pursuant to Rule 144 under the Securities Act.
6.3. OBLIGATIONS OF A HOLDER AND OTHERS IN A REGISTRATION. (a) Each Holder agrees to timely furnish such information regarding such person and the securities sought to be registered and to take such other action as the Company may reasonably request, including the entering into of agreements and the providing of documents, in connection with the registration or qualification of such securities and/or the compliance of such registration statement with all applicable laws. Such Holders severally agree that, in connection with any offering undertaken pursuant to subsection 6.1, the Company shall have the right to, if it deems an underwriter or underwriters necessary or appropriate, designate such underwriter(s). If the registration involves an underwriter, each participating Holder agrees, upon the request of such underwriter, not to sell any unregistered securities of the Company for a period of 180 days following the effective date of the registration statement for such offering and to enter into an underwriting agreement with such underwriters containing customary terms and provisions.
(b) If at any time after giving written notice of its intention to register any Registrable Securities and prior to the effective date of such registration statement, the Company shall determine for any reason not to register or to delay registration of such Registrable Securities, the
Company may, at its election, give written notice of such determination to each Holder and in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration, without prejudice as to a Holder's rights with respect to any future registration.
6.4. INDEMNIFICATION.
(a) Subject to applicable law, the Company will indemnify each Holder, each underwriter and each person controlling such Holder or underwriter against all claims, losses, damages and liabilities, including legal and other expenses reasonably incurred, arising out of any untrue or allegedly untrue statement of a material fact contained in the registration statement, or any omission or alleged omission to state a material fact required to be stated in the registration statement or necessary to make any statements therein not misleading, or arising out of any violation by the Company of the Securities Act, any state securities or "blue sky" laws or any applicable rule or regulation, except with respect to an untrue statement or omission contained in any information or affidavit furnished in writing by the Holder for inclusion in such registration statement.
(b) Subject to applicable law, each Holder, severally and not jointly, will indemnify the Company, and each person controlling the Company, against all claims, losses, damages and liabilities, including legal and other expenses reasonably incurred, arising out of any untrue or allegedly untrue statement of a material fact contained in the registration statement, or required to be stated in the registration statement or necessary to make the statements contained therein not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information or affidavit furnished in writing by such Holder to the Company specifically for inclusion in such registration statement.
6.5. TRANSFER OF REGISTRATION RIGHTS. The registration rights of a Holder under Section 6 hereof shall automatically be transferred to any transferee of this Warrant, or any portion thereof, or of any Registrable Securities, without any notice or other action by the transferring Holder of such transferee. Any such transferee will be deemed to be a Holder for purposes of this Section 6, and as a condition precedent to such transferee's exercise of its rights hereunder, such transferee must agree to be bound by the terms of this Section 6.
6.6. EXPENSES OF REGISTRATION. The expenses incurred in connection with registrations pursuant to this Section 6, namely all registration fees, federal and state filing and qualification fees, printing expenses, fees and disbursements of counsel for the Company and expenses of any special audits of the Company's financial statements incidental to or required by such registration, shall be borne by the Company, except that the Company shall not be required to pay the fees and disbursements of counsel for the Holder or Holders or underwriters' discounts or commissions relating to Registrable Securities being sold by any Holders.
Section 7. MISCELLANEOUS.
7.1. ENTIRE AGREEMENT. This Warrant constitutes the entire agreement between the Company and the Warrantholder with respect to this Warrant and the Warrant Shares.
7.2. BINDING EFFECTS; BENEFITS. This Warrant shall inure to the benefit of and shall be binding upon the Company and the Warrantholder and their respective heirs, legal representatives, successors and assigns. Nothing in this Warrant, expressed or implied, is intended to or shall confer on any person or entity other than the Company, the Warrantholder and their respective heirs, legal representatives, successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Warrant.
7.3. AMENDMENTS. This Warrant may not be modified or amended except by a written instrument signed by the Company and the Warrantholder.
7.4. SECTION AND OTHER HEADINGS. The section and other headings contained in this Warrant are for reference purposes only and shall not be deemed to be a part of this Warrant or to affect the meaning or interpretation of this Warrant.
7.5. FURTHER ASSURANCES. Each of the Company and the Warrantholder shall do and perform all such further acts and things and execute and deliver all such other certificates, instruments and/or documents as any party hereto may reasonably request in connection with the performance of the provisions of this Warrant.
7.6. NOTICES. All demands, requests, notices and other communications required or permitted to be given under this Warrant shall be writing and shall be deemed to have been duly given if delivered personally, sent by confirmed facsimile or sent by United States certified or registered first class mail, postage prepaid, to the parties hereto at the following addresses or at such other address as any party hereto shall hereafter specify by notice to the other party hereto:
(a) if to the Company, addressed to:
Elite Pharmaceuticals, Inc.
165 Ludlow Avenue
Northvale, New Jersey 07647
Attention: Chief Executive Officer
(b) If to the Warrantholder, addressed to the address of such person appearing on the books of the Company.
Except as otherwise provided herein, all such demands, requests, notices and other communications shall be deemed to have been received on the date of personal delivery thereof, the sending of confirmed facsimile thereof or on the third Business Day after the mailing thereof.
7.7. SEPARABILITY. Any term or provision of this Warrant which is invalid or unenforceable in any jurisdiction shall be ineffective in such jurisdiction to the extent of such invalidity or unenforceability without rendering invalid or unenforceable any other term or provision of this Warrant or affecting the validity or enforceability of any of the terms or provisions of this Warrant in any other jurisdiction.
7.8. FRACTIONAL SHARES. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to the Warrantholder an amount in cash equal to such fraction multiplied by the of a share of Common Stock as of the date of such exercise.
7.9. GOVERNING LAW. This Warrant shall be interpreted and the rights and liabilities of the parties hereto determined in accordance with the laws of the United States applicable thereto and the internal laws of the State of New York (other than its choice of law rules). The Company and Warrantholder consent that all service of process may be made by registered mail directed to such party at its address set forth in subsection 7.6 above.
7.10. COUNTERPARTS. This Warrant may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Warrant.
IN WITNESS WHEREOF, the Company and the initial Warrantholder have caused this Warrant to be signed by their duly authorized officers as of the 20th day of July, 2004.
ELITE PHARMACEUTICALS, INC.
ELITE PHARMACEUTICALS, INC.
WARRANT EXERCISE FORM
(To be executed upon exercise Warrant)
The undersigned, the record holder of this Warrant, hereby irrevocably elects to exercise the right, represented by this Warrant, to purchase _________ of the Warrant Shares and herewith pays the Exercise Price in accordance with the terms of this Warrant by tendering payment for such Warrant Shares to the order of ELITE PHARMACEUTICALS, INC. in the amount of $______________.
The undersigned requests that a certificate for the Warrant Shares being purchased be registered in the name of ________________ and that such certificate be delivered to _____________.
Date _____________ Signature ________________________
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock covered thereby set forth below, to:
and hereby irrevocable constitutes and appoints ________________ as agent and attorney-in-fact to transfer said Warrant on the books of Elite Pharmaceuticals, Inc., with full power of substitution in the premises.
In the presence of
Note: The above signature should correspond with the name on the face of the within Warrant.
Exhibit 10.3
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS"), AND SHALL NOT BE SOLD OR OTHERWISE TRANSFERRED BY THE HOLDER EXCEPT BY REGISTRATION OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UPON THE ISSUANCE TO THE COMPANY OF AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT AND THE STATE ACTS.
Warrant to Purchase 25,000 shares of Common Stock
(subject to reduction as provided herein)
Dated: July 7, 2004
WARRANT
TO
PURCHASE COMMON STOCK
OF
ELITE PHARMACEUTICALS, INC.
This certifies that, for good and valuable consideration, Elite
Pharmaceuticals, Inc, a Delaware corporation (the "COMPANY"), grants to
[_________] or his registered assigns (the "WARRANTHOLDER"), the right to
subscribe for and purchase from the Company 50,000 shares (subject to reduction
to 35,000 shares as provided herein) (the "WARRANT SHARES") of common stock, par
value $0.01 per share, of the Company ("COMMON STOCK") at the exercise price of
$4.20 per share (subject to adjustment as provided herein, the "EXERCISE
PRICE"). This Warrant shall be exercisable from and after 9:00 A.M., Eastern
Standard Time on July 7, 2004 but no later than July 6, 2007 to and including
5:00 P.M. (the "EXPIRATION DATE"). The Exercise Price and the number of Warrant
Shares are subject to adjustment from time to time as provided in Section 6.
SECTION 1. EXERCISE OF WARRANT; LIMITATION ON EXERCISE; TAXES; TRANSFER; DIVISIBILITY.
1.1. EXERCISE OF WARRANT. This Warrant is immediately exercisable and may be exercised, in whole or in part, at any time on or prior to the Expiration Date. The rights represented by this Warrant may be exercised by the Warrantholder of record, in whole or in part, from time to time, by (a) surrender of this Warrant, accompanied by the Exercise Form
annexed hereto (the "EXERCISE FORM") duly executed by the Warrantholder of record and specifying the number of Warrant Shares to be purchased to the Company at its offices at 165 Ludlow Avenue, Northvale, New Jersey 07647 (or such other office or agency of the Company as it may designate by notice to the Warrantholder at the address of such Warrantholder appearing on the books of the Company) during normal business hours on any day (a "BUSINESS DAY") other than a Saturday, Sunday or a day on which the American Stock Exchange is authorized to close or on which the Company is otherwise closed for business but not later than 5:00 P.M. on the Expiration Date; (b) payment of the Exercise Price by delivery to the Company in cash or by certified or official bank check in New York Clearing House Funds, of an amount equal to the Exercise Price for the number of Warrant Shares specified in the Exercise Form, and (c) such documentation as to the identity and authority of the Warrantholder as the Company may reasonably request. Such Warrant Shares shall be deemed by the Company to be issued to the Warrantholder as the record holder of such Warrant Shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for the Warrant Shares as aforesaid. Certificates for the Warrant Shares specified in the Exercise Form shall be delivered to the Warrantholder as promptly as practicable. The stock certificates so delivered shall be in denominations as may be specified by the Warrantholder and shall be issued in the name of the Warrantholder or, if permitted by subsection 1.4 and in accordance with the provisions thereof, such other name as shall be designated in the Exercise Form. If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of the certificates for the Warrant Shares, deliver to the Warrantholder a new Warrant evidencing the rights to purchase the remaining Warrant Shares, which new Warrant shall in all other respects be identical with this Warrant.
1.2. LIMITATION ON EXERCISE. If this Warrant is not exercised prior to 5:00 P.M. on the Expiration Date, this Warrant, or any new Warrant issued pursuant to subsection 1.1, shall cease to be exercisable and shall become void, and all rights of the Warrantholder hereunder shall cease.
1.3. PAYMENT OF TAXES. The issuance of certificates for Warrant Shares shall be made without charge to the Warrantholder for any stock transfer or other issuance tax in respect thereto; PROVIDED, HOWEVER, that the Warrantholder shall be required to pay any and all taxes which may be payable in respect to any transfer involved in the issuance and delivery of any certificates for Warrant Shares in a name other than that of the then Warrantholder as reflected upon the books of the Company.
1.4. RESTRICTIONS ON TRANSFER. Neither this Warrant nor any of the Warrant Shares may be transferred or sold except in compliance with applicable United States federal and state securities laws. Subject to the foregoing, this Warrant and all rights hereunder are transferable, in whole or in part, by the Warrantholder and any such transfer is registrable at the office of the Company by the holder hereof in person or by its duly authorized attorney, upon surrender of this Warrant in accordance with Section 3 hereof.
1.5. REDUCTION OF WARRANT. If the loan from Warrantholder to Company's wholly-owned subsidiary Elite Laboratories, Inc. is prepaid by the date which is 180 days from
the date of this Warrant, the number of shares for which this Warrant may be exercised shall be reduced from 25,000 to 18,750.
1.6. REPRESENTATION BY HOLDER. The Holder (i) represents and warrants to the Company that it is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and (ii) agrees not to exercise this Warrant unless it is an "accredited investor" at the time of such exercise.
Section 2. RESERVATION AND LISTING OF SHARES.
All Warrant Shares issued upon the exercise of the rights represented by this Warrant shall, upon issuance and payment of the Exercise Price in cash, be validly issued, fully paid and nonassessable and free from all taxes, liens, security interests, charges and other encumbrances with respect to the issuance thereof other than taxes in respect of any transfer occurring contemporaneously with such issuance. During the period within which this Warrant may be exercised, the Company shall at all times have authorized and reserved, and keep available and free from preemptive or similar rights, a sufficient number of shares of Common Stock to provide for the exercise of this Warrant.
SECTION 3. EXCHANGE, LOSS OR DESTRUCTION OF WARRANT.
If permitted by subsection 1.4, upon surrender of this Warrant to the Company with a duly executed instrument of assignment and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant of like tenor in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant and, if requested by the Company, an agreement to indemnify the Company for any loss resulting from the Warrant to be replaced, the Company will execute and deliver a new Warrant of like tenor.
Section 4. OWNERSHIP OF WARRANT.
The Company may deem and treat the person or entity in whose name this Warrant is registered as the holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by anyone other than the Company) for all purposes and shall not be affected by any notice to the contrary, until presentation of this Warrant for registration of transfer as provided in subsection 1.1 or in Section 3.
Section 5. CERTAIN ADJUSTMENTS.
The Exercise Price at which Warrant Shares may be purchased hereunder and the number of Warrant Shares to be purchased upon exercise hereof are subject to change or adjustment as follows:
5.1. NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or the
Exercise Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly send by first class mail, postage prepaid, to the Warrantholder, notice of such adjustment.
5.2. PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION. In case of any consolidation of the Company with or merger of the Company into another entity or in case of any sale, transfer or lease to another entity of all or substantially all the assets, the Warrantholder shall have the right thereafter upon payment of the Exercise Price in effect immediately prior to such action to receive upon exercise of this Warrant the kind and amount of shares and other securities and property which a holder of a number of shares of Common Stock equal to the number as to which this Warrant is exercised would be entitled to receive after the happening of such consolidation, merger, sale, transfer or lease had this Warrant been exercised immediately prior to such action, subject to future adjustments, which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 5. The provisions of this subsection 5.2 shall apply similarly to successive consolidations, mergers, sales, transfers or leases.
5.3. ADJUSTMENTS.
(a) STOCK DIVIDENDS, DISTRIBUTIONS OR SUBDIVISIONS. In the event the Company shall issue additional shares of Common Stock pursuant to a stock dividend, stock distribution, subdivision, share split or reclassification, concurrently with the effectiveness of such event, the Exercise Price in effect immediately prior to such event shall be proportionately decreased with the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior to such event and the number of shares underlying the Warrant shall be proportionately increased.
(b) COMBINATIONS OR CONSOLIDATIONS. In the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification, reverse split or otherwise, into a lesser number of shares of Common Stock, concurrently with the effectiveness of such event, the Exercise Price in effect immediately prior to such event shall be proportionately increased and the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior to such event shall be proportionately decreased.
Section 6. REGISTRATION RIGHTS.
6.1. PIGGYBACK REGISTRATION. If at any time or from time to time, the Company shall register the sale of any of its Common Stock under the Securities Act of 1933 (the "SECURITIES ACT") for its own account or the account of any of its security holders, other than a registration on Form S-8 relating solely to an employee benefit plan or a registration on Form S-4 relating solely to a transaction under Rule 145 of the Securities Act, the Company will:
(i) give to the initial Warrantholder and each other person or entity who holds all or any portion of this Warrant or the Warrant Shares (collectively with the initial
Warrantholder, the "HOLDERS") written notice thereof as soon as practicable prior to filing the registration statement or offering statement, but in any event not later than 10 days prior to such filing; and
(ii) on behalf of all entities requesting inclusion in such offering, include the Registrable Securities (as defined in Section 6.2) in the offering and may condition such offer on their acceptance of any other reasonable conditions (including, without limitation, if such offering is underwritten, that such requesting holders agree in writing to enter into an underwriting agreement with customary terms). If the representative of the underwriter advises the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, the numbers of shares to be included in the underwriting or registration shall be allocated first to the Company, second, to the Company's security holders that triggered the instant registration (the "TRIGGERING HOLDERS") and thereafter shall be allocated among the Holders and other security holders requesting inclusion in the offering pro rata on the basis of the number of shares each requesting Holder and other security holder requests to be included bears to the total number of shares of all requesting holders that have been requested to be included in such offering (to the extent not included as a Tiggering Holder). If a person who has requested inclusion in such offering as provided above does not agree to the terms of any such underwriting, such person shall be excluded therefrom by written notice from the Company or the underwriter. The securities so excluded shall also be withdrawn from registration, if applicable.
6.2. REGISTRABLE SECURITIES. For the purposes of this Section 6, the term "REGISTRABLE SECURITIES" shall mean any Warrant Shares issued or issuable to a Holder upon exercise of its Warrant, any shares of Common Stock issued to a Holder as a dividend on its Warrant Shares, and any other shares of Common Stock distributable on, with respect to, or in replacement of or substitution for such Registrable Securities, including those that have been transferred as permitted under this Warrant, except for those that have been sold or transferred pursuant to an effective registration statement or as may be resold pursuant to Rule 144 under the Securities Act.
6.3. OBLIGATIONS OF A HOLDER AND OTHERS IN A REGISTRATION. (a) Each Holder agrees to timely furnish such information regarding such person and the securities sought to be registered and to take such other action as the Company may reasonably request, including the entering into of agreements and the providing of documents, in connection with the registration or qualification of such securities and/or the compliance of such registration statement with all applicable laws. Such Holders severally agree that, in connection with any offering undertaken pursuant to subsection 6.1, the Company shall have the right to, if it deems an underwriter or underwriters necessary or appropriate, designate such underwriter(s). If the registration involves an underwriter, each participating Holder agrees, upon the request of such underwriter, not to sell any unregistered securities of the Company for a period of 180 days following the effective date of the registration statement for such offering and to enter into an underwriting agreement with such underwriters containing customary terms and provisions.
(b) If at any time after giving written notice of its intention to register any Registrable Securities and prior to the effective date of such registration statement, the Company shall determine for any reason not to register or to delay registration of such Registrable Securities, the Company may, at its election, give written notice of such determination to each Holder and in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration, without prejudice as to a Holder's rights with respect to any future registration.
6.4. INDEMNIFICATION.
(a) Subject to applicable law, the Company will indemnify each Holder, each underwriter and each person controlling such Holder or underwriter against all claims, losses, damages and liabilities, including legal and other expenses reasonably incurred, arising out of any untrue or allegedly untrue statement of a material fact contained in the registration statement, or any omission or alleged omission to state a material fact required to be stated in the registration statement or necessary to make any statements therein not misleading, or arising out of any violation by the Company of the Securities Act, any state securities or "blue sky" laws or any applicable rule or regulation, except with respect to an untrue statement or omission contained in any information or affidavit furnished in writing by the Holder for inclusion in such registration statement.
(b) Subject to applicable law, each Holder, severally and not jointly, will indemnify the Company, and each person controlling the Company, against all claims, losses, damages and liabilities, including legal and other expenses reasonably incurred, arising out of any untrue or allegedly untrue statement of a material fact contained in the registration statement, or required to be stated in the registration statement or necessary to make the statements contained therein not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information or affidavit furnished in writing by such Holder to the Company specifically for inclusion in such registration statement.
6.5. TRANSFER OF REGISTRATION RIGHTS. The registration rights of a Holder under Section 6 hereof shall automatically be transferred to any transferee of this Warrant, or any portion thereof, or of any Registrable Securities, without any notice or other action by the transferring Holder of such transferee. Any such transferee will be deemed to be a Holder for purposes of this Section 6, and as a condition precedent to such transferee's exercise of its rights hereunder, such transferee must agree to be bound by the terms of this Section 6.
6.6. EXPENSES OF REGISTRATION. The expenses incurred in connection with registrations pursuant to this Section 6, namely all registration fees, federal and state filing and qualification fees, printing expenses, fees and disbursements of counsel for the Company and expenses of any special audits of the Company's financial statements incidental to or required by such registration, shall be borne by the Company, except that the Company shall not be required to pay the fees and disbursements of counsel for the Holder or Holders or underwriters' discounts or commissions relating to Registrable Securities being sold by any Holders.
Section 7. MISCELLANEOUS.
7.1. ENTIRE AGREEMENT. This Warrant constitutes the entire agreement between the Company and the Warrantholder with respect to this Warrant and the Warrant Shares.
7.2. BINDING EFFECTS; BENEFITS. This Warrant shall inure to the benefit of and shall be binding upon the Company and the Warrantholder and their respective heirs, legal representatives, successors and assigns. Nothing in this Warrant, expressed or implied, is intended to or shall confer on any person or entity other than the Company, the Warrantholder and their respective heirs, legal representatives, successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Warrant.
7.3. AMENDMENTS. This Warrant may not be modified or amended except by a written instrument signed by the Company and the Warrantholder.
7.4. SECTION AND OTHER HEADINGS. The section and other headings contained in this Warrant are for reference purposes only and shall not be deemed to be a part of this Warrant or to affect the meaning or interpretation of this Warrant.
7.5. FURTHER ASSURANCES. Each of the Company and the Warrantholder shall do and perform all such further acts and things and execute and deliver all such other certificates, instruments and/or documents as any party hereto may reasonably request in connection with the performance of the provisions of this Warrant.
7.6. NOTICES. All demands, requests, notices and other communications required or permitted to be given under this Warrant shall be writing and shall be deemed to have been duly given if delivered personally, sent by confirmed facsimile or sent by United States certified or registered first class mail, postage prepaid, to the parties hereto at the following addresses or at such other address as any party hereto shall hereafter specify by notice to the other party hereto:
(a) if to the Company, addressed to:
Elite Pharmaceuticals, Inc.
165 Ludlow Avenue
Northvale, New Jersey 07647
Attention: Chief Executive Officer
(b) If to the Warrantholder, addressed to the address of such person appearing on the books of the Company.
Except as otherwise provided herein, all such demands, requests, notices and other communications shall be deemed to have been received on the date of personal delivery thereof, the sending of confirmed facsimile thereof or on the third Business Day after the mailing thereof.
7.7. SEPARABILITY. Any term or provision of this Warrant which is invalid or unenforceable in any jurisdiction shall be ineffective in such jurisdiction to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable any other term or provision of this Warrant or affecting the validity or enforceability of any of the terms or provisions of this Warrant in any other jurisdiction.
7.8. FRACTIONAL SHARES. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to the Warrantholder an amount in cash equal to such fraction multiplied by the Fair Market Value of a share of Common Stock as of the date of such exercise.
7.9. GOVERNING LAW. This Warrant shall be interpreted and the rights and liabilities of the parties hereto determined in accordance with the laws of the United States applicable thereto and the internal laws of the State of Delaware (other than its choice of law rules). The Company and Warrantholder consent that all service of process may be made by registered mail directed to such party at its address set forth in subsection 7.6 above.
7.10. COUNTERPARTS. This Warrant may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Warrant.
IN WITNESS WHEREOF, the Company and the initial Warrantholder have caused this Warrant to be signed by their duly authorized officers as of the 7th day of June, 2004.
ELITE PHARMACEUTICALS, INC.
ELITE PHARMACEUTICALS, INC.
WARRANT EXERCISE FORM
(To be executed upon exercise Warrant)
The undersigned, the record holder of this Warrant, hereby irrevocably elects to exercise the right, represented by this Warrant, to purchase _________ of the Warrant Shares and herewith pays the Exercise Price in accordance with the terms of this Warrant by tendering payment for such Warrant Shares to the order of ELITE PHARMACEUTICALS, INC. in the amount of $______________.
The undersigned requests that a certificate for the Warrant Shares being purchased be registered in the name of ________________ and that such certificate be delivered to _____________.
Date _____________ Signature ________________________
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock covered thereby set forth below, to:
and hereby irrevocable constitutes and appoints ________________ as agent and attorney-in-fact to transfer said Warrant on the books of Elite Pharmaceuticals, Inc., with full power of substitution in the premises.
In the presence of
Note: The above signature should correspond with the name on the face of the within Warrant.
EXHIBIT 31.1
CERTIFICATION
I, Bernard Berk, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Elite Pharmaceuticals, Inc. (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
/s/ Bernard Berk
Date: August 13, 2004 _____________________________________
Bernard Berk
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EXHIBIT 31.2
CERTIFICATION
I, Mark I. Gittelman, certify that:
1. I have reviewed this report on Form 10-Q of Elite Pharmaceuticals, Inc. (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
/s/ Mark I. Gittelman
Date: August 13, 2004 _____________________________________
Mark I. Gittelman
Chief Financial Officer and Treasurer
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Elite Pharmaceuticals, Inc. (the "Company") on Form 10-Q for the quarter ended June 30, 2004 filed with the Securities and Exchange Commission (the "Report"), I, Bernard Berk, Chief Executive Officer of the Company, certify, pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented.
/s/ Bernard Berk
Date: August 13, 2004 _____________________________________
Bernard Berk
Chief Executive Officer of
Elite Pharmaceuticals, Inc.
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This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
A signed original of this written statement required by Section 906 has been provided to Elite Pharmaceuticals, Inc. and will be retained by Elite Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Elite Pharmaceuticals, Inc.
(the "Company") on Form 10-Q for the quarter ended June 30, 2004 filed with the
Securities and Exchange Commission (the "Report"), I, Mark I. Gittelman, Chief
Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S. C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
(3) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
(4) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented.
/s/ Mark I. Gittelman
Date: August 13, 2004 _____________________________________
Mark I. Gittelman
Chief Financial Officer and Treasurer of
Elite Pharmaceuticals, Inc.
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This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
A signed original of this written statement required by Section 906 has been provided to Elite Pharmaceuticals, Inc. and will be retained by Elite Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.