U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 2006
-----------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period ended to
COMMISSION FILE NUMBER: 333-45241
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ELITE PHARMACEUTICALS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 22-3542636
--------------------------------------------- --------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
165 LUDLOW AVENUE, NORTHVALE, NEW JERSEY 07647
----------------------------------------- ------------------------------
(Address of principal executive offices) (Zip Code)
(201) 750-2646
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(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [x]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [x]
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, 2006: 19,392,536 (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, 2006
(unaudited) and March 31, 2006 1 - 2
Consolidated Statements of Operations for the three
months ended June 30, 2006 and June 30, 2005 (unaudited) 3
Consolidated Statement of Changes in Stockholders'
Equity for the three months ended June 30, 2006 (unaudited) 4
Consolidated Statements of Cash Flows for the three
months ended June 30, 2006 and June 30, 2005 (unaudited) 5
Notes to Consolidated Financial Statements 6 - 10
Item 2. Management's Discussion And Analysis of Financial
Condition And Results Of Operations 11 - 15
Item 3. Quantitative And Qualitative Disclosures
About Market Risk 15
Item 4. Controls and Procedures 15
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. 16
Item 6. Exhibits 16
SIGNATURES 17
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30, MARCH 31,
2006 2006
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 6,700,373 $ 8,919,354
Accounts receivable, net of allowance for doubtful accounts of
$ --- and $153,250, respectively -- --
Current portion of restricted cash - capital project fund 939,652 1,173,896
Prepaid expenses and other current assets
-----------
594,618 470,633
----------- -----------
Total current assets 8,234,643 10,563,883
----------- -----------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 4,223,780 4,308,969
----------- -----------
INTANGIBLE ASSETS - net of accumulated amortization 53,922 59,457
----------- -----------
OTHER ASSETS:
Deferred charges --
Security deposit 6,980 6,980
Restricted cash - debt service 415,500 415,500
EDA bond offering costs, net of accumulated amortization
of $10,000 and $7,000, respectively 344,452 347,452
------------ -----------
Total other assets 766,932 769,932
------------ -----------
Total assets $13,279,277 15,702,241
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
1
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS's EQUITY
JUNE 30, MARCH 31,
2006 2006
(Unaudited)
CURRENT LIABILITIES:
Current portion of EDA bonds $ 175,000 $ 175,000
Accounts payable and accrued expenses 1,151,586 1,740,263
Dividends payable -- 33,333
------------ ------------
Total current liabilities 1,326,586 1,948,596
------------ ------------
LONG TERM LIABILITIES:
EDA bonds - net of current portion 3,980,000 3,980,000
------------ ------------
Total long-term liabilities 3,980,000 3,980,000
------------ ------------
Total liabilities 5,306,586 5,928,596
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock -- $.01 par value;
Authorized 4,483,442 shares (originally 5,000,000
shares of which 516,558 shares of Series A Convertible
Preferred Stock retired) and 0 shares outstanding as
of June 30, 2006 and March 31, 2006 respectively
Authorized 10,000 Series B Convertible Preferred Stock -
issued and outstanding - 9,750 and 10,000 shares,
respectively 98 100
Common Stock - $.01 par value;
Authorized - 65,000,000 shares
Issued and outstanding - 19,392,536 shares and
19,190,159 shares respectively 193,925 191,902
Additional paid-in capital 60,603,142 57,983,190
Accumulated deficit (52,517,633) (48,094,706)
------------ ------------
8,279,532 10,080,486
Treasury stock, at cost (100,000 shares) (306,841) (306,841)
------------ ------------
Total stockholders' equity 7,972,691 9,773,645
------------ ------------
Total liabilities and stockholders' equity $ 13,279,277 $ 15,702,241
============ ============
The accompanying notes are an integral part of the
consolidated financial statements.
2
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
JUNE 30,
---------------------------------
2006 2005
----------- -----------
(Unaudited) (Unaudited)
REVENUES
Manufacturing fees $ 131,900 $ 114,781
Royalties 21,127 --
----------- -----------
Total Revenues 153,027 114,781
----------- -----------
COST OF OPERATIONS:
Research and development 1,316,408 738,987
General and administrative 546,913 426,530
Depreciation and amortization 119,535 93,750
----------- -----------
1,982,856 1,259,267
----------- -----------
LOSS FROM OPERATIONS (1,829,829) (1,144,486)
----------- -----------
OTHER INCOME (EXPENSES):
Interest income 100,506 19,830
Interest expense (70,631) (56,125)
Non-cash compensation through issuance of stock
options and stock warrants (300,000) (44,550)
----------- -----------
(270,125) (80,845)
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES (2,099,954) (1,225,331)
----------- -----------
PROVISION FOR INCOME TAXES 1,000 1,000
----------- -----------
NET LOSS $(2,100,954) $(1,226,331)
=========== ===========
Preferred stock dividends (200,056) --
----------- -----------
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLD $(2,301,010) $(1,226,331)
=========== ===========
BASIC AND DILUTED LOSS PER COMMON SHARE $ (.12) $ (.07)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 19,239,331 18,058,934
=========== ===========
The accompanying notes are an integral part of the
consolidated financial statements.
3
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------ --------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
------ ------ ------ ------ -------
BALANCE AT MARCH 31, 2006 (AUDITED) 10,000 $ 100 19,190,159 $ 191,902 $60,105,107
Three Months ended June 30, 2006:
(Unaudited)
Conversion Preferred to Common (250) (2) 111,111 1,111 (1,109
Non-cash compensation through
issuance of stock options -- -- -- -- 300,000
and warrants
Net loss for three months ended -- -- -- -- --
June 30, 2006
Dividends -- -- 91,266 912 199,144
----- ----- ------ ----- -------
BALANCE AT JUNE 30, 2006 (UNAUDITED) 9,750 $ (98) 19,392,536 $193,925 $60,603,142
======= ======== ========== ======== ===========
TREASURY STOCK
------------------- ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT DEFICIT EQUITY
------ ------ ------- ------
BALANCE AT MARCH 31, 2006 (AUDITED) (100,000) $(306,841) $(50,216,623) $ 9,773,645
Three Months ended June 30, 2006:
(Unaudited)
Conversion Preferred to Common -- -- -- --
Non-cash compensation through
issuance of stock options -- -- -- 300,000
and warrants
Net loss for three months ended -- -- (2,100,954) (2,100,954)
June 30, 2006
Dividends -- -- (200,056) --
----- ----- ------------ -----------
BALANCE AT JUNE 30, 2006 (UNAUDITED) (100,000) $(306,841) $(52,517,633) $ 7,972,691
======== ========= ============ ===========
The accompanying notes are an integral part of the
consolidated financial statements.
4
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
JUNE 30,
---------------------------------
2006 2005
----------- -----------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,100,954) $ (1,226,331)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 122,535 93,750
Non-cash compensation satisfied by issuance
of common stock, options and warrants 300,000 44,550
Changes in assets and liabilities:
Accounts receivable -- 142,113
Prepaid expenses and other current assets (123,985) 39,064
Security deposit -- (6,980)
Accounts payable, accrued expenses and
other current liabilities (588,677) (330,408)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (2,391,081) (1,244,242)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (28,811) (42,673)
(Increase) in restricted cash -- (87,912)
Release of restricted cash 234,244 --
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 205,433 (130,585)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends (33,333) --
Principal equipment note payments -- (30,337)
Proceeds from exercise of stock options -- 40,000
Proceeds from exercise of stock warrants -- 156,502
----------- -----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (33,333) 166,165
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (2,218,981) (1,208,662)
CASH AND CASH EQUIVALENTS - beginning of period 8,919,354 3,902,003
----------- -----------
CASH AND CASH EQUIVALENTS - end of period $ 6,700,373 $ 2,693,341
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 18 $ 11,591
Cash paid for income taxes 1,000 1,000
SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Preferred Stock dividends of $200,056 paid by
issuance of 91,266 shares of Common Stock
The accompanying notes are an integral part of the
consolidated financial statements.
5
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2006 AND 2005
(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 subsidiaries, Elite Laboratories, Inc. ("Elite
Labs") and Elite Research, Inc. ("ERI"), for the three months
ended June 30, 2006. As of June 30, 2006, 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, 2006. There have been no changes in significant accounting
policies since March 31, 2006.
The Company does not anticipate being profitable for fiscal year
2006; therefore a current provision for income tax was not
established for the three months ended June 30, 2006. Only the
minimum corporation tax liability required for state purposes is
reflected.
NOTE 2 - NJEDA REFINANCING
On August 31, 2005, the Company successfully completed a
refinancing through the issuance of the tax-exempt bonds (the
"Bonds") by the New Jersey Economic Development Authority (the
"Authority"). The refinancing involved the borrowing of
$4,155,000 evidenced by a 6.5% Series A Note in the principal
amount of $3,660,000 maturing on September 1, 2030 and a 9%
Series B Note in the principal amount of $495,000 maturing on
September 1, 2012. The net proceeds, after payment of issuance
costs, were or will be used (i) to redeem the outstanding
tax-exempt Bonds originally issued by the Authority on September
2, 1999, (ii) refinance other former equipment financing and
(iii) for the purchase of certain equipment to be used in the
manufacture of pharmaceutical products.
Interest is payable semiannually on March 1 and September 1 of
each year. The Bonds are collateralized by a first lien on the
Company's facility and equipment acquired with the proceeds of
the original and refinanced Bonds. The related Indenture
requires the maintenance of a $415,500 Debt Service Reserve Fund
consisting of $366,000 from the Series A Bonds proceeds and
$49,500 from the Series B proceeds. $1,274,311 of the proceeds
has been deposited in a short-term restricted cash account to
fund the future purchase of manufacturing equipment and
development of the Company's facility.
6
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STAT EMENTS
THREE MONTHS ENDED JUNE 30, 2006 AND 2005
(UNAUDITED)
NOTE 3 - STOCKHOLDERS' EQUITY
WARRANTS AND OPTIONS
During the three months ended June 30, 2006, 250 shares of
Series B Preferred Stock were converted into 111,111 shares of
Common Stock.
Dividends accrued on Series B Preferred Stock through conversion
date or June 30, 2006 were satisfied by the issuance of 1,318
and 89,948 shares of Common Stock, respectively.
During the three months ended June 30, 2006, 3,750 options
expired and 65,500 were forfeited.
The following grants were made under the Company's 2004 Stock
Option Plan in the current fiscal year.
On June 1, 2006, the Company entered into a one year consulting
agreement with David Filer, whereby Dr. Filer is to provide
financial advisory services to the Company. In consideration for
his services, Dr. Filer received options to purchase 10,000
shares of Common Stock exercisable from June 1, 2006 to June 1,
2009, with an exercise price of $3.00 per share.
On May 3, 2006, the Company granted options to purchase 70,000
shares of Common Stock with an exercise price of $2.26 per share
to its chief financial officer. One-third of the options vest on
May 3, 2007, a second third vest on May 3, 2008 and the final
third vest on May 3, 2009.
Additionally, in May, 2006, 54,000 ten (10) year options were
granted to six (6) employees which vest three (3) years from
grant date.
The per share weighted average of the above mentioned stock
options ranged from $1.55 to $1.69 using the Black-Scholes
options pricing model with the following weighted average
assumptions: no dividend yield; expected volatility of 59.52%;
risk free interest rate of 5.00% and expected lives of ten (10)
years.
The Company, in May 2005, revoked 180,000 of outstanding
unexercised options granted prior to the adoption of the 2004
Stock Option Plan originally earmarked to members of the
abandoned Scientific Advisory Board.
The Company took a charge of $300,000 and $44,550 for the three
months ended June 30, 2006 and 2005, respectively, which
represents the fair value of the vested options, utilizing the
Black-Scholes options pricing model on the grant date.
At June 30, 2006, Elite had outstanding 3,036,000 options with
exercise prices ranging from $1.50 to $3.00 and 6,679,179
warrants with exercise prices ranging from $1.50 to $4.20; each
option and warrant representing the right to purchase one share
of Common Stock.
7
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2006 AND 2005
(UNAUDITED)
NOTE 4 - COMMITMENTS AND CONTINGENCIES
COLLABORATIVE AGREEMENTS
On June 21, 2005, the Company and IntelliPharmaCeutics Corp.
("IPC"), entered into an agreement for the development and
commercialization of a controlled released generic drug for
certain gastric diseases by the parties. The Company is to share
in the profits, if any, from the sales of the drug. This
agreement was amended on December 12, 2005, whereby IPC and a
Canadian company with marketing and distribution capabilities in
Canada, have agreed to develop and commercialize the product for
Canada. Elite and IPC will share their proceeds of
commercialization in Canada on same terms as in the June 21,
2005 Agreement.
On June 22, 2005, the Company and Pliva, Inc. ("Pliva") entered
into a Product Development and License Agreement, providing for
the development and license of a controlled released generic
anti-infective drug formulated by the Company. The Company is to
manufacture and Pliva is to market and sell the product. The
development costs are to be paid by Pliva and the Company and
the profits are to be shared equally. Pliva is to make milestone
payments to the Company.
The aforementioned agreements are in their infancy stages.
On March 30, 2005, the Company entered into a product,
development, manufacturing and distribution agreement with
Harris Pharmaceutical, Inc. ("Harris") and Tish Technologies LLC
("Tish") with respect to a controlled release generic
anti-infective drug. The product is a generic equivalent to a
branded drug. The agreement provides for (i) the drug
development by Elite with costs of development to be shared by
Elite and Harris, (ii) the manufacture of the product by Elite
and its sale to Harris for distribution, and (iii) Tish to be
responsible for any requisite submissions to the FDA relating to
the product. Elite is to share in the profits, if any, generated
from the sale of the product.
On June 19, 2006, the Company received written notice from
Harris of Harris' intent to terminate the Product Development,
Manufacturing and Distribution Agreement, dated as of March 30,
2005. As the date hereof, there have been no material revenues
earned under the Agreement.
CONSULTING AGREEMENTS
On June 1, 2006, the Company entered into a one year consulting
agreement with David Filer, whereby Dr. Filer is to provide
financial advisory services to the Company. In consideration for
his services, Dr. Filer received options to purchase 10,000
shares of Common Stock exercisable from June 1, 2006 to June 1,
2009, with an exercise price of $3.00 per share.
On May 23, 2006, the Company entered into a consulting agreement
with Oppenheimer & Co., Inc. ("Oppenheimer") to render financial
advisory services to the Company in connection with potential
acquisitions by the Company, strategic alliances with other
pharmaceutical companies, advice with respect to future
financings to be undertaken by the Company and introductions to
key parties in the capital markets. In consideration for its
services, Oppenheimer received from the Company a cash fee of
$60,000.
8
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2006 AND 2005
(UNAUDITED)
NOTE 4 - COMMITMENTS AND CONTINGENCIES (Continued)
CONSULTING AGREEMENTS (Continued)
On November 8, 2005, the Company entered into an agreement with
an investor relations firm to provide investor relation services
including, but not limited to, overall management of the
Company's corporate communications program, securing group
appointments, assistance with mass targeted mailings, compiling
promotional materials, editing news releases and other corporate
functions. The consultant is to receive $10,000 a month
beginning November 1, 2005 and was granted non-qualified options
to purchase 75,000 shares of the Company's Common Stock, vesting
pro-rata over a six month period at a price of $2.26 per share,
the fair market value of a share of Common Stock on the date of
the grant. The per share weighted average fair value of the
above mentioned options was $1.70 using the Black-Scholes option
pricing model
For the three months ended June 30, 2006, consulting expenses
under these agreements amounted to an aggregate of $90,000.
EMPLOYMENT AGREEMENT
On September 2, 2005, the Company entered into an amended and
restated Employment Agreement with Bernard J. Berk, providing
for Mr. Berk to continue to serve as the Company's Chief
Executive Officer through August 31, 2009. The Employment
Agreement also provides for an annual bonus as determined by the
Compensation Committee of the Company's Board of Directors.
Pursuant to the agreement:
- Mr. Berk waived his rights to 75,000 of 300,000 options
granted to him on July 23, 2003. The Company determined that
the remaining 225,000 options are fully vested.
- Mr. Berk's salary was increased to $330,140. Such increase
became effective May 1, 2005 and will accrue but not be
payable until November 1, 2005.
- Mr. Berk was granted under the Company's 2004 Stock Option
Plan, ten-year options to purchase 600,000 shares of Common
Stock at $2.69, the fair market value of Common Stock as of
the time of grant. See Note 3 as to the vesting of these
options.
- 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 or as a result
of a "change of control" (as defined in the employment
agreement). The severance will be payable in accordance with
the terms of his employment agreement.
LEASE
On July 15, 2005, the Company entered into a lease for two years
commencing on July 1, 2005 for part of a one-story warehouse for
the storage of finished and raw material of pharmaceutical
products and equipment. The lease has a renewal option for a
five-year period.
Future minimum lease payments for the periods ending June 30,
are:
2007 $27,923
9
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2006 AND 2005
(UNAUDITED)
NOTE 5 - SUBSEQUENT EVENTS
On July 12, 2006, the Company entered into a Financial
Advisory Agreement (the "Agreement") with Indigo Ventures,
L.L.C. ("Indigo"). The term of the Agreement is for three years
effective as of July 1, 2006; provided, that either party can
terminate the Agreement, for any reason, at any time upon 30
days written notice. Pursuant to the Agreement, Indigo, on a
non-exclusive basis, agrees to advise, consult with, and assist
the Company in various matters as requested (and only to the
extent requested) by the Company which may include, without
limitation (i) a review of the Company's business, operations
and financial condition, including advising on capitalization
structures; (ii) advice relating to general capital raising
matters; (iii) recommendations relating to specific business
operations, strategic transactions and joint ventures (iv)
advice regarding future financings involving debt or equity
securities of the Company or any affiliate of the Company and
(v) assistance with interaction between the Company and its
current and future investors. The Company initially paid Indigo
$45,000 and will pay Indigo $15,000 per month on an ongoing
basis.
Additionally, Indigo acquired a warrant to purchase up to
600,000 shares of Common Stock, par value $0.01 per share, of
the Company (the "Common Stock") for an aggregate purchase price
of $150,000. The warrant (i) shall vest as follows: 50,000
shares shall vest quarterly beginning on the three (3) month
anniversary of July 1, 2006, (ii) shall expire on July 1, 2011,
and (iii) shall terminate, to the extent unvested, as of the
date of termination of the Agreement, (iv) shall fully vest upon
a change of control and (v) shall have an exercise price of
$3.00 per shares of the Common Stock.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED JUNE 30, 2006 COMPARED TO
THE THREE MONTH PERIOD ENDED JUNE 30, 2005 (UNAUDITED)
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, 2006 (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 results of development agreements with pharmaceutical companies,
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 its 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 a specialty pharmaceutical company principally engaged
in the development and manufacturing of oral controlled-release products. The
Company's strategy includes developing generic versions of controlled release
drug products with high barriers to entry and assisting partner companies in the
life cycle management of products to improve off-patent drug products. Elite's
technology is applicable to develop delayed, sustained or targeted release
capsules or tablets. Elite has one product currently being sold commercially and
a pipeline of eight drug products under development in the therapeutic areas
that include pain management, cardiovascular, allergy and infection. The
addressable market for the Elite's current products exceeds $6 billion in the
aggregate. Elite also has a GMP and DEA registered facility for research,
development, and manufacturing located in Northvale, New Jersey.
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
11
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.
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 are 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 reduce net loss and net loss 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. It
should be noted that actual results may differ from these estimates under
different assumptions or conditions.
RESULTS OF CONSOLIDATED OPERATIONS
THREE MONTHS ENDED JUNE 30, 2006 COMPARED TO THREE MONTHS ENDED JUNE 30, 2005
Revenues consisted of manufacturing fees and royalties of $131,900 and
$21,127, respectively, for the three months ended June 30, 2006. Revenues of
$114,781 consisted solely of manufacturing fees for the three months ended June
30, 2005.
General and administrative expenses (G&A) for the three months ended
June 30, 2006 were $546,913, an increase of $120,383, or approximately 28.2%,
from G&A for the comparable period of the prior year. The increase was
substantially due to increases in consulting fees approximating $100,000,
partially offset by a decrease in legal and accounting fees.
Research and development costs for the three months ended June 30, 2006
were $1,316,408, an increase of $577,421, or approximately 78.1% from $738,987
for the comparable period of the prior year, primarily the result of increases
in wages, raw materials, laboratory and manufacturing supplies. The costs
associated with the manufacturing of batches of Lodrane 24(R) and the work
completed on newly signed development agreements have contributed to this
increase.
We are unable to provide a break-down of the specific costs associated
with the research and development of each product on which we devoted resources
because a significant portion of the costs are generally associated with
salaries, laboratory supplies, laboratory and manufacturing expenses, utilities
and similar expenses. We have not historically allocated these expenses to any
particular product. In addition, we cannot estimate the additional costs and
expenses that may be incurred in order to potentially complete the development
of any product, nor can we estimate the amount of time that might be involved in
such development because of the uncertainties associated with the development of
controlled release drug delivery products.
Depreciation and amortization for the three months ended June 30, 2006
increased by $25,785 to
12
$119,535 from $93,750 for the year earlier comparable period as a result of the
increases in depreciation and amortization on acquired new machinery and
equipment and upgrading of the corporate and warehouse facilities.
Other expenses, net for the three months ended June 30, 2006 were
$270,125, an increase of $189,280, or approximately 189.3%, from the comparable
period of the prior year. The increase was primarily due to an increase of
$255,450 in charges related to issuance of stock options offset by additional
interest income, due to higher compensating balances as a result of the private
placement and EDA refinancing.
As a result of the foregoing, the Company's net loss for the three
months ended June 30, 2006 increased to $2,100,954 from the net loss of
$1,226,331 for the comparable period of the prior year.
MATERIAL CHANGES IN FINANCIAL CONDITION
The Company's working capital (total current assets less total current
liabilities), decreased to $6,908,057 as of June 30, 2006 from $8,615,287 as of
March 31, 2006, primarily due to the use of cash in funding net loss of
$1,829,829 from operations.
The Company experienced negative cash flow from operations of
$2,391,081 for the three months ended June 30, 2006, primarily due to the
Company's net loss from operations due to an increase in research and
development activities as to the drug products in its pipeline
On November 15, 2004, Elite's partner, ECR, launched Lodrane 24(R),
once a day allergy product, utilizing Elite's extended release technology to
provide for once daily dosing. Under its agreement with ECR, Elite is currently
manufacturing commercial batches of Lodrane 24(R) in exchange for manufacturing
margin and royalties on product revenues. Royalty income earned for the three
months ended June 30, 2006 was $21,127. The Company expects future cash flows
from royalties to provide additional cash to help to fund its operations.
On June 21, 2005, the Company and IntelliPharmaCeutics Corp. ("IPC"),
entered into an agreement for the development and commercialization of a
controlled released generic drug for certain anti-infective diseases by the
parties. The Company estimates that the product had an addressable market in the
U.S. of approximately $4 billion in 2004. The Company is to share in the
profits, if any, from the sales of the drug. On December 12, 2005, the agreement
was amended with respect to the development and commercialization of the
controlled release drug product in Canada. Since IPC intended to enter into an
agreement with a Canadian company with respect to the development, distribution
and sale of the drug product in Canada, the parties agreed to suspend their
obligations under the agreement with respect to the development and
commercialization of the controlled release drug product in Canada. IPC agreed
to pay the Company a certain percentage of any payments received by IPC with
respect the commercialization of the controlled release drug product by such
Canadian company.
On June 22, 2005, the Company and Pliva, Inc. ("Pliva") entered into a
Product Development and License Agreement providing for the development and
license of a controlled released generic anti-infective drug formulated by the
Company. The Company is to manufacture and Pliva will market and sell the
product. Under the agreement, the partner is to make milestone payments to the
Company. The development costs are to be paid both by Pliva and the Company,
they have agreed to share the profits equally.
No assurance can be given that any of the above products will be
successfully developed or that individually or in the aggregate they will
generate any material revenues for the Company.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended June 30, 2006, the Company experienced
negative cash flow and financed its operations primarily through utilization of
its existing cash. As of June 30, 2006, the Company had
13
approximately $6.7 million of cash and cash equivalents, a decrease of
approximately $2.2 million from the $8.9 million at March 31, 2006 and had
working capital of approximately $6.9 million.
Net cash used in operating activities was $2,391,081 during the three
months ended June 30, 2006, compared to $1,244,242 for the three months ended
June 30, 2005. Net cash used in operating activities during the three months
ended June 30, 2006 included the Company's net loss of $2,100,954 and increases
in prepaid expenses and other current assets, offset in part by non-cash charges
of $300,000 in stock option charges and $122,535 in depreciation and
amortization expense. Net cash used in operating activities during the three
months ended June 30, 2006 included the Company's net loss of $1,244,242 offset
in part by non-cash charges of $44,550 in stock option and warrant charges and
$138,300 in depreciation and amortization expense.
Investing activities provided net cash of $205,433 during the three
months ended June 30, 2006, which resulted primarily from the release of
restricted cash offset by 28,811 in property and equipment purchases.
During the three months ended June 30, 2006, financing activities used
net cash of $33,333 to pay dividends. During the three months ended June 30,
2005, financing activities provided net cash of $166,165 derived from the
exercise of stock options and warrants totaling 196,502, offset by $30,337 in
principal note payments.
As of June 30, 2006 the Company had cash and cash equivalents of
approximately $6.7 million. The Company anticipates that such position is
adequate to finance its operations through June 30, 2007 but thereafter
additional financing may be required, particularly in view of the Company's
expenditures required for the further development and commercialization of its
products. The Company has no current arrangements with respect to additional
financings. The Company intends to seek additional funds through the sale of
additional debt or equity, however no assurance can be given that the Company
will be able to obtain the required additional financing or if obtained it will
be on favorable terms. The Company's inability to obtain additional financing
when needed would impair its ability to continue to meet its business
objectives. Other possible sources for such additional financings are the cash
exercises of the Long Term Warrants issued in the October 2004 private
placement, the Replacement Warrants issued in the December 2005 private
placement and other warrants and options that are currently outstanding.
The Company had outstanding, as of June 30, 2006, bonds in the
aggregate amount of $4,155,000, consisting of $3,660,000 of 6.5% tax exempt
Bonds with an outside maturing of September 1, 2030 and $495,000 of 9% Bonds
with an outside maturity of September 1, 2012. 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
redemption of previously issued tax exempt bonds issued by the Authority in
September 1999 and to refinance equipment financing, as well as provide
approximately $1,000,000 of capital for the purchase of additional equipment for
the manufacture and development at the Company's facility of pharmaceutical
products and the maintenance of a $415,500 debt service reserve. All of the
restricted cash, other than the debt service reserve, is expected to be expended
within nine months ended December 31, 2006 and is therefore categorized as a
current asset on the Company's consolidated balance sheet as of June 30, 2006.
Pursuant to the terms of the related bond indenture agreement, 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, 2006, the Company was in
compliance with the bond covenants.
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.
As of June 30, 2006, the Company's principal source of liquidity was
approximately $6,700,373 of
14
cash and cash equivalents. The Company also may receive funds through the
exercise of outstanding stock options and warrants in addition to funds that may
be generated from the potential sale of New Jersey tax losses. There can be no
assurance that proceeds from the sale of tax losses and from the exercise, if
any, of outstanding warrants or options will be material.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company had no investments in marketable securities as of June 30,
2006 or assets and liabilities which are denominated in a currency other than
U.S. dollars or involve commodity price risks.
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, based on an
evaluation of the Company's disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), the
Chief Executive and Chief Financial Officer of the Company concluded that the
Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in its Exchange Act reports
is recorded, processed, summarized and reported within the applicable time
periods specified by the SEC's rules and forms.
There was no change in the Company's internal controls over financial
reporting that occurred during the fiscal quarter ended June 30, 2006 that
materially affected or is reasonably likely to materially affect the Company's
internal controls over financial reporting.
15
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Stockholders at Registrant's Annual Meeting of Stockholders held on
June 28, 2006 took the following actions:
1. Elected its four Directors.
No. of Votes For No. of Votes Against
Bernard Berk 16,172,793 40,042
Edward Neugeboren 15,176,393 1,036,442
Barry Dash 16,178,893 33,942
Melvin Van Woert 16,178,893 33,942
2. Approved the adoption of the amendment to the Company's 2004
Stock Option Plan to increase to 7,000,000 the shares subject to
the Plan by a vote of 3,090,028 shares for, 207,793 shares
against, and 15,940 shares abstaining.
3. Approved the proposal to ratify the Registrant's Series B
Financing, which involved the sale of the Registrant's Series B
Preferred Stock and common stock purchase warrants pursuant to a
Securities Purchase Agreement, dated as of March 15, 2006 by a
vote of 3,207,952 for, 79,969 shares against and 25,840 shares
abstaining.
4. Approved the engagement of Miller, Ellin & Company LLP as the
Company's independent auditors for the year ended March 31, 2006
by a vote of 16,183,799 shares for, 50,352 shares against and
12,626 shares abstaining.
ITEM 6. EXHIBITS
(a) Exhibits:
4.1 Form of Warrant to purchase 600,000 shares of Common Stock
issued to Indigo Ventures LLC filed as Exhibit 4.1 to
Registrant's Report on Form 8-K filed with the Securities and
Exchange Commission on July 18, 2006 and incorporated herein
by reference thereto.
10.1 Financial Advisory Agreement between the Registrant and Indigo
Ventures LLC filed as Exhibit 10.1 to Registrant's Report on
Form 8-K filed with the Securities and Exchange Commission on
July 18, 2006 and incorporated herein by reference thereto.
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.
16
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 11, 2006 By: /s/ Bernard Berk
--------------------------------------------
Bernard Berk
Chief Executive Officer
(Principal Executive Officer)
Date: August 11, 2006 By: /s/ Mark I. Gittelman
--------------------------------------------
Mark I. Gittelman
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
17
EXHIBIT 31.1
CERTIFICATION
I, Bernard Berk, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006 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;
(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;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter that
has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over
financial reporting.
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 11, 2006 _____________________________________
Bernard Berk
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION
I, Mark I. Gittelman, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006 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;
(c) 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;
(d) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(e) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter that
has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over
financial reporting.
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 11, 2006 _____________________________________
Mark I. Gittelman
Chief Financial Officer and Treasurer
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, 2006 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 11, 2006 ----------------------------------------
Bernard Berk
Chief Executive Officer of
Elite Pharmaceuticals, Inc.
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, 2006 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 11, 2006 ----------------------------------------
Mark I. Gittelman
Chief Financial Officer and Treasurer of
Elite Pharmaceuticals, Inc.
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.